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FINANCIAL TIMES 


Optimism over new 
dru 9s treatment 
tor Aids patients 

^WeSmeVL^M^i ! 15 drUES ’ GIaxo,s new 3 TC 
and most AZT, has the strangest 

yet tes^ P ^i? nged c am cal effect of any treatment 
or cUnical *rhl. show. TO? 
L ' ut v1rus levels m blood cells by 
a year, compared with an u per 

^ W eS; G t ffiSSi to 

StowSSSKSS 0 itseU ratber ^ Ucensi ^ 

n^ndv?„f ressed to reso * v © Irish Grids: 

« Utgomg Coalition partners are under 
raunS^^IS^H 116 ! 10 find a speed? resolution to the 
2KS!°“ cal cnsta - ^ Dafl. Ireland's pariia- 
meSt’ 10 ^ t0 a S ree a new govern- 

l i wait to ^ which way Spring i 
jumps. Page 2; Fear of IRA split is rejected. Page 6 

Kemper and Conseco drop merger plan: A 

5r“™ merger between US financial services groups 
Kemper and Conseco has been abandoned, opening 
tne door to other suitors, including GE Capital and 
Dean Witter Discover, who have also expressed 
interest in Kemper. Page 17 

Fears remain despite Angola accord: 

Prospects for peace in Angola remained u ncertain 
despite the signing of an agreement to «»r*d the 
country’s 19-year civil war. Page 16 

BZW seeks stronger (IS presence: BZW, the 
investment banking arm of Barclays, has started a 
review of its business in the US that could i««fl to 
the bank entering a partnership with, or acquiring, 
a US investment b ank page 17 

Ukraine seeks aid to shut Chernobyl plant: 

Ukraine is to seek western financing to decommis- 
sion the Chernobyl nuclear power station, the site 
in 1986 of the world's worst nuclear accident Page 3 

Republicans close to deal on trade pact: 

Senator Robert Dole, Republican leader in the US 
Senate, said he was close to a deal with .the admin- 
istration on passage of the Uruguay Round imple- 
menting legislation this year. Page i 

EU to monitor Tokyo-US trade: The European 
Union will monitor the implementation of US- 
Japanese trade accords to ensure they do not 
unfairly exclude third countries, an EU-Japan min- 
isterial meeting agreed. Page 4 

Financial stability Is Russian priority: 

Russian first deputy prime minister Anatoly Chu- 
bais said the country was entering a new phase of 
economic development with ji strong, government 

team fav r ^q ^ y partlnTi,: ftnnrruragn irivnftt. 

meiitaMl^^evefiriaudal stability. Page 3 

European rnanufactiaera ■out c l asse d': Only 
one ih50 Branpean manufacturers is “world class", 
yet three out offourbeBeve they can compete with 
the best of their international rivals, according to a 
fora-comxtry survey; page a 

Bank warns on Interest rates: British interest 
rates must be raised if the UK economy continues 
to expand at the current speed. Bank of England 
governor Eddie.Geapge. warned. Page 6 

Lloyd's faces legal challenge: Groups 
representing loss-making Lloyd's of London mem- 
bers have combined to finance a legal challenge to 
the insurance market's latest attempt at recouping 
money owed by the members. Page 6 

SCA lifts forecast: SCA, Sweden's second 
largest forestry group, raised its 1994 profits fore- 
cast after doubling profits to SKrl.59bn ($ZL7m) in 
the first months. Page 19 

(Hi holds conference on crime: Ministers and 
officials from more than 120 countries meet under 
tigh t security in Naples today for a three-day 
United Nations conference on international crime, 
ffccetess crime boss who is all too real. Page 10 

European Monetary System: The French franc 
moved ahead of the Danish krone in the EMS grid 
last week, but the spread between the strongest and 
weakest currencies remained broadly unaltered. 

The grid is likely to be afitected if the Bundesbank 
council decides on Thursday to shift German inter- 
est rates. Currencies, Page 25 
■g— ib. find . November 18, 1994 


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MONDAY NOVEMBER 21 1994 




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Bosnia’s Moslem-led government demands air strikes as warfare intensifies in north 

UN force on 


high alert as 
Serbs near 
safe area 


* * ’I. 

I t&v 1 , / :./■ - ■’ 




By Bruce Clark on board HMS 
Invincible, Laura SRbar in 
Belgrade and Nancy Dime In 
Washington 

The 40,000-strong United Nations 
force in former Yugoslavia was 
placed on high alert last night as 
intensifying warfare in northern 
Bosnia left the peacekeepers vul- 
nerable to assault from both 
Serbs and Moslems. 

The Moslem-led Bosnian gov- 
ernment angrily demanded that 
the UN follow up its new resolu- 
tion and authorise air strikes 
against Seri) forces advancing on 
the Moslem enclave of Bihac. 

Mr Haris Silajdzic, Bosnian 
prime minister, said that despite 
an emergency meeting of the UN 
Security Council on Saturday, 
Serb tanks were moving towards 
Bihac yesterday. "The concrete 
action would be to take out these 
tanks - serious air strikes." 

On Saturday night the Security 
Council passed an emergency res- 
olution authorising Nato aircraft • 


VW board 
concerned 

at tension 
over Piech 


Royal Navy welcomes wider 
Bosnia role Page 3 


to extend their role as policemen 
of the skies to the Serb-controlled 
areas of Croatia, after Serb air- 
craft based in Croatia made two 
air raids on the Bihac area in two 
days. An aircraft In the second 
attack crashed into an apartment 
block in the town of C azln, near 
Bihac, killing the pilot and 
wounding at least nine people. 

Mr Willy Claes, Nato secretary- 
general, indicated on CNN televi- 
sion that the alliance was 
waiting only for a request from 
the UN but stressed that "we are 
ready to intervene not only politi- 
cally but militarily ... we are 
ready to give a very clear and 
strong signal to Serbs that this is 
enough and it must stop”. 

In the US, Senator Robert Dole, 
the Republican leader in Con- 
gress, expressed frustration with 
the UN’s role: “The UN should 



On guard: British troops point their weapons towards Serb-held positions during a patrol in Sarajevo’s notorious ‘supers’ alley* 


get off Nato’s back and let Nato 
take care of Serbian aggression." 
He would visit Nato headquarters 
next week “and tell them I don’t 
see any reason for their existence 
if they have to take orders from 
the UN". 

The Security C.ouncil resolu- 
tion was welcomed by a senior 
British naval officer who is over- 
seeing air policing activities in 
the Adriatic. Captain Richard 


Hastilow, commander of the 
Royal Navy aircraft carrier HMS 
Invincible, said the new policy 
was intended to stop hostile air- 
craft leaving the ground in the 
Serb-controlled areas of Croatia. 

The worsening situation 
around Bihac has presented the 
UN with one of its toughest chal- 
lenges since it became involved 
in peacekeeping in former Yugo- 
slavia in 1992. Draconian action 


against the Serbs would leave 
peacekeepers vulnerable to retali- 
ation in many parts of Bosnia, 
while the UN’s failure to protect 
Bihac was incurring the anger of 
local Moslems. 

Reports from Bihac said local 
people were attacking the 
vehicles belonging to the 1,000- 
strong contingent of lightly- 
armed UN soldiers from Bangla- 
desh, whose stocks of food and 


medicine have run very low. 

Fighters loyal to the maverick 
Moslem leader Mr Fikret Abdic, 
who opposes the Bosnian govern- 
ment, were engaged yesterday in 
heavy house-to-house fighting in 
the town of Velika Kladusa, 
north of Bihac. However, a UN 
spokesman said the Bosnian Serb 
army seemed to be respecting the 
borders of the UN-designated safe 
area around Whan. 


EU to monitor Japanese trade accords with US 


, By WflSon Dawkins in Tokyo 


By Christopher Parties 
tn Frankfurt 

Mr Ferdinand Piech, Volkswagen 
chairman, win be told to tune 
down-iris public statemen t s at a 
meeting with senior members of 
the automotive group’s supervi- 
sory board this week. 

Anxiety about Mr Pitch's 
aggression was initially roused 
by a recent outburst in an inter- 
view in which he accused his 
middle management of coward- 
ice and conspiring against him. 

It was exacerbated at the 
weekend by the publication of 
e x tra c t s from a letter accusing 
Mr Piech of being a dictator. 

The letter, unsigned and pur- 
portedly from a group of middle 
managers, was sent to Mr Elans 
laesen, chairman of the supervi- 
sory board, Mr Gerhard Schrfl- 
der, prime minister of VW’s 
home state, Lower Saxony, and 
Mr Elans Zwickel, leader of the 
IG Metafl trade union. 

All are members of the super- 
visory hoard’s powerful praesi- 
dium, which is due to meet Mr 
Pfgch on Thursday, a day before 
a full supervisory board session. 

The letter warned Dr Liesen 
not to be misled by the apparent 
recovery at VW. “Make plain to 
Mr PiSch that a global concern 
cannot by run like a feudal flef- 
dom manned by serfs,” it said. 

The signs of tension at VW 
have also revived debate among 
non-executive supervisory direc- 
tors on the possible need for a 
“shadow cabinet”, or substitute 
top management, which could 
step in if Mr Pi&cb does not stay 
for his full five-year contract 

The proposal was first floated 
last year during the still- 
unresolved industri al es pionage 
allegations against VW’s eccen- 
tric purchasing director, Mr Josd 
Ignacio Ldpez de Arriorttia. 

. While the supervisory board is 
eager to avoid open conflicts 
with management which could 
put VW’s recovery at risk, it is 
also concerned that Mr Pitch’s 
confrontational style is damag- 
ing the group’s image. Its 

Continued on Page 16 
Skoda plan revised. Page 19 


The European Union is to 
monitor the implementation of 
US-Japanese trade accords to 
ensure they conform with multi- 
lateral trading rules and do not 
unfairly exclude third countries. 

The move was agreed at an 
annual EU-Japan ministerial 
meeting in Tokyo over the week- 
end. At the same time, the Euro- 
pean Commission Raid that Brus- 
sels hoped to see Japan's current 
account surplus fall from last 
year's 3.1 per cent of gross 
domestic product to 2 per cent by 
1996. Mr Masayoshi Takemura. 
the finance minister, said the fig- 
ure was reasonable, but Japan 
could not accept a date. 


Attemp't to ensure Europe not excluded from deals 


• Sir Leon Brittan. leader of the 
three-commissioner negotiating 
team and European commis- 
sioner for external economic rela- 
tions and trade, stressed that the 
EU was-not seeking a firm target 
for reduction of the surplus. In 
line with its continuing aversion 
to the US strategy of seeking to 
pin Tokyo to precise figures on 
opening its markets. 

It was simply an expectation 
based on the Japanese govern- 
ment's economic policies, Sir 
Leon said. “We have made prog- 
ress on many items, 1 ' he added, 
referring to a series of largely 
technical market-opening mea- 


Page 4 

■ Small steps forward for 
Eivopean exporters 


sures announced by the Japanese 
government at the weekend. 

The meeting emphasises the 
EU*s growing anxiety to ensure 
that European businesses are not 
cut out of trade deals negotiated 
by the US in the 18-month old 
economic framework talks 
between Tokyo and Washington. 
These cover a wide range of sec- 
tors that in c lud e prominent Euro- 


pean competitors,' including cars 
and car parts, telecommunica- 
tions and financial- services. 

The EU, for its part, was not 
seeking concessions for European 
business to the exclusion of oth- 
ers, but felt certain it could 
increase its share of the Japanese 
market “given the proper oppor- 
tunities”, said Sir Leon. 

Mr Yohei Kono, the foreign 
minister, assured Sir Leon that 
Japanese trade accords with the 
US would automatically be 
extended to other trade partners. 
Sir Leon feared that Japanese pri- 
vate sector companies might, 
despite this, still feel under politi- 


cal pressure to buy VS cmlhriar 
telephones, aircraft and car parts, 
rather than equally competitive 
European ones. 

However, Japan declined the 
Commission’s request to monitor 
jointly the implementation of 
trade deals with the US. Tokyo 
and Brussels will monitor US-Ja- 
pan trade in parallel, with the 
Japanese government keeping 
the Commission Informed of 
progress in its US trade talks. 

The EU had no plans to revive 
its felled attempt to launch trilat- 
eral trade talks with the US and 
Japan, said Sir Leon. The week- 
end ministerial meeting had 
shown it wub possible to make 
progress under present arrange- 
ments, he said. 


Saudi Arabia seeks 
to extend oil curbs 


lamnlTed indostiiid 

of having an “obscene sense of gojartjfto eager avoid ope] 

dosingtbat the government with management w 

£^000 (5935,000) on wine for official gatherings in pni VW’s recovery ai 

the last five years. Page 6 also concerned that 

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^^TSaNCIAL TIMES LIMITED 1994 No 32,529 Week No 47 


By Robert Corzine In Ball 

Saudi Arabia will today ask the 
Organisation of Petroleum 
Exporting Countries to extend 
the current production ceiling 
until the end of 1995 in order to 
bolster oil prices. 

A one-year rollover of the 
24.52m barrel a day ceiling would 
be a sharp departure from Opec’s 
policy in recent years of trying to 
balance world supply and 
demand through frequent 
changes in output 

Analysts say it would also give 
a signal to world oil markets that 
Saudi Arabia, Opec’s largest pro- 
ducer and the only one with large 
spare capacity, is prepared to 
forgo possible volume increases 
next year in favour of a strategy 
that, if successful could deliver 
higher prices. 

Other Opec ministers meeting 
in the Indonesian resort of Bali 
also favour a rollover. But it is 
not certain that ail accept the 
need for such a long extension. 

Iran, one of Opec’s persistent 
price hawks, said yesterday that 
it would consider all options. Mr 
Gholamreza Agbazadeh, oil min- 
ister, said he would look at all 
rollover proposals, whether they 
were for “12, six or three 
months." 

Iran had been thought to 
favour a three-month extension. 
But some Gulf Arab officials yes- 
terday described it as unaccept- 


able because it would have little 
market credibility. 

Saudi Arabia, however, might 
accept a six-month rollover if the 
one-year proposal runs into stiff 
opposition. Saudi officials had 
been publicly advocating the six- 
‘ month option as late as last 
week. 

But some analysts believe cur- 
rent oil prices already discount a 
six-month extension. They claim 
that a one-year rollover would 
send a strong bullish signal to 
world oil markets in the short 
term. 

But the strategy assumes that 
non -Opec producers would not be 
able to increase output quickly to 
meet the full lm b/d increase in 
world demand expected next 
year. Over the past year a surge 
in non-Opec production, espe- 
cially from Norway and the UK, 
has been more than adequate to 
meet rising demand. 

The Saudi plan also assumnc 
that quota cheating by Opec 
states will remain at relatively 
modest levels. 

One Opec delegate said the 
Saudi strategy was not meant to 
produce a sharp jump in oil 
prices next year. “I can’t see 
Brent going above $23 a barrel" 
he said - the benchmark Brent 
Blend currently stands at about 
$16.50. Instead, it is meant to put 
pressure on minimum prices, 
and to reduce frequent price 
swings. 



GENEVE 

■'A /'. / •6 '" 



CONTENTS.® 


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Business Trawl . 
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The Marveti _ - • - za 

Emenjng Markets 21 

Wold Bond MaM« _ . . 22 

Eq^y Markets « 

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Money Martels 25 

Share Woonadon JBJB 

World Stack Markets 24 

Smu 

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FINANCIAL, TIMES MONDAY NOVEMBER 21 1994 


' 1 .v 

. : a 1 j 


NEWS: EUROPE 



John Murray Brown assesses the tough choices facing the Labour leader 

Irish wait to see which way Spring jumps 


Spring: three options 


As Ireland’s political parties 
try to patch together a new 
coalition government in the 
wake of the last week's crisis, 
all eyes are on Dick Spring, the 
Labour leader and outgoing 
deputy prime minister and for- 
eign minister. 

The choice of coalition is 
largely Mr Spring's, in many 
ways the principal actor in last 
week's drama, which resulted 
in the collapse of the 22-month 
coalition and the resignation of 
Mr Albert Reynolds as prime 
minister. 

He has three options. He can 
go back into coalition with 
W anna Fail under its new 
leader, Mr Bertie Ahern - the 
unanimous choice of the party 
on Saturday. Labour and the 
conservative Fine Gael, the 
main opposition party could 
put together a government 
with one or both of the smaller 


opposition parties (the Demo- 
cratic Left or the Progressive 
Democrats) although this 
would produce a paper thin 
majority in the 166 -seat parlia- 
ment The third option is to go 
to the country, and seek a new 
mandate. 

Overriding all this is another 
concern: that a protracted 
search for a new government 
could damage the Northern 
Ireland peace process. 

A poll in yesterday's Irish 
Independent suggests Mr 
Spring is the main beneficiary 
of last week's turmoil. Confi- 
dence in his performance is at 
an all-time high of 69 per cent 
His party’s standing is at IS 
per cent, if he heeds the 
results, a Fianna Fail coalition 
seems inevitable: 43 per cent 
are in favour, while, perhaps 

more significantly, only 27 per 
cent want a general election. 


Returning last night after a 
weekend in his North Kerry 
constituency, Mr Spring may 
well have reflected that he has 
been here before. In 1992, his 
rating and his party's was also 
on a high. Even his parliamen- 
tary speeches - attacking 
Fianna Fail in a no confidence 
motion in November 1992 - 
have an uncanny resemblance 
to last week’s assault And yet 
just two months later, in Janu- 
ary 1993, Labour was in coali- 
tion with Fianna Fail, for the 
first time in the history of 
either. 

How different is it this time ? 
Mr Ahem is from the left wing 
of the party. Indeed, as a for- 
mer trade union negotiator, he 
earned a reputation as an effec- 
tive conciliator. Mr Ahern is 
also said to have a special rela- 
tionship with Labour's Mr 
Ruairi Quinn, who as employ- 


ment and enterprise minister 
was a key architect, with Mr 
Ahern, of the government pol- 
icy programme under the out- 
going administration. 

Mr Ahem is described as a 
Fianna Fail moderate. On 
social and moral issues, some 
commentators believe he may 
be closer to Labour than his 
party’s mainstream. In Ireland, 
much has been made of the 
openness with which he has 
discussed the breakdown of his 
marriage. However, in his 
acceptance speech after win- 
ning the party nomination on 
Saturday, he promised social 
reform “that takes account of 
our distinctive values and con- 
victions. " - a remark which 
seemed to be aimed more at 
F ianna Fail traditionalists than 
designed to court his possible 
coalition partner. 

A coalition with Fianna Fail 


would have some supporters 
within Labour's parliamentary 
party, anxious to avoid an elec- 
tion and confident in the 
carve-up of cabinet jobs that 
Labour could dictate the terms 
to a cowed Fianna Faff leader- 
ship. Labour party managers 
wm be only too aware that yes- 
terday’s poll, although showing 
increased support for Labour, 
actually only restores the posi- 
tion the party enjoyed prior to 
the 1992 election. 

Labour was bitterly critic- 
ised for betraying grassroots 
support. Indeed, the party’s 
strong showing in the 1992 
election, where it secured 33 
seats, was largely because the 
voters believed they were vot- 
ing Labour to root Fianna Fail 
out of power. At grassroots 
level. Mr Ahem, who was pres- 
ent at the cabinet meeting on 
Monday, is just as culpable as 


Mr Reynolds in misleading, par- 
liament over the paedophile 
priest extradition case. 

Mr Jim Kemmy, Labour's 
chairman and an astuteiodge 
of grassroots nfood, made it 
clear over the .weekend he 
opposed another deal with 
Fianna Faff. 

Given Mr Spring's perconhl 

rtifffmTf ias with Ml* J ohn Bru- 
ton, the Fins Gael leader, that 
alternative would be difficult 
to imagine. Moreover Labour, 
party managers wj& be -aware 
that with three or more parties 
in Mr Spring, would 

have difficulty arguing fra* as 
many the six cabinet portfohas 
Which the party hold in .the 
outgoing- adm inlstratian. ' 

If both options are ruled out, 
then the only alternative win 
be a general election. It afl' 

rests with Mr Spring. . ’ 

See Editorial Comment 


to run 


By Dmrfd Buchan in UMo 


The French Sodahst party 
l y e ster d ay told Mr Jacques 
Delors; outgoing head of thfr 
j European Ccmuntsskm^ffrat^ he- 
had a " “doty" to rrmffor fee 

p residency in its colours, i 

- M&dngup Mr Detors’8 .state- 
ment last, week, that if te 
decided to . become a candidate 
j it would be out of duty, Mr . 
Henri EmmanaeUi, the party's 
first secretary; said: "In the * 
Tiara of the very great major- 
ity of Sodalfets, I say: to you. ■ 
Jacques, that it is your -duty." -. 

This appeal- brought pro- 


Polls test adds I Oslo rally shows No camp’s strength 


to pressure on 
Italian coalition 


By Karen Fossti in Oslo 


By Andrew Hil in Milan 


The fractious Italian 
government of Mr Silvio Ber- 
lusconi yesterday faced its first 
electoral test since June, at the 
end of a week of political tur- 
moil and social unrest. 

Italians in more than 200 
towns and regions across Italy 
voted in local and regional 
elections, the first poll since 
the June elections to the Euro- 
pean parliament in which Mr 
Berlusconi’s Forza Italia move- 
ment increased its share of the 
national vote at the expense of 
the other main parties. 

Within the Last week. Mr 
Berlusconi has had to contend 
with anti-government demon- 
strations across the country, 
starting with a rally of more 
than 1.2m people in Rome on 
November 12 against plans for 
pension and welfare cuts. 

A combination of tension 
within the coalition govern- 
ment and protest on the streets 
was expected to hit support for 
Forza Italia in the mayoral 
elections. However, the official 
results - due today - will be 
difficult to interpret because of 
complicated local alliances, 
which in some cases pitted 
candidates from the national 
coalition parties against one 
another. 

In any case. Mr Berlusconi is 
likely to be more concerned 
about the passage of the cru- 
cial 1995 budget through parlia- 
ment, and Thursday's meeting 
with trade union leaders at 
which the government will try 


The Italian treasury has 
cleared the way for publicly 
owned charitable foundations 
to give up majority control of 
many of Italy’s banks, in an 
attempt to encourage further 
modernisation of the 
fragmented banking sector, 
writes Andrew HilL Mr 
Lamberto Dini, treasury 
minister, has approved a 
directive which obliges the 
foundations to find new ways 
of funding their charitable 
activities over the next five 
years. It will also provide 
fiscal incentives for the 
foundations to “privatise” 
their h anking subsidiaries by 
selling off more than 50 per 
cent of the shares. Following 
the 1990 reforms, banking 
subsidiaries could be 
transformed into joint stock 
companies but foundations 
had to retain a controlling 
stake. 


THE FINANCIAL TIMES 
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-to avert Italy's second general 
strike this autumn, scheduled 
for December 1 

The government was 
defeated in the lower chamber 
of parliament last Thursday, 
when the populist Northern 
League - one of three main 
coalition parties - allied with 
opposition deputies to approve 
amendments watering down 
reform of the overburdened 
pensions system. The chamber 
of deputies is likely to approve 
the overall package of mea- 
sures today. 

Closer cooperation between 
the League and, for example, 
the opposition Popular party 
could make it easier for the 
government to push through 
the budget package in the 
upper house, where it does not 
have a majority. Financial 
markets reacted positively on 
Friday, as investors looked for- 
ward to the possibility of 
agreement with the unions, 
albeit on a less stringent bud- 
get. 

Mr Sergio Cofferati, leader of 
the CGIL - one of three main 
trade union federations - yes- 
terday warned that it was pre- 
mature to suggest that the gen- 
eral strike might now be called 
off. 

However, he agreed that “the 
certainty of reform and the 
commitment of the whole par- 
liament and the social partners 
to it would be a reassuring sig- 
nal for the markets". 

Mr Berlusconi will still have 
to resolve tensions between his 
coalition partners, even, if he 
reached a truce with his oppo- 
nents on the budget 


Opponents of Norwegian 
membership of the European 
Union yesterday organised a 
rally of 25,000 people in Oslo, 
one of the country's largest 
ever political demonstrations. 

“This shows the strength of 
the No side - people came 
from all over the country. If 
this support continues next 
week, we will win,” said Mrs 
Anne Enger Lahnstein. head of 
the main opposition Centre 
party and leader of the No 

r-amp al pn 

Norway holds its national 
referendum on joining the 
Union next Monday. The No 
campaign, nervous that recent 
approval by neighbouring Fin- 
land and Sweden could help 
swing opinion in Norway, has 
been encouraged by waning 
support for EU membership 
following an earlier spurt after 
the Swedish Yes vote on 
November. 

Opinion polls at the weekend 
gave the No side 64 per cent 
compared to 46 per cent for the 
pro-EU campaign, after elimi- 
nating undecided voters, who 
still account for around 12 per 
cent of the electorate. This con- 
trasted with a surge of 5-6 per- 
centage points by the Yes - 
ramp early last week. 

Police estimated that 20,000- 


25,000 people attended the 
rally. Demonstrators carried 
signs which read “Yes to 
Democracy, No to the EU". The 
organisers chartered 300 buses 
and four trains to bring people 
from as far away as Finnmark 
in northern Norway. 

The No movement has also 
fielded seven prominent Nor- 
wegians opposed to EU mem- 
bership. They included Mr 
Jens Heyerdahl, president and 
chief executive of Orkla, one of 
Norway’s top five listed compa- 
nies, which produces a wide- 
range of consumer goods and 
which is one of the country's 
biggest employers. 

Most senior business and 
industrial figures are strongly 
backing EU membership, say- 
ing it will benefit Norwegian 
companies. But Mr Heyerdahl 
said that competition from out- 
side would damage local manu- 
facturers and cost jobs. 

• Finland's parliament finally 
ratified the October 16 referen- 
dum result in favour of EU 
membership at a session on 
Friday. The vote had been 
delayed by anti-EU members 
until after Sweden had voted 
in the hope that Swedish rejec- 
tion would help them block 
F innish accession. But the two- 
thirds majority required for 
ratification was easily 
achieved. 




mm- 


A piece of hot whale meat sustains an opponent of European Union membership after his arrival 
by bus from northern Norway for a rally in the capital at the weekend. The poster over the stand 
says “Yes to fish - No to EU*. The demonstration by some 25,000 people was one of the cou ntr y ' s 
largest ever ap 


German ruling saps Rexrodt’s energy 


Germany’s economics minister, 
Mr G (inter Rexrodt, will 
require more than skill this 
week when he tries once again 
to persuade his European 
Union colleagues to introduce 
measures aimed at deregulat- 
ing the ElTs energy sector. 

Only with Britain has he 
been unable to reach agree- 
ment about third party access 
(TP A), which would allow out- 
siders access to the national 
energy grids in Europe. Hie has 
not even been unable to mus- 
ter support at home as last 
week’s decision by Germany’s 
highest federal court, con- 
firmed. 

The court ruled that Winter- 
shall, the gas subsidiary of 
BASF, Germany's largest 
chemical group, does not have 
the right of TP A to the gas grid 
in eastern Germany. The east's 
gas transmission system is 
monopolised by Verbundnetz 
Gas (VNG). The shares of this 
former state-owned company 
were distributed by the Treu- 
hand privatisation agency in 
1990, giving 35 per cent to 
Ruhrgas, western Germany's 
largest gas distributor. 

In practice, Ruhrgas enjoys a 
majority position because its 
allies, torinriing BEB, another 
gas company, and the east Ger- 
man municipalities, together 


Minister’s campaign for deregulation of the EU 
sector has been undermined by last week’s federal 
court decision, writes Judy Dempsey in Bonn 


hold an additional 25 per cent 
plus one share. Wintershall 
has 15 per cent plus one share 
and Gazprom, the Russian 
state-owned gas company, 5 
per cent 

Although the court is not 
expected to explain its decision 
until next month - the issue 
has hi g hli g hted a bizarre situa- 
tion in which Mr Rexrodt is 
pushing for deregulation of the 
energy sector in the EU, while 
being undermined at home by 
divisions about TP A. 

Frustration is growing 
among eastern and western 
German enterprises which 
want cheaper energy. “I don't 
understand what the fuss is all 
about," said Mr Volkmer Pore- 
zag, a senior technician at the 
Foto und Spezialisierungspa- 
pierfabrik. a company located 
in Welssbom, south-west of 
Dresden, and the source of the 
dispute between Wintershall 
and VNG. “All we wanted was 
cheaper energy. And we 
wanted a choice.” 

The enterprise employs 230 
people and provides paper to 


the photographic industry. In 
1991, its management had 
expected, as in the past, to sign 
a contract for gas supply from 
Erdgas SQdsachsen (ESG), the 
regional distributor - until, 
that is, it was approached by 
Wintershall. 


Frustration is 
growing among 
German 
enterprises 
which want 
cheaper energy 



“We were trying to enter the 
eastern German market at the 
time.” said Mr Henning Storek, 
Wintershall’s spokesman. “We 
wanted to supply this paper 
factory with gas. It was uneco- 
nomic to build a special pipe- 
line which would link it to our 
own lines. So we applied for 
permission - Third Party 
Access - to supply our gas 
through Erdgas SQdsachsen.” 

However, VNG distributes 
gas to the regional gas compa- 
nies, which in turn supply the 
local councils, or Stadtwerke. 
So when Wintershall applied 
for access to the gas grid, VNG 


refused. 

The west German company 
complained to the federal car- 
tel office that VNG was pre- 
venting competition, and in 
June 1992, the office came out 
in favour of TP A. Appeal and 
counter-appeal followed cul- 
minating in the federal court's 
decision against Wintershall. 

“we do not know yet if this 
court ruling is a one-off indi- 
vidual case decision, or 
whether it has actually ruled 
against the principle of TPA," 
said Mr Martin Weyand, an 
energy expert at Germany’s 
Association of the Gas and 
Water Industry (BGW). Either 
way, energy and industry 
groups are fundamentally 
divided on the issue. 

BASF /Winters hall believes 
that if the large German utili- 
ties are uot prepared to open 
up the gas and electricity grids 
and offer cheaper energy, then 
it will go it alone. Wintershall 
is already Investing DM4bn 
(£l.6tra) in building gas pipe- 
lines across east Germany. 

Mr Rexrodt also has the sup- 
port of the Verband (ter Indus- 
triellen Energle und Kraftwirt- 
chaft. an industrial association 
of energy users, hardly surpris- 
ing since BASF currently 
heads the organisation. In 
addition, a recent VIK paper 
concluded that “electricity and 


gas prices for Industry in Ger- 
many are between 30 and 40 
per emit, and in some extreme 
cases, 100 per cent higher than 
in other European countries". 

However, the powerful Ver- 
band komxnunaler Uniemeh- 
men, the association of munici- 
pal enterprises, want nothing 
to do with TPA. Under current 
legisla t io n , a municipality has 
exclusive right to issue a con- 
cession contract to a utility to 
supply the city. If TPA were 
introduced, annual revenues of 
about DMSbn earned from 
these concessionary rights 
would be reduced. 

However, Mr Rexrodt’s 
deregulation plans would at 
least allow the m unicipalities 
to choose which utility compa- 
nies they want to supply their 
customers. But the VDWE, the 
association in which Ger- 
many’s large Utility c ompanies 
are grouped, does not want to 
lose its monopolistic position 
allowing the companies to 
carve out their areas of supply. 

The BGW, for its part, 
opposes deregulation on the 
grounds that Mr Rexrodt has 
failed to make provision to 
compensate those who 
invested in building the energy 
grids in the first place, or to 
define the ownership of these 
grids. 

“The real problem facing 
Rexrodt is that he has iMtofl at 
home to establish a political 
basis and a consensus for his 
deregulation plans," a BGW 
official said. “He is lobbying in 
Brussels without domestic sun- , 
port" i 


Socialist delegates and, mili- 
tants at the party's national 
congress which canduded yes- 
ferday. The relative strength of 
the Defors-for^reridentcamp 
within the party probably 
approximates to the 87.5 -pear 
cent of delegates who eariter 
yesterday - voted tor Mr 
EmmanueDi as first secretary.. 

Since Mr EmmanueDi faced 
no rival -for the post to which 
he was nominated last July in 
succxsstoa to Mr MichelRoo 
ard, the 12J per cent' vote 
against Mm came largely from, 
those who regard Mr Deters as 
too much a man of . the centre. 

. The possibility .of a- Deletes 
presidential candidacy, par- 
tially reviving Socialist hopes 
shattered in .recent legislative 
elections, gave the congress a 
rare degree of harmony. 

- Adding to the. aura of recon- 
ciliation, President. Francois 
Mi tterr and name tO the former 
mining town .of Ltevin an Sat- . 
urday to commemorate a col- 
liery disaster of 20 years ago, 
to mate his peace With a party 
from which/ he has seemed 

trw»r«uriiig f y distant tn recent 

years, and to, stiffen its resolve 
to keep the Elysfie palace in; 
Socialist hands. 

Mr Emmanuelli reminded 
delegates that Mr Deltas “has 
been one of us for more than 20 
years and many of ns were 
members of the same govern- 
ment" when Mr Delors was 

fjmmra minister m 1981-fld. 

The reality Is that the Social- . 
1st party, winning only 14J> per 
cent of the vote in last Ji ms's 
European partiament etertinna 
under Mr Rocard’s leadership, 
is virtually at the beck and call 
of Mr Delors, whose opinion 
poll rating is far higher. But 
Mr BnimflimelH promised dele- 
gates that the party would go 
through the form c£ approving 
its presidential candidate and 
idatform, at a further conven- 
tion probably in January. 

Mr Emmanuelli made no 
apology for “swinging the 
party to the left”. He called for 
France's 39-hour working week 
to be reduced progressively to 
35 hours without any compara- 
ble redaction in bade pay, not 
as a miracle core, for unem- 
ployment but for a fairer divt 
skm of effort and wealth. He 
also said it was time for Social- 
ists, particularly those in the 
European parliament, to break 
their working consensus with 
Christian Democrats which 
was alienating left- and right- 
wing voters from Europe. 

He admitted “some differ- 
ences" an these points with Mr 
Delors, who has warned 
against Europe harming its 
competitiveness by reducing 
work but not rewards, and who 
has always valued the role 
played In European integration 
by consensus-minded Christian 
Democrats. But there was no 
sense in the left playing up its- ' 
differences. 

The first secretary clearly 
indicated his view that the 
Socialist party's role would be 
to anchor the left for Mr 
Delors, who would he free to 
reach out to the centre. 

Mr Francois BoDande, a for- 
mer Socialist deputy who runs 
Mr Delors’s Tfimoins political 
discussion club in France, said 
he (fid not think Mr Emman- 
uelli’s public appeal would . 
gratly influence file Comma- 
ston president's decision. “This 
turns on personal factors, and 
on developments on the right 
as much as on the left” 


Mom manufacturing and 
ernain service sector businesses 


European factories ‘outclassed’ 


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Only one in 50 European 
manufacturers are genuinely 
“world class" - yet three oat 
of four believe they can com- 
pete with the best of their 
international rivals, according 
to a four-country survey pub- 
lished today. 

The apparent gap between 
companies* perceptions of 
their competitiveness and tbe 
reality is revealed in “Made in 
Europe” by Mr Philip Hanson 
of IBM Consulting Group and 
Professor Chris Voss of Lon- 
don Business School. Their 
study of more than 650 fecto- 
ries in Finland. German, the 
Netherlands and Britain is 
billed as the largest and most 
comprehensive of manufactur- 


ing practice and performance 
in northern Europe. 

The findings have important 
implications for manufactur- 
ers. “The best in Europe is 
equal to the best in the 
world," says Prof Voss. “But 
the challenge for Europe is to 
bring all companies up to this 
standard. In too many compa- 
nies and sectors in all coun- 
tries, inertia and complacency 
are the main enemies, but 
there are also success stories." 

Germany, the Netherlands 
and Britain have similar num- 
bers of world class manufac- 
turers. but overall, the UK 
comes bottom of tbe four in 
both practice and perfor- 
mance. This is because it has a 
much longer “tail” of poorly 
performing companies, 


depressing its overall position. 

Using a strongly Japanese- 
influenced model developed by 
London Business School, the 
stndy found just 14 of the 663 
sites were world class, as mea- 
sured by qualities ranging 
from executive vision to effec- 
tive use of “lean" production 
techniques and manufacturing 


Hie performance is disap- 
po inting . say the authors. 
However, 46 per cent of the 
factories came in the next best 
category, and, with determina- 
tion, could become world 
class. 

Throughout the four conn- 
tries, the self-opinion of inter- 
national competitiveness runs 
well ahead of evidence of 
world class best practice, says 


the study. And those dose to 
being world class were much 
more realistic thaw less 
advanced companies. There 
was also clear evidence in all 
the countries that forefgn- 
owned companies - especially 
Japanese-owned - outper- 
formed domestically-owned 
ones in almost every area of 
Practice and ue rfu nwanra - -r . 

Among the big surprises was 
the performance of companies 
i n for mer East Germany- 
Restructured under new own- 
era, for more sites than expeo- 
ted were moving towards 
world class status. 

Made in Europe - a Four 
Nations Best Practice Study. 
Available from Matthew " 
Edwards at IBM on (OS) 0181 
575 7700.199 


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Monday November 21 1994 


^H^i^s p e Hs out new phase of development 

Financial stability 
‘Russia’s priority’ 


NEWS: EUROPE 


Kuchma to discuss Chernobyl closure 


ByJOhh ThQm *»l m Moscow 


E|S£w 3 

SHpS 

^Uon. ZJSS^StS 

biSt^ achieve financial sS- 

Mr Chubais said: -The 
exphcit instruction or presi- 

hTth? ltSin ‘ S that 19ft=i should 
be the new stage of Russian 

economic rerorm and that we 

Mt rS TS h l he 5031 tbat 
<dnce rh Ched >, re fonners 
an<» the end of taai . . . pn va . 

hsation has been achieved. Sta- 

bl M?rl n i S not Z et ach 'eved." 

Mr Chubais, the former pri- 
vatisation minister who has 
now emerged as the standard 
bearer of liberal economic 
reforms, said both President 
Boris Yeltsin and Mr Viktor 
Chernomyrdin, the prime min- 
ister, were committed to the 
1995 budget, which aims to 
bring down the monthly infla- 
tion rate to 1-2 per cent by the 
year-end. 

“It seems to me that until 
now the personal role of Prime 
Minister Chernomyr din , his 
fundamental change of Rus- 
sian economic policies is still 
underestimated and misunder- 
stood in the west His role is 
crucial and extremely impor- 
tant Now we have the strong 
support of Chernomyrdin and 



Chubais: IMF support crucial 


of Yeltsin,'* he said. 

Mr Chubais said support 
from the International Mone- 
tary Fimd would be ‘■crucial" if 
stabilisation was to work and 
said he was prepared to change 
some budget details to respond 
to its concerns. 

However, Mr Chubais fore- 
saw a fight with the Duma [the 
lower house of parliament] to 
enact the budget and accepted 
the need for compromise. “We 
could' discuss the structure of 
the government expenditure. 
We could discuss the sources 
of the non-inflationary way of 
covering the deficit of the bad- 
get. But I will not accept 
changes of principle to the 
budget," he said. 

The government would not 
waiver over its commitments 


Far left and right make 
running in Krasnodar 


John Lloyd on a poll battle in south Russia 


B attles for the regional 
and city parliaments in 
Krasnodar Krai, 
southern Russia, are a micro- 
cosm of the disorder among 
Russia's democrats and the 

nr ggniBflttptnal ktaengtH nf ftip 

far right and left The party 
campaigns leading up to yes- 
terday's election - the results 
of which will be known today 
or tomorrow -have been domi- 
nated by two groups, both of 
which fielded some 30 candi- 
dates: on the left, the hardline 
Communists united in a group 
named Otechestvo, or father- 
land; and on the far -right, the 
Liberal Democratic Party of 
Russia (LDPR), led by Mr 
Vladimir 22urinovsky. 

The far-left groups which 
make up Otechestvo were able 
to put aside their sectarian dif- 
ferences, though they proved 
to be too extreme for the offi- 
cial Russian Communist party, 
which ran separately. 

Mr Igor Kolomhtsev. editor 
of the Kub anaky Kurier, one of 
the main regional papers 
which enthusiastically sup- 
ports the LDPR says the party 
has several leading members 
but that they all "submit to the 
leadership of Vla dim ir Volfbv- 
itch [Zhirinovsky]. We have 
one leader, because we know 
that he is the person people 
know and they wfll vote for us 
through him". 

Mr Alexander Kovalov, an 
organiser for the liberal Rus- 
sia's Choice party, led nation- 
ally by the former prime minis- 
ter. Mr Yegor Gaidar, said: 
“We tried to unite but the peo- 
ple in Moscow won't have it. 
Each of them wants the presi- 
*hoiT"-a view illus- 


UKRAJNE 


> RUSSIA 

KRASNODAR 
Krasnodar 


ADIGEY 



9kW>jM0K 4 


GEORGIA 


dent’s chair," a view illus- 
trated by the absence of demo- 
cratic leaders in the campaip. 

The local adminis tration also 
put forward some 30 ^ndi- 
dates to the regional and city 
parliaments under the banner 
of “Our Group, Our home . A 
leading light of that grot® is 
the city’s mayor, Mr Valery 
Samoilenko who was fired tort 
week bv President Boris Yelt- 

president’s decrees • Focal 
opinion was divided o 
whether this would hann him, 
or increase his popularity. 

Besides controlling the 

Kurier newspaper, theZton- 

ovsky fertion a)® P™S*2.5 


inovskovo (Zhirinovsky's 
Truth) and runs a local televi- 
sion .station, M Studio, which 
last week was running and re- 
running videos of Mr Zhirin- 
ovsky's tours of the area. 

Mr Kolomiitsev says a group 
of wealthy local entrepreneurs 
have given financial support to 
the LDPR. They support the 
party organisation, and put up 
the money for, and advertise 
on, the television station. 

“The main issues here," he 
says, “are crime and corrup- 
tion: crime associated with the 
immigrants who have come 
here from the Caucasus 
because of the wars, and the 
corruption of the local adminis- 
tration. This is a special area. 
A great deal of ofl and metals 
goes out of the port of Novoros- 
siysk; the people in power take 
a slice of that and put it in 
hank accounts in Cyprus." 

It was corruption, says Mr 
Kolomiitsev, which tamed him 
from a democrat to an avid 
supporter of Mr Zhirinovsky. 
He bad collected a dossier on 
the local administration, and 
went last November to Moscow 
to present it to President Yelt- 
sin. After a series of appoint- 
ments with officials, he was 
told by a fellow petitioner - 
with a similar dossier - from 
Irkutsk that the latter’s evi- 
dence had persuaded Mr Yelt- 
sin to sign an order dismissing 
a top area official, only to 
revoke it two days later. 

"I understood tee was no 
gbod going on. 1 had an intro- 
duction to Vladimir Volfovich 
from his local leaders. 1 went 
to see Mm and was immedi- 
ately shown in and had a long 


It is now widely acoepted thai^ CWna ortere 


% 

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- - market In the world today , 

published tf-montNy in Chinese with a drctdaiion 
w senior officiate in both me indistrialsectDrand 


direct access lor marKswg Western technology 
hnd services. Whether it is advertising a corporate 

message Of StfTtpty a ^ ent ’ 

^^^piease call us ter lurther information. 


194 OUI Bnagton Md. 

London Sun OAHL England 

f? lawiwa on SB7W 
“ FM-OnonGMSu 


talk. ... I became a member 
and never regretted it. I think 
Russia needs a period of order 
- not fascism, not camps - but 
a period where the guilty are 
punished." 

This sentiment is widespread 
in Krasnodar. Nikolai, a pen- 
sioner who would not give his 
last name, made a torrent of 
complaints about migrants and 
about crime. "They have no 
fear of punishment," be said. 
“At least in Stalin's time you 
could be sure of equality and of 
fear before the law. Now you 
need someone in power who 
says, right, you're guilty, 
you’ve murdered, you will be 
shot. Do that three or four 
times and you’ll have peace." 
For all his robust views, Niko- 
lai supports not the Commu- 
nists or the LDPR, but 
Yabloko, the reformist group 
led by Mr Grigory Yavlinsky, 
which fielded six candidates 

The liberal parties, too. have 
had to take note of local senti- 
ment Russia's Choice, accord- 
ing to Mr Kovalev, has three 
principles: the clean-up of local 
government and publication of 
the budget; unity among 
Kuban Cossack organisations; 
and “protection of Russian 
speakers". Mr Kovalov says 
that “there are many peoples 
living here peacefully - but the 
migrants who have come in 
from the.struggles in the Caus- 
casus cause huge problems.” 

Businessman Sergei Frolov, 
of the Economic Freedom 
party, who has spent Rbs20m 
of his own money on the cam- 
paign, says: “I don't talk to 
people about economic reform, 
they don't understand these 
things. I talk about ensuring 
water supply, getting new 
trams, getting stable prices”. 

“We need a sense of our own 
history. We need to create a 
middle class and property 
rights. People don't understand 
this. But they will respond to 
people of character and energy; 
everything depends on the 
individual in our politics." 

Mr Kolomiitsev agrees, but 
draws a different moral “It's 
not like the west . . . Here 
everything is myth, rumour. 
People believe the opposite of 
what they hear from the 
authorities. They respect 
strong characters. That helps 
us now, which is why we're 
winning." 



By Matthew Kaminski in Kfav 


to reduce inflation to its set 
targets and to refrain from 
issuing any central bank cred- 
its to fund the budget deficit 
and from contemplating any 
rise In government spending 
on the military and agricul- 
tural sectors. 

The government would also 
attach a high priority to 
encouraging greater domestic 
and foreign investment, Mr 
Chubais said. “The main thing 
which should be done is first 
financial stabilisation. People 
will never invest if they have 
15 per cent per month infla- 
tion. And the second also fun- 
damental task is to reform the 
Russian security market infra- 
structure," he said. 

Mr Chubais said the Russia's 
domestic savings bad increased 
from Rbsfi trillion Ithousand 
billion] in January to Rbsl5 
trillion in July. “The popula- 
tion is ready to invest but has 
no ideas what is the reasonable 
way to invest. That is why 
they are using MMM. But I 
would like them to invest not 
in MMM but in the small 
machine building factory in 
Kaluga.” he said. 

Mr Chubais also met with 
western b usiness leaders yes- 
terday to discuss ways of 
encouraging foreign invest- 
ment The meeting discussed 
ways of introducing a more 
predictable and stable tax 1 
regime and of promoting Rus- 
sia’s access to international , 
markets. 


Ukraine will present a new 
plan to shut down the Cherno- 
byl unclear power station dar- 
ing President Leonid Kuch- 
ma’s summit In Washington 
this week, senior Ukrainian 
government officials said at 
the weekend. 

Ukraine will seek western 
financing of $1.49bn (£90m) to 
decommission the plant $2bn 
to finish work on three Soviet- 
era reactors elsewhere in the 
country and $3bn to build two 
western-type units near tbe 
Chernobyl site, they said. 

la turn. Ukraine would 
cover up to $6bn in other costs 
associated with shutting down 
Chernobyl - site in 1986 of the 


world's worst unclear accident 
• including constructing a new 
sarcophagus to encase the 
damaged fourth reactor, 
according to Mr Mikhati Uma- 
nets, head of Ukraine's nuclear 
power authority. 

The proposal, on its face, 
falls short of conditions 
sought by the Group of Seven 
leading industrialised coun- 
tries this summer. Ukraine 
does not agree immediately to 
close one of the two operating 
reactors at Chernobyl and does 
not set a timetable. 

The Chernobyl reactors can 
be closed only once the west- 
ern-style plant is built, Ukrai- 
nian officials said. Work on 
restarting a third Chernobyl 
reactor, badly damaged by fire 


in 1991, continues. 

“After ratifying [the nuclear 
Non-Proliferation Treaty last 
week], we want the west to 
endorse this course,” said Mr 
Umanets, riting a deal the US 
and Japan struck with North 
Korea earlier this year to 
bniid sew plants. “A better 
option Is hard to find”. 

Mr Dmytro Tabachnyk, bead 
of the president’s administra- 
tion, appealed for support - 
especially from the EU - and 
pointed to Ukrainian wiffing- 
ness to meet western states 
halfway. 

Ukraine’s government this 
month approved on energy- 
sector overhaul drawn up with 
World Bank help. The steps, 
including electricity price 


increases for industry and 
household consumers, are 
aimed at more efficient energy 
use lessened dependence 
on Russian and Turkmen 
imports. 

The EU states, led by Ger- 
many and France, have sought 
Chernobyl’s closure after 
Ukraine's parliament last year 
voted to keep It open and tbe 
government last February 
secretly decided to restart 
work on the third fire-dam- 
aged reactor. 

At the Naples summit this 
summer, the Group of Seven 
leading industrial nations 
pledged $2 00m is initial grants 
for shutdown if Ukraine 
accepted its action plan. The 
EU, viewing Chernobyl as of 


paramount concern, also 
offered $480m in loans and 
9115m in grant aid at the 
Corfu summit thta summer. 
Additional support would 
come from the European Bank 

for Reconstruction and Devel- 
opment and the World Bank. 

Ukraine's government, after 
committing itself to eventual 
shutdown in April, dismissed 
the aid as insufficient. 

The US has worked to bridge 
differences. 

Mr William White, the US 
deputy secretary of energy, 
last week hinted at a break- 
through in Washington. “Stay 
tuned,” be said. “The energy 
sector and Chernobyl in partic- 
ular will be a big part of the 
summit agenda”. 


UK Navy welcomes wider Bosnia role 


Bruce Clark gets a taste of the gruelling schedule aboard HMS Invincible 


F ighter pilots on the 
Invincible, the British 
Navy's 204)00 tonne air- 
craft carrier on patrol in the 
Adriatic yesterday added a 
strip of Serb-held territory in 
Croatia to their potential thea- 
tre of operations after receiv- 
ing instructions from Nato. 

Capt Richard Hastilow, the 
ship’s commander, welcomed 
the prospect of playing a wider 
role in the policing the skies 
over the embattled north Bos- 
nian enclave of Bihac. The cap- 
tain hoped it would be possible 
to deter Serb aircraft from 
making further air attacks on 
Bihac from Croatian territory. 

As the crisis in Bihac has 
unfolded over the last few 
days, the rise in adrenalin lev- 
els among the 1 ^00-strong 
crew of the Invincible has been 
perceptible but not dramatic, 
perhaps because they are 
already working so near the 


limits of their capacity. 

Ever since the carrier was 
deployed in the Adriatic three 
months ago. its nine fighter 
pilots have been committed to 
a gruelling work schedule, 
with pairs of Sea Harrier air- 
craft policing the Bosnian 
skies every few hours. 

Engineers work eight hours 
on, eight hours Off to maintain 
the Sea Harriers and Sea King 
helicopters. In the rare 
moments when there are no 
duties over Bosnia, pilots and 
seamen test one another’s 
skills by staging mock battles 
in which Harriers swoop 
towards the ship, and the crew 
go through the motions of 
defending themselves by 
unleashing Sea Dart missiles. 

Their tasks, routinely 
assigned by Nato, include 
enforcing the no-fly zone over 
Bosnia - which could mean 
shooting down any aircraft 


which refuses to leave - prepar- 
ing for possible air raids in 
support of UN ground troops, 
and old fashioned aerial recon- 
naissance. 

Aircraft based on the Invinci- 
ble also play some part in 
enforcing the arms embargo 
against the former Yugoslav 
republics; and officers on board 

are mnfiilMit. that thp h.in on 

arms deliveries to Bosnia can 
still be enforced, despite the 
recent change of US policy. 

The US is continuing to pro- 
vide its allies with basic infor- 
mation against sea traffic in 
the Adriatic, although its own 
ships will not stop aims going 
to Bosnia If they find any. Both 
the Invincible and the Sea Har- 
riers were designed for very 
different roles in cold war 
times. The carrier was 
intended for air defence in the 
Atlantic, with its helicopters 
engaging in anti-submarine 


warfare and early warning 
tasks. But the carrier has 
adapted well to tbe newly dis- 
covered art of “off-shore peace- 
keeping." 

The tactics of Gen Sir Mich- 
ael Rose, the British army offi- 
cer who is head of UN ground 
forces in Bosnia - and his 
insistence is on making only 
sparing use of air power - are 
very well understood on board 
the Invincible. “We are not 
gung-ho about this," says Capt 
Hastilow. 

Thanks to a continuous 
exchange of liaison officers 
between land and shore, the 
peacekeeping doctrine evolved 
by British forces in Bosnia - 
which favours consensus over 
constraint, wherever possible - 
is as staunchly professed by 
seamen and pilots as it is by 
ground troops. 

To use one of the favourite 
metaphors of Gen Rose, sol- 


diers sailors and airmen are 
“singing from the gamp hymn 
sheet". 

Ironically enough the carrier 
was not deployed in the Adri- 
atic with the intention of 
becoming more deeply embroil- 
led in the Bosnian conflict. If 
anything the opposite is true. 

While the ship is currently 
providing services to Nato, offi- 
cers on the Invincible are 
highly conscious of the 
“national task" of pulling out 
British ground forces which 
would be their top priority in 
any dramatic deterioration of 
the Bosnian crisis. 

But the insistence with which 
officers on the Invincible dis- 
cuss the moment when 
“nati onal tasks" might take 
over is a reminder of how 
quickly the alliance solidarity 
could unscramble if its mem- 
bers continue to disagree over 
Bosnia. 


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4 


FINANCIAX TIMES MONDAY NOVEMBEKr^I-i^ 


NEWS: INTERNATIONAL 


Republican leader says fast track legislation may not be renewed by Congress next year 

Dole ‘close to a deal’ on Uruguay Round 


By Nancy Dimne in Washington 

Senator Robert Dole, Republican 
leader in the US Senate, yesterday 
said he was close to a deal with the 
administration on passage of the Uru- 
guay Round im p l ementing le gislatio n 
this year. 

Mr Dole Is considered the hey to 
approval of the Round: some lobbyists 
say he can bring 12 Republican votes 
with him. Sixty out of 100 votes are 
needed for passage of a budget rule, 
which would dear the legislation for 


floor action. Even with Mr Dole's sup- 
port, the vote is expected to be close. 

He also suggested on television yes- 
terday that Congress would not sup- 
port a renewal of “test track” legisla- 
tion next year. This could hill 
administration plans to negotiate fur- 
ther trade agreements with Chile and 
other Tf ffHn American nations. 

The so-called fast track is a promise 
by Congress that it will vote trade 
agre eme nts up or down, without 
attempting to amend them. The 
adminis tration was unable to get test 


track renewal attached to the Uru- 
guay Round Implementing legislation 
this year, even with Democrat control 
of Congress. 

That failure is seen as having crip- 
pled President Bill Clinton on the 
trade front as he prepares to meet 
Latin American presidents at the 
s ummi t of the Americas next month. 

Mr Dole met administration officials 
at the weekend and threw a new 
dpmflnd on the negotiating table. He 
has asked for “assurances” from Mr 
Lloyd Bentsen, the treasury secretary. 


which would ease passage of a cut in 
the capital gains tax rate next year. 

This could be accomplished without 
cost to the budget, if the proposed 
legislation is "scored” by the Trea- 
sury as a revenue enhancer rather 
than a loss, as Republicans have been 
arguing for years. 

As a potential candidate for the 
Republican presidential nomination 
in 1996 Mr Dole is struggling to satisfy 
the concerns of the Republican right 
wing that the WTO would mean a loss 
of US sovereignty. 


He said he would “fix” the legisla- 
tion with amendments next year. “1 
proposed a way to get out of the WTO 
if we have these arbitrary, capricious, 
adverse decisions coming from this 
secret panel” he said. 

One of his suggestions is to estab- 
lish a panel of US trade experts to 
report to Congress on rulings from 
WTO dispute settlement panels. Con- 
gress could poll out of the WTO after 
three rulings, unfavourable to the US, 
were deemed by the experts to be not 
in conformance with WTO rules. 


Small steps forward for European exporters 

William Dawkins at the sixth EU- Japan ministerial meeting in Tokyo *«»>****- a* 



Sowca: MMsuy rf Finance. Japan 


S atisfaction but not eupho- 
ria was how Sir Leon 
Bzittan. the European 
Trade Commissioner, described 
his mood after the sixth EtJ-Ja- 
ppn annual ministerial meet- 
ing on Saturday. 

Sir Leon and his two col- 
leagues, Mrs Christiane Scriv- 
ener, in charge of tax and cus- 
toms. and Mr Renfi Steichen, 
responsible for agriculture, 
returned to Brussels yesterday 
with a briefcase half-full of 
s mall , yet concrete, trade 
prizes designed to help Euro- 
pean exporters make their way 
in the Japanese market. 


Individually, the fruits of the 
commissioners' visit are as 
twhninal and iow-proffle as the 
components of Europe’s 
attempt to achieve economic 
integration - a process which 
may have lessons for Japan's 
present halting steps to eco- 
nomic deregulation. 

Yet in total, the outcome is 
enough. Sir Leon claimed, to 
show that Europe's diplomatic 
style of trade negotiations with 

Japan is bringing results. That 
message is intended to soothe 
any European executives who 
suspect they are being cut out 
of Japanese trade deals 


achieved by their US competi- 
tors through threats of unilat- 
eral action from Washington. 

The EU trade prizes are: 

• A Japanese government 
declaration that it wishes pri- 
vate sector companies to allow 
no political considerations to 
influence commercial deci- 
sions. Given the traditional 
power of nods and winks from 
Tokyo, this could carry real 
weight, if backed up by 
bureaucrats in the minis tries 
concerned. 

• Tokyo is to negotiate with 
Brussels, starting imm ediately, 
on recognition of each others' 


industrial certification and 
product tests. The EU is the 
first trade partner with which 
Japan has had such talks. 

• Japan has agreed that 
imported food can carry "use 
by” dates, rather than the date 
of manufacture, as proposed in 
its most recent deregulation 
package, in July. 

• Japan will accept Japanese 
standards certificates issued by 
EU bodies, for textiles imports. 

• Imports of high-quality EU 
Linen will be permitted to carry 
labels differentiating them 
from inferior competition. 

• European exporters of 400 
electrical appliances will be 
able to certify themselves as 
safe under Japanese s tandar ds 
from next year, rather than 
have their goods tested in 
Japan. 

On top or this, the Commis- 
sioners patted their hosts on 
the back for progress in open- 
ing the Japanese market since 
the last ministerial meeting in 
January 1993. They were espe- 
cially pleased with a plan for 
clearer public procurement 
rules, tighter laws against bid- 
rigging, and a recent boost to 
the staff and operating guide- 
lines of the formerly toothless 


Fair Trade Commission. 

Sir Leon pointed out that 
there was still a long way to go 
on other trade gripes with 
Japan, SUCh as the raw tiniiing 
wide gap in tax on imported 
and Japanese spirits. Financial 
deregulation had not gone far 
enough and there was still a 
large number of official curbs 
on large stores, said a EU 
report 

While Japan’s trade surplus 
with the US has continued to 
rise, by 9.4 per cent to $4420bn 
(£27bn) in the first 10 months 
of this year, its surplus with 
the EU is in its second year of 
decline, perhaps evidence that 
Europe's polite approach pays. 


Japan's surplus with the EU 
fell by 19.5 per cent to $l&55bn 
in the 10 months to October. 

Sir Leon firmly that 

the EU is tempted by the US 
strategy of trying to pin Japan 
down to targets for import 
market share or the reduction 
of its current account surplus 
to a certain ratio of gross 
domestic product. 

Yet the EU team's official 
“expectation” that Japan's sur- 
plus would fall substantially 
by next year indicates that it 
wishes to apply at least polite 
pressure. "We should not be 
starry-eyed. . . and yet we 
should not be overly cynical” 
said Sr Lean. 


Japanese drinks regime under fire 


Japan’s practice of taxing its domestically 
produced shochu spirit more lightly than 
whisky, gin and other internationally made 
drinks comes under attack again today, writes 
Roderick Oram, Consumer Industries Editor. 

In two days of talks with Japanese officials in 
Tokyo, a delegation of producers from the EU, 
the US and Sweden will urge the gover n ment to 
use its 1995/96 budget to harmonise its liquor 
taxes. Seven years ago, Japan accepted the find- 
ing by a Gatt panel that its taxes discriminated 
agahwt non-shocfan drinks, but so Ear it has 
only partly amended them. Whisky and brandy 


are still taxed between four and seven times 
more heavily than shochu, a traditional liquor. 
The rate on vodka, gin and rum is two to three 
times higher. 

Shochu’ s share of the distilled drinks market 
has risen from 61 per cent in 1989 to 74 per cent 
today, according to Mr Tim Jackson of the 
Scotch Whisky Association, who is leading the 
delegation. Imported drinks account for only 8 
per cent of the market, compared with more 
than 30 per cent in most other developed coun- 
tries. The taxes also favour shochu over Japa- 
nese-made whisky and other spirits. 


Quebec 
shelves big 
hydro plan 

By Robert Glbbens In Montreal 

Quebec has shelved its 
controversial C$13bn ($9.6bn), 
3.100MW Great Whale hydro- 
electric project indefinitely, 

“Great Whale is an ice for a 
good kmg while and we don't 
need it now,” said Mr Jacques 
Parizeau, Quebec's premier, 
whose separatist Parti Qu€be- 
cois government won the Sep- 
tember 12 provincial election. 
He promised a new review of 
Quebec's energy needs. 

The decision was warmly 
greeted by environmentalists 
everywhere and by the Quebec 
Cree Indian leader, Mr Mat- 
thew Coon Crome. 

The Great Whale river, run- 
ning into Hudson Bay and its 
huge watershed, would have 
been dammed. A big area in 
the ancestral lands claime d by 
the Cree would have been 
flooded. The Cree have fought 
the project since 1985, demon- 
strating also in the US and 
Europe. 

Labour and business groups 
warned , of job losses, saying 
they would soon lobby again in 
support of the project . 

Great Whale, 700 miles xxuth 
of Montreal, was to have fol- 
lowed the James Bay hydro 
development just south. of it 
James Bay. now being com- 
pleted, adds about 13.000MW to 
Quebec's power capacity for 
CS20bn.. Quebec, Canada's sec- 
ond biggest province, has total 
generating capacity of more 
than 30.000MW - almost all 
hydro. 

The Great Whale project 
received a heavy blow in 1992, 
when New York state can- 
celled 20-year supply options 
worth at least CS17bn. Quebec 
could not finance Great Whale 
without guaranteed exports to 
underwrite international bond 
Issues. 


INTERNATIONAL PRESS REVIEW \ 

i! ^ u y 

Little Prince pays a call 


ARGENTINA 


By David Piling 


The arrival of the "Little 
Prince”, as some Argentine 
papers refer to Britain's Duke 
of York, was by no means the 
only news story in town. The 
official royal visit, the first 
since the 1982 Falklands war 
between Argentina and 
Britain, vied for space with a 
political brawl over allegedly 
extortionate telephone tariffs, 
the hotting-up of presidential 
elections and, most notably, 
continued hack-biting over 
government budgetary woes. 

The last item was slapped 
across the front pages after 
President Carlos Menem 
decreed a freeze on all public 
spending for the rest of the 
year. Journalists inevitably 
produced reams asking if the 
state machine was about to 
grind to a halt: would govern- 
ment officials have sufficient 
supplies of coffee and toilet 
paper to last them until Christ- 
mas? Who was going to pay for 
the. president’s forthcoming 
trip to Syria? 

But the duke held his own 
against such feisty competi- 
tion, even -.making the front- 
page fofloWIng flag-burning 
demonstrations : outside the 
British embassy. 

The press was tom between 
whether to treat the visit as a 
serious news item or to view It 
as a somewhat frivolous exer- 
cise in bilateral, protocol. 
“Twelve years after the Malvi- 
nas war, Menem received the 
Little Prince of the British 
throne in an act of reconcilia- 
tion: they played golf, they 
exchanged military uniforms 
and today they will inaugurate 
the Canning statue,” the daily 
Paginal 12 highlighted on its 
front page. Almost as an after- 
thought, it added: "27 arrested 



Menem: decreed freeze 


and 5 wounded in protests.” 

Not that the symbolism of 
the royal presence was Lost on 
anyone, particularly after 
recent controversy over Argen- 
tina’s alleged proposal to pay 
Falkland islanders up to $L5m 
(£9 15m) each to give up their 
British citizenship. “The inhab- 
itants of the Malvinas view the 
visit with unease ” said Ambito 
Financiero. “The apparently 
growing possibility of a recon- 
ciliation between both coun- 
tries makes them fear for the 
eventual sovereignty of the 
islands.” 

Ample coverage was also 
given to Argentine disquiet at 
the return of the prince, who 
participated in the war as a 
helicopter pilot. El Cronista 
aired the opinions of Radical 
deputy Ralil Galvin, who 
“exhorted the government not 
to exaggerate in the honours 
bestowed upon the prince, 
because this 'would signify a 
lack of respect to those who 
died in the Malvinas’". 

Newspapers also focused on 
potential tension over the 
duke’s visit to the former naval 
base of the General Belgrano 
cruiser, "sunk by the British 


outside the exclusion zone”. 

La Nad6n said: "A contradic- 
tory mood was expected among 
navy officials, with many hint- 
ing that they would refuse to 
shake hands with the British 
prince or to comply with the 
military salute.” It said, 
though, that most Argentines 
were less worked up about fra- 
ternising with a former enemy. 
“While some of those on the 
left and the right deplore the 
visit. . . for most people the 
arrival of the prince does not 
constitute an important topic 
of conversation [because] it 
reminds them of an incident 
they would prefer to forget” 

The Falklands theme was 
not forgotten, though by the 
end of the week it had shifted 
to the reported sacking of 
Argentina's ambassador to 
London. Mr Mario Campora 
was said to have lost his job 
for criticising the plan to buy 
back the islands - known 
locally as "Menem's bribe” - 
on the grounds that you should 
not pay for wbat was already 
yours by right 

The sovereignty buy-back 
idea, originally put forward by 
British prime ministerial 
adviser Sir Alan Walters, has 
by and large been ridiculed. In 
particular, Pagina/12 ran an 
article shortly before the 
duke’s arrival in which the 
Falklanders were represented 
by a photograph of penguins 
dressed up in top-hats and 
tails. The paper felt that the 
"kelpers” were basically 
immune to Argentina's charm 
offensive. “The foreign minis , 
ter acts like a man trying to 
seduce a woman. He will not 
be disheartened even though 
he is slapped on the face at 
each hint” 

The article said Falkland-Ar- 
gentine relations had perhaps 
been irreversibly ruined by the 
conflict 



A soldier stands guard in a Bio shanty town n«Mr 


Rio slums crackdown 


Brazil’s armed forces sealed 
off seven of Rio de Janeiro’s 
shanty towns over the week- 
end in a move one military 
commander described as “psy- 
chological intimidation" of the 
city's drag traffickers, Angus 
Foster writes from Sao Paulo. 

The exercises, which 
Involved more than 1,000 
troops and police, were the 
biggest since the federal gov- 
ernment last month gave the 
military control over rounding 


up Rio’s drug kings. The city’s 
police force, wUtely corru pte d 
by drug money, had lost con- 
trol of Rio's several hundred 
shanty towns to the traffick- 
ers. 

The armed forces' move- 
ments encountered almost no 
resistance and were largely 
welcomed by residents. 

The government decided to 
use troops partly because of a 
massacre of 13 shanty town 
residents by police last month. 


INTERNATIONAL news digest - 



to strengtheil t|es 


Saudi Arabia and Russia, which established full dqtoafe: 
relations after the . 1990-91 Gulf cristo yesterday ■ agreed -to 

im p r rygp rpfotinnw and strengthen ^agraaMBt 

prime minister Victor, 

rials said that tie .agreement would open the door 
rioaig on trade, economlcsxultnre, technology andsport/Iwy 
said that they also hoped ter doser political ties. Dxgtaoate to 
the region paid that - Mr GhamBumdli*. who is on a tourttf 
Gulf 'countries, was keen to.- reassure weaBihr 
suspicious of Moscow’s ties- with Baghdad t hat.R ussia would 
not develop t Wn at . the expenseof relatio n s with . other . states, 
Moscow h as been leading a campaign in the UN Security 
CouncU to ease .F flyytimw on Baghdad- imposed a fUaitts 1990 
ln u M gjflti. Total t rod** turnover btJ.weesu.-the two. cou ntr i e s is 
email and worth only about $3Gm a year, mostly comprising 
exports, fwhuBng 1 timber and cars, to Saudi Arahia. 
especially after Iraq's recognition of its /Southern ^neighbour 

earlier this mon&LReuter, Riyadh 

Volvo truck plant for Poland 

Volvo/ the- Swedish car and commercial, vebide. maker, to to 
establish a truck assembly plaid; in Poland. The plant, which 
will be located to Wroclaw, will have a; capacity to assemble 
UP to . 1000 heavy medium-duty" trucks a year- Volvo 
tracks have been assembled hitherto. in Potend.hy Jrfcz, the 
Polish track maker, but this agreement expires at toe-end of 
the year. The Swedish group said that it would he moving 
equipment, .tools and personnel from toe. Jabs facilities to 
Wroclaw, where It planned to produce more than 700 tracks to 
2995. Volvo Is the ift»ding importer of hetory-dntytrucks to 
Poland are* t pqrat ff to deliver around550units this year. K has 
es tablished a new marketing ynd fbwnne company during 1991 
and has a network of 10 dealers selling exclusively Volvo 
vehicles. Kevin Done, London . - - 

Success claimed against Eta 

Security chiefs to, toe Basque Country yesterday claimed toat 
they had dealt a «i gnffl«mt blow against the Eta separatist 
group after a succession of detentions ami toe- discovery of 
urban hideouts and arms caches. However, the' violent 
response by Eta supporters, who rioted in protest, served to 
da«h hopes for peace to the Basque country. The. events, winch 
centred an Bilbao, followed toe arrest last to week in Tonkin, 
south France, of Mr Felix Lopfa dela CaDe who was allegedly 
to charge of Eta's active sezvire unite. The apparent response 
by Eta to the Touloai arrest was an attempt to murder an army 
sergeant to Bilbao. This attack failed when the sergeant 
opened fire against three Eta toembacs and toe latter were 
later involved to a shootout with members of the security; 
forces who killed cme separatist, wounded 9 second and cap- 
tured the third. Tom Burns, Madrid 

China and Vietnam hold talks 

The leaders of China and Vietnam held landmark talks in 
Hanoi, yesterday, focusing more on solidarity than on the 
bitter (fisputes between the two neighbourtog countries. Com- 
munist party chipfc Jiang Zemin Of China, ynri Do MUOL Of 
Vi etnam led large delegations to toe highest-level exchange 
between the world’s two most populous communist states 
since they normalised relations three years ago. Mr Jiang said 
that the talks were sure to Improve relations between Vietnam 
and China. He and this Vietnamese leaders would have “an 
extensive and in-depth exchange of views on further jlevetop- 
ing our bilateral relations and on regional totematfnnai 
issues of common concern.” Reuter, Hanoi . . ^ . 

Human rights talks in Cuba 

The United Nations’ top human rights official , Mi* Jose Ayala 
Lasso, preferred to play the di plomat rather then the j taiga 
when he visited Cuba at the invitation of the gov ernmen t this 
we*. The three-day visit was the first to Latin America by toe 
UN Hi g h Commissioner for Human Bights since he tootkup 
the newly created post this year. He stressed his visit was 
primarily aimed at opening up a dialogue with - the Cuban 

authorities, but he made a point nf meeting political dissident* 
as well as senior members of Cuba’s one-party co mmunis t 
government He said that he had urged the government to 
ratify existing human rights conventions, such as the Conven- 
tion against Torture. But he also noted that economic condi- 
tions were inseparable from human rights and clearly 
endorse d a U N general assembly motion calling for the Hffipg 
of a longstanding US economic embargo against Cuba. Pascal 
Fletcher, Havana 

UN mission in Guatemala 

A United Nations mission to monitor respect for human rights 
in Guatemala will begin operating today amid a climate of 
social instabili t y and soaring levels of abuses. The mission of 
s ome 300 observers is fruit of an a gmampn* signed in March 
between the government and left-wing guerrillas, which both 
sides have sin ce frequently violated. Its mandate is to support 
toe authorities in investigating human rights abuses and to 
make recom menda tions on how gristing institutions can be 
improved. But it faces a judicial system where judges are 
frequently bribed or threatened and a police force which is 
poorly paid, badly trained, routinely corrupt and with little 
investigative capacity. The mission wffl also need the coopera- 
tion of the powerful army, which has jealously guarded Its 
independence and virtual de facto immunity from prosecution. 
Edward Otiebar, Guatemala City 

Bangladeshi talks fail 

^ inlan Steptam said yesterday that 
he had unfed to end Banglad es h’s protracted political crisis 
an V2 l ? d “ av ® 030 countiy soon. “I hope there can still be a 
peaceful and speedy resolution of the issues that today divide 
ymn political parties,” he said. “Violence and uproar wffl 
I urge the people of Bangfedeshnotto go 
down that road. Bangladesh’s political opposition has boycot- 
^ pariwment since February and mounted other protests to 
try to force tte government to resign and call elections under 

L?J!^^n adm 2? strati0IL ^ dected government need not 
can new polls until 1996. Reuter, Dhaka 





NEWBRIDGE 


Europe, Middle East and Africa, Tel: 44 (0) 633 413602. America, Tel: 1 703 834-3600. Asia Pacific, Tel: 1 613 591-3600. 

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MONDAY NOVEMBER 21 1994 ★ 


NEWS: INTERNATIONAL 


Fundamentalists force Arafat to remove kid gloves 


Julian Ozanne assesses the Palestinian leader’s position after Friday’s killings 

minSwHuiSS SW ti0 . n ®» 

the Gaza Strin 4hK Pal ? tinians ** 
over . it is a Sm/h thoueh for f™® 

MinmSiV “ ?° to losing. 

the authlrit^Sj! 31 !® 11 between 
Islamic ResistanS? th ? Hamas 

*S”as! 

weakness an? ^ raf ^ t s a PParent 

rf aSfS w?in?« rit ^ 011 

1881 Friday's 

violence. U Palestuuans “» mtemal 

“ Tllere has been a big increacp « n 
®uPPort for Hamas," Sid^ 8 ^ 

Soumni. head of the gS. BmS 
“* *" “But it’s tap^S 
to distinguish support for their 

fix**? support for their 
long-term goals. Few Palestinians 


want to see an Islamic state but 
there is increasing frustration and 
anger about a lack of progress and 
the groups are using it" 
Hamas and Jihad have vowed to 
continue attacks on Israel unto die 
Jewish state is forced to surrender 
all occupied Arab land from the Jor- 
dan river to the Mediterranean sea. 
Many Palestinians see Hamas and 
Jihad attacks as legitimate resis- 
tance to Israeli occupation and are 
increasingly discontented with Mr 
Arafat who is locked into a peace 
process winch appears to many Pal- 
estinians to be going nowhere. The 
Islamic leaders know that attacks 
against Israel win diem support 
H The peace agreement has 
deprived Palestinians of their rights 
and it is our right to resist occupa- 
tion.” said Sheikh Abdullah 
Sbammi, a leader of Islamic Jihad. 
"We are going to continue attacks 
against Jews anywhere and make 
them feel they can have no security 


on our land and we know this is 
going to make us stronger with the 
Palestinian people because we are 
now the only hope for Palestinian 
rights." 

In the aftermath of Friday’s kill- 
ings both Jihad and Hamas have 
tried to portray themselves as the 
victims of oppression by Mr Arafat. 
In a culture steeped in the political 
and religious values of martyrdom, 
the deaths are likely to add to the 
appeal of the Islamic groups. 

Publicly Hamas and Jihad deny 
they are seeking confrontation with 
the Palestinian Authority and are 
anxious to rule out the threat of 
civil war. Since Friday Islamic lead- 
ers have urged their supporters to 
step back from violent conflict with 
Mr Arafat and turn their guns on 
IsraeL 

"Nobody can push us to a civil 
war." said Sheikh Abdullah Izak of 
Islamic Jihad. "There will be more 
military activities against Israel but 


we don’t want confrontation with 
the authority. Arafat and the 
authority are our brothers." 

But political observers believe 
thnt m uch of Hamas rhetoric is for 
internal consumption because they 
do not want to be perceived by Pal- 
estinians as challenging the author- 
ity and risking dvfl war. They are 
determined to sabotage Mr Arafafs 
rule and force him into confronta- 
tion because they see the authority 
and the peace agreement as an 
obstacle to liberating the historical 
land of Palestine. 

“The Islamic mov ement is greedy 
for power but it is not sure that 
they have yet decided to go for 
power," said Mr Sourani. “They 
don’t think like other political 
groups in terms of ultimate political 
goals. For them it is quite enm qgft 
to go along with the struggle, which 
could take generations. It might 
involve destroying Arafat and if 
there is chaos they don’t mind so 


long as they can keep the struggle 
alive and openly confront IsraeL” 

Furthermore the Islamic move- 
ment is diverse and often speaks 
with different voices. While some 
leader s have called for dialogue ami 
reconciliation, others have said it is 
impossible to reach a modus viv- 
endi with the Authority. The mili- 
tary wings of the movements also 
seem virtually autonomous from 
the leadership above ground and 
much more radical. A leaflet by the 
military wing of Hamas warned yes- 
terday the gro u p would extract a 
Utter revenge against the authority 
for Friday's lrflHng c mtoa Mr Ara- 
fat replaced his military com- 
mander, a senior police rfwaf amt 
his justice minister who were 
described by Hamas as corrupt trai- 
tors, criminals, murderers. 

Since his return to Gaza five 
months ago Mr Arafat has treated 
the Islamic opposition with kid 
gkrves against the advice of hard- 


liners like Gen Nasr Yussuf, overall 
Palestinian mi litar y commander. 
Like his opponents he has been anx- 
ious to avoid the possibility of civil 
war. But his authority has been so 
openly fronted that before Friday’s 
confr ontation it was beginning to 
look as if be was not in control of 
the streets. 

Senior advisers to Mr Arafat say 
that the Authority cracks 

down farther they will be drawn 
into a battle which could attract 
Mamie activists from the region 
who will see Gaza as a soft target 
for advancing their goals of an 
Islamic revolution in the region. 

ft is a fear which is shared in 
neighbouring Egypt. President 
Hosni Mubarak warned cm Friday 
♦fart “without giving the P alestin- 
ians hope, Gaza could become a 
base for destabilisation that will 
affect not only the Middle East. . . It 
is going to affect Europe. It is very 
easy to go from here to Europe 


especially as you have cells of fun- 
damentalists all over Europe now.” 

Mr Arafat yesterday called for 
national unity but said he would 
not allow any force from outside to 
harm the Palestinian dream. The 
Authority has repeatedly said since 
Friday that outside dements pro- 
voked the ennfHrt, a lacrt r efer ence 
to extremist groups in Syria and 
Iranian Islamic fundamentalists . 

As if to prove the claim, angry 
Iranian students protested outside 
the Palestinian mission in Tehran 
yesterday calling Mr Arafat a tool of 
Zionism. A leading Iranian cleric 
said revenge should be taken 
against Israel ami the US but that 
“Arafat and his clique come next in 
line to be punished.” 

Since Friday there has been a 
stand-off between the Palestinian 
authority and the Islamic groups, 
mediated by Israeli Arabs and inde- 
pendent Palestinians. But Mr Sour- 
ani warned: “Neither side can 
afford to retreat because one step 
backward means a loss of control.” 
Both rides are carefully weighing 
the risks of farther violence. 


Angolan oil output shrugs off civil war 

A LONG LASTING PEACE 

SUflfiAfNARl F DEVELOP. 


By Robert Corzine 


The Angolan civil war which 
has left most of the country’s 
economy in rains has barely 
affected the oil industry, 
w hich this year has bit new 
production highs. 

A new deep-water field off 
the coast of the Cabinda 
enclave is about to begin pro- 
duction, taking Angola’s dally 
output up to about 600,000 
barrels a day of generally high 
quality ofl, well up on the 1993 
average of 512,000 b/d. 

The consistent rise in output 
has been achieved in spite of 
fighting earlier this year 
which destroyed some oil stor- 
age and loading facilities 
around the coastal town of 
Soya, just s ou t h of Gwhfwda. 

Part of Ifre reason why 13 m 
oil industry has proved so 
resilient is the fact that much 
of ffie production is from off- 
shore fields beyond the range 
of land-based artillery. 

The growing use of offshore 
processing mil tanker loading 
facilities maanw oil no longer 
needs to be piped ashore 
before being exported, mainly 
to the US. 

Although the war has not 
disrupted the industry, a polit- 
ical settlement would probably 



Angola government and rebel leaders at yesterday’s signing of a peace accord 


encourage a faster pace of 
development. 

Many companies, for exam- 
ple,- are keen to explore far- 
ther in the onshore areas of 
Cabinda. Bid; the threat of 


attacks from a Cabindan sepa- 
ratist .group has prevented 
them from carrying out seis- 
mic studies and other explora- 
tion activities. 

A good deal of exploration is 


taking place offshore, how- 
ever. Earlier this week the 
Angolan news agency Angop 
repor t ed that Elf Aquitaine, of 
France had dis c overed an oil 
field ,130km off the coast . 


Other companies, including 
Chevron of the US. are opti- 
mistic that the deep water 
areas now being licensed win 
prove as prolific as those in 
shallower waters. 


Renamo leader accepts 
party’s defeat at polls 


Fears of renewed war in 
Mozambique have receded now 
that Mr Afonso D htakama. the 
former rebel leader, has 
accepted defeat far his Renamo 
movement in last month’s first 
multiparty general elections, 
Renter reports from Maputo. 

The October 27-29 pall was 
won by bis rivil war foes. Pres- 
ident Joaquim Chissano and 
the Frelimo party, which has 
ruled since 1975 jnrtflppnrienffl 
from Portugal. 

Mr Dhlakama fagtefad how- 
ever, that final results 
announced by the fad ppwniiwnt 
national electoral co mmissio n 
on Saturday contained irregu- 
larities and were not free and 
fair as declared by interna- 
tional observers. 

Nevertheless, he said he 
would play a constructive role 
as head of the opposition in 
pa rliament, adding : “I send a 
message of peace to the Moz- 
ambican people.” 

The results gave Mr Chis- 
sano 53.3 per cent and Mr 
Dhlakama 33.73 per cent of the 
5.4m votes cast in the presiden- 
tial election. Frelimo won 129 
seats in. the 250member'paiiia- 


ment. Renamo won 112. A 
gmaii coalition, tVio Democratic 
Union, won the rest 

Mr Aldo Aiello, the Dinted 
Nations representative who 
has been overseeing an Octo- 
ber 1992 peace accord that 
ended 16 years of civil war 
between Renamo and the for- 
merly Marxist government, 
gave his seal of approval So 
did the Organisation of African 
Unity and the European Union. 

"Problems have occurred, 
irregularities were recorded 
and disruptions did take 
place," Mr Ajello told a news 
conference. "However, 
throughout the entire process, 
there has been no event or 
series of events which could 
affect foe overall credibility of 
the elections." 

Di ploma ts said the risk of 
fresh conflict now seemed 
remote. “Dhlakama had to say 
there were irregularities to 
save his pride. Kit Mozambi- 
cans are tired of war. He 
knows there is no point going 
back to foe bush,” said a west- 
ern diplomat. 

Mr Dhlakama boycotted the 
first day of voting because of 


fraud allegations, prompting 
fears that he might plunge 
Mozambique back into war as 
happened in Angola, southern 
Africa’s other former Portu- 
guese colony. But pressure 
from foe the UN, which had 
spent Sim a day on the peace 
process, from neighbour- 
ing states, which threatened 
intervention, persuaded him to 
rejoin the elections. 

Mr Chissano, in a victory 
broadcast, called for peace 
among foe 16m people, most of 
wham have lost fomfly, friends 
or limbs in foe war, which 
reduced Mozambique to one of 
foe world’s poorest countries. 
"War was defeated at these 
elections,” he said. "AH have 
the patriotic obligation to heal 
the wounds.” 

While prandstng to open dia- 
logue with opposition parties 
and urging that Mr Dhlakama 
be treated with respect, Mr 
Chissano revealed no plans to 
include ids former foe in the 
catenet due to be formed by 
mid-December. 

HanfflTmr g in ffwilhnn Hulk at 

international pressure to form 
a natimai unity government. 



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NEWS: UK 


Central bank issues warning on interest rates 


By Gntan Tett, 

Economics Staff 

British Interest rates must be 
raised if the UK economy con- 
tinues to expand at its current 
rate, Mr Eddie George, gover- 
nor of the Bank of England 
[the UK central bank], warned 
yesterday. 

His comment follows publi- 
cation of figures last week 
which showed that the UK 
economy is growing much fas- 
ter than previously expected. 

The figures have fuelled City 
speculation that Mr George 
will soon press for a rise in 


The government faces strong pressure to 
demonstrate in the Budget that its sympathies 
are shifting from cars to public transport, our 
Transport Correspondent writes. The long 
queue of projects waiting for cash includes: 

• Technologies for electronic tolls on motor- 
ways are being evaluated by the Department of 
Transport for testing next year. More details of 


the expected private sector contribution to the 
project may be announced in the Budget 

• Light rail or "supertram" projects planned 
in several cities. 

• Proposals for a second road bridge across 

the Firth of Forth near Edinburgh - costing an 
estimated £4 00 m - are being studied by the 
Scottish Office. 


interest rates. But Mr Kenneth 
Clarke, chancellor of the 
exchequer, who is to speak on 
the economy in the House of 
Commons on Wednesday, is 
likely to be reluctant to raise 
rates before Christmas if, as 
expected, his Budget on 


November 29 unveils tighter 
fiscal measures. 

Nevertheless, with last 
week's figures indicating gross 
domestic product 4.2 per cent 
higher in the third quarter 
f-han in the same quarter last 
year, Bank of England officials 


believe growth is now unsus- 
tainably high. 

Speaking in Dubai, where he 
was attending an International 
banking conference, Mr George 
told Reuters: “We have the 
economy growing very 
strongly. Unless it begins to 


slow down of its own accord, 
there is no doubt we will have 
to to help it slow down 
through tighter monetary pol- 
icy." 

At Mr George’s last mone- 
tary meeting with the chancel- 
lor, the two men apparently 
agreed to leave interest rates 
unchanged at 5.75 per cent 

Mr Clarke's next monthly 
meeting with Mr George is 
scheduled for December 7, and 
economists are divided about 
the risk of a rise then. How- 
ever. Mr Clarke is likely to face 
protests from within his own 
Conservative party If he raises 


interest rates before Christmas 
having; as expected, acted in 
the Budget to Introduce tighter 
tax measures. 

Although manufacturing is 
growing steadily, boosted by a 
recovery in exports, last week's 
figures suggested that trading 
conditions will be tough for 
retailers in the pre-Christmas 
period. Meanwhile, as the 
chancellor and governor have 
stressed in recent weeks, UK 
inflationary pressures remain 
relatively subdued, with the 
underlying rate of retail price 
i nflatio n at its lowest for 27 
years. 



Spending 
on wine 
is dubbed 
‘obscene’ 


The opposition 
Labour party 
yesterday 
accused minis- 
ters in the 
Conservative 
government of 
operating an "obscene sense of 
priorities’' in official spending 
on wine, James Blitz writes at 
Westminster. The accusation 
came after the government dis- 
closed that It had spent more 
than £570,000 - an average of 
£5.26 ($8.62) a bottle - on wine 
for official gatherings in the 
past five years. 

Hr Alan Milburn, Labour 
MP for the northern England 
town of Darlington, said the 
purchasing was done by an 
organisation called the Gov- 
ernment Hospitality Fund 
Advisory Committee for the 
Purchase of Wine under the 
auspices of the Foreign Office. 
Sir Ewen Fergusson, chairman 
of Contis Bank, chairs the 
advisory committee of five 
wine experts. Sir Ewen was 
UK ambassador to South 
Africa in the early 1980s and 
ambassador to France from 
1987-92. 

Hr Milburn accused the 
committee of wasting public 
funds while Conservative 
finance ministers are urging 
restraint in public expendi- 
ture. “With huge spending 
cots being planned, it is an 
obscene sense of priorities to 
lavish large sums of public 
money on buying wine to dish 
out at receptions," he said. 

The Foreign Office said the 
average spending of £110,000 a 
year "does not necessarily 
mean that money was actually 
used in the last year because 
some wine is bought and then 
stored.” It said 500 functions 
were arranged by government 
departments last year involv- 
ing 35,000 guests. 

Such entertainment, involv- 
ing people from all walks of 
life, was in “direct support of 
government activities and 
objectives,” it SOM, citing 
examples as diverse as the pro- 
motion of exports and an 
award ceremony for disabled 
people. It added that govern- 
ment officials and not the five 
experts decided which wines 
to buy. 


Tories learn why 
supporters are 
deserting them 


By Robert Poston 

A blackout on media coverage 
of the National Health Service 
features in a draft Conserva- 
tive party communications 
plan for the next general elec- 
tion. 

Not intended for publication, 
it was written by Hr John 
Maples, the party’s deputy 
chairman and a former minis- 
ter, for Mr John Major, the 
prime minister, and officials at 
the party's headquarters. 

It is based on market 
research by the party 
of individuals on average 
earnings who voted Conserva- 
tive in the 1992 general 
election but now say they 


might or would not because 
they see the government as 
“ineffectual and unable to 
deliver its promises". Those 
surveyed are in the average- 
income social categories whose 
support was crucial to the Con- 
servatives' three previous elec- 
tion victories. 

They are described in the 
research as “natural Conserva- 
tives" but they disapprove of 
privatisation and believe that 
the “rich are getting richer on 
the backs of the rest". 

Dated 30 September 1994 Mr 
Maples' proposal for wooing 
them back says the election 
“could be as little as twenty 
months away and no more 
than thirty months". It 


JOHN MAPLES (tett) on . . . 

i The economy: "What we are saying is completely at odds with their [our supporters'} 
experience" 

The state health service: "The beet result for the need twelve months would be 
zero media coverage' 

Opposition leader Tony Blair: "If Blair turns out to be as good as he looks we 
have a problem” 

The media: *We need to feed our friends and potential friends In the press w flh 
good stories' 

Other "friends": "We must avoid antagonising our friends in the police, 

CBI [Confederation of British Industry - the UK’s biggest 
employers' group] etc if we can possibly help IT 
What Conservative supporters with average Incomes think about the govern m ent 
" 'incompetent' in three senses - cannot run the country; 'Ixti-m-a-china-shop 1 approach to change and 
scandals; shooting ourselves in the toot 



identifies the task in the 12 
months before the 1995 Conser- 
vative party conference as 
eroding or reversing the 
Labour party's lead in the 
opinion polls on Tour main 
issues: the economy, law and 
order, education and the state 
health service. 

On the economy, Mr Maples 
says: “The crucial issue here is 
living standards, which are 
“falling in 1994 to 1995" and 
will “again in 1995 to 1996”. He 
says the government's talk of 
recovery is “completely at odds 
with their [the surveyed Tory 


supporters'] experience". While 
he believes that Labour’s lead 
on law and order can be 
reversed, he is pessimistic on 
the health service. The paper 
says: “We can never win on 
this issue". It adds: "The best 
result for the next twelve 
months would be zero media 
coverage of the National 
Health Service". 

Apart from the health ser- 
vice. Labour's other great elec- 
toral asset is identified as its 
leader, Mr Tony Blair. The 
paper says: “If Blair turns out 
to be as good as he looks, we 


have a problem”. It continues: 
“We cannot- paint Blair as a 
left winger”. 

However, it urges a strategy 
of drawing commitments from 
the Labour leader which illus- 
trate the divide between him 
and many members of his 
party. 

Mr Maples suggests trying to 
appeal to disenchanted sup- 
porters by changing and 
increasing the tax levied on 
executive share options In 
order to deflect criticism of 
“excessive" executive pay 
packages. 


Names unite to combat threat to divert funds 


Lloyd’s faces extra challenge 


By Ralph Atkins 
Insurance Correspondent 

Groups representing loss- 
making Lloyd’s of London 
members have combined to 
finance a legal challenge to the 
insurance market's latest 
attempt at recouping money 
owed by the members. 

The new Litigating Names' 
Committee says it has enough 
money for a challenge in the 
High Court to Lloyd’s propos- 
als for ensuring that damages 


won In courts by loss making 
Names are used to settle their 
outstanding debts at the insur- 
ance market. 

A month-long consultation 
exercise on Lloyd's proposals 
ended last week with approxi- 
mately half of those respond- 
ing understood to oppose the 
changes. 

The new committee says its 
legal advice suggests that, by 
trying to put itself in a prefer- 
ential position ahead of other 
creditors. Lloyd's is breaching 


fundamental principles of 
insolvency law. 

Mr Michael Deeny, chairman 
of the Gooda Walker Action 
Group, whose members 
recently won damages for neg- 
ligence, said: "We are confi- 
dent that the High Court will 
declare these changes unlawful 
and we urge Lloyd's to aban- 
don them. The priority erf the 
council of Lloyd's should be 
just and equitable settlement, 
not forcing Names to engage in 
fresh legal battles." 


Fear of IRA split is rejected 


By Stewart Dafby in Belfast 

Mr John Hume, leader of 
Northern Ireland’s mainly 
Roman Catholic Social Demo- 
cratic and Labour party, has 
dismissed reports that the Irish 
Republican Army will split and 
that one faction will abandon 
the August ceasefire. 

His comments followed 
reports that an ERA faction 
based in South Armagh would 
take up arms again by March if 
Britain did not make signifi- 
cant constitutional concessions 


to the republican movement 
He said at the weekend: "I 
have been at the centre of the 
[peace] process from the very 
beginning. I can tell you there 
are no deadlines for the IRA, 
no secret deals." 

Earlier Mr Hume said he 
firmly believed the ceasefires 
by the IRA and anti-republican 
paramilitaries loyal to the UK 
would prove durable. 

Addressing bis party’s 
annual conference in Cooks- 
town, County Tyrone, he pre- 
dicted that the ceasefires by 


both sides will prove to be deci- 
sions that have taken the gun 
and the killing of human 
beings out of our politics for 
ever." 

• Mr Gerry Adams, president 
of the nationalist Sinn Fein 
party, yesterday deplored 
Northern Ireland's spate of 
punishments by severe beat- 
ing. “I am opposed to them; I 
always have been," he said on 
BBC television in London. But 
he cautioned against blaming 
all such beatings in nationalist 
areas on the IRA. 


London found to 
contain nation’s 
worst poverty 


By Alan Pike, 

Social Affairs Correspondent 

Britain’s biggest cities became 
concentrations of growing dis- 
advantage during the 1980s, a 
study by the Policy Studies 
Institute, an independent right- 
wing think-tank, concludes 
today. 

Birmin gham, Glasgow, Liver- 
pool and Manchester are all 
shown to have experienced 
growth problems, with inner 
city deprivation spreading to 
nearby areas. 

London, in spite of the afflu- 
ence of some citizens, “increas- 
ingly contains the largest con- 
centration of poverty and 
relative deprivation in 
Britain”. On the basis of new 
means of defining deprivation 
devised by the government 
recently, 17 London boroughs 
appear among the 30 most 
deprived areas in England. 

The report - a study of 
changes in deprived areas 
between 1981 and 1991 - 
reaches the "depressing con- 
clusion" that "government 


urban policies over a decade or 
more have as yet had only lim- 
ited success in reducing disad- 
vantage in the most deprived 
urban areas”. 

Employment opportunities in 
deprived areas are shown to be 
affected far more by general 
levels of activity in the 
national economy than by ini- 
tiatives h~Vn government tank 
forces, “however valuable they 
may have been”. There was, 
says the report, no observable 
correlation between changes In 
unemployment and the exis- 
tence of task farces. 

The study shows that, while 
London's deprived areas had 
lower levels of unemployment 
than other deprived parts of 
Britain in 1981, the capital’s 
unemployment rates rose by 
more than 50 per cent between 
1981 and 1991. A relative wors- 
ening of the unemployment 
position in the deprived Lon- 
don boroughs had continued 
since 199L 

Premature death rates in 12 
out of 13 London boroughs had 
grown worse since 1990. 


UK NEWS DIGEST 




for 



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-y/ 





Mr Cedric Browii, diief eXficutive of British Gas, 
a 75 per cent pay rise, taking Ms ..basic 
£475,000, The £205,000 increase, wWch-bas ^beeala^otete^ 
the hg gircntng qf year, makes Mr Brown s basic igynaw 

among the highest of any UK -public company dfoecfam .Pmw 
executive directors of British Gas hava received rises m u? to 
50 per cent following a review by foe non-executive. dtrectqr% 
The news has provoked an angry reaifonircnft trate-imjftns 
and po liticians . Mr Alastair Darling,' the Labo ur part y s 
spokesman, said -that the increaseswere “sheer stupidity”. Mr 
David Stirzaker, an. official of Unison, Britain’s biggest tame 
union, described' the rises as "scand alo us* when British- 
was shedding more than 25,000 jobs and his union's mem bers 
at the company -had received rises of less, than 3 per cant- ■ .%. 

Why do you deserve to be paldso much? , Page 15 

Crankshaft deal for Perkins J 

Albion Automotive, created by a management buy-fo .to. take 
over foiled truckmaker Dafs UK component, operations; is to- 
manufacture 30,000 crankshafts a year for Perkins- Group, one 
of the world’s biggest engine producers: The death? expected 
to create about 50 jobs at Albion's fitefifties toLeyland; 
north-west England, where last November’s buyrin preserved 
employment . for 310 workers as well as 430 at , the AHrfon axle 
plant at Scotetovm, Glasgow- ' \ : ;- _ - i- 

Hualon firm on Ireland pledg? 

Hualon Corporation, of Taiwan has denied allegations that it 
intended to renege em its pledge not to use its planned foctory 
in Northern Ireland to compete with producerafn mainland 
Europe. The British Apparel -and Textile Confederation last 
week said it would appeal to the European Court against the 
European Commission's , approval of £5lm in UK go vernment - 
aid for the £15Tm project It said the aid was oohditfonal on the 
basis that “production from 'the- plant would be -high- volume 
goods of low added value to comp&e wfrh low cost imports". 

But the confederation feared that the factory’s output would 
be high added-value products competing directly with existing 
European production. Hualon insisted that- the plant was 
intended “to supply from inside the EU a sector of tte market 
which is Increasingly being served by producers outside 
Europe." / . 

Growth urged at two airports 

London’s Heathrow and Gatwick airports could handle an 
extra 30m passengers a year if two small aixflelds. near the 
capital were developed, says the Adam Smith Institute^ a free 
market think-tank. Pressure could be takas '.off the two . big 
airports by expanding RedUQ airfield 20 miles south of Lon- 
don and the underused RAF station at Northolt about 6 miles 
north of Heathrow, ft says. The government is atoadycahsid- 
ering developing Northolt for tenan business aircraft. , 

Lottery winners are pursued 

Cainelot, the consortium organising the 
National Lottery, was last night Waiting 1 for 
two of the seven jackpot Winners in the first 
contest' to claim their, share of the £5-8m 
M ._ OM . L ($9-5m) jaokpot. The seven were bemgpdrsued 
by newspapers which have offered rewards to 
readers who help identify the winners. A total 
of 1.15m won prizes, mostly of £10, while the 
seven jackpot winners will each receive £839£>4 The, total 
payout will be more than £22m. 

The lottery draw was shown on BBC. Television on Saturday 
was watched by an average 19.3m people wiffl 2L7m tuning in. ‘ 
for the draw in the final minutes, according to early figures. 
Only 7.8m watched the rival (xanmerrial network and only 
7.4m saw the commercial network’s Diana: Portrait of d Prin- 
cess, which, was screened immediately after the lottery show in 
an attempt to win -viewers back. 

Russians apply for war medals 

Couriers may he used by the British army's Medals Office to 
meet heavy demand for medals won by Russian members of 
the British forces during the second world war. “Most of than 
went back to Russia after the war and were unable to ctoim 
their medals because of the Iron Curtain." said Lt Col Jhn 
Condon, head of the Medals Office. “We are looking at using a' 
courier to get medals to out-of-the-way places in Russia.” 


Lottei 

4 



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7 




FINANCIAL TIMES 


MONDAY NOVEMBER ?! 15^4 


MA N A C E M E NT 


T he search for an equita- 
ble formula for top exec* 
utive pay has acquired a 
new urgency this 
autumn, as pressure 
mounts on directors to curb embar- 
rassingly high pay rises. 

This month, it was the turn of Sir 
Bryan Nicholson, president of the 
Confederation of British Industry, 
to criticise "increases and perfor- 
mance bonuses which are not only 
well above infla tion, but also out of 
proportion with the rewards 
received by the workforce for the 
company's performance”. 

So for. companies have Med to 
provide an adequate justification 
for the rewards they pay top execu- 
tives. The link between pay rises 
and performance of the UK’s largest 
companies is non-existent accord- 
ing to a study by Graef Crystal, a 
US pay expert. Interest in the issue 
has also been heightened by pres- 
sure on companies to remedy short- 
comings as many of the 10-year 
share option schemes introduced 
from 1984 come to an end. 

Large, poorly-designed, incentive 
packages can be a problem, rather 
t-fran a solution. The provision of 
performance-related bonuses on top 
of share options is “divisive, infla- 
tionary and . . . greed-promoting”, 
according to Sir Owen Green, for- 
mer chairman of BTR. 

A similar debate is raging in the 
US, where the rewards to top execu- 
tives have escalated rapidly in 
recent years, often helped by multi- 
milli on -dollar share option gains. 

Intense controversy has been 
aroused by attempts to regulate 
executive pay more tightly and by 
proposed changes to the accounting 
treatment of share options. Salaries 
are now subject to greater disclo- 
sure and higher taxes on that share 
of the income which exceeds Sim 
(£600.000) a year and is not perfor- 
mance linked. 

Preoccupation with the size of 
executive rewards seems to be 
largely an Anglo/American phenom- 
enon. but the popularity of share 
options has spilled into France, 
where companies have been quick 
to spot their tax advantages. 
“Options have become practically 
the most significant element of 
executive compensation,” says 
Eduardo de Martino, a partner with 
accountants Arthur Andersen in 
Paris. “You can't really recruit or 
retain a high-quality executive 
without them." 

In most other European coun- 
tries. the culture of share options 
has yet to develop, although 
bonuses are commonplace. In Italy, 
for instance, where the small- and 
medium-sized enterprises which 
form the backbone of the Italian 
economy are not listed on the stock 
exchange, top Italian directors may 
receive up to 25 or 80 per cent of 
their remuneration in the form of 
cash bonuses. 

Hie fiercest debates about execu- 
tive pay, however, are taking place 
in the US and UK, which both have 
highly developed stockmarkets and 
where the influence of any individ- 
ual shareholder on company direc- 
tors is relatively weak. 

Much of the debate stems bom 
the desire of institutional share- 
holders to ensure that top managers 
are focused on their investors’ inter- 
ests. TTie rise of the professional 
manager means that “the investing 
institutions demand a check on the 
otherwise unfettered power of the 
executives, who might be tempted 
to live well at the shareholders’ 


Vanessa Houlder lo oks at moves to counter recent criticism of big 
bonuses by establishing a better link with performance 

Why do you deserve 
to be oaid so much? 



EXECUTIVE LUNCH 


expense", according to Alastair 
Boss Goobey, chief executive of Pos- 
Tel Investment Management 

Not everyone accepts that share- 
holders can extract a better perfor- 
mance from senior executives by 
paying for results. Alfie Kohn, a US 
management theorist believes that 
the motivational theory underpin- 
ning this doctrine is “profoundly 
wrong-headed”. The Pensions and 
Investment Research Council, 
which advises UK institutions on 
corporate governance issues, thinks 
that incentives for senior executives 
are inequitable and encourage 
Short-term thinking. 

The idea that incentives should 
be an integral part of top managers' 
pay packets, however, has become 
entrenched. Share option schemes, 
which typically allow senior execu- 
tives to buy shares (worth up to 
foar times their salary) at today's 
price in three years’ time, are used 


by 98 per cent of FT-SE 100 and Mid 
2S0 Index companies, according to 
New Bridge Street Consultants. 
Even the Labour party's proposal to 
remove tax concessions from share 
options is unlikely to dislodge them, 
it believes. 

Nonetheless, share options have 
come under increasing fire. The 
Association of British Insurers 
believes that they “may not provide 
the long-term motivation to high 
performance that was intended 
when they were introduced. Options 
have not created long-term share- 
holders, since they are usually exer- 
cised, and the shares sold, at the 
first possible opportunity. 

The most powerful criticism of 
share options is that they are based 
on a fallacious linkage between 
share price and management perfor- 
mance. In a boll market, executives 
with options stand to gain no mat- 
ter how poor the company’s relative 


performance has been. Conversely, 
in a bear market, a strong perfor- 
mance would not be recognised. 
Moreover, there is no downside if 
the share price falls after a disas- 
trous performance; the options sim- 
ply expire worthless. 

This inability to punish failure in 
the same way as they reward suc- 
cess can distort company policy. 
“You might decide as a company to 
make acquisitions to make the 
share price go up. If it goes wrong 
you have not lost anything," says 
Brian Friedman, head of compensa- 
tion and benefits at Arthur Ander- 
sen. 

But these arguments do not con- 
vince everybody. Brian Main, a pro- 
fessor at the University of Edin- 
burgh, argues that the portrayal of 
options as lacking downside risk 
neglects the fact that they have a 
real value when they are issued, 
which can be calculated using pric- 


ing formulae. 

Yet this solution depends on find- 
ing agreement on an acceptable 
method of valuing executive share 
options, which is fraught with diffi- 
culty. When the Accounting Stan- 
dards Board wrestled with the issue 
earlier this year, it concluded that it 
was not practical to include a 
“meaningful” money value of 
options in the accounts. 

In the US, the Financial Account- 
ing Standards Board is mired in 
controversy as it grapples with the 
same issue. It, however, is expected 
to conclude that executive options 
can be valued and should be treated 
as a cost that should be set against 
profits in a company’s accounts. 

This debate about valuation influ- 
ences another controversial area of 
the debate about incentives - 
namely, whether performance crite- 
ria should be used as qualifying 
hurdles when managers exercise 
their options. The -Association of 
British Insurers and the National 
Association of Pension Funds have 
decided to insist on performance 
conditions for options schemes to 
ensure that rewards are for real per- 
formance rather than mediocrity. 

Main argues that hurdles are- 
illogical. Since they merely lower 
the initial value of the option 
because of the lower probability of 
subsequent profitable exercise, it 
has “little net effect other than 
creating a bureaucratic complex- 
ity". 

M&G, the institutional investor, 
has resisted the introduction of per- 
formance conditions for other rea- 
sons. “We are firmly of the view 
that performance benchmarks for 
the exercise of options may not be 
in the best interests of sharehold- 
ers." said Paddy Linaker, then man- 
aging director, in February. 

His arguments rested on the arbi- 
trary nature of a particular perfor- 
mance yardstick and the potential 
conflicts of interest it can present 
“There is a real danger that same 
companies, in their search for 
benchmarks, will choose guidelines 
that are too demanding and which 
will result in unwise corporate 
strategies being pursued," he said. 

Over two thirds of the 33 compa- 
nies which have published bendi- 
marks for their options schemes 
since July 1993 have opted for earn- 
ings per share targets, according to 
a new study. However, they have 
the weakness that they can be 
manipulated through changes in 
accounting procedures. 

The other most common mea- 
sures are based on share price or 
total shareholder return. Their 
main disadvantage is that options 
gains are already linked to the 
growth in the share price. 

In a few cases, other types of mea- 
sures are being considered. 
Bradford Property Trust, for 
instance, has plumped for condi- 


tions based either on earnings .per 
share or net asset value. BP, which 
considers that fluctuations in oil 
prices and exchange .rates rule out 
price and rarnfogg per share, 
is con sideri n g using a measure that, 
compares its own return to share- 
holders against that of the other oil' 
majors. Other possibilities, based on 
concepts such as cash generation or 
return on capital, have been pr <y 
posed by compensation consultants. 

As troll as tinkering with their 
share option schemes; an increasing 
number of companies are experi- 
menting with an alternative, the- 
long-term incentive plan. These are 
schemes which reward management ; 
for performance over an extended 
period with cash or shares. 

Supporters of these schemes 
argue that they can neatly be tied 
to performance, without being sub- 
ject to the vagaries of the stock, 
market Reuters has announced a 
scheme which awards shares to 
executives at the beginning of the 
performance period, which are 
released at the end of five years, 
subject to a strong showing on total 
«fharwhn7A»r returns. No sham s are 
released if Renters is ranked in the 
last 25 companies in the FT-SE 100, 
but all are released if it is in the top 
40, with a graduated release 
between these two points. 

Long-term incentive plans are 
arguably an improvement on share 
option p lans , but risk being discred- 
ited if they are introduced as yet 

annthur Konri -ruit to top executives 

on top of what they already got 

Benefits are potentially large. “A 
maximum award of between 50 per 
amt and 100 per cent of salary is 
becoming fairly common," accord- 
ing to New Bridge Street Consul- 
tants. Moreover, all but one of the 
76 FT-SE 100 and Mid 250 Index 
index companies that have adopted 
incentive plans are using them in 
addition to their option schemes. 

Potentially. Incentive plans are 
open to abuse. There is no formal 
insti t utional shareholder limit on 
individual participation and they do 
not normally require shareholder 
consent Moreover, although awards 
are eventually disclosed as direc- 
tors’ emoluments, this is long after 
they were awarded and the 
amounts are often inadequately 
ex plain ed in terms of performance. 

This hi g hli g hts the broader case 
for more rigorous rules about the 
disclosure of executive pay. In the 
US, the SEC. the securities regula- 
tor, introduced a requirement in 
1992 tor each firm to disclose its top 
executives’ pay, together with the 
firm's performance over the last 
five years, compared with a relative 
index of a peer group of companies. 

“The implications have been 
far-reaching," says Peter Chingos of 
KPMG Peat Marwick. “It puts a sig- 
nificant amount of responsibility an 
a company to demonstrate- the rela- 
tionship between pay and perfor- 
mance.” 

Clearer and more detailed expla- 
nation of top executives’ pay in the 
UK would, on its own, do little to 
calm the public’s disquiet But by 
putting greater pressure on execu- 
tives to justify their salaries, it 
might lead to more, restraint on 
basic pay and more carefully 
designed incentive packages. In the 
meantime, however, the escalation 
of top executives’ pay will be seen 
by many as serving nobody's Inter- 
ests but their own. 

Additional reporting by Andrew Hill 
and Andrew Jack. 



•'Vr J* a- •'-& «> .: K.V.' 


Moving out of apartheid’s shadow 


I was in the new South Africa 
last week talking to human 
resources directors, consul- 
tants and managers. 

All labelled themselves as “pale 
males”, whose jobs and futures are 
threatened by new affirmative 
action initiatives. Apartheid, always 
a pigment of the imagination, casts 
a long shadow in the business world 
of this beautiful country. 

Many are worried by the pros- 
pects of legislation that would make 
organisations reflect the demo- 
graphic status of society. In other 
words, about 75 per cent of all staff 
at all levels should be black. 

There is talk everywhere of “Afri- 
canisation", although what this 
means is rather unclear. The word 
Eurocentric is used pejoratively to 
dismiss any idea or activity that is 
not favoured and is seen to be the 
practice of the “white minority rac- 
ist regime". 

Yet the American-originated con- 
cepts of victimisation, entitlement, 
affirmative action and the equality 
of results (not opportunities or 


inputs) are embraced with open 
arms. There is an obsession with 
the redistribution of poverty, hi so 
many spheres Mandela has shown 
an excellent example by letting go 
of the baggage of the past But the 
expectations of those who voted far 
him were fanned by prospective 
parliamentarians and could never 
be fulfilled. 

Political and organisational lead- 
ers find themselves in a dilemma. 
Support affirmative action publicly 
and the skilled whites the economy 
desperately needs continue to emi- 
grate, believing there will be less of 
a future tor themselves and their 
children. Let the “disadvantaged of 
the past" remain underdogs and the 
inflated expectations of the blacks 
might lead to more revolution. 

It all seems rather a no-win situa- 
tion. Some organisations try to com- 
promise by giving “gfass-ceQinged" 
pale males a hefty financial reward 
for promoting a young black man- 
ager over him or her as second 
prize. But only the most successful 
can afford this strategy. 


ADRIAN FURNHAM 



One of the big problems in the new 
South Africa is the whole process of 
consultation. The country moved 
from paucity to plethora; from 
authoritarian dictact with no con- 
sultation at any level to a prolifera- 
tion of forums where everyone can, 
must and does have their say how- 
ever mundane, repetitive or ill-in- 
formed. No manager dare not let a 
representative have his/her say. 
This can lead to a whole series of 
problems. Many managers feel 
intimidated enough to abdicate 
their responsibility for decisions 


and allow majority rule to prevail. 

Accountability is thus diffused 
and unfocused because the rules or 
participation and responsibility are 
never spelled out. But the most 
notable result is that all decision- 
making processes are long and 
tedious and satisfy no one. 

The old South African govern- 
ment was spectacularly successful 
at creating decision-making struc- 
tures of Byzantine complexity. Par- 
liaments, boards, committees multi- 
plied, often to the advantage of 
those that sat on them. Obtaining 
an approval in the old system was a 
nightmare because of the sheer 
complicated nature of the govern- 


ment structures. Alas, not only did 
business organisations mirror this 
love of complexity but the new mas- 
tern. rather than sweeping the state 
clear have only added to it. People 
from all persuasions are aware of 
the fact that entanglement in 
bureaucratic niceties can be an 
excellent ploy to bide real issues 
and promote the status quo. This is 
not the slash-and-bum approach of 
revolutionaries nor the work of 
right-sizing, re-engineering. It 
remains the analysis-paralysis 
approach which may work well 
when one is dealing with constitu- 
tions, but is less well suited to the 
world of making widgets. 


As always in times of great change, 
people's time perspective shifts 
from the long to the short term. For 
years, informed South African busi- 
ness leaders were filled with a sense 
of impermanence and discontinuity. 
Trapped between the powerful 
forces of Afrikaaner hegemony and 


Black African nationalism, English- 
speaking whites and many Indian 
entrepreneurs simply kept their 
heads down and tried to make mon- 
ey. . and get it out of the country. 
The short-term “let's-live for the 
day” philosophies still prevail in the 
“wait-and- see” period. But business 
needs to invest in, and build for a 
future which involves a. significant 
cultural shift. 

There is a saying in Afrikaans 
which directly translated mean s 
“tomorrow is another day”. 

It is usually regarded' as a state- 
ment of optimism about the future, 
looking forward to the possibility of 
a new start There is a lot of busi- 
ness optimism In South Africa. But 
like all. big political and economic 
metamorphoses it takes time and 
effort. The economic situation of 
eastern Europe is a reasonable par- 
a ll el. In the words of the prime min- 
ister “If it isn’t hurting, it isn’t 
working.” 

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



4?sci^ntifBf y? '^r * 


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tlS« 


tmstefSdeut fariiiof; *- f - 

.organisation rV- :■ 

machines twremtora^t^l^a- v ? 
'* wftKfom*rcby<rufes and, * •:*.V . 



t'toafctbe; 



as'.i 

+.i 

* they blamed bur fofcaJgdiug,: as 

"ft »L. -ft, . s •»- - - - - - 






.actors. The®ratfonaL afcfor^ part 

ffirasm out^mwealisticbylhe 
me&tXmiMM&ybaM Chester : 

• 9Bari*r£ who sk^raan&gers as 

yay"sorfaFact)OTS. But 
•tire OoseO^ystwii doctxine held - ' 
^kroy for decades.- . - 7. 
Only from aboet 1970 did .. 

• tbobry.fiaaffy patch tip. with . * 

; reaBty, comMningan open • , 

whit the “social actor” view.'- 
iBmcetpdsfS'tashfm far the 
Jdeatimt manageraand < : 
mustboth 

’Undertake Iffefoogleaining. 

>•-’ Weber only faatWeserves his 
. : :<tt*bdern repufotiaft tor two 
■reasons. Ffrst, Itis never fair to 
<.fndge with too mneh hindsight - 
/.at thethne r lris thfiahtog seemed 
• : quite reasonable- ;Seron4 Ite was 
rfess'oigpesshfe titan-most people 
realise. He matte a relatively 
enHghtened distinction {for his 
day and background^ between 
-power and authori t y . Power, be 
' said, was the Ability to force - 
people to obey, regardless of - 
their level m resistance. Under 
authority, however.orderswere 
Obeyed voluntarily. 

The Inadequate exercise of 
authority fa most bureaucracies 
disturbed, Weber; he saw the * 
excessive wielding of power a$ a 
' threatto human freedom and .. 
democratic yaluas. He warned . 
v .timt.tareancracy could. torn into 
anfron cageJBfe even wrote 
. “this passion for bureaucracy is 

• driving me to despair”. 

• Yet Weber’s influence has 1 
perpetuated. the dangerous 
metaphor of organisations as 
machine bureaucracies, rather - 


As the strategy and 
organisation expert Hewy . . 
Mratzberg argues, machine 
structures can only work weli so 
tong as a set of simple, 

. repetitive tasks need to be 
performed consistently. When * 
tasks grow more complex and' - 
change, themachine's regulated 
efficiency impairs the 


impeding creativity and 
motivation* In todays world, 
that is a pretty lethal 

combination. 

Christopher Lorenz; 



The FT Is circulated in 160 countries worldwide, with a readership In excess of one million people 

• The weekday FT is read by 139,000 senior business people In Great Britain 

• More UK business people read the FT than any other national dally newspaper 

For a full editorial synopsis and details of available advertisement positions, please contact: 


More than half of Europe's top Chief Executives read the FT 
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financial-, 


*MES MONDAY NOVEMBER 21 1994 * 


It takes 8,000 people to fly it, 
And 28,000 to look after it 

United aircraft are flown by 8,000 of the world’s most experienced pilots 
and cared for by 28,000 of the worlds most skilled mechanics and flight attendants 
Thats a sure indication of the value we place on efficiency and service - 
and one more reason why weve become one of the worlds biggest airlines. 
Come fly the airline thats uniting the world. Come fly the friendly skies. 

For reservations, see your travel agent or call United on 081 990 9900 
(0800 888 555 outside London). 


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FINANCIAL TIMES MONDAY NOVEMBER. ; 



crime 


who is all too real 


This well-educated, well-spoken, cosmopolitan businessman 
is laughing all the way to die bank, says Jimmy Bums 


W hile officials 
and ministers 
from more 
than 120 coun- 
tries meet 
today in Naples at the start of 
a UN conference on organised 
international crime, many a 
big-time crook will be laughing 
all the way to the hank. 

As Lillano Ferraro, a senior 
official with Italy’s ministry of 
justice, commented last week: 
“The organised crime syndi- 
cates have already held this 
kind of meeting . . . they just 
meet in a hotel in eastern 
Europe and divide the profits." 

It has taken the Italians 
more than five years to gener- 
ate sufficient interest among 
UN member states even to talk 
about the subject. And that, 
according to the organisers, is 
probably all they’ll do in the 
Palazzo Real 

Attempts at improving inter- 
national co-operation on law 
enforcement remain hampered 
by a combination of political 
rivalries, jealously guarded 
national legal systems, official 
corruption - and rank ineffi- 
ciency. 

In contrast, the organised 
international criminal frater- 
nity has become increasingly 
sophisticated; it is adept at 
extending its operations across 
frontiers, establishing areas of 
common interest, and manipu- 
lating the world’s economic 
system for hugely lucrative 
ends. 

“International organised 
criminals have learnt to outwit 
law enforcement agencies," 
says James Wyburd. an inves- 
tigator with MRC Business 
Information Group. 

In the words of John Kerry, a 
US senator, these global mob- 
sters cause so much trouble 
that they are “the new commu- 
nism. the new monolithic 
threat". 

Who are they? 

The really big boys are 
pretty far removed from his- 




tory's, and Hollywood’s, gang- 
ster self-publicist: Alphonse 
Capone, better known as A1 - 
the man whom the American 
crime writer Jay Robert Nash 
describes as “a near illiterate 
who acquired millions and 
knew not where to spend a 
dime of it". Capone died of 
syphilis and paresis of the 
brain. In the words of one of 
his gang: “AI’s brain just 
exploded." 

Times have changed. 
Eduardo Vetere, a former pro- 
fessor in law who heads the 
UN’s anti-crime branch, based 
in Vienna, says: “Today’s big- 
time c riminals are more seri- 
ous and dangerous than 
Capone ever was. The world 
has become smaller, while the 
criminals have become bigger. 
It’s a global village, in which 
crime in one country is easily 
transferred to others." 

There is no one better to ask 
about old- and new-time crooks 
than Mike Cherkasky. An 


employee of KroU Associates. 
one of the world's leading pri- 
vate corporate spook agencies, 
Cherkasky is a former New 
York attorney’s investigator 
who helped convict John Gotti, 
boss of the American mafia, in 
1992. and was a prominent 
investigator in the BCCI case. 
Cherkasky now helps super- 
vise one of New York’s garbage 
collection services, once the 
preserve of the mob. 

“The mob - blue-coliar crim- 
inals like Gotti - may have 
worn Armani suits and cash- 
mere coats, but they used their 
fists to get to the top," he says. 
‘They had no choice. There’s a 
different kind of corporate 
criminal around now. He is a 
cosmopolitan businessman, 
well-educated, well-spoken, 
who knows how to move 
among politicians and transfer 
his money from Wall Street to 
London to Paris and onwards if 
he wants to. He has plenty of 
opportunities, hut greed makes 


him take the criminal route." 

The world's leading organ- 
ised criminals do not give 
interviews bragging about 
their activities, as Capone did, 
daily, to the Chicago press. The 
meanest use journalists for tar- 
get practice if they get any- 
where near. Behind today's 
organised criminal lies a veri- 
table machine of hardware and 
hard men which makes 
Capone’s hoods look like choc- 
olate soldiers. 

Perhaps the most colourful 
prototype of the new interna- 
tional gangster was Pablo 
Escobar, a collector of giraffes, 
camels, beautiful women and 
classic cars, including 
Capone’s Pontiac. Colombia's 
drug baron turned the smug- 
gling of cocaine into the 
world’s biggest money-spin- 
ning bootleg operation. His 
ability to bribe and corrupt 
officials went far beyond his 
home town of Medellin, where 
he is believed to have author- 



I 


St Ceciliatide 

International Festival of Music 1995 



in association with 




the Financial Times 


Exactly one year from today sees the start of a brilliant new 
musical event , to be held annually in the historic venue of 
Stationers 3 Hall in the City of London. 

Fiori Musicali, the Lindsay String Quartet, John Lill 
and Julian Joseph play music spanning the 320 year history 
of the Hall , and each evening's music is followed by a candlelit 
dinner in the gilded Court Room. 

The 1995 Festival concerts are sponsored by: 

Aylesford Newsprint Limited 
The Financial Times Group 
Industrial Bank of Japan International 
Kores Nordic Group 
JKPMG Peat Marwick 
Sinclair Roche & Temperley 
Southern Electric pic 
Straker Office Supplies pic 
The Reuter Foundation 
Twinstar Chemicals Limited 




Wang (UK) Limited 


op 


For further information, please telephone 
Elizabeth George 
on 01327 350972 


Pi 


Us 




a 




Bank, the group’s London- " 
based subsidiary. Sheikh 
Khafefl, a leading businessman 
in Saadi Arabia's Eastern 
Province, has been a director 

of ABC since 1992 and was 

founder director of Saudi 
American Bank, the 
Riyadhrbased joint venture 
bank of winch Citibank isa. 
ipgdfng shareholder. Some' 

Western observers had 
expected Stanislas 
Yassukovkh, thedeputy 
chairman, to replace Saudi. 


indisputably back a± the top. 
Portugal's Fortuna magazine 


ised payments of $im per day 
to keep himself out of jail. 

Escobar bad a private army 
of 1,000 armed with state-of- 
the-art military hardware, and 
an A-team of lawyers well- 
versed in the art of laundering 
his ill-gotten gains through the 
world's I mainly off-shore) 
financial centres. 

Escobar was shot dead 
almost a year ago by the Col- 
ombian army, supported by the 
CIA, the US air force and the 
US drug enforcement agency. 
Yet he might have escaped had 
it not been for rival drug bar- 
ons turning against him. 

Next to the Colombian boys, 
it is the emerging criminal fra- 
ternity in eastern Europe 
which is likely to cause most 
worry at this week's confer- 
ence. In a background paper to 
the conference, the UN's anti- 
crime division does not mince 
words when it comes to the 
new Russian mafia. 

“Roubles as well as smug- 
gled arms and valuable metals 
worth billions of dollars leave 
the country in an unregulated 
fashion each month, while 
there is a substantial inflow of 
black and grey money," the 
anti-crime squad states. 

The criminal fraternity 
includes blue-collar villains not 
so different from the one-time 
Chicago mobsters. But at his 
most sophisticated, the eastern 
European criminal bribes offi- 
cials, terrorises western busi- 
nessman, manipulates the 
banking system, launders 
money around the west with 
front companies and exchange 
control fiddles, and engages in 
s uch transnational activities as 
prostitution, drugs smuggling 
and arms trading. 

Only last week a nuclear 
power plant was temporarily 
shut in Lithuania because of 
“terrorist" threats. 

The Naples conference is a 
gesture fitting in a city of 
magic and death. But that is 
all it is: a symbol 


Abdellatif takes 
over from Saudi 
at ABC 


Champalimaud 
empire restored 


country's richest inffltfdna!, 
with a personal net worth 
estimated at EsWflffl. Bat he ' 
admits Portugal is too small 
for him and is not e xpecte d to ; : 
ipalw any more important - • . 
re _acqnisttions.He remains in V 
Brazil leaving the-day-fo-day , 
ni«n ftfr ament of the family *s 
Portuguese interests to his son . 
Luis,chairman ofMundial 
Confianga. 


When Ahmed Abdellatif, 
manag in g director of Riyad 
Rank, Saudi Arabia’s spconfl 
largest, takes the helm of Arab 
Banking Corporation next 

year, bankers expect a period 

of consolidation rather than 
revolution from the former 
deputy governor of Sama, the 
Saudi central bank, writes 
Mark Nicholson. 

Abdellatif. 59, who will 
became ABC’s chief executive 
once Riyad Bank has replaced 
him , is a vary different figure 
from Abdullah Saudi ABC’s 
founder. Saudi who quit last 
month after 14 years in charge, 
is credited with turning the 
Bahrain-based offshore 

hanking imit into one Of the 

biggest hanks in the MuWte 
East with offshoots in Europe 
and Asia. 

But Saudi despite his name, 
is a former Libyan central 
banker, and it is widely felt 
that hie naHmiatit y was the 

primary reason for ins 
resignation. Kuwait and the 
United Arab Emirates, who 
with Libya are the chief 
shareholders in the hank, were 
concerned that Saadi’s Libyan 
mnnfff»t i 0P5 might lead the US 
to freeze the bank's assets. 

Abdellatif. by contrast, is a 
friendly, sure-footed Sandi who 
was plucked oat of his 
countr y' s central bank to 
re v ive the fortunes of Riyad 

Rank an imdpr ppr f nT -imng 

gian t which had never made 
the most of its mflogntial 
shareholders and solid Capital 
base. He is credited with doing 
a good job but as an ex-central 
banker he is not expected to 
match Saudi’s e n trepreneurial 
management style. 

Another sign of the 
increasing Saudi Arabian 
mfinRnno is the appointment of 
Shaikh Kfralid All Al tnrki, who 
has ta}rem over tram Saudi as 
chairman of ABC International 


financial times 

FINANCIAL 

REGULATION 

REPORT 


Financial Regulation Report is a 

monthly service from the Financial Times, ft provides 
subscribers with up-io-date and thorough information 
on worldwide regulatory developments and their 
implications for the financial services industry. 

To receive a FREE sample copy contact: 

Simi Bansal. Financial Times Newstarets. Marketing Depanmou. 
Third Floor. Number One Southwark Bridge. London SEI 9HL England. 
Tel: (+44 71 J 87.1 3795 Fax: (+44 71 > 873 3935 


TKr p*nk Mil ft MJ S, m ml mr, hrwAl mIm 

ipulri^ • lar suilrap bw pwpArw 


FINANCIAL TIMES 


I I *'•— MuMnOk M«ni Hn*K. Mil ■**_ 

N„ wm. VATbghnnh.*. 



Antonio Champafimaud, the 
76-year-old Portuguese 
en tre p r en eur who last week 

bought back another part of 


Zarella: GM’s 
ray of hope - 


In its efforts to rebuild Its 
battered US aufoLbusiiiess* 
General Motors has turned to a 
man who knows alot about . 


from him after the revolution 
of 1974, is admired and 
abominated with equal 
fervour, writes PeterWlse. 

He has been both landed as 
“Portugal’s greatest 
industrialist" and loathed as 
an incarnation of capitalist 
exploitation. During the 
Salazar-Caetano dictatorship, 
he was est imated to control - 
two-thirds of Portugal’s 
industrial capacity. Starting 
with an inherited cement 
company, he moved into steel 
banking and insurance. 

Making a fortune was easy 
the first time round in an 
economy protected from 
outside competition and 
benefiting from captive 
colonial markets. But 
Champaihnand, whose blunt; 
autocratic style leaves few 
people indifferent, believes he 
has proved his worth as an 
e n trepre ne ur by rebuilding the 
group that wag adzed from, 
him by a short-lived 
Communist-leaning 
government Last week he 
paid Es37.3bn (£5.74bn) to 
regain control of Banco Pinto - 
e Sotto Mayor, Portugal’s sixth 
largest bank. He had already . 
bought hade the insurance 

mmpgrty M mwtifll ftinfiawyn 

in 1992. 

nham p aiinuMMi once put in a 
claim for more than EslOOObn 
in compensation for the 
nationalisation of his assets 
but has received only a small 
fraction of that amount 
Instead, he is buying back his . 
Portuguese companies, 
through a reprivatisation 
programme begun in 1989, 
with earnings from Brazil 
where he fled in 1975 and built 
an extensive business centred 
on cement and livestock. 

After years in the 


writes Richard Waters. 

In a rare move, the car and- 
truck-maker last week turned 
outside to lack anew head of ' 
marketing for its lore north 1 
American operations. Ronald 
Zarella had been the number 
two executive at Bausch 4 
Lamb, manufacturer of trendy 


Jack Smith, GATs chief •’ \ 
executive; says the automaker - 
was drawn to Zarella by bis - 
“enormous innltifttnctlopa] ■ 
experience and global 
hi nnri . h qildinp er p ertigp * 7 

Despite the overblown. . 
ihetoaic, tidsmaynotbefar - •• 
from the mark: Zarella, 45, has 
an engineering-degree as well 
as an MBA, and spent the early 
part of his career 
engineering and 
mafimfacturipgjobs. That is.no - 
bad thing, given that in future 
he wifi have to negotiate with 
GM engineers ova: the 

gp ariffnaffrtnB of nnw y phirites 

for the US market. . 

The brand-building came in 
Bauscfr& Unnh’smternaticaial 
division, whose sales jumped ". 
from $l40m to $850m in the five 
years under ZareBa's control 

GM will hope he can rustle 
up the same magic for its own . 
products, which include 
venerable but hardly 
trend-setting names like 
Chevrolet, Cadillac and 
Oldsmobfle; it has lost ground 
to family sedans like Ford’s 
Taurus and sport-utility - 
vehicles tike Chrysler’s Jeep. 

Zarella says ins job involves 
"better defining customer 
segments”, then creating and 
selling products for each. 

Sounds easy? For GM, whose 
share of the US market has 
slipped to33J2per cent, it has 
proved anything but 



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AND NOTICE IS FURTHER GIVEN Am be 
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Artamnacm approved by the Sdhcme Creditors 
of MICA Remamance Lid l The Coorp«n 
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despatched to Scheme CrcdltaB of the Of&fcn 

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found in cyberspace 

Digital jukeboxes are set to have a big impact on the music industry. Alice Rawsthom reports 


I PatteS'n L ^' and *5 

jukebox. lihiFT 1 l S wr 

to »nd thc Internet 

music “ of alternative rock 

Austra!ia'?t’ch ' fru,n Arizona to 
orT to ThciV 10 lh?S* 

tr ans S, P 


cassette. 

Lord and . 

£?iL w 5° used' their skills and 
computer system to reach 


Putterson are cyber- 


( 20.000 


over the world. a ,„Us ISSn* U " 

°L lho multi nationals^ that 
dommate the ftUbn music Indus 
try. The major record companies 
cognise that digital diffusion 
Phenomenon that will. 
acc .cunt for a significant 
chunk of music distribution. What 
■ ?» y . , not ltn0w is how quicklv it 
will take off - or how to approach 

“We're working in the dark." sav$ 
^ ar ® L Jo h n ; director of legal affairs 
for the British Phonographic Indus- 
try (BPI) in London. “There's no 


doubt that at some stage digital dif- 
fusion will become a major part of 
the music market. My personal 
opinion is that it could happen 
very, very quickly." 

At present tl»e industry is In the 
unenviable position of not knowing 
whether digital diffusion Is a golden 
opportunity to boost pruGts. or u 
tlireat to its financial stability. Thc 
gtuba! music market is dominated 
by six companies - Sony. Time 
Warner. Matsushita. Bertelsmann. 
Thom- EMI and Polygram. 

If a compact disc sells for £12.99 
in the ITK. thc artist earns SSp, the 
producer Up, the publisher +lp and 
the manufacturer £1.05. The retailer 
takes £L25 and thc record company 
£4.66 (mostly to cover distribution 
costs), leaving £2.27 for VAT. 

This means that if a record com- 
pany can deliver a compact disc 
directly to the consumer's home, it 
will save the chunk of the £1.66 
previously spent on distributing it 
to the record shop and the retailer's 
£3.25. In short, it wifi be able to sell 
the same product for the same price 
much more profitably. 

Such calculations have encour- 
aged thc major groups to dabble in 
digital diffusion, Warner Bros, jjart 
of the Time Warner group, now 
offers on-line access tu some of its 
recordings dim ugh America Online 
and CompuServe, the US on-line 
services. 


tielfen Records, a Matsushita sub- 
sidiary. also releases material on 
CompuServe. This summer it 
became the first major record com- 
pany to produce a CD- Rom game. 
Ceflcn joined with Jasmine Multi- 
media. a small Californian software 
house, to create Vid Grid, a visual 
jigsaw that enables thc user to 
assemble videos from artistes 
including Red Hot Chili Peppers. 
Aomsmith and .limi Hendrix. 

These projects are stilt seen as 
experiments. The current genera- 
tion of on-line music services is not 
sophisticated enough for main- 
stream use. R can take as long as (5 
minutes to download a three-minute 
sung from IUMA on the Internet. 
The sumid quality is patchy (more 
like EM radio than compact disc) 
and the visuals limited to black and 
white. 

Some of tiie new digital diffusers 
- such as pHreak. a dance music 
fonuat run by Intermedin, a multi- 
media consultancy in London - 
deliver their services by computer 
modem rather than the Internet. 
This means that pHreak has a more 
limited market tbau the Internet's 
web of 25m users, but it can make 
the most of thc vivid colours and 
sharp definition offered by com- 
puter graphics. 

The Internet will become progres- 
sively more efficient. Digital junkies 
will also soon be able to transfer 


music to compact discs, rather than 
cassettes, with the launch of record' 
able video-CDs. Thc expansion of 

digital cable radio, now a fledgling 
medium in thc US and UK which 
relays dozens or specialist music 
stations to the home on cable TV 
connections, will provide another 
digital delivery system. 

Each home could eventually have 
its own “virtual record shop". The 
viewer would be able to order an 
album by remote control via a digi- 
tal cable box fitted to the TV set, 
pay for it by credit card and record 
it on to a compact disc, rather than 
buying it from a retailer. 


H 


owever. there is a 
risk that, rather than 
benefiting from digi- 
tal diffusion, the 
record companies will 
be marginalised by it. At present, 
their major artistes need them to 
secure access to their vast retail 
distribution systems. If digital diffu- 
sion became a major medium, the 
artistes might be tempted to break 
away and handle their own distribu- 
tion. There is also the threat that 
digital diffusion will continue to 
develop in its current fragmented 
form as an underground movement 
with devastating consequences for 
the music industry's revenue. 

The first wave of digital diffusers 
are effectively pirate operations. 


They should, in theory, be licensed 
to “selT music by the appropriate 
industry authority, such as the 
UK’s Performing Right Society 
(PRS). They should also pay royal- 
ties to that authority and the record 
company. Otherwise they could 
simply buy one compact disc and 
send It to be copied by thousands of 
subscribers. 

The PRS estimates that “literally 
hundreds" of on-line services have 
surfaced in the UK this year. So far 
it has been approached by only 
three and has licensed one, Cer- 
berus, which received official sanc- 
tion last week. 

“We’re not Luddites," says David 
Uwemeditno. head of legal affairs. 
“We encourage new technology 
within the regulatory system. We 
want to find a fair way for these 
new services to pay for their music. 
We're still working on it.” 

Time is running ouL The BPTs 
research suggests that once people 
have access to on-line services such 
as digital cable radio, their expendi- 
ture on compact discs and cassettes 
declines dramatically. 

“Record companies have histori- 
cally made a lot of money from dis- 
tribution and if they don't act 
quickly they could lose it," said Ms 
John. "The problem is that, as 
usual, technology is moving much 
faster than the law - and the indus- 
try’s process of thought.” 



Red Hot Chili Peppers: part of the CD-Rom game 


Mosaic: software sprat to catch an Internet mackerel 


By Louise Kehoe 

California's Netscape Communications has 
tens of thousands of eager customers for 
its first product, a “navigator" for the 
global Internet Which is not surprising, 
because this Silicon Valley software 
start-up company is handing out free 
copies of its Mosaic computer program to 
anyone who asks. 

That might seem an odd way to go about 
building a new business, but Jim Clark, 
chairman and co-founder of Netscape, has 
his eye on a prize far bigger than the 
revenues he may be sacrificing today. 

He believes that giving away the Beta 
version of the Mosaic navigator will help 
gamer support for Netscape's much more 
ambitious plans to transform the Internet 
- a global network of millions of 
computers - from a playground for 
computer enthusiasts into the primary 
route for electronic commerce. 

until earlier this year, dark was an 
Internet sceptic. As chairman of Silicon 


Graphics, a leading manufacturer of 
computer work-stations he founded in 
1932. he had been pursuing interactive 
television as the future path for the 
information superhighway. 

Then he met Marc Andreesen. A 
23-yea r-old cyber-star computer science 
graduate, Andreesen created Mosaic, a 
software program that enables even 
computer novices to explore the Internet's 
vast resources. 

Since Andreesen and a group of fellow 
students working at the University of 
Illinois’ National Center for 
Supercomputing Applications launched 
Mosaic on to the Internet last year, it has 
been used by an estimated 2m people. 

“I realised that Mosaic on the Internet 
was the way bo create all sorts of 
interactive multimedia services,” says 
Clark. “While the television industry is 
moving slowly toward interactive 
multimedia services, the Internet is 
spawning more and more sophisticated 
applications every day.” 


Clark resigned from Silicon Graphics 
and formed Netscape last April, hiring 
Andreesen and half a dozen other former 
students from the University of Illinois to 
get the venture off the ground. 

Starting from scratch, Clark claims, the 
team created a faster, more robust version 
of Mosaic ns well as a "NetSite" program 
for businesses that want to create 
interactive services on the Internet. 

Like the original Mosaic, Netscape's 
software provides Internet users with a 
relatively simple way to find information 
using “hypertext" linking between 
different documents and databases. 

By clicking on a highlighted word in a 
hypertext document, you are 
automatically transferred to related 
material which might be stored in the 
same computer data base or in another 
one half a world away. 

Were you to read this article via the 
Internet, for example, there would 
probably be opportunities to refer back to 
other FT articles about the Internet You 


might also be able to click on the word 
Mosaic to access the NASC Internet 
server, or pick Netscape to download the 
company’s free software, or switch to 
Silicon Graphics' Internet server and read 
about its products. 

"When you click on a hyperlink, you 
initiate a process.” says Clark. “Today that 
is typically the retrieval of a document a 
movie or an audio recording." 

The Internet is essentially a set of 
standards: communications protocols that 
define how data is moved from one 
computer to another, says Clark. “The 
internet is going to be the de facto 
standard for all kinds of interactive 
multimedia services.” 

Just as the establishment of technology 
standards spawned the personal computer 
revolution. Clark sees these Internet 
standards as likely to create vast 
opportunities in interactive multimedia 
services. “Those companies that are 
writing applications today are going to be 
best poised for the opportunity to create 


interactive digital businesses in thc 
future." 

However, there are several technical 
barriers that must be overcome before the 
Internet is ready for the mass market. 
Today, the infrastructure of the Internet is 
primitive, says Clark. Standard telephone 
line access is too slow to deliver video, and 
it takes several minutes just to retrieve a 
colour picture. But as telephone and cable 
TV companies upgrade their networks, the 
Internet will become foster and more 
versatile, he predicts. 

Partnerships with telephone companies 
are a central element of Netscape's plans 
to bring the Internet to a bigger audience. 
"By early next year there will be several 
telecommunications companies 
announcing that they provide 
Internet-related services,” says Clark. "I 
call it Internet dialtone. It will become one 
of the basic services that “phone 
companies offer”. 

Security is another problem on the 
Internet. Today there is no way of 


ensuring that sensitive information such 
as credit card numbers can be protected 
from computer hackers - a serious 
impediment to electronic commerce. 

However, using advanced encryption 
technology from RSA Data Security, a 
leader in the field, Netscape has created a 
secure version of its software, which it 
aims to sell to companies that want to do 
business on the Internet 

The ability to track and bill Internet 
users is another essential element of 
Netscape's plan to help usher in electronic 
commerce. For electronic publishers, one 
of the most important things is building in 
the ability to track subscribers in order to 
attract advertisers, says Clark. "We 
believe that advertising is an absolutely 
fundamental part of this.” 

The biggest barrier that Netscape faces, 
however, is persuading businesses to ply 
their wares in the electronic marketplace. 
H anding out free software that draws tens 
of thousands of potential consumers to the 
Internet is merely the first step. 


Designed to work 

Colin Amery discusses the future for offices and factories 


M ajor industrial 
companies 
often find 
themselves 
with an 
embarrassment of old build- 
ings that have outlived their 
purpose and would be wasted 
if they could not be modern- 
ised. This is a special problem 
in Britain, where the first 
industrial revolution began 
and where the pace of indus- 
trial change quickly outstrip- 
ped the usefulness of old plant. 

The changes that automation 
brought to heavy industry rep- 
resent only one aspect of the 
evolution of working patterns 
in the late 20th century, for 
advances in computerisation 
and information technology 
have only just started to 
change the way Britons work 
in offices. . 

The future shape and design 
of offices and factories is far 
from clear, and it is to archi- 
tects that we must look as 
innovators and leaders of the 
design revolution. 

Last week saw the annual 
Office of the Year award, spon- 
sored by the British Institute 
of Facilities Management and 
Du Pont OJK). Memorably, the 
judges described the office 
building as the “all too immov- 
able object" in any company’s 
portfolio of assets. 

It is clear that the develop- 
ment of office design i? Britain 
has improved considerably 
even during the recession, and 
one area of noteworthy 
improvement has been the 
involvement of the ^[Worce 
in the process. Consultation 
between architect and chant is 
the key to successful design. 
Si it is vital that discussion 
Strt the working envuon- 
ment occurs throughout any 

“ES** emerge with 

startling clarity when archi- 
tects take the time to ask ques- 
tions Underwriters, for esaw- 

prewouldbeetappierbreedU 

Sir Richard Rogers had le 

s="55s® 

gb«ss£ 

workers ta« 

SI? causes' imluapp* ness - 


1 



Highly successful and Innovative treatment of Boots plant near Nottingham 


Architects hate to see the moss 
of pin-ups and tcchnicolur pho- 
tographs of children, wives and 
mistresses that adorns most 
work-stations. But this reac- 
tion is an overly purist one, 
and indicates a wish to conceal 
anything that might reveal 
that life itself is not particu- 
larly well designed. 

It is fascinating that recent 
surveys by estate agents in 
London have confirmed what 
we have known for a long time 
- that people prefer to be able 
to open windows, see the world 
and breathe real air even if it 
is a bit noisy and polluted. 
Fashion plays its part it was 
not so long ago that office 
builders and developers were 
equally convinced that work- 
ers preferred the "deep plan" 
with sealed windows and little 
access to views of the outside 
world. 

Of course, in reality it is 
more likely to be the enormous 
expense of running and main- 
taining air-conditioning plant 
that will dictate a return to a 
more natural and less profli- 
gate office environment 

The winner of the Office of 
the Year award, rather surpris- 
ingly, was a huge purpose-built 
complex for Lloyd’s Bank: Can- 
ons House, on an 11-acre site in 
the dockland area of Bristol. 
Nealy 1,500 people work in this 
building, handling retail bank- 
ing business. The building was 
designed by Arup Associates, It 
has a distinctive classical 
architectural look on the out- 


side but comprises conven- 
tional energy-saving office 
spaces on the inside. 

A more interesting proposi- 
tion was the offices of Hamil- 
ton Oil in London, where the 
company has faced a problem 
common to many companies - 
the conversion and upgrading 
of an existing and inadequate 
building. Hamilton occupies 
part of Devonshire House in 
Piccadilly, a mid- 20th century 
office building. Inside it is a 
forest of structural columns: 
outside, there is ancient fenes- 
tration that needed replacing. 
Traffic noise in central London 
was also a problem in a build- 
ing that faces on to Piccadilly. 

B oots, in turn, is a 
company that 
should be glowing 
- in its case for a 
highly successful 
and innovative treatment of 
one of Its large industrial 
plants near Nottingham. One 
of its factories on the site at 
Beeston was a pioneer when it 
opened in 1933. In fact, it was 
seen by English Heritage as a 
building of such historical and 
architectural importance that 
it gave it that mixed blessing, a 
Grade 1 listing. This is an 
extremely rare distinction for 
an industrial plant, and 
acknowledges thc importance 
of the design by Sir Owen Wil- 
liams, which has been 
described as “a milestone in 
concrete architecture in 
Britain." 


The factory has been in con- 
tinuous operation since 1933, 
and was designed to allow a 
complete production process to 
flow north to south along thc 
length of tbe building. Owen 
Williams' design was highly 
innovative for the 1930s. The 
production line dictated the 
length of the plant, and the 
need for os much natural light 
hk possible produced the 
design of a concrete roof with 
150,000 glass discs. There are 
heating tubes in the glass 
walls to prevent condensation 
(something that has not yet 
reached the average British 
bathroom mirron. and cantile- 
vered roofs offer loading bays 
as large as isft with no sup- 
ports. 

Roots is to be commended 
for successfully carrying out a 
three-year. EKini renovation nf 
this listed Industrial master- 
piece. The company has proved 
that a building that is well 
designed for a specific purpose 
in the first place, and takes 
account of basic needs for light 
and air. has a life far beyond 
that of a property developer’s 
speculative, low-cost offering. 

The future for the design of 
places of work depends on the 
rate of technological change. 
But the recent office awards, 
and the experience "f Bouts, 
show that companies shuuld 
look to good designers from 
the start, because that is the 
way to ensure Jung life and 
flexible usage in return for 
substantial investment- 



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FINANCIAL^ TIMES ' MONDAY NOVEMBER 21 1994 



Ttaei 

psanaaoh' 
nwnwa 
detortone ' 
tforitotfie - 
length of ■ 
<W>y# : on air mrtov, tha 
Aaewiiaflon off European 
MrSnos said last week. It 
sahfRootdtf confirm what 
air firamBets had“already 
been noticing: that delay* 
ard on the increase * 


Theassoebfloa 
repre jonu 9A wefaodwfed 
European alrHnea. hi Its 
tfOMtm df p m d taiBl y 
review ft sakl that the 
pro portion of Wflhta 
detayed in the Joiy- 

September period by more 


than f* mhriw WnlW 
peres^asdntlZApar 
cemtatho second quarter 
ond IIS per cent in 8w 
same period last year.. 

TbeaseoctaBopsaldlt 
had been a ■ftre mcwWrr . 
sm nmw for p asse nger • ••' 
dem a nd*. But foam was : 
another side to foe cote 
c ongestion, ^tec od ■ 
ran nbemotpasaongoff a 
haum passed through 


airports have been ■ 
stretched to foe Sodt” 

The AEA reckoned that 

l ec t ors rotated to afr 
traffic control wove the 
biggest bug-bears, akmg 

wW> ii tie h mm Mi m of , 


BUSINESS TRAVEL 


Safe^fint 


An rftfea passenger group n 
the US has advised 3s 
members to avoid fiying on 
anauftwfih' fewer tfwh 31: seats 
because racoRtesfwwftey . . 
new a far higher fetal' acceded 
rate than, bigger akcraft 

David Stempter. of the. ' 
international AMne Passengers 
Association said that one reason 
for frra tltepaity was that , the US 
Federal Aviation’ AdnwilstaBQn 
slowed operators erf aircraft 
wfthfewerfifen SI seatetofly 
under lass sfringent safety and . 
operating rules. 

He sdd about 65 per cere of 
accidents for Writer commuter . 
aircraft occurred at ni^Tt, h bad 
weather, or both- about twice 
ftig rate for jet afercraft 



Rus^ain ffiy : feafS;- 

IhOwari tf r 
aMfemem ■. 
want to 

info 

Russia, 
despAss. 
series d fate craslwlfiat 
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foe safoly of RibMUb V. 
teipaa fran hSteiia Bdfcttd * ' 
avMofloffldaiwjia. Pfenje: : 
Jeenrik^ head off UTA, ' ' • ' 
wMcbrepresonte some 300 
abflaea, said hi Moscow 
that devel op ing air . 


importer* votr nigmoog 

o v IaUu w Industry. 

Tho OS State DepaRtm 
Issued a watnldg aboflt 


My. RwH Mi i w fta 



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What is the best area in which 
to stay? 

Pick a hotel as close as possi- 
ble to where you will be work- 
ing. The notoriety of Bang- 
kok’s traffic jams is richly 
deserved. If your business 
takes you all over the city, try 
hotels on and around Ratchad- 
amri Road. That way you 
should be able to reach govern- 
ment offices, the main business 
districts and the airport with- 
out great difficulty. 

On holiday, stay nest to the 
river at The Oriental. It is 
more fun to look at exotic rice- 
barges and river-taxis than the 
concrete shop-houses and 
tower blocks that dominate the 
rest of Bangkok. 

Hotels? 

The Regent on Ratchadamri 
Road is efficient and quiet and 
has an Asian flavour that dis- 
tinguishes it from the rest of 
the world's wearisomely fiunfl- 
iar five-star hotels. The Hyatt 
next door looks like an ugly 
glass and concrete wedding 
cake from outside, but is pleas- 
ant enough within. Next to it is 
a Hind u-cum-B uddhist shrine 
where Thais pray to win the 
lottery. 

On the other side of Lump ini 
Park is the Dnsit ThanL Once 
Bangkok's tallest building, this 
1970-vintage hotel looks its age. 
but is arguably as central as 
you will find. Not far away on 
Sa thorn Road is the Sukhothai, 
a new and well -designed hotel 
with ponds and statues that 
will calm frenzied executives. 

Officially, all of these cost 
between 50)00 and 6,000 baht a 
night, but discounts are avail- 
able if you ask. 

How about restaurants? 

Try not to eat in hotel res- 
taurants. Thai food - fresh, 


Smart Guide: Bangkok 

Jaunt through 
the jams 

Victor Mallet gives a few tips 


simple, spicy, cheap - is usu- 
ally better at a street stall than 
in a gloomy coffee shop. 

It is hard to go wrong with 
Thai food outside the hotels. 
Among the better Thai restau- 
rants are Ban Chiang (Srivleng 
Road) and Ban Khun Por (In 
Siam Square) - both, are in 
wooden Thai houses. 

For particularly spicy fere 
and north-eastern Thai mu- 
sic, try the 

outdoor Ban 


one. Nor is licentious behav- 
iour restricted to portly west- 
ern men. The Japanese have a 
street of bars in Patpong; 
unless you look Japanese, you 
will probably not get past the 
door. 

Other entertainments are 
scarce, but you could watch a 
Thai kick-boxing match at 
Lump ini stadium, ningmag are 
irritating: many films are 

in English with 

Thai subtitles. 


Lao (Sukhum- Do not point your but the sound 
Tit 36). feet at neonle. quality is of- 

If your bow- . ^ P V ten poor and 

els cannot faiita tOUCh ttieni OH tI10 the words in- 


nny more chilli , 

Bangkok has 
plenty of Ital- 
ian. Indian, 

Arab, French 
and Japanese 
restaurants, and more besides. 
For superb Kobe steaks and 
Japanese beer, the smoky 
Misu’s Kitchen on Patpong 1 is 
a must 

Entertainment? 

Bangkok is as notorious for 
its night life as for its traffic - 
again, justly. Patpong is the 
best-known drinking, whoring, 
ogling and night-time shopping 
area in Bangkok, possibly in 
the world - but is not the only 


head, or joke 
about the Thai 
royal family 


audible. 

What local 
qnirks should I 
be aware of? 

Do not point 
your feet at 
people, touch them on the 
head, be impatient or bud, or 
joke about the Thai royal fam- 
ily. If you bribe, bribe the right 
person at the right time. 

Obey these mbs and you are 
unlikely to get into trouble. 
Thais say their culture Is non- 
confrontationaL but you may 
dispute this if you watch peo- 
ple driving. And in a recent 
A-Z business guide to Thai- 
land. A was for Assassination. 


Transport? 

This is the bane of Bankgok. 
Be flexible. Leap out of your 
taxi and walk if it helps you 
reach a meeting on time, but 
remember that the city is 
hot, humid, short erf pavements 
and sometimes flooded with 
sewage. 

On some routes, you may 
find It quicker to use a river- 
taxi or canal-boat, but it pays 
to know exactly where you 
want to get off. Many business- 
men. think fl p th fpg of nsrng a 
motorcycle-taxi, but weaving 
through the traffic on these 
maohinfig is as dangerous as it 
is quick, and the air you 
breathe is thick with fumes. 
Suppose 1 have a spare day? 

Take a boat up the Chao 
Phraya river (or a bus) to Ayu- 
thaya, the temple-rich former 
capital of Thailand sacked by 
Burmese invaders. 

If you prefer nature to cul- 
ture, drive to the Khao Yai 
national park at dawn and 
walk in the forest. In the 
midHTg of the park are some 
food stalls serving a dish listed 
on the menu as “Untold Mis- 
eries Pork". 

• Thai Airways is increasing 
flight frequency and capacity to 
Europe, as well as adding Istan- 
bul as a destination during the 
current winter season (to March 
25), the airline said. 

It will raise flight frequency 
to Europe from 34 to 43 flights a 
week, including a twice-weekly 
service to Istanbul and Athens 
and seven a week to Paris and 
Frankfurt It will also fly four 
times a week to Copenhagen 
and three times to Stockholm. 

An increase in regional ser- 
vices will indude seven flights a 
week to Kunmmg in Yunnan 
province, southern China. 



Bangkok crush: the notoriety of the city’s traffic jamais deserved 


How to order room 
service and save time 


What do you do after you have 
placed an order with room 
service? A shower Is- out of the 
question - the food will arrive 
soon and you do not Want to 
answer the door wrapped in a 
toweL Telephoning home is not 
a good idea - you might be 
ioierrapted, writes Michael 
SkapmJcer. 

You could do some work, but 
you are jet-lagged and hungry. 
So you fie on your bed - 
watching CNN, noting how 
difficult it is to fill a 24-hour - 
news service. Fifty, minutes 
later, your order has still not 
arrived. You are seething at 
the wasted time. 

You telephone room service 
to complain. You begin: “I 
ordered some food nearly an 
hour ago ...” only to be 
interrupted by a knock on the 
door. “Ah, I think that might 
be it," you say weakly. 

Some hotels say they 

understand how you feeL Jane 
Mackie, European marketing 
manager at ITT Sheraton, says 
interviews with guests at 
European' hotels showed that . 
they wanted room service 24 


hours a day, and more control 

over when it arrived. 

She says Sheraton plans to 
fritra riiira au a ppo intm ents 
system, allowing guests to 
specify what time they want 
thBirroomsexviceordertobe 
delivered. Guests who want to 
go for a swim can ask for 
orders to arrive in exactly 90 
minutes, for example. . 

When they go oat in the 
morning, they can say they 
want their order to arrive at a 
specific Unlit m the evening; 
ilsre will be a mbnimim 
delivery period. 

Kurt Ritter, chief executive 
of Radissou-SAS hotels, says 
he has come up with another 
answer. At the company's 
hotel at Stockholm rail station, 
you can order food from the 
McDonald's next door. 

The order arrives in four 
minutes. The service is 
available 24 hours a day. Your 
bQl is debited and the hotel 
settles with McDonald's later. 
You can order healthier fore 
from the hotel’s restaurants, 
but Ritter says his guests seem 
to prefer McDonald's. 


Plague outbreak in China denied 


Reports of an outbreak g£ 
plague in more than 200 cities 
in China were a “fabrication", 
although seven cases of the 
disease had been detected since 
June, an official report said. 

Xinhua news agency, 
quoting an unnamed health 
nfBriai, said the, disease was . 


immediately brought under 
control after the cases were 
detected in remote regions of 
TSbet and Qinghai province, in 
south-western fflima. 

The report said China had an 
average of 10 cases of plague a 
year, having tam«i the itiwww 
in 1955.. 


A new world of hotels for the 
up-and-coming business traveller 



it you think the sky's tho limit for your 
business worldwide, we couldn't agree more. 


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£.1 




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*MES MONDAY NOVEMBER 21 1994 



PARIS . 

The tow Opera is in 
residence at the Theatre des 
Champs-Sytees for foe next 

three weeks, with staged 
performances of 
TcftaflccwsK/s ‘'The Queen of 
Spades'. Mussorgsky’s 
r Khovanshchina" and two 
Rirnaky-Koraakov rarities - 
.“Sadto"and ‘Legend of the 
Invisible City of KBeztr. 
k ' The casts Include Kirov 
Bl -favourites Oiga Borodna 
■ andGeDra 

. Gorchakova All 
.performances are 
conducted by 
Valery 
6 »gjev 
(left)- 


BOLOGNA 

TheTeatro 
CommunaJe has 
chosen one of 
Rossini’s lesser- 
known comic operas. 
“II Turco in ItaUa", to 
open ffs new season 
on Saturday. The 
production brings 
together a number of 
eminent Rossfaans, 
Including the . 
conductor EveHno 
PWo, the soprano 
Marie! la Devia and 
the tenor Rockwell 
Bloke. 


HEW YORK 

Ctty Batters winter 
season opens 
tomorrow at the 
Lincoln Cento- aid 
RBistifl February 26. 
The first night gala 
features the world 
premi er e of a new 
pas de deux by Peter 
Martins, followed by 
a week of repertory 
performances. ~ 
George Balanchine's 
production of "The 
Nutcracker” wB run 
throughout the 
Christmas period, 
starting on November 
30. 


AMSTERDAM A 

An unusual ^ 

exhfomon of late w 
medieval art opens at 1 
thottjkansaeum on ' 
Saturday. Entitled "The 
Ait of Devotion 1300- ’ 
1<W. it brings together 
50 paintings, 
miniatures, -i 

goldsmiths’ work end A 
prints. Among the M 
artists are Mantegna W 
and Memttng, The . J 
objects - smaB in a 
she and made with Jt 
precious materials 
- represent some ^Hf| 
of the most 

beautiful ^K|p| 
works of at 

of the period, JgtMWt 


Of elegance 
and mild 


subversion 


Alastair Macaulay reviews plays at 
the never-timid Glasgow Citizens 


T he Glasgow Citizens 
Theatre has a feel like 
no other theatre in 
Britain, but a feel that is 
a lot like the rest of 
Glasgow; lively, fashionable, unaris* 
tocratic, outgoing, and mildly sub- 
versive. The foyer alone has a 
unique blend of vitality and ele- 
gance. But the real excitement 
derives from the stage. Stages, 
rather; for the Cite, since 1992, has 
housed not one theatre but ttiroo 
Repertory is adventurous, produc- 
tions imaginative. I have had had 
evenings there (few), but not timid 
ones. 

Recently, Philip Prowse brought 
together Rupert Everett and four 
other actors to perform both Noel 
Coward's Private Lives and Cooped 
by three more actors) Tennessee 
Wiffiams’s The MSk Train Doesn’t 
Stop Here Anymore. Prowse is a 
style merchant; you could never 
watch a Prowse production and for- 
get that someone had staged it For 
these two, his stage was black and 
white, with a few other very strong 
colours (like shocking pink); the 
maid in either play -is acted by a' ’* 
man; both plays are set in the pres- 
ent day; and the already stylised 
parlance of tire leading characters is 
stylised more intensely. But the act- 
ors are stimulated by swapping 
between two such dissimilar 
vehicles, and, the plays, are alive.. 
Both. were 1 fair more brisk, Amny. 
and fresh, than -Prowse’s curreht 
West End Lady Windermere's Fim. . 

No one-wentfarfhar inswapping 
roles than Everett Remarkably, In 
ne ither role did he fully reveal his 
most bankab le asset - his film-star 
looks, hi both, he seemed to be in 
disguise, and each disguise was riv- 
eting, entertaining, surprising. In 
The Milk Train, he was the dying 
ex-beauty Flora Goforth; in Private 
Lives, he played Victor, Amanda's 
humourless new husband, created 
in 1930 by Laurence Olivier. Eds 
Victor was a deliberately 
two-dimensional romp, played with 
a crusty Prince Charles accent and 
think specs. I prefer Coward played 
3-D, but Everett’s" cartoon creation 
was a load of fim. IBs Flo ra, ho w- 
ever, was one of those rare travesty 
performances where a man uses his 
physical and vocal force not to dis- 
tort a femafo.cbaiacter but to inten- 
sify it. ’ 

Ercrett has 'large-scale -authority 
onstage. He can command both 
superficial languor and underlying 


hysteria, and be uses the full long- 
limbed physique to great effect 1 
know that everyone is playing Ham- 
let these days, but might not Ever- 
ett reveal more in the role than 
most? 

Flora Goforth, in The Milk Train 
Doesn’t Stop Here Anymore, is one 
of Tennessee Williams’s monstrous 
regiment She is trying to finish the 
memoirs of her racy life while only 
half admitting that her death is 
nigh; she is mysteriously visited by 
Chris, a younger if not young man, 
a dark angel who prepares her, as 
he has apparently prepared sundry 
other women of her impmarinnai 
circle, to meet death with a good 
grace; and meanwhile her time is 
wasted by another chatty virago, 
“the Witch of Capri’* (splendidly 
performed by Georgina Hale). All 
Flora thinks about is life; she even 
keeps contemplating Chris as a 
potential lover. 

w illiamc believed “the play will 
come off better the further it is 
removed from conventional thea- 
tre”. and Prowse surrounded it with 
various ‘kinds of artifice. Whenever 
flora ottered “a good line”, it was 
followed by instant (taped) 
applause, in which he briefly rev- 
elled - before suddenly cutting It 
dead with a gesture. Prowse also 
upped the homo element in the sup- 
porting roles. You can imagine the 
new connotations this gave a play 
that was already a meditation on 
the loves and life that are past, and 
the death that approaches all too 
test And yet the effect made the 
play not morbid but bracing. 

Private Lives, though in modem 
dress, was presented by Prowse as 
the brittle retreat into escapism 
that it indeed is. “Jagged with 
sophistication'' was the style. Greg 
Hicks was the harshest Elyot I have 
ever seen, with his cut-the-crap 
angry drawl; and his characterisa- 
tion was three-dimensional enough 
to set the tone for the whole produc- 
tion. The rest were slightly more 
cartoon-like, but no less vivid. 
Sophie Ward, with her Grace Kelly 
looks, wits a robust, blasde. vituper- 
ative Amanda, and Victoria Scar- 
borough an amusingly doll-like 
Sibyl. It was astonishing how often 
the cast charged past surefire 
laugh-lines but revealed the comedy 
elsewhere. This Private Lives was 
aB the more refreshing because it 
made no attempt to be definitive 
- Meanwhile, in the Stalls Studio. 
Antony McDonald's staging of Ger- 


iNTERNATtONAt 


production directed by GOnter 
Kramer. Conductor Jifl Kout at 7.30 
pm; NOV 23, 25, 29; Dec 1 


BONN 


PARES 


Optra National do Paris. Bastife 

TOTS 47 42 57 50 

Churig: conducts foe C^chestra et 

Choarrs de rOpdra . 

Paris for their perfomwnce of Verdi s 

Requiem at 8 pm; Nov 21 

jESjasaiwwffBw 

21/47!£o8 24Ws9K^by 

Gergiev at 7.30 pm, Nov23 
La Damede Pjqu* cJva^Geraiev 


Sssssw- 

7j 30 pm; Pec 6 - 


■ ROME 

THEATRE 

Teatro DelP Opera Tel: (0039) 6 
481601 L’Ariesiana: by Bizet at 7 
pm; Nov 25, 26, 27 


■ BERLIN 

OPERAMAUJET ,030) 3 41 92 

parts. Anew 



Rupert Everett as ex-beauty Flora Goforth in The Milk Train Doesn’t Stop Here Anymore 


trade Stein turns out to be nine 
plays and a recipe by the great 
American avant-garde writer. Cae- 
sar kisses every night. Lucrezia 
Borgia had no cousins. Three sisters 
who are not sisters. To hear Ger- 
trude Stein is, at first, to plunge 
into nonsense, and she sounds like 
Lewis Carroll’s daughter and heir. 
Yet the words never lose their 
sense. The opposite, rather. Stein 
sounds wonderful, but she never 
employs words for sound alone. Lis- 
tening, we are unusually aware of 
the meanings of each word - often 


she recycles sentences, with slight 
variations, to extract maximum 
ambiguity from them - and it is the 
fact that we understand that makes 
us 90 deliciously baffled. 

McDonald, one of the most origi- 
nal designer-directors on the British 
scene, fills the stage with a little 
cartoon house and its solid, tilted, 
wooden shadow on the floor. Four 
microphones hang from the ceiling, 
into which the five actors some- 
times speak. But, wherever we hear 
the voices coming from, we are 
never in doubt that this is live thea- 


Gertrade Stein is in repertory at 
the Citizens Stalls Studio, Glasgow, 
until December 3. 


OPERA/BALLET 
Oper Dor Stadt Tel; (228) 7281 II 
Guarany; by Antonio Gomes, to 
Italian with German surtitles. 
Conductor John Neschllng, 
production by Werner Herzog at 8 
pm; Nov 30 

La FancluBa del West by Puccini, in 
ttaban with German surtitJes. 
Conductor Eugene Kohn, production 
by Gian-Carfo del Monaco at 7 pm; 
Dec 2 (8 pm) 

La Traviata: by Verdi. A new 
production conducted by Eugene 
Kohn, with production by Jfirgen 
Rose. In Italian with German sureties 
at 8 pm; Nov 22,26(7 pm) ; Dec A 
(7 pm) 

The Steeping Beauty: anew 
production of Tchaikovsky's ballet 
Produced and choreographed by 
Youri Vfimos, conductor Michel 
Sasson at 7 pm; Nov 27; 

Dec 1 (8 pm), 3 


OPERA/BALLET 

Hot Muzksktheater Tel: (020) 551 89 
22 Rosa: new production of the 
opera by Andriessen. Directed by 
Peter Greenaway at 8 pm; Nov 22, 
25,28 


event inspired by Bruegel’s, 
’Landscape with FaH of Icarus’. ' 
Belgian director Fndddrrc Ramand 
collaborates with Italian artist 
Fabrizio Plessi and composer 
Michael Nyman at 7.45 pm; Dec 2, 3 


LONDON 

Jazz eclectic, pianist 
MuftNHchard - 
Abrams begins a UK 
tour on Friday at foe 
Queen Btzabeth Hafl. 
An inspiring 
etperirnanttitefartd. 
composer, Abrams Is 
also an origins! 
ffTtarpTHcror 

st and ard material. 
Which parts of te# 
vast repertoire the ' 
Sight-piece orchestra 
wi perform onThh 
rare visit is anybody's 

guess - but it could 

be the of the m 

year. J 


Huddersfield Festival/David Mi 


Gloria: the 


sweet and 


T hough it may seem an 
improbable place to any- 
one who never ventures 
north of Watford, Hud- 
dersfield has boasted 
Britain’s pre-eminent festival of 
contemporary music for many years 
now. This year’s festival, both wide- 
ranging anil intensive - for as usual 
it highlights particular composers, 
by way of supplying focus - is 
unusually rich, and it has some- 
thing special to celebrate: a new 
theatre. 

Since the old Victorian Theatre 
Royal was demolished more than 30 
years ago, Huddersfield has had 
none. In the new Lawrence Batley 
Theatre, constructed within an ele- 
gant 1819 b uilding which used to be 
a huge chapel, the town now has 
just what it needed, and so does the 
festival Hie interior is trim, airy, 
acoustically excellent, comfortable 
to sit in fit holds an audience of 
about 475 people), and pleasing to 
behold. For good measure there is a 
smaller studio theatre, too. The fes- 
tival is eagerly making plans for at 
least cam contemporary opera per 
year. 

The inaugural choice was ILK. 
Gruber’s Gloria, “a pigtale" - Glo- 
ria von Jaxtberg in the original Ger- 
man, but this porcine comedy-fable 
has been transferred in Amanda 
Holden's bright translation to the 
Pennines. Not, however, the stag- 
ing, which is a co-production with 
Opera North and the Big Bang 
Theatre Munich; it was Helmut 
Danninger of the latter company 
who first wanted the opera from 
Gruber, and he has directed it as for 
the Bavarian audience who will 
soon see it at their Volksoper. That. 

I think hag proved a mhrarf bless- 
ing. . 

The stay is sour-sweet and sim- 
ple. Gloria, the prettiest pig around, 
is rejected by her jealous sty-family, 
bat dreams of a handsome prince 
who will find her. Never having 
learned the meaning of “sausages". 
She mi the fa rmhan d who 

comes to lead her to the slaughter 
for her romantic saviour; there is a 
nick-af-time rescue. AH the roles are 
taken by five singers, and the curi- 
ous little band consists of seven 
players doubling can various wind 
and percussion instruments, a harp- 
ist and a single violin, (rather a vir- 
tuoso part). 

The composer draws bracing, 
racketty, quirky sounds from his 
orchestra. Superficially there are 
plain echoes of Kurt Weill, but 
Gruber’s off-centre basses, cun- 
ningly irregular rhythms and cross- 
tonal tricks are very much bis own. 
there is grateful maslc fbr' tbe sing- . 
ere, thqagfr ~ m thfe-aepotat at" 
least, '--'.with Jess lys^^ ^ow'thflin . 
in his splendid concerts. After ; twu;; 


sour porker 


tre. Two of the cast are outstanding: 
Paola Dionisotti and Siobfaan Stan- 
ley. Dionisotti’s wonted vigour and 
economy pay great dividends here. 
Stanley has wit, elegance, mor- 
dancy, pathos, stillness, and perpet- 
ual ambiguity. I would like to see. 
her now in a single Large role. In 
Stein, she perfectly leads us into the 
mesmerising rings and eni gma < of 
the language. 


hearings, I still think that Dannin- 
ger’s production and Marc Deggell- 
er’s designs do the singers no 
favours, not at any rate for a stag- 
ing in Britain. 

Despite the transposition to the 
Pennines, with suitable local refer- 
ences, the costumes are cod-Bavar- 
ian an d mostly in shiny black and 
white plastic. In fact pigs and farm- 
hands alike look to a British eye 
like German fashion victims (not to 
put too fine a point on it), poor, 
pretty Gloria as much as the rest 
The gestures and -movements vis- 
ited upon the hard-working actors 
are of a mock-naive archness that 
recalls the worst of children's tele- 
vision, as do the sets. Character is 
barely sketched, because everyone 
is kept so busy hopping, waving 
and laboriously shifting extraneous 
props. 

One can imag ing Gloria in a far 
crisper, wittier production, and 
some day we must hope to see one. 
Mary Hegarty’s sweetly vacuous 
heroine has her mnwwmts, arid the 
other Opera North singers work 
hard. Stefan Asbury conducts an 
mylimt band very efficiently. 

Among several concerts on Satur- 
day - the Huddersfield program- 
ming is always generous - two 
stood out The Danish Wind Quin- 
tet, wonderfully cultivated players, 
delivered very early, faded Henze, 
but also wistful Hans Abrahamsen 
(their compatriot), three evocative 
Jonathan Harvey fragments from 
1978 and a sort of vaudeville by 
another Dane, Mogens Winkel 
Holm. The real discovery was an 
“Eidiendorff-qulntett” by Gruber’s 
colleague Kurt Schwertsik, tiny 
pieces after single lines by that 
poet: every one odd, magically 
expressive and perfectly musicaL 

That evening brought the Cam- 
bridge New Music Players, con- 
ducted by Paul Hoskins, who con- 
firmed their rapidly growing 
reputation. Besides early* pungent 
Maxwell Davies (Antechrist) and 
recent chips from the workbench of 
Harrison Birtwistle (“Songs by 
Myself”, all with a sullen gleam), 
there were several young Cam- 
bridge products of varying promise. 
Far and away the most striking was 
Living Toys by Thomas Ades, tin- 
gling, brilliantly intricate end fasci- 
nating - just as Max Loppert 
reported here several months ago. A 
lot of people are watching the prog- 
ress of young Ades's career with 
avid interest; some others, no 
doubt, with envy too. 


Festival continues until 27 Novem- 
ber (Festival office 0484-425082); 
Gloria visits Newcastle, Aldeburgh 
asri-. Leicester before reaching the 
Qneen Ehzabeth Hall on December 


;V;.- 


■ BRUSSELS 

CONCERTS 

Phtthamonique de Bruxelles Tel: 
(02) 507 84 34 KoninkMjk 
Concertgebouworkest: conducted by 
Sir Georg Solti play Beethoven, 

Bart ok and Koddty. With pianist 
Evgeny KIssin at 7.30 pm; Nov 23, 
26. 29; Dec 2 


LONDON 


GALLERIES 

Barbican Tel: (071) 638 8891 A 
Bitter Truth: a multi-media 
exploration of changes in attitudes 
towards the first world war 
throughout its duration; to Dec 1 1 
Hayward Tel: (071) 261 0127 
Romantic Spirit in German Art 
1790-1990: examines work of early 
Romantic painters. Includes section 
on German Expressionists; to Jan 8 
National Gallery Tel: (071) 839 3321 


■ AMSTERDAM 

GALLERIES 

RQksmuseum Tel: 020 873 21 21 
Art of Devotion 1300-1500: major 
winter exhibition focusing on the 
spiritual function of objects in the 
medieval period; from Nov 26 to Feb 
26{not Sun) 


CONCERTS 

Barbican Tel: (071) 638 8891 
Mozart: idomeneo: Sir Colin Davis 
conducts the London Symphony 
Orchestra at 7 pm; Nov 25, 27 
Festival Hall Tel: (071) 928 8800 
Philharmonia Orchestra: with 
conductor Charles Dutoit and pianist 
Peter Jabkxiski play Tchaikovsky 
(piano concerto No. 2) and 
Shotekovich (symphony No. 5) at 
7.30 pm; Dec 8 
Russia Old and New. Royal 
Philharmonic Orchestra with the 
Brighton Festival Chorus, London 
Choral Society and conductor 
Vladimir Ashkaiazy perform 
Schnittke, Prokofiev and 
Rachmaninov at 7.30 pm; Dec 5 
Vienna Philharmonic Orchestra: 
Schubert symphony No. 8 and 
Brahms symphony No. 4 conducted 
by Carlo Maria Giulini. In the 
presence of HRH Princess 
Alexandra at 7.30 pm; Nov 23 
Queen Elizabeth Han Tel: (071) 928 
8800 The Fall of Icarus: Multi-media 


Allegory: selection of paintings from 
the permanent collection on the 
theme of allegory; to Dec 4(not Sun) 
Royal Academy Tel: (071) 439 7438 
The Glory of Venice: a major survey 
of Venetian art in the 18th century; 
to Dec 14 
OPERA/BALLET 
Barbican Tel: (071) 638 8891 The 
Kirov Opera: director Valery Gergiev 
brings his entire company to the UK 
for just one night to give the first 
complete British performance of 
Rimsky- Korsakov's opera. The 

Legend of the Invisible City of Kitezh 
at 7 pm; Nov 26 

English National Opera Tel: (071) 
832 8300 Ariadna on Naxos: by 
Strauss. A Graham Vick production 
ai 6.30 pm: Nov 22. 25; Dec 1 
Khovanshchina: new production of 
Musorgsky's opera. Director 
Francesca Zambello at 6.30 pm; 

Nov 24, , 30; Dec 3. 6 
Royal Opera House Tel: 071 240 
1200 An Ashton Celebration; The 
Royal Ballet Company pays tribute 


to its founder Choreographer. 
Performance indudes a new 
production of Daphnes and Chto8 toy 
Ravel at 7.30 pm; Nov 21. 28i 30 
La Traviata: by Verdi. A new 
production by Richard Eyre. Georg 
Solti conducts for the first five 
performances, then Philbpe Auguin. 
In Italian with English surtittes at 
7.30 pm; Nov 25, 29; Dec 2. 5 
Mixed Programme: indudes the 
World Premiere of Michael Clark's 
New Clarke Ballet, Fearful 
Symmetries choreographed by 
Ashley Page, and Symphony in C by 
Bizet, choreographed by George 
Balanchine at 7.30 pm; Dec 1, 6 
The Sleeping Beauty: a new 
production of Tchaikovsky’s ballet 
Produced by Anthony Dowell, set 
designed by Maria Bjomson at 7-30 
pm; Nov 23, 26 (2 pm); Dec 3 (2 pm) 
THEATRE 

National, Cottestoe Tel: (071) 928 
2252 Rutherford and Son: by Gltha 
Sowerby, directed by Katie Mitchell. 
Sat and Thur mate at 2.30 pm; to 
Nov 26(not Sun) 

National, Oliver Tel: (071, 928 2252 
Racing Demon: by David Hare, the 
first of a trilogy of plays. Sat mat at 
2 pm; to Nov 22{not Sun) 

The Seagull: by Chekhov, in a new 
version by Pam Gems. Sat mat at 
2pm at 7.15 pm; Nov 23. 24, 25, 26 


Italian at $.pm; Nov 25, 28; Dec 2, 

6. Lady Macbeth of Mtsensk: by 
Shodtatovich (Russian) at 8 pm; Nov 

22, 26,\30; Dec 3 

Madarria Butterfly: by Puccini at 8 

pm; Dec 1, 5 

Ffigdetto: Italian opera by Verdi at 8 
pm; Nov 23, 26, 29; Dec 3 
New Yoric State Theater Tel: (212) 
870 5570 the Nutcracker Tue-Thu 
6pm. Fri 8 pm. Ring for other times 
and matinees. Tchaikovsky ballet by 
NY City Ballet; from Nov 30 to Dec 
31 (not Mon) 

THEATRE 

Walter Kerr Tel: (212)239 6200 
Angels In America: Tony Kushnerfs 
Tony-award winning play. Sun mat 
at 3pm. Wed., Thurs., Sat at 8 pm; 
to Dec 4 


WORLD S^Vt)G£ 
BBC for Eurdpejgad be 
received in western Europe 
on Medium Wave 648 kHZ 
(463m) 


EUROPEAN CABLE 
AND SATELLITE 
BUSINESS TV 


(Central European Time) 
MONDAY TO FRIDAY 
NBC/Super Channel: FT 
Business Today 1330; FT 
Business Tonight 1730, 
2230 


WASHINGTON 


MONDAY 

NBC/Super Channel: FT 

Reports 1230. 


■ NEW YORK 

GALLERIES 

Museum of Modem Ait Tel; (212) 
708 9480 A Century of Artists’ 
Books: Exhibition of 140 books from 
some of this century's foremost 
artists; to Jan 24 
OPERA/BALLET 
Metropolitan Tel: (212) 362 6000 
Don Giovanni: by Mozart, sung in 


CONCERTS 

Kennedy Centre Tel: (202) 467 
4800 Los Angetes Philharmonic: 
Conducted by Esa-Pekka Salonen, 
with pianist Otile Mustonen play 
Lutoslawski, Ravel and Sibelius at 5 
pm; Nov 26 
GALLERIES 

PMEEps Collection Tel: (202) 387 
2151 Pktographs of Adolph 
Gotti leb: exhibition of one of the 
founding members of the New Yoric 
School; to Jan 2 
OPERA/BALLET 
Kennedy Centre Tel: (202) 467 
4600 Le Nozze di Figaro: by Mozart 
sung in Italian with English sur-tities 
at B pm; Nov 22, 25, 27 
Washington Opera Tel: (202) 416 
7800 Faust by Gounod. Director, 
Ellen Douglas Schlaefer, conductor, 
Richard Bradshaw. Faust played by 
Jianyi Zhang, in French with English 
surtittes. at 7 pm; Nov 21, 26 


TUESDAY 

Eironews FT Reports 
0745, 1315. 1545, 1815, 
2345 


WEDNESDAY 
NBC/Super Channel: FT 
Reports 1230 


FRIDAY 

NBC/Super Chaimefc FT 
Reports 1230 
Sky News: FT Reports 
0230,2030 


SUNDAY 

NBC/Super Channel: FT 
Reports 2230 
Sky News: FT Reports 
0430, 1730; 







14 


I imagine a fleet of dirigi- 
bite - steerable airships - 
in the upper atmosphere 
collecting and redirecting 
telephone calls around the 
world. 

Implausible as it may sound, 
it was one option considered 
by Motorola, the world’s larg- 
est portable phone maker, in 
its search for ways to develop a 
mobile phone service to extend 
from the wilds of Antarctica to 
the Kalahari desert 
Motorola opted, instead, for 
satellites, and Iridium - the 
consortium it leads - is now 
the front-runner in an expen- 
sive and technically complex 
race that has been joined by 
seven consortia. What they 
envisage is a high-quality ser- 
vice over low-cost pocket tele- 
phones offering calls at a cost 
of $3 or less a minute and serv- 
ing both cellular phone users 
and those without access to 
cellular systems. 

Cellular mobile phone ser- 
vices are well established in 
the developed world, with 
lOQm-2QQm cellular phones 
expected to be in use by 2000. 
But cellular systems can only 
cover localised areas. Calls 
beyond their network must be 
routed via earth-stations 
through geostationary satel- 
lites that hover some 22,000m 
above the Earth's surface, 
where, from the ground, they 
appear stationary. 

There are large areas of the 
world without access to the 
telephone exchanges, lines, 
switching capacity and admin- 
istrative capability to run cel- 
lular phone services. Mobile 
phone users can still gain 
access to geostationary satel- 
lites in these areas, using their 
own portable equipment - and 
the battlefield reports during 
the Gulf war bear witness to 
the quality of such services. 
But the calls are expensive, at 
between $5 and $10 a minute, 
and the equipment needed to 
make and receive them weighs 
more than a lap-top computer, 
fills a suitcase and costs 

$25,000. 

The key to the new satellite 
services is advances in micro- 
electronics which have made it 
possible to cram an entire 
earth station, capable of trans- 
mitting and receiving signals 
from up to 6,000 miles above 
the Earth's surface, into a 
package no larger than a con- 
ventional pocket phone. 

Iridium and its competitors, 
will launch low-earth orbit sat- 
ellites (Leo) that will circle the 
globe at a height of about 
2,000km, and medium-earth 
orbit satellites (Meo) at about 
10.000km to handle the traffic. 

Iridium has already built six 
erf its planned 73 satellites and 


Alan Cane on 

moves to 
expand the 
mobile phone 
market 


The maoi contendere 

GLOBALSTAR 
INMARSAT j 

IRIDIUM r\J 

ode$sey//£V7 




expects to launch the first in 
1997. Last week, Odyssey, a 
joint venture between TRW, 
the US aerospace manufac- 
turer, and Teleglobe, a Cana- 
dian telecommunications oper- 
ator, announced that they were 
joining the race. In addition, 
Globalstar, developed by Loral 
and Qualcomm, EUipsat, Con- 
stellation fln mmnnira t! Pn .S and 
American Mobile Satellite Cor- 
poration, are contenders from 
North America. 

These CIS contenders were 
last week submitting applica- 
tions for the necessary licences 
to the US Federal Communica- 
tions Commission. 

Between them, they will 
have to raise close to JlObn in 
debt and equity. Only Iridium 
is so far fully subscribed; hav- 
ing raised $1.6bn in equity, it is 
now looking for a further 
$1.6bn in loans. Odyssey, the 
newcomer, which has a guar- 
anteed $15Gm from TRW and 
Teleglobe, is seeking a further 
$850m in equity and $lbn in 
loans. 

Outside the US. only Inmar- 
sat, a London-based, interna- 
tional consortium, has 
announced plans to set up a 
global mobile phone network, 
called Project P. A pioneer of 
satellite communications. 






mm 


FINANCIAL TIMES MONDAY NQVEftdBEK^l 3^94 , 


Long 

distance 

lines 


Inmarsat first offered maritime 
voice and data services, using 
a geostationary satellite sys- 
tem. in 1982. It now provides 
satellite communications to 
some 40.000 customers in ship- 
ping and aerospace. 

Inmarsat's owners - leading 
telecommunications organisa- 
tions in some 75 countries - 
have until December 16 to 
deride whether to put up the 
$lbn the organisation needs for 
the first phase of the $2.8bn 
Project P. 

Inmarsat, like the other con- 
sortia. plans to act as whole- 
saler. selling to “customers" 
who will distribute the capac- 
ity worldwide. These distribu- 
tors are likely to be existing 
telecommunications companies 
such as Vodafone, the UK cel- 
lular phone group, which will 
become Globalstar's franchisee 
for countries where it operates 
cellular networks. 

The service will still be more 
expensive than conventional 
mobile telephony but the tar- 
get customer is the global busi- 
ness traveller prepared to pay 
a premium for a service that 
will be available anywhere. 
Other customers are expected 
to include governments, small 
vessels, public and private 
emergency services and users 
in areas suffering from poor 
communications. 

Each consortia has its own, 
jealously guarded set of esti- 
mates on the likely rewards 
from this market Most calcula- 
tions. however, are tied to the 
likely population of mobile 
phones. Mb’ John Windolth, a 
spokesman for Iridium, says 
that if the consortia had lm 
subscribers for its voice service 
by 2002, “We would be very 
profitable". 

Mr Patrick McDougal, a 
spokesman for Inm arsat, 
believes its service could break 
even within three years of its 
launch in 1999. 

The technology used may 
prove s ignifican t in determin- 
ing the price of the service, 
with Iridium and Globalstar 
planning to use Leos and Odys- 
sey and Inmarsat p lanning to 
use Meos. Leo operators need 
more satellites to cover the 
ground, but provide higher 
transmission quality. Meo 
operators promise lowest cost 
and technological risk. 

But adequate finance and 
management commitment are 
likely to prove for more conclu- 
sive than earth orbits in sort- 
ing the winners from the los- 
ers. And the only real certainty 
at present is that the rivalry 
between the consortia will be 
intense. Analysts believe it is 
unlikely the market will be 
able to support more than two 
competitive services by 2000. 


E ngland's soccer man- 
agers have long 
known the harsh disci- 
pline of league tables: 
if they underperform in the 
Carling Premiership or 
Endsleigfa League, punishment 
often swiftly follows. Tomor- 
row the heads of the UK’s state 
secondary schools face similar 
pressures, with the publication 
of performance league tables 
that will be widely studied by 
parents, governors and local 
education authorities. 

The tables are part of a new 
culture sweeping the public 
sector. The performance of 
managers in other parts of the 
public sector is also being mea- 
sured by a range of indicators 
designed to test their success 
in delivering services. 

Tomorrow's school league 
tables, the third set published 
in as many years, are the most 
ambitious so far. They will 
include figures for exam per- 
formance at GCSE (normally 
taken by 16-year-olds) and 
A-Ievel (taken at 1S>, voca- 
tional qualifications, truancy 
rates and - for the first time - 
details of how long children 
spend in lessons. 

Tbe exercise is part of the 
prime minister's Citizen's 
Charter campaign to improve 
the quality of public services. 
Mr John Major believes that 
poor performers exposed by 
comparative statistics will be 
compelled to improve, even if 
it is difficult for their custom- 
ers to go elsewhere for service. 

In tbe health service, hospi- 
tal league tables were pub- 
lished for the first time in June 
this year. They revealed wide 
variations in speed of service: 
in general surgery, for exam- 
ple. 88 per cent of patients 
were admitted to hospital 
within three months at the 
Dorset Healthcare Trust; at the 
Kidderminster Healthcare 
trust. 24 per cent had still not 
been admitted after a year. 

Doctors complained that the 
indicators were crude, telling 
patients nothing about the 
quality of medical care they 
would receive. But Mrs Vir- 
ginia Bottomley, the health 
secretary, was unrepentant: 
“Information is a spur to 
improvement.” she said. 

Next spring will see the most 
ambitious league table exercise 
yet, when the Audit Commis- 
sion. the local government 
watchdog, publishes tables for 
the 449 local authorities in 
England and Wales. These will 
use 70 separate measures to 
compare performance across 
all the main local services. 

Residents will be able to find 
out how quickly their council 
answers the telephone or bow 
long it takes to complete coun- 


In league with 
the table makers 


John Authers analyses the effects of ranking 
UK schools and other parts of the public sector 


UK public sector performance indicators: leapues ahead; 


Education authorities 
Top seven ■ " 

1993 - 


Local authorities: 
telephone response tarSat*';^ 


Isles of ScSy. 
Kingston, London 
Sutton _ ■ 
North Yorkshire 
West Sussex 


So dal 
depnvabon 
rarWng* 

1 ’ 


Afterdate: 


Brings^ *&.:.■ . 


Dorset 


6 Surrey 


social deprivatipnt^ ivhich: 

clearly corralatte ^^pjor 
exam results, . . 1 

The tout least deprived local 
authorities in . Er ^Land. frnea- . 
sured by the government's edu- ’ 
cational needs hades ) are ft* 
Scflly lsles, North Yorkshire, 
Surrey and West Sussex; They 
'came In the tojrsisrEq fife. 
GCSE results league table last 
year. In contrast, -six-of th^) 
most deprived, anthpritigs^ 
t to London boroughs crEacfr 
ney.Newbam, Lambefe,' Slag- • 
ton, Southwark and Tdwiar 
Hamlets were m - 

IB for GCSKiesultS- ■ : 

However, Labour pofitidans, , 
- who oppose' the 
league ..tables, are. tlnvqus. 

: about produang fcabW^based .- 
bn social ^ backgrounds. 

. fe«r that this could institaffoat \ 
alise low .expectations- fo 
depnvedareas... : 


7 

Buddngtamshire 

16 

Bottom seven - ■ 


102 

Lambeth 

. 107 

103 

Manchester 

35 

104 

Islington 

104 

105 

Barking 

67 

106 

Tower Hamlets 

106 

107 

Southwark 

102 

108 

Knowsloy 

89 


Bassettaw - ..V Brings*/ .. ■ * 
Croydon: 

South Hams: ' ' 30secortds 


T hey Ml into the sec- ' 
ond camp, Which 
wants to explora vaV : 
ue-added _ measures' 
using academic progress. This 
would test ddldten at -iT and 
16, and see whether they 
improved by more or less than : 
the average. 

The problem is that 'nattormf . 
curriculum tests for 11-yeiar- 
olds will become compulsory 
only at the end of this school 
year. Many local authorities 
abandoned their /own - teste -of - 
U-yeardds when the' national . : 
tests were announced. RefiabW - 
“value-added” tables for sec-' - 
- ondary schools might therefore - 
be five years away.- 
. But even the /‘raw”; tables , 
derided by teachers appear to 
have improved performance. 
Last year 4Ll per cent of 15-1S- : 
year-olds in England gained^ 
five GCSE passes at grades A; ' 
to C, up from 38J per cent in ; 
1992 when the league tables - 
were first, published.' Sharp 
Improvements .. In' /A-level 
results have also been recorded. . 
by independent schools stare ■ 
newspapers started p ublishing - 
their own tables in 1990. ' 
League tables seem to have' 
had consequences for head- 
teac^ere. .fo the private sector, 
tnrnover of bwnlg has roughly 
doubled in - the- past decade, 
with many facing angry gbver- • 
hois' meetings if their schools ’ 
slip in the tables. . 

- Two years ago. parents even 
forced the resignation of the 
high mistress of St Phial’s 
Girls' School in London > 
never outside, the top io in. the 
country according to the 
Financial Hmes’s own ranking - 
- because they did not like her 
policy of rednemg the number 
of GCSEs which girls took. 
Football managers will recog- 
nise the phenomenon. 


extension • 'j-H .■ ■ 


East Yorkshire: 80% witfiiri 20 seconc^ef 

switetiboanj; 3D seconds at .* 
- . extension 


*Bas«d on iwitai d benofli etaknantB. ( 

mmipants. Hghesi raofcad a test daprtiMd 


Somch; Osparnmof eaicrtian DeparuniDt1orE(r*naDoAM(KCOR)iAanr < 


cil bouse repairs. The same 
exercise will also provide sta- 
tistics on law and order, such 
as the speed with which emer- 
gency 999 rails are answered, 
and how many complaints are 
made against the police. 

Mr Andrew Foster, controller 
of tbe Audit Commission, has 
already decided not to publish 
all 60,000 separate items of 
information - more t han 
appears in a typical UK tele- 
phone directory. However, 
edited comparative statistics 
will be available next year. 

Mr Foster believes that tbe 
decision to measure perfor- 
mance drives up standards, 
even before comparisons are 
published. Including prompt- 
ness in answering mail and 
telephone calls in the local 
authority league tables, for 
example, required councils to 
set targets, and measure how 
often they were attained. 

These targets, published in 
June without mention of 
whether authorities were meet- 
ing them, revealed disparities 
in the tasks authorities were 
setting themselves. Surrey 
County Council had aimed to 
answer calls within BO seconds, 
but . when it saw that this was 


far out of line with the rest it 
cut its target to 20 seconds. 

The Audit Commission has 
consulted local government 
officers closely in choosing the 
performance indicators, avoid- 
ing the confrontational 
approach adopted by education 
ministers when setting up 
school league tables. 

Mr Foster justifies this by 
saying that grygp ta nry> of flip 
validity of the indicators is 


Teachers and 
academics claim it 
is misleading to 
judge schools by 
exam results alone 


important If they are to influ- 
ence managers’ behaviour. “If 
practitioners 'can rubbish our 
methods, then all the work 
we've put in is of little value. 
We can’t afford to let our credi- 
bility about tbe nature of the 
data or the methodology be 
impugned.” 

In contrast the launch of the 
first education league tables in 
1992 was marred by inaccura- 
cies in the data. For example. 


schools that pooled their 
A-level results in consortia 
were not credited with any 
A-levels at alL Newspaper 
headlines concentrated on the 
inadequacies of the govern- 
ment’s information, rather 
than shortfalls in particular 
schools’ performance, dulling 
the impact of the tabu*?. 

Even though the data in 
school league tables are now 
more accurate, controversy., 
over the choice of performance 
indicators persists. Teachers, 
backed by academic opinion. 
Halm it is Tnigtemflng to judge 
arhnftk by waw results 
They say the most important 
factor in determining a pupal’s 
ultimate examination perfor- 
mance is the level of achieve- 
ment he or she had readied 
when starting at the school. „ . 

Publishing- exam results in - 
isolation inevitably shows 
schools with selective intakes 
performing best, the critics* 
add. They would prefer to see 
league tables reflecting how 
well schools perform with the 
childr en they take in. 

Supporters of such “val- 
ueadded” tables foil into two 
camps. First are those who 
want tables to take account of 


mWi 


LETTERS TO THE EDITOR 


Number One Southwark Bridge, London SEl 9HL 

Fax 071 873 5938. Letters transmitted should be dearly typed and not hand written. Please set fox for finest resolution 


Cacophony 
of calls on 
state burden 


CrossRail decision a joint one 


Accounting & Audit 


Corporate Finance 


Corporate 

Recovery 


Forensic 

Accounting 


With effect from today — 21 November 1994 — 
the new UK headquarters of Touche Ross & Co. 

is located at Stonecutter Court, 
1 Stonecutter Street, London EC4-A 2TR. 


Management 

Consultancy 


Tel: 0171 936 3000. Fax: 0171 583 1198. 


Managed Financial 
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Taxation Sendees 


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Ross 


Touche Ross & Co. is the UK practice of Dcloitte Touche 
lohmatsu International, one of the world's largest providers of 
accounting and auditing, management consulting and 
tax services. We have over 56,000 people in 1 1 9 countries 
serving national and international enterprises, public 
institutions, middle market businesses and the professions. 


From Mr Richard Brown. 

Sir, While Zygmunt Tysz- 
Mewicz's analysis of European 
competitiveness Is typically 
penetrating (Personal View, 
November 17). his assertion 
that “with the notable excep- 
tion of Unice, nobody is talking 
about the size, cost and burden 
or the state in Europe’s econo- 
mies" is astonishingly blink- 
ered. 

Many other business repre- 
sentative organisations, includ- 
ing chambers of commerce, 
have been lobbying for years 
for deregulation, reduction in 
public spending and with- 
drawal of the state. 

National governments, simi- 
larly. have been pressing for 
deregulation, following a trail 
blazed by tbe UK. Indeed in . 
May. Kenneth Clarke, UK 
chancellor, supported a call by 1 
Gunther Rexrodt, Germany’s 
economic minister, for deregu- 
lation. 

Furthermore, at a European 
, level, the Corfu summit estab- 
lished, under Bernard Molitor, 
a group charged with putting 
forward proposals for lifting 
the burden of legislation, while 
the Commission is establishing 
a standing comlnittee for 
administrative simplification. 

Unice is no lone voice. There 
is a cacophony of calls for less 
burdensome state that the 
Commission sbould not ignore. 
Richard Brown, 
deputy director general, 

The Association of British 
Chambers of Co mme r ce . 

9 Tufton Street, 

London 

SWIP3QB 


From Mr Geoff Maynard. 

Sir, Yes, we are looking to 
recruit a new chief executive 
who can make a valuable con- 
tribution to our thinking on 
the need to establish an entity 
appealing to the private sector 
and separate from the three 
promoters of CrossRail, the 
proposed east-west cross-Lon- 
don rail link (“CrossRail team 
plans to split from partners”, 
November 18). 

The decision on the form of 
any separate entity, however, 
will not be down to the new 
chief executive as you suggest; 
the decision wQI be a matter 
for the government as share-' 
holder, in consultation with* 
the promoters, London Under- 


ground. British Rail and Rail- 
track. 

In reporting our conversa- 
tion, your correspondent has 
taken two thoughts out of con- 
text. The way CrossRail is 
eventually developed- for the 
benefit of London- and the 
south-east region wiff in forge 
measure depend on- |he views 
of the private sector, since it is 
the private sector that will be 
providing a subs tantial part of 
foe finance needed. 

The step change In journey 
experience and scale of result- 
ing benefits for London can 
only result from the introduc- 
tion of a project such as Cross- 
Rail - just as has been experi- 
enced with cross capital RER 


services in Paris. Some people 
have suggested that 'the same 
result can instead be achieved 
by upgrading parts of the exist- 
ing underground network. But 
all of our research with Lon- 
don Underground shows that 
such measures do not produce 
a viable alternative to Cross- 
RaiL 

Maintaining and improving 
the existing Tail networks is 
essential anyway. 

Geoff Maynard, 
director, 

British Railways Board, 

London Rail Development. 
Boston House, 

24 Eoersholt Street, 

PO Box 100, 

London NWl 1DZ 


Give AIM 
a chance 


From Mrs Julie Hydon. 

Sir. Lex queried (“Growing 
companies", November 16) 
whether there is a need for the 
Alternative Investment Market 
and. for the planned pan-Euro- 
pean market, Easdaq. 

Without further information 
on the latter, it is .difficult to 
judge whether Easdaq might 
be necessary, but I think that 
for the most part, the stock 
exchange’s proposals for the 
AIM are well-balanced, and 
that there is a need for this 
particular market. 

Might I suggest that critics 
of the AIM keep a low profile 
and give the new market a fob- 
chance? I 

Julia Hydon, ! 

38 Austemoood Close, \ 

Chalfont St Peter, I 

Buckinghamshire 5L9 9DE i 


UK seeking coherence in 
European defence 


rr-:: 




CSS 


Li£\ 
i.? ■ i 1 ' - 
'. r- 


i 

;5*v. 


Helping 


tare 


spec 


l.'ft ... - 


Case against minimum wage 


DehRiteMie 


AuAjrt*cJlif iftr fostauir nt Ourirml Acrmaionb fa EpglmJ mi Wda (u £Bn an favobimt I 


Prom Mr Graham Mackenzie. 

Sir, Mr John Monks (Letters, 
November 15) refers to a recent 
Engineering Employers’ Feder- 
ation. survey which found 
almost 40 per cent of respon- 
dents in favour of a statutory 
national minimum wage. The 
full survey reveals a rather dif- 
ferent new. 

More than half of tbe respon- 
dents opposed a statutory min- 
imum wage. Forty eight per 
cent of the same sample 
thought that a mfninmm wage 
Would increase unemployment, 
while only 8 per cent thought 
it would cut unemployment. 


While the £EF wants a pros- 
perous economy with high lev- 
els of pay this can only be 
achieved through productivity 
and innovation, not by statu- 
tory imposition of employment 
conditi ons. 

The EEF. therefore, cannot 
be party to a consensus in 
favour of a statutorily-imposed 
national minimum wage. 
Graham Mackenzie. 
director general, 

Engineering Employers' 
Federation. 

Broadway House 
Totinll Street. 

London SW1H 9NQ 


From Dr Jonathan ByaL 
. Sir, Ian Davidson is correct 
in arguing f Conflict of inter- 
est”, November 16) that the US 
decision to withdraw from the 
enforcement of the arms 
embargo on Bosnia should 
force the Europeans to look 
much more seriously at their 
own defence structure. Yet he 
is wrong to suggest that 
Britain advocates a “loose, 
floppy, amoeba-like” security 
arrangement for the continent. 

The creation of a European 
defence identity depends on 
deeds, not just vision or words; 
it ultimately requires Increased 
military budgets, something 
which no member state, with 
the notable exception of 
France, is willing to contem- 
plate. 

The Eurocorps structure 
estab l ished by France and Ger- 
' ma qy has just managed to 
Work out joint emblem^ com- '■ 
mand languages and the food 
served to its soldiers; in short 
everything necessary for a 
parade on the boulevards of 
Pans, rather than actual fight- 
ing. And the Western Euro- 
pran Union, presented as the 
EU s budding military arm, 
consisted until recently of little 
more than a few bureaucrats 
and some filing cabinets In 
transit between London and 
Brussels. Faced with this real- 

Iw t ^? ritish P°«ition was 
that nothing should be done to 
supplant Nato as the alliance 
which has both the means and 
the command structure neces- 
sary for any serious military 


task. Davidson’s “amoeba-like 
org ani s ms ” swim in the murky 
waters of the Balkans, where 
all current institutions piled 
in. and achieved nothing In 
particular. 

Far from seeking to place 
spanners in the works, the 
British government is now 
actively pushing for a more 
coherent European defence 
arrangement At the weekend 
Pranco-British summit tin* two 
■ countries created a combined 
air force group explicitly 
designed to capitalise on the 
experience gained in Bosnia; 
Britain is also working to 
exishrixie the mechanisms by. 
which Europe could use US 
military equipment in future 
crises. 

stance is no longer 
dictated by some wistful han- 

a “special relation- 
ship with the Americans: tids- 
was shattered by President Bfll 
Uinton fairly early on in his 
jfrfadfmcy. Instead, the British- 
Dehamour is governed by a per 
fectly logical assumption that . 

rtroctures cur- 
rantly touted for the continent 

JS!2v, be T * reaI “ order to be 

cradible. But perhaps your cor- 
respondent is right after all: 
“ashing Britain in every article 
on European affairs is much 
more predictable and tidy than 
se tting out a host of compli- 
cated arguments. ' 

Jonathan Eyal, 


4 K 




^ -• 






:KS- 


■ -V- 

H-' ■■■ 

■ 

. v e : 

St 

:• 


gw? Vr*ted Services Institute 
Jbr Defence Studies. 

Whitehall, London SW1A 2ET 


*J£l» 



/ 


FtNANCl ALT<JV , FQ 


MONDAY NOVEMBER 21 1994 


FINANCIAL times 

TeMvn Southwark Bridge, London SEI 9HL 
• U 'W3 3000 Telex: 922186 Fax: 071-407 5700 


_kl° n day November 21 1994 

No bad thing 
for Ireland 


siBps."s,‘ 

^nSr,r < *^ s&dS; 

real chance of relief for tv 

t S? ttei Y Pomilatic 
Hnn!! 0 ^ 4** coition in Dul 

SJSSfa b"? “Uapsed ow 

«nat outsiders might reeard ac 
domestic squabble 35 

diUS? ** **°®R however, t 
“smiKUie issues involved in to 
^integration of the Irish goven 
**“ resignation of M 
^ert Reynolds as prime mlnistf 
2“ lefl der of Fianna Fail, the lari 
est party, as irrelevant to tb 
Peace process and the future c 
from it The confroi 
tabou between Mr Dick Sprin 
and his Labour party. on the on 
nand. and Mr Reynolds’ party o: 
tne other, has exposed some vita 
questions about the democrat! 
process^ in the Irish republic. 

The first is whether the countr 
can c la i m to be a genuinely sect 
lar state while the Roman Cathc 
he church continues to wield ; 
pervasive influence in politics 
life, a subject of enormous con 
cem to the northern Irish protes 
tant population. The second is tb 
tradition of making blatant!' 
political appointments to the Iris] 
judiciary. The third is the ques 
tion of accountability of politi 
dans for their words and actions 
an important component in ai 
open and flourishing democracy 
On all of these concerns, the Irisl 
republic would appear to havi 
emerged strengthened as a demo 


era tic state from the events of the 
past week. 

The confrontation in the coali- 
tion blew up over the insistence of 
Mr Reynolds on nominating his 
friend and attorney-general, Mr 
Harry Whelehan. as the next pres- 
ident of the High Court, the sec- 
ond highest judicial office in the 
land. Mr Whelehan was already a 
highly controversial figure for his 
role in seeking to prevent a 14- 
year-old rape victim from travel- 
ling to Britain for an abortion. His 
obvious reluctance to extradite a 
self-confessed paedophile priest to 
face charges in Northern Ireland 
compounded the impression that 
he was unduly influenced by the 
most conservative pigments in the 
Catholic church. 

The fact that both have now 
been forced to resign - and that 
their resignation has been wel- 
comed by the Irish population - 
su g gest s that the trend towards a 
more secular state is growing, as 
is the pressure for clean govern- 
ment. Both misled their cabinet 
colleagues and parliament, and 
both have been held accountable. 

Mr Spring now feces a tough 
decision whether to reform the 
coalition with Fianna Ffiil under 
its new leader, Mr Bertie Ahem. 
On balance, he would appear wise 
to do so, at least to bring mini- 
mum disruption to the peace pro- 
cess. Mr Ahem has a good record 
as a successful negotiator and bro- 
ker of tough compromises as a 
trade union leader, and labour 
minister. Mr Spring has proved 
some important points. Now the 
most crucial thing is to keep the 
peace process on track. 


Helping Arafat 

ft was always on the cards that Ireland, and was endorsed by 72 
tbe price of peace between. Israelis per cent of the voters. Evan so the 


and Palestinians ndgbi .be a civil 
war among the latter, if not the 
former. Both nationalisms lay 
r.iahn to the same stiver of land. 
Any territorial compromise repre- 
sents, to the eyes of many on both 
sides, a betrayal of the cause. 

The legitimacy of the leadership 
which accepts such a compromise 
iTbbimdtolfe questioned. Some 
fighters will believe they have a 
right and a duty to fight on. Gen- 
erally they win protest that they 
ha7e no desire to fight fellow 
countrymen. Their target remains 
the national enemy or occupying 
power. But this puts the leader- 
ship in an impossible position. Zt 
has to choose, as Israel's prime 
minister invited the Palestine lib- 
eration Organisation to choose 
last month, between peace with 
Israel and peace with Hamas. 

That was the situation of the 
Irish provisional government in 
1922. Having signed a treaty with 
Britain, it could not allow Irish 
dissidents to continue the war. It 
had to fight a civil war against 
them , or lose the treaty. Today 
Yassir Arafat has to crack down 
an Hamas, or lose his agreement 
with IsraeL 

The precedent is not encourag- 
ing. The Irish treaty created a 
Fine State comprising 26 counties 
ont of the 32 in the island of 


ensning civil war was more terri- 
ble and destructive than the war 
against the British which pre- 
ceded it 

Mr Arafat is being asked to fight 
his civil war in much !«« favoura- 
ble circumstances. He does not 
have a free state, only a limited 
“self-governing antharity” f and he 
controls only two gmafl fragments 
of the independent state he hopes 
for. As for the strength of his sup- 
port, no <me knows because no 
elections have been held. Probably 
be could have mustered a majority 
a few months back. Whether he 
could now is much more doubtfuL 

The danger that he would lose a 
civil war in these conditions is 
such that there is an almost equal 
danger he will avoid it by revert- 
ing to war with IsraeL Either out- 
come would be a disaster for Israel 
and more especially for Yitzhak 
Rabin, who his staked everything 
an the peace process. It is in Mr 
Rabin’s own interest to give Ur 
Arafat a chance of success, by 
quickly ceding him real authority 
to the West Bank as a whole. That 
may bring closer the moment 
when Mr Rabin in his turn has to 
choose, between peace with the 
Palestinians and peace with those 
Israelis who would fight rather 
than withdraw. But that choice 
too is one that has to be faced. 


Rare species 


able that, within years, 
aid became extinct The 
ce to update the Cites 
m on endangered species, 
deluded this weekend in 
made that dear. Would 
i matter? On one view, it 
t the loss would pose no 
e threat to human health 

i several counts, it is 
rtting effort into saving 
cies. In western eyes, 
ephants, whales and the 
romantic beasts, whose 
is valued even by those 
ar see a live specimen. 
I communities, the ani- 
i greatly to tourism 
1 For all countries, the 
^present a pool of genes 
s p flftmHgi value, 
s the best means of sav- 
e species? The threats 
are poachers who want 
isks. hides and meat tor 
trmers who resent the 
they do, and the steady 
meat of human societies 


luiww. . , 

ice of the task i s to 
an economic incentive 
animals' numbers at 
levels. But there are 
jar problems. One is 
me east and central 
ntries have found, the 
f the live animals, 
irism, generally go to 

Bient and companies, 

due of dead animals is 
poachers and fencers, 
shave tonnd it hard 
Lte the benefits of tour- 
alleveL 

iemand for products 

io horn, driven 
aarkets, has not yet 


— - 

Jrican poverty, it “ 


'possible that species would be 
extinct before prices rose by 
PHCrtigh to Choke ttermflnrt. 

One solution is simply to 
improve enforcement of national 
rules against killing animals. 
South Africa, which devotes con- 
siderable resources to protecting 
its wildlife, has found numbers of 
elephant and white rhino growing 
rapidly, even though it allows lim- 
ited domestic trade in ivory. 

But that requires funds which 
are beyond the resources of poorer 
countries. One of the best argu- 
ments for maintaining an Interna- 
tional ban against trade in prod- 
ucts of endangered species is that 
it makes guarding the a n i m als 
raster and cheaper even for the 
poorest states. The Worldwide 
Fund for Nature estimates that 
the budgets for protecting ele- 
phants have dropped by nearly 90 
per cent in Zimbabwe, Zambia and 
Tanzania since the worldwide ban 
on ivory trade in 1989 

A third device is to reduce 
demand iter the products. Environ- 
mental groups argue that since 
the start of the ivory ban, the 
price of ivory has Mien - where it 
can be obtained - while the price 
of rhino horn has increased. That 
is, they say, .partly because tbs 
main mar kets for ivory were in 
western countries which have 
enforced tough import controls on 
ivory. Meanwhile, western public 
opinion has turned against Ivory, 

There is no single solution to 
the problem of supporting rare 
. species. But the Cites conference 
was right to uphold the ban on 
elephant and white rhino prod- 
ucts, as one of several mecha- 
nisms. The next useful step would 
be to increase pressure on those 
governments which have so far 
taken a relaxed attitude towards 
import of banned products. 


★ 


15 


Martin Ebner’s challenge to the UBS board has unsettled 
Switzerland’s cosy corporate culture, says Ian Rodger 

Bank raid or 

revolution 


Union Bank of Swrtzerfamb under siege 




UBS share pricntSFr) 
1.800 - 



S witzerland's cosy business 
community has never 
seen anything tike the bit- 
ter proxy battle at the 
Union Bank of Switzer- 
land, where a determined outsider 
has taken on a powerful establish- 
ment for control of the company. 

Six weeks of hectic trading have 
wiped more than SFrlbn (£489 m) 
from the bank’s market capitalisa- 
tion. And it remains imgiwsr 
whether the UBS board will attract 
enough votes at tomorrow's extraor- 
dinary general meeting of share- 
holders to see off a challenge to 
their governance from Mr Martin 
Ebner, a tittle-known Zurich broker- 
fund manager. 

But the case is about more than 
UBS; it also marks the be ginning of 
the end for continental Europe’s 
discreet and private approach to 
corporate governance. Capital mar- 
ket liberalisation and privatisation 
have created a new shareholder cul- 
ture bent on accountability. And Mr 
Ebner, a former share analyst, has 
confronted the bank with it 
In 1984, Mr Ebner left the Zurich 
private bank J. Vontobel to set up 
BZ Bank, specialising in block 
trades for institutions. Feared by 
established rivals, the bank is one 
of the most pushy players in the 
Zurich market. Mr Ebner diversified 
Iptp fund management in 1991, tak- 
ing control of an investment com- 
pany, Pharma v ision 2000, specialis- 
ing to pharmaceutical shares, and 
starting another, BE Vision, for 
financial shares. He declared the 
Visions would be activist sharehold- 
ers, and BE Vision began to needle 
the mighty UBS. 

As one of only three international 
h anks with triple-A status from all 
the big credit-rating agencies, UBS 
would not seem a propitious target 
tor a 4i«iitoit shareholders* move- 
ment But Mr Ebner says the bank’s 
teal return to shareholders - aver- 
aging 53 per cent in the past 15 
years - is far too low. He argues 
that as Switzerland’s largest and 
most prestigious bank, UBS must 
break lazy habits acquired from 
dominating formerly cartelised 

ilnwiraHr financial mar k e ts 

“The only banks that will survive 
are those which concentrate on 
their most efficient and profitable 
activities,” he said to a speech to 
the UBS AGM last ApriL At that 
meeting; BE Vision put a motion to 
reduce the UBS board from 23 mem- 
bers to nine. The motion was 
defeated, but BE Vision, to every- 
one’s surprise, attracted some 40 
per cent of the votes. 

Mr Ebner interpreted this support 
as a Wider mandate to challpng p the 
bank's overall governance, and fore- 
saw a unique opportunity Dext 
spring when the terms of 10 UBS 
directors expire. 

A couple of months ago, he 
informed UBS directors that he was 
trying to attract a majority of share- 


holders’ votes with a view to mak- 
ing substantial board and strategy 
changes at the next AGM. 

As UBS has a market capitalisa- 
tion of over SFr30bn, it would nor- 
mally be prohibitive!; expensive to 
accumulate enough votes for such a 
cause. But, like many European 
companies, the bank has two clas- 
ses of shares, bearer and registered. 
They are issued in roughly equal 
numbers and each carries one vote 
per share. But the registered shares 
have a par value only one-fifth of 
that of the bearer shares, making 
them a cheap way to buy votes. 

Theoretically, at today's market 
prices, an investor could buy all of 
the 2225m registered shares, carry- 
ing 51 per cent of the votes, for 
some SFr6bn. By contrast, the 21.3m 
bearer shares, which carry the 
other 49 per cent of the votes, would 
cost more than SFr25bn. 

Until recently, registered shares 
traded at an effective discount, in 
that it cost less to buy five regis- 
tered shares than it did to buy one 
bearer share. This was because of 
rules prohibiting foreigners from 


voting with them and preventing 
anyone from voting with more than 
5 per cent of them. These restric- 
tions were intended to prevent UBS 
from a foreign takeover. 

But this year the registered 
shares have traded at a growing 
premium, trading at a price 40 per 
cent above one-fifth of the price of a 
bearer share by late September. 
UBS directors suddenly realised 
they faced a serious threat. 

They called tomorrow’s extraordi- 
nary general meeting to propose 
converting all the registered shares 
intn bearers on terms that would 
slash their voting power to a lewd 
in line with the 172 per cent of 
capital they contribute to the com- 
pany. They offered no compensation 
for the collapse in the premium on 
registered shares that would follow 
conversion. And they declared that 
a two-thirds majority of all shares 
present at the meeting, provided 
they represented more than 50 per 
cent of the capital, would be suffi- 
cient to approve the m o ti o n. 

Mr Ebner and other registered 
shareholders cried foul, arguing 


they should be compensated for the 
loss of voting power and be able to 
vote separately on a proposal to 
remove their rights. 

UBS said that compensation could 
only come from money that belongs 
to all shareholders, and so would 
invite legal action from aggrieved 
bearer shareholders. 

UBS would appear to have the 
more virtuous position to defend. 
Mr Robert Studer, Fh» ohtef execu- 
tive, points out that the stogie share 
structure would improve market 
liquidity and remove the danger 
that Mr Ebner and Us aili« rrmjfi 
take over control through a rela- 
tively small investment “He is a 
raider. He wants to walk away with 
money. He is not interested in what 
wfll happen to UBS in 10 years,” Mr 
Studer charged last week. 

Mr Ebner says registered shares 
provide the only effective way fix- 
shareholders to press the bank’s 
board and management to perform 
better. This is because a very large 
proportion of the shares can only be 
voted in favour of the board. 

A large proportion of UBS shares 


- over 40 per cent of those voted at 
the last AGM - are held by Swiss 
hanks for their clients. Swiss law 
provides that, if the banks have a 
general power of attorney from 
their clients, as most do, and 
receive no specific instructions to 
the contrary, they ran only vote 
these shares in favour of the 
board's resolutions. 

Both sides have been clumsy and 
amateurish in their camp ai g ns, Mr 
Studer declared at one point that 
Mr Ebner’s demand that the bank 
achieve a return on equity of 15 per 
cent was “ridiculous”, only to be 
reminded that two years ago he had 
given it as a target for the longer 
term. For his part, Mr Ebner 
claimed UBS could fall into the 
hands of international drug dealers 
if the protection against foreign 
takeovers provided by the regis- 
tered shares were lost 

O nly later did he 
explain why be would 
not set out an alterna- 
tive strategy for UBS: 
strategy was a board 
decision; shareholders* responsibili- 
ties were only to set the target 
return on equity, set incentives for 
top management, and appoint direc- 
tors to get on with it 
Most Swiss bankers and institu- 
tional shareholders are expected to 
support UBS tomorrow because 
they do not want to offend the coun- 
try’s most powerful bank or because 
they dislike Mr Ebner. 

But the extraordinarily high vol- 
ume of registered share trading - 
11.6m last month - reflects how 
many fund managers would rather 
sell than decide what voting stance 
to take. 

Both UBS and Mr Ebner accuse 
each other of buying big volumes of 
registered shares, and both deny it 
The truth is made more difficult to 
discern by the potential for buying 
votes through futures contracts 
or borrowing shares from custodi- 
ans. 

Mr Ebner says that if he loses, he 
will immediately seek a court 
injunction preventing conversion of 
the registered shares. Registered 
shareholders would then retain 
their extra power for votes at the 
AGM in April, and the UBS’s deci- 
sion to precipitate the current fight 
would have been in vain. 

Mr Studer shrugs. “Maybe we will 
have mobilised a few minds, sensi- 
tised a few shareholders." 

Whatever the immediate out- 
come, shareholders in UBS and 
many hig «™tini>nia| companies are 
likely to be the ultimate winners. 
UBS directors have belatedly real- 
ised Mr Elmer's demands for more 
rigorous management have a lot of 
support among their widening 
shareholder base. Directors of other 
big quoted Swiss and European 
companies would be unwise to 
ignore thp message. 


Balanced ticket for business and greens 



The delicate halance 
of power between 
UK industry and its 
adversaries in the 
green lobby may be 
on the point of 
being upset A draft 


PE1 f?£S? L BUI establishing the 


VIEW Environment 
Agency, which absorbs Her Majes- 
ty’s Inspectorate of Pollution 
(HMIP), the National Rivers Author- 
ity (NBA) and the waste regulation 
functions of local authorities, con- 
tains a loosely worded clause 
requiring the agency to take 
account of the costs and benefits of 
its actions- 

While the business community 
welcomes this as a recognition of 
reality, others fear it opens the way 
tor polluters to block moves to pro- 
tect the environment 

Bui even if the new agency's stat- 
utory role is weaker than many 
environmentalists hoped, environ- 
ment secretary John Gummer’s 
claim that there will be up place for 
busybodies may prove, premature. 
Most of the problems business feces 
in meeting environmental stan- 
dards are not caused by too tight a 


statutory definition of the duties of 
HMIP or the NRA. They arise more 
often from ill-considered, or illogi- 
cal, directives proposed by the 
European Commission - and from 
the tendency of regulators to mea- 
sure their success mainly in terms 
of prosecutions. 

The cost of waste disposal, for 
example, which industry and house- 
holds alike must bear, may rise sub- 
stantially in the next few years. 
This will not be because of the 
actions of any British regulator but 
because the European landfill direc- 
tive threatens the cheapest method 
of waste disposal in the UK The 
directive, which may be forced 
through despite British objections, 
ignores the geological and other 
characteristics which make landfill 
more acceptable in the UK than 
elsewhere in Europe. 

Equally unnecessary is the bur- 
den imposed on British farmers by 
immediate implementation of the 
nitrates directive. This enforces 
standards for drinking water which 
have been arbitrarily chosen by 
Brussels in defiance of World 
Health Organisation recommenda- 
tions. No scientific or medical evi- 


dence exists to support them and 
they are now belatedly being ques- 
tioned by other bureaucrats within 
the European Commission. 

Since the Environment Agency’s 
role will be to enforce standards but 
not to set th e m, the deregulators 
should concentrate cm persuading 
Britain’s European partners to mea- 
sure environmental quality in the 
broadest sense. A draft directive on 

Most of the problems 
business faces on 
environmental 
standards arise from 
EU directives 


integrated pollution controls is now 
under negotiation. From the point 
of view of British industry it is cru- 
cial that the principle of BATNEEC 
- best available technology not 
entailing excessive cost - should be 
built into this directive. 

This principle, already widely 
used by Her Majesty’s Inspectorate 
of Pollution, achieves a compromise 
between the needs of industry and 


the demands of the greens. It pro- 
vides a valuable safeguard for busi- 
ness against the continental prefer- 
ence for rigid emission standards. 

An agency strong enough to com- 
mand the confidence of the more 
realistic environmentalists could 
use the experience gained by HMIP 
for the benefit of the environment 
while also protecting UK employers 
against meddlesome bureaucracy 
and the ravages of Brussels. A con- 
structive dialogue between the 
agency and those whom it regulates 
should prevent the imposition by 
over-zealous officials of burdens on 
business never intended by govern- 
ment or legislators. 

hi any event, it is doohtftil how 
far industry Itself wants to water 
down the aims of the environmental 
lobby. Unlike the extra costs to 
employers of the Social Chapter, 
which simply destroys jobs by 
undermining the competitive posi- 
tion of those companies which have 
to carry them, investment in higher 
enviro nmen t al standards «in bring 
commercial advantages. 

Customers, especially younger 
ones, may prefer products and ser- 
vices supplied in an environmen- 


tally responsible way. Employees, 
particularly those with scarce skills, 
are easier to retain when offered a 
good working and living environ- 
ment From a national viewpoint 
countries with high environmental 
standards will attract investment in 
the high value-added industries 
which we want our children and 
grandchildren to work in. 

The challenge for both the agency 
and the pressure groups is to har- 
ness the resurgence of interest in 
the environment and build on ini- 
tiatives such as the chemical indus- 
try's responsible care programme. 
Business must show commitment to 
continuous environmental improve- 
ment. using systems capable of 
being externally verified and pro- 
mote more environmental reporting 
and audit In the long term, dilution 
of the agency's statutory role does 
little for either business or the envi- 
ronment 

Tim Yeo 


The author is a former UK environ- 
ment minister 


Observer 


From little 
acorns grow 

■ Here is one for Gardener's 
Question time. How do you ensure 
that a small press release from an 
unknown firm of Shropshire seed 
merchants — hi g hli g hting the 
shortage of British acorns - can 
grow into a healthy Euro-scare 
story from which cuttings can 
happily be taken only a few weeks 
after first blossom? 

The press release, designed to 
drum up business for the company, 
caught Fleet Street’s imagination 
because It drew attention to a little 
known UK Forestry Commission 
regulation based on an EC directive. 
Anyone establishing a plantation of 
young trees for forestry purposes 
can only use acorns from one of 42 
registered oak “stands” in the UK 
As a result of this year's poor crop, 
demand will have to he met by 
importing foreign acorns from 
countries such as Poland. 

The regulation - in force for well 
over a decade - only applies when 
UK government grants for planting 
oak trees are concerned. There is 
nothing to stop any private 
individual or land-owner from 
collecting acorns and growing oak 
for their own use. 

However, let's not spoil a good 
story. Having started with 
“Euro-meddlers try to fell our oaks” 
and “British acorns not good 
enough says Brussels”, by 
yesterday the Independent on 


Sunday and the Sunday Express 
were both blaming the UK acorns’ 
problems on Adolf Hitler. The 
Brussels directive is said to be 
based on a German Forest Race law 
drafted when Hitler was in power. 

The Forestry Commission 
believes the current row is a 
nonsense - a view shared by Bryan 
Cassidy, the Tory MEP who drew 
Observer's attention to the affair. 
British oaks were wiped out in the 
ice age and most of the oaks in 
Britain today have come from the 
continent. So much for the Daily 
Express’ view that German or 
French oak is “about as tough as 
stork margarine”. 


Tate and smile 

■ Isn't it lucky that charities are 
duty bound to have charitable 
thoughts? Otherwise some of them 
might be cursing the Tate gallery 
come Budget day. 

It seems that Customs & Excise is 
determined that the Tate should 
cough up £12m in value added tax 
which will be due on the conversion 
costs of transforming the old 
Ranks ide power station into its new 
art gallery. The Tate, however, 
counts as a charity. And social 
welfare charities and worthy bodies 
- such as nursing homes - are 
hoping the Budget will include 
them in the zero- VAT rate on 
converting commercial buildings 
into housing. Current betting is 
that the worthies will win and the 
charities lose and all because 



Customs just can’t bear to see that 
£ 12 m slipping from its grasp. 

Result if Eton wanted to convert 
a warehouse into a boarding bouse 
it could get VAT relief; if a local 
charity wanted to convert the same 
building to a day centre for the 
elderly it couldn't 


Sailing by 

■ Good news from British 
shipbuilders. Only days after the 
last rites were performed for Swan 
Hunter, one of Europe's 
best-equipped shipbuilders. Britain 

has secured an Older for a ... square 
rigged sailing ship. 

It seems that any navy worth its 


salt has a square rigger In its fleet 
these days. So the Indian 
government has commissioned 
Hampshire naval architect Colin 
Mudie to design a 177ft 
three-masted barque to train India’s 
young sailors before they move up 
to something more powerful. 

Mudie has carved out quite a 
niche for himself He has designed 
the Young Endeavour (Australia), 
Tunas Samudera (Malaysia) and 
Lord Nelson. His latest vessel will 
accommodate 45 cadets anil have a 
2,000 mile range. The bad news is 
that the ship will be built in Goa 
and not Sunderland. 


Soldiering on 

■ France's President Mitterrand 
may be thinking about finding his 
successor, but Andreas Papandreou, 
Greece’s ailing socialist prime 
minis ter. Is making another stab at 
immortality. Rather than take 
well-earned retirement after serving 
as premia’ for nine of the past 13 
years, he is preparing to undergo 
heart surgery once again. 

Papandreou, 75, has been in poor 
health since having a double bypass 
in London in 1988. But this time he 
is too weak to travel The operation 
is expected to take place early next 
year in Athens’ gleaming new 
Onassls Cardiac Centre founded 
under the will of the late shipping 
magnate Aristotle Onassis. 
Conveniently from the point of 
view of medical bills the Onassis 
hospital was incorporated into the 


Greek national health system by 
Papandreou a few years ago. 


Hectrifying logic 

■ John Baker and Brian 
Birkenhead, the architects of 
National Power’s well-received 
move to buy back up to lOBAm of its 
shares from the Treasury, appeared 
well pleased with their efforts on 
Thursday. And with good reason. 

Within a day of the 
announcement, the chief executive 
and finance director of National 
Power exercised a large raft of 
Share options. Birkenlirari matte a 
£380,000 turn from the transaction, 
while his boss netted £713.000. The 
additional profits to the two from 
Thursday’s price rise, amounted to 
a worthwhile £23,488. 

Admittedly, the directors had had 
to wait until the announcement of 
their results, before they could 
make such transactions. But when 
they told analysts on Tliursday that 
the buy-back deal was in 
everybody’s interests, they clearly 
meant it 


Milk stout 

■ What better place for Barings to 
stage its presentation for the Alaska 
M2k Corporation of the Philippines 
than at The Brewery in London’s 
ChjsweU Street If you want to pop 
along, drop a line to Cressida Stout 
Don’t feel bitter if you're not 
invited. 




16 



081 6892266 


mupmMtmima mammas 


FINANCIAL TIMES 

Monday November 21 1994 


DALE 

□ALE 

□ALE 

DALE 


Dale Power Systamsji^ 

i^mrfTvButldtDOsFflOTWg^Y 1 ^ 

TO Ora 614141 TO«cS 216 3 FMcO^ aj^ 


Aids drugs combination gives 
most effective results so far 


By Cffive Cookson, 

Science Editor 

A combination of two Aids drugs, 
Glaxo's new 3TC and Wellcome’s 
established AZT, has the stron- 
gest and most prolonged rfinioal 
effect of any treatment yet tested. 

First results of clinical, trials 
with the 3TC-AZT combination, 
which were released at an inter- 
national congress on Aids ther- 
apy in Glasgow, Scotland, yester- 
day, show the drugs cut virus 
levels in blood cells by 99 per 
cent after a' year. This compares 
with an 11 per cent reduction 
over six months using AZT alone. 

The results are so encouraging 
that Glaxo has decided to con- 
tinue developing 3TC itself rather 
than licensing it to Wellcome. * 


The two UK pharmaceutical com- 
panies had announced in March a 
provisional agreement giving 
Wellcome the option to develop 
and market 3TC as a treatment 
for HIV infection, the virus that 
causes Aids. But negotiations to 
implement the agreement have 
collapsed because Glaxo now sees 
3TC as a more promising poten- 
tial product 

“Glaxo is fully committed to 
the development and eventual 
marketing of 3TC and will pro- 
ceed to bring it through the regu- 
latory process as quickly as pos- 
sible.” the company said last 
night. 

It plans to file for regulatory 
approval in the first half of 1995 
to sell 3TC in combination with 
AZT. The two companies are con- 


tinuing discussions on commer- 
cial co-operation over 3TC/AZT 
combination therapy. 

The Glasgow conference heard 
results from two trials of 3TC/ 
AZT involving a total of 352 
patients infected with HIV. As 
well as producing the drastic 
reduction in the levels of virus, 
the combination was far more 
effective than AZT in improving 
patients’ CD4 cell counts, which 
measure the damage done to the 
immune system by the infection. 

."The results of AZT/3TC In 
combination are better than any 
of the combinations which have 
been tried to date,” said Dr 
Schlomo Staszewski of Goethe 
University Clinic in Frankfurt, 
Germany, who was In charge of 
one study. “These data are 


extremely significant not only for 
their effectiveness in reducing 
virus and increasing CD4 cell lev- 
els but also because the effects 
persisted throughout the year- 
long study,” added Prof Christine 
Katlama of the Piti&Salp6tri@re 
Hospital in Paris, the other study 
leader. “It is also Important to 
note that the combination was 
very well tolerated by patients." 

Longer clinical trials will be 
necessary to confirm that the 
3TC-AZT combination actually 
improves the health and extends 
the life of people with HIV. 

First evidence from test-tube 
experiments that 3TC plus AZT 
could be effective in combating 
the disease emerged publicly at 
the World Aids Conference in 
Japan in August this year. 


Absence of rebel leader raises doubts over end to civil war 

Angolan peace uncertain despite pact 


By Michael Holman in Lusaka 

Prospects for peace in Angola 
remained uncertain last night 
despite the signing of an agree- 
ment to end the country’s 19-year 
civil war which has cost half a 
milli on lives. 

A warm handshake between 
Angolan president Eduardo dos 
Santos and General Eugenio 
Manuvakola, who signed on 
behalf of the Unita rebel move- 
ment, did little to allay fears 
aroused by the absence from the 
ceremony of its leader, Mr Jonas 
SavimbL 

The agreement, in which the 
warring parties pledge a ceasefire 
with effbct from midnight tomor- 
row, envisages the integration of 
Unita forces into the army, a 


coalition government and fresh 
national elections, to be moni- 
tored by a 7, 000-strong United 
Nations force. The government 
has ceded to Unita three sec- 
ond-rate provincial governorships 
as well as four minor ministries. 

The truce ceremony fell well 
short of what had been planned. 
President dos Santos delegated 
the signing of the document to 
his foreign minister. 

The programme for the cere- 
mony, attended by African trad- 
ers and western officials, listed 
Mr Savimbi as a participant. But 
over the weekend Unita officials 
said an Angolan government mil- 
itary offensive launched a fort- 
night ago would prevent him 
from attending. 

Although Gen Manuvakola, 


Unita’s secretary-general and 
chief negotiator, said yesterday 
Unita intended to implement the 
deal, Mr Savimbi has yet to make 
his position clear. A 1991 peace 
agreement, negotiated by US and 
Soviet diplomats, collapsed after 
Mr Savimbi refused to accept 
defeat by Mr dos Santos' MPLA 
party in the following year’s elec- 
tion. 

The renewed conflict has left 
Angola more bitterly divided but 
the recent MPLA offensive may 
have given the government the 
upper hand. 

Government forces recently 
captured the Unita stronghold of 
Huambo, 530km southeast of the 
capital, L uanda 

Southern African leaders who 
attended the signing are under- 


Irish poll urges party leaders 
to avoid calling fresh elections 


By John Murray Brown in Dublki 

Ireland’s outgoing ruling 
coalition partners were nnder 
growing pressure last night to 
find a speedy resolution to the 
current political crisis. 

The coalition's difficulties were 
exacerbated by an opinion poll 
indicating widespread opposition 
to a general election and 43 per 
cent of those polled backing a 
new coalition between Fianna 
Fail and Labour. 

The DM1, Ireland’s parliament, 
is due to meet tomorrow to try to 
agree a new government and vote 
a new prime minister, although 
no conclusive result is expected. 
Political parties will probably ask 
for more time. Mr Joe Costello, a 
Labour MP, indicated that “sub- 
stantial” negotiations would only 
start after tomorrow's vote. 

Amid fears that a protracted 
delay in forging a new govern- 
ment could damage the Northern 
Ireland peace process, Mr Bertie 


Ahem, the newly installed 
Fianna F40 leader, said he would 
-“take account” of the poll, which 
indicated 73 per cent against call- 
ing early general elections. 

Ireland’s outgoing government 
broke up last week with the res- 
ignation of the prime minister, 
Mr Albert Reynolds, before a vote 
of confidence which he was 
expected to lose. 

The crisis began when Labour 
accused Mr Reynolds of mislead- 
ing parliament over the attorney- 
general’s role in an extradition 
case involving a Roman Catholic 
priest who was later convicted in 
Northern Ireland of child abuse. 
Mr Harry Whelehan, the attor- 
ney-general involved, also 
resigned from his new position of 
president of the Irish High Court 

Speaking an BBCl’s Breakfast 
with Frost programme, Mr Ahem 
referred to the “fairly substantial 
nature” of yesterday’s opinion 
poll and made it clear he 
favoured a new arrangement 


with Labour. However, in his 
first public statements since 
being voted in as party leader on 
Saturday, Mr Ahem also tried to 
reassure his traditional Fianna 
Ffiil support and hacked the 
objective of a united Ireland with 
a promise of a social programme 
“that takes account of our dis- 
tinctive values and convictions” 
Much will depend on Mr Dick 
Spring, Labour leader and outgo- 
ing foreign minister, whose with- 
drawal from the government on 
Wednesday ensured its downfall. 
A Fianna Fail-Labour coalition 
would do much to restore 
in oment um in the peace process 
and provide continuity as Dublin 
and London try to finalise the 
framework document to provide 
the basis for a lasting constitu- 
tion for Ulster. 

Irish wait to see which way 
Spring jumps. Page 2 
Fear of IRA split rejected. Page 6 

Editorial Comment, Page 15 


stood to have warned Mr Savimbi 
they are ready to offer military 
assistance to the MPLA govern- 
ment if they decide he is to blame 
should the peace process collapse 
a second time. 

Nicholas Shaxson adds from 
Luanda: Both sides have access 
to funds should war resume. The 
government is pumping about 
$2.5bn a year of offshore oil. 
Unita still controls much of the 
north-eastern diamond trade, last 
year worth some S250m. 

Recent US Republican electoral 
victories will revive the influenc e 
of old Unita friends, such as Sen- 
ator Jesse Helms, incoming chair- 
man of the Senate Foreign Rela- 
tions Committee. 

Oil Industry survives. Page 5 


VW board 
concerned 
over tension 

Continued from Page l 

members are understood to be 
more than satisfied with the ben- 
efits of the shake-out started two 
years ago when Mr Piech took 
charge. VW last week said its 
losses after nine months had 
been cut to DM73m ($46 3m) this 
year from DM133bn last year. 

Although the origins of the let- 
ter, published in today's edition 
of the news magazine Der Spie- 
gel, are uncertain, the internal 
resistance to Mr PiSch’s regime 
was confirmed In a recent inter- 
view in which he said he was 
“still working 1 ” on middle' man- 
agers reluctant to toe the line. 

He alleged that unknown VW 
employees had tried to bug his 
private telephone and sabotaged 
Ms press office communications. 
The interview was widely sera 
as the launch of a wholesale 
offensive on the next manage- 
ment layer. 


FT WEATHER GUIDE 


Europe today 

High pressure over France and the 
north Balkans will Bring calm, dry 
conditions to most of Europe. 
Scandinavia, European Russia and the 
eastern Mediterranean will remain 
unsettled,- although Sweden wfll 
become drier. Heavy rain wDI continue 
along the coasts of Norway, Scotland 
and northern Ireland, while Russia will 
have snow and rain. Central Europe, 
northern France and the British Isles 
win have fog. low cloud, drizzle and 
some sunshine. The western 
Mediterranean will be sunny and warm, 
with temperatures exceeding 20C on 
the southern coasts. 

Five-day forecast 

Thunderstorms wjfl move away from 
the eastern Mediterranean. Southern 
Europe win be dry with sunshine, fog 
and light winds. From Wednesday, 
unseasonably warm weather will end 
the cool spell in the British Isles, 
Benelux and France. Scandinavia wifl 
remain unsettled. Eastern Europe will 
become cold and unsettled by the end 
of the week. 

TODAY’S TEMPERATURES 




^1020 











fes? 


am . 


al 


L 









W f VI 

is 1 i 




ATI 


■ Wwtb ‘rent m. rn CoM front A A, mud speed In KPH 




More and more experienced travellers 
make us their first choice. 


Lufthansa 


Stuatton at 12 GMT. Tampara&ffBS maximum tor day. Forecasts by Mateo Consult of the Netherlands 

Caracas shown- SC Fan an 21 Madrid sun 18 Rangoon 

Canfiff doudy 11 FranWut cloudy 10 Majorca sun 21 Reykjavik 

Casablanca sun 20 Geneva ter 12 Malta Mr 20 FUo 

Chicago rain 4 Gibraltar aun 20 Manchester fair il Rome 

GdOfpw fair 11 Glasgow cloudy 11 Manila fair so S. Frsco 

Dakar fair 29 Hambug fata 9 Melbourne shower IB Seoul 

Dates fair 18 HefaMd shower 4 MaxfcoOty fair 23 Skrcaore 

Delhi sun 25 Hong Kong lair 27 Miami fair 28 Stockholm 

Dubai aun 31 Honolulu fair 29 M3an aun 13 Strasbourg 

OubBn Mr 11 tetmbd shower 10 Montreal steel 2 Sydney 

Dubrovnik fair 19 Jakarta fair 31 Moscow sleet 0 Tangier 

Edinburgh cloudy 10 Jersey fair ii Munich rain 12 TaiAvtv 

Karachi aun 32 Nairobi fair 25 Tokyo 

Kuwait fair 29 Naptes sun 20 Toronto 

L Angles sun 19 Nassau tOr 28 Vancouver 

Las Palmas aun 26 New York rain 13 Venice 

Lima cloudy 23 Nice sun 18 Vienna 

Lisbon sun 18 Nksoaia thund 14 Warsaw 

London fair 11 Oslo fair 8 Washington 

LuxJwurg fab- 10 Paris doudy 12 WefUngton 

Lyon fair 13 Perth sun 33 Winnipeg 

Madeira sun 23 Prague rain 11 Zurich 



Maximum 

Beflfao 

fair 

7 

Caracas 

shower 

sc 

Faro 

aim 

21 

Madrid 

sun 


Celsius 

Belfast 

fair 

10 

Cardiff 

doudy 

il 

Frenkfut 

doudy 

10 

Majorca 

aun 

Abu Dhabi 

sun 

31 

Belgrade 

cloudy 

12 

Casablanca 

sun 

20 

Geneva 

fair 

12 

Malta 

fair 

Accra 

fair 

32 

Berlin 

fata 

11 

Chicago 

rain 

4 

Gibraltar 

BUI 

20 

Manchester 

ter 

AJgtere 

sun 

23 

Bermuda 

doudy 

24 

Cologne 

ter 

11 

Glasgow 

cloudy 

11 

Manna 

fata 

Amsterdam 

fair 

12 

Bogota 

fas- 

21 

Dakar 

fat- 

29 

Hamburg 

Mr 

9 

Melbourne 

ahowar 

Athena 

fair 

14 

Bombay 

ter 

34 

Dates 

ter 

18 

Helsinki 

shower 

4 

Mexico Ctty 

fata 

Atlanta 

fair 

22 

Brussels 

fair 

11 

Delhi 

sun 

25 

Hong Kong 

fair 

27 

Miami 

fair 

B. Aires 

showier 

23 

Budapest 

doudy 

11 

Dubai 

aun 

31 

Honolulu 

lata 

29 

Milan 

aun 

BJiam 

fair 

10 

CJagen 

fab- 

9 

Dubfin 

ter 

11 

tatanbd 

shower 

10 

Montreal 

atari 

Bangkok 

fair 

33 

Cairo 

fair 

20 

Dubrovnik 

fata- 

19 

Jakarta 

fair 

31 

Moscow 

atari 

Barcelona 

sun 

19 

Cape Town 

sun 

22 

EcBnburgh 

cloudy 

10 

Jersey 

ter 

11 

Mwich 

rain 










Karachi 

aun 

32 

Nairobi 

fair 










Kuwait 

fair 

29 

Naples 

sun 


fair 35 
rain 6 
cloudy 26 

sun 20 

lair 14 
fair 9 
thund 33 
fair S 
doudy 11 
fair 24 
sui 21 
shower 22 
doudy 15 
rain 5 
doudy 4 
sun 13 
rain 12 
rain 10 
fab- 13 
rain 13 
Snow -11 
doudy 11 


THE LEX COLUMN 




UBS under pressure 


The battle between the board of Union 
Bank of Switzerland and Mr Martin 
Ebner, the maverick find manager, is 
nearing its fHmar Tomorrow inves- 
tors will vote on a board proposal to 
strip the bank’s registered sharehold- 
ers, of which Mr Ebner's BE Vision is 
the largest, of their special voting 
rights. 

For registered shareholders, it is 
clear what to do. Their shares enjoy 
an effective premium of 17 per cent 
over the bank's bearer stock, which 
would be wiped out if the board’s pro- 
posal carried the day. Given that regis- 
tered. shareholders command 51 per 
cent of the bank's votes, one might 
think their self-interest would settle 
the battle. But things are not so sim- 
ple. UBS, through its fcmd manage- 
ment arm, holds power of attorney 
over a large slug of its own shares. By 
voting them in favour of the board 
proposal, it may well be able to neu- 
tralise other registered shareholders. 

As a result, the bearer shareholders' 
votes will also be crucial. For them, 
the essential question is whether it is 
in their interests for Mr Ebner to be 
stripped of his influence. Probably not 
Though Mr Ebner has not spelt out a 
complete strategy for UBS, he is press- 
ing the bank to improve its returns - 
perhaps by focusing mi its lucrative 
fund management arm and reducing 
its less profitable retail banking net- 
work. UBS says it too plans to 
improve profitability. But it is hard to 
avoid the conclusion that it has been 
spurred to do so by Mr Elmer's prod- 
ding. If he is marginalised. UBS will be 
under less pressure to perform. So 
bearer shareholders, too, should vote 
against the board. 

Solvency standards 

Britain’s actuaries are incensed that 
the government’s proposed solvency 
benchmark for occupational pensions 
wifl give an unduly optimistic picture 
of a frmd's financial health. That is 
because the proposed methodology 
allows schemes to count their equity 
holdings when assessing their ability 
to meet liabilities to pensioners expec- 
ted to live at least 10 years. The actu- 
aries argue passionately that gilts 
should be used as they provide more 
certainty of providing the necessary 
income. 

However the debate is resolved, it 
has usefully served to hi g hli g ht the 
trade-off between investments in equi- 
ties versus gilts. It is exposing some- 
thing that may have bran obscured 
during the 1980s when high equity 


tBkfcePs narrow. 




..-2JW 


20,000 ~-l 


19,000-1 


;. v ; •• -A<i! : 

’*7 




Soue* FT Graph#* 


returns could be taken for granted; 
that investment in equities is at the 
expense of the security of pensioners’ 
entitlements. TO guarantee that secu- 
rity requires a higher proportion of 
gilts in a pension portfoEo. And. yet, 
because equities outperform gilts over 
the long term, it costs a company 
more to fund greater security, '□lose 
companies whose funds have a low 
solvency margin - end therefore run 
the risk of failing the new standards - . 
will eventually be obliged to make 
greater contributions to their funds. 

It is alarmist to suggest that the 
solvency proposals will ultimately 
lead to a massive switch out of equi- 
ties. Most funds have a high degree of 
solvency; and those that do not have 
until the next century to make the 
adjustment Bui for some funds, which, 
face the obligation to meet BaMUtira 
sooner rather than later, toe shift to 
gilts has already begun. 

Tokyo markets 

Aggressive overseas buyers of the 
Tokyo stock market in tire first quar- 
ter have been disappointed by the Nik- 
kei’s progress. Foreign investors had 
hoped the market would move forward 
sharply on the back of an expected 
strong recovery in corporate earnings. 
The interim earnings reported by man- 
ufacturers this month have indeed 
been strong. But the Nikkei has 
moved sideways. Admittedly, US 
investors are sitting on 5 per cent prof- 
its since March, but that is due to the 
dollar’s depredation against the yen. 
Domestic shareholders have enjoyed 
no improvement whatsoever. 

The reason tor investors' frustration 
Is that the nwrninpi recovery among 
manufacturers has already been, dis- 
counted. Sectors such as steel and 
paper have outperformed the market 


by about ID per cant tins year. But the 
Nikkei has been hekl back by sectors 
such as construction and banking 
which have fallen is par cent and u 
p ir cent respectively. ' ; - v ? 

Overseas investors have nieithectiiB 
weight norcomfictence to create a mto- 
ket recovery. For the market to nwye 
forward decisively, it must be driven, 
by domestic buyers.. But Japanese 
institutions view equities, which yield 
less th an 1 per cent, as expensive com- 
pared with bonds which yield . 4.75 per 
cent Moreover, the banks, troubled 
poorly performing loans, still own 20 
per cent of the market Whenever the 

Nikkei picks up; they ' into - 
strength. If the market breaks' out 
from its recent trading range sooivtoe 
move is likely to be down. . . 

Metals . - ._”.F,-V : j 

Base metals . prices -enjoyed ‘ an . 
extraordinary trading period last' 
week. The prices of copper "and ate. 

. minlnm clambered 5 . per cent ht fraa-' 
tic trading on the London Metal 
Exchange. That was the cnTmmaffoa 
of a bull ran which has: driven tfase . 
metal prices up more than 60 pra crat- 
since January. 

The rise in some ofthe metals may 
be justified. Reserves of copper an the 
lmr have fallen nearly 50 per. .cent 
since this time last year, leovbigTras 
than five weeks V stocks. Demand, 
dri v en by rapid economic gr owflv Js 
expanding fast Meanwhile, new sim- 
ply is not due to cpme on-stream until 
the second half of next year. ‘ 

Similarly, aluminium stocks -have 
fa Tien 20 per rapt, with demand strong . 
and ' supply controlled until at least : 
the end of 1996 through a voluntary 
agreement by; manufacturers. But\ 
stocks of Hn l lead, -rime arw ^ 
of which have posted impressive' 
increases this year; have risen over 
Hip last 12 months. Even if iTbumwA jg 
strong, supply appears stronger. 

The arrival of speculative commod- 
ity and hedge funds Indiscriminately 
buying baskets of metals are the main 
cause of the explosion in pzices..They 
have .viewed commodities such as met- 
als as a hedge against inflation. Bat 
the scale of the funds has swamped 
the fimriamentflifi of the metals mar- 
kets. No doubt, when the fashionable 
money flows out again - and it will 
because metals pay no interest - 
prices will suffer a sharp correction. 
With many funds anxious to book 
profits before the year-end, the base 
metal bubble could buret before 
Christmas. 


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FINANCIAL TIMES 


COMPANIES & MARKETS 


For a wealthier tusme 
and a Leal tinier life . 


phene D-ivid Ri^crfiin on (W52 2^3262 



MARKETS 


_l THIS WFEk 


«ERARO BAKER 

global , nv ^S r 

and cSSSIS^ ' n “b «• US and Japar 
the turkey and the h3Ve 3X1 Q PP°rtunity. ov 

developments in m f to rev,ew »» West 
Page 20 ,n ,he s,ru 99'e tor the dollar. 



martin wqlf 

economic eye 

it would take at least 20 to 30 
years for China to become a 
superpower, even if reform were to 
continue, which is far from assured. 
But China is already a better 
qualified candidate for membership 
of the G? than Russia. Page 20 


BUNDS: 


b ° nd ' 9 ,ft - market 'S in a 
ranfldent mo-ad, rallying in the face of Tuesday’s 

' .^ S shorM6rm interest rates. Elsewhere; 
^ n ^^ debt has among the worst 
" h,S year 3 market mettdown. 


EQUITIES: 

In New York, with the Thanksgiving holiday on 
Thursday, uncertainty is expected to continue over 
wnat is generally one of the slowest weeks of the 
year. Meanwhile, the phrase ‘soft landing* is making 
a comeback as the London market tries to «$«««> 
the likety impact of last week's move by the US 
Federal Resen/e to raise US interest rates. Page 21 


EMERGING MARKETS: 

The world’s emerging markets largely discounted 
last week's action by the US Federal Reserve as 
thoughts remained focused on whether there will 
be a final rally to end the year. Page 21 

CURRENCIES: 

Foreign exchange markets face a quiet few days, 
after a week in which a deluge of data, combined 
with a monetary lighting from the Fed, failed to 
generate any significant movement in the dollar. 
Page 21 

COMMODITIES: 

Today sees the introduction of a market makers' 
scheme for the Brent crude option contract, which, 
according to Peter WHdbfood, the chief executive of 
London’s International Petroleum Exchange, “will 
increase accessibility" to the contract Page 20 

INTERNATIONAL COMPANIES: 

One of the most keenly awaited decisions In the 
investment banking world Is expected to be taken 
in Bonn today when Chancellor Helmut Kohl meets 
with Deutsche Teleloom to decide which banks will 
handle the DM15bn ($9.7bn) partial privatisation of 
the German telecommunications concern. Page 19 


UK COMPANIES: 

The move by Standard Life, the UK's largest mutual 
life insurer, to offer higher surrender values to 
customers who cash in long-term policies early has 
sparked controversy. Page 18 


STATISTICS 


Base lending rates 25 

Company meetings .. — — 23 

Dividend payments 23 

FT-A World indices — 20 

FT Guide to cwencies — 19 
Foreign exchanges 25 


London recent issues — .25 
London share service . 28-29 

Managed funds 26-27 

Money markets — — 25 

New Int bond Issues 22 

NYSE service 30-31 

World stock mkt indices.. ..24 


BZW looks to strengthen presence in US 


By John Gapper, 

Banking Editor 

BZW. the investment banking arm of 
Barclays, has started a strategic review 
of its business in the US that could lead 
to the bank entering a partnership with, 
or acquiring, a US investment bank. 

BZW executives believe that it needs 
to strengthen its presence in the US in 
order La compete with other global 
investment banks. At the moment, BZW 
has limited US bond operations and it 
does not sell US equities. 


The bank's review is being led by Mr 
Donald Brydon. the newly-appointed 
deputy chief executive of BZW. Barclays 
may appoint outside advisers to help in 
the review, which is expected to be com- 
pleted by the middle of next year. 

The move follows efforts by Barclays 
to run down its US retail hanking busi- 
nesses, and refocus its activities for 
large companies. It has reduced the 
number of companies it deals with over 
Lhe past 18 months from 900 to 200. 

Sir Peter Middleton, chairman of BZW. 
said that BZW “had a shortage, which 


we are determined to rectify, of dollar 
products". He said that it was likely to 
examine both its presence in US equities 
and fixed income. 

Sir Peter emphasised that BZW was 
keeping an open mind about strategies 
for US expansion. “We shall do some- 
thing- Either we shall grow something 
organically, or look for a partner, or 
something of that sort" 

BZW has a range or businesses in the 
US including treasury and derivatives. It 
has a government bond trading licence, 
and a small mortgage-backed bonds 


desk, but its equities presence is limited 
to selling European and Asian shares. 

BZW executives believe that it could 
not compete head on with the large US 
“bulge bracket" firms such as Morgan 
Stanley and Goldman Sachs. However, 
they think BZW needs a strong US oper- 
ation in order to operate globally. 

One possibility would be to form a 
partnership with a small US investment 
bank in order for both partners to gain 
access to each other's markets. Several 
smaller US securities firms have faced 
difficulties penetrating London markets. 


Barclays previously had a small opera- 
tion researching and selling US equities, 
which it acquired from the former 
Drexel Burnham Lambert. These 
operations were closed three years ago 
because they were seen as too expen- 
sive. 

Barclays has been accumulating capi- 
tal in the past year because of retained 
earnings and shrinking assets, which 
would allow it to expand through acqui- 
sition. 

Last week it announced a buy-back of 
SSOOm in preference shares. 


John Ridding reports on foreign groups interested in a big stake in computer maker 


Bull sale puts France on 
the horns of a dilemma 



Ptan&HHl 

Jean-Marie Descarpentries: is thought to favour a large shareholding by employees 


T he privatisation or Groupe 
Bull, the loss-making com- 
puter manufacturer, is the 
French government's most diffi- 
cult task so far in its programme 
to sell 21 public-sector groups. 

The planned privatisation, 
which kicked ofT on Friday with 
the opening of a tender for stakes 
in the company, is the first test 
or the government's ability to sell 
one of the casualties of the public 
sector. 

It may also force the govern- 
ment into tough decisions con- 
cerning -the extent to which it 
will allow foreign electronics and 
telecommunications groups to 
invest in the national computer 
company and penetrate the 
French market, possibly to the 
detriment of powerful domestic 
players, such as Alcatel and 
France Telecom. As one Paris 
banker said: "They need to sell 
Bull, but this may involve 
increased access in strategic mar- 
kets for foreign companies such 
as NEC of Japan or AT&T of the 
US." 

The complexity of the govern- 
ment's task stems from Bull's 
financial plight. Whereas previ- 
ous privatisation candidates have 
all been profitable, the computer 
maker has been in the red since 
1989, racking up total losses of 
more than FFr20bn ($3.9bn) as it 
has struggled with increasingly 
competitive markets, bureau- 
cratic management and an 
inflated cost base. 

Although losses have been 
curbed as a result of a cost-cut- 
ting plan by Mr Jean-Marie Des- 
carpentries. who took over as 
chairman last autumn. Bull 
remains vulnerable in many busi- 
ness areas. A report this year by 
an Independent consultancy 
claimed only the company’s large 
systems and computer mainte- 
nance businesses were secure. 

The legacy of losses has 
required a succession of subsi- 
dies. Since the start of last year, 
the computer maker has received 
FFrll.ibn in state aid, roughly 
three times analysts' estimates of 
its value. European Commission 
approval of such huge transfers. 


matched only by capital injec- 
tions for Air France and Credit 
Lyonnais, was granted only on 
condition of rapid privatisation. 

Because public investors are 
unlikely to be attracted by such a 
risky proposition, the govern- 
ment has been constrained to 
seek privatisation through selling 
stakes to industry partners. "We 
are seeking to find a majority 
shareholder, or significant minor- 
ity shareholders to allow the 
company to reinforce its indus- 
trial strategies," said Friday's 
statement from the French econ- 
omy and industry ministries. 

The good news is that even 
before the official launch of an 
invitation for bids, potential 
investors had expressed interest. 
NEC, which holds 4.4 per cent of 
Bull and supplies its partner with 
mainframe computers, said this 
month that it wanted to raise its 
stake. It is thought to be seeking 
a holding of about 10 per cent to 
use Bull to expand its services 
and supply network in Europe. 


AT&T, the US telecoms com- 
pany and Quadrat, parent of 
CSEE. the French electronics 
concern, are weighing a joint bid 
for up to 40 per cent of Bull's 
shares. IBM, which holds a 2.1 
per cent stake in its French coun- 
terpart has yet to make clear its 
intentions, while Motorola, which 
recently concluded a technology 
partnership with. Bull, may also 
be a candidate for a stake. “The 
company holds a few trumps,” 
said one electronics analyst “It 
has a strong European base and 
some quality technicians." 

T he flurry of interest has 
drawn a positive response 
from the French govern- 
ment. “It is a good sign that 
investors are showing them- 
selves," said Mr Jos£ Rossi. 
French industry minister. 

But the potential proposals are 
likely to leave Mr Rossi and his 
government colleagues with 
some daunting decisions. The 
proposal from AT&T and CSEE, 


for example, could prove contro- 
versial. 

If the offer is confirmed - so 
far only a preliminary letter has 
been sent to the government - it 
could solve at a stroke the priva- 
tisation conundrum. In conjunc- 
tion with a bigger stake for NEC, 
the state would be able to obtain 
its objective of reducing its 76 per 
cent stake to a minority holding. 

But there are hurdles. AT&T's 
interest in the privatisation does 
not tie in the computing side of 
Bull's operations. Instead, the US 
company is seeking to enter 
France’s telephone services mar- 
ket which is monopolised by 
France T616com, the state opera- 
tor. 

AT&T is thought to be offering 
to buy a large stake in Bull in 
return for the award of a tele- 
coms services licence, although 
the French market, in line with 
EU policy, is not set to be liberal- 
ised until 1998. 

Such a proposal throws up 
thorny questions for the govern- 


ment. France Telecom, which 
holds 17 per cent of Bull, is likely 
to resist the arrival of one of its 
main international rivals. 
Alcatel, the French telecoms 
equipment giant and another 
rival of AT&T, would also be 
expected to oppose such a solu- 
tion. 

ln addition, Mr Descarpentries 
is thought to favour a series of 
smaller investments by industrial 
partners and a substantial share- 
holding by employees, rather 
than the presence of a powerful 
shareholder such as AT&T. Trade 
unions, wary of foreign share- 
holders and fearing Bull will be 
broken up after the sale, are 
planning demonstrations against 
the privatisation this week. 

The French government 
declines to comment on specific 
proposals, but has indicated it 
will not oppose the presence of 
foreign companies on the share- 
holder register. “The only thing 
which interests me is to give the 
company the chance to succeed." 
said Mr Rossi. 

Friday’s statement also made 
clear that the French govern- 
ment is seeking to maintain Bull 
as a whole. "It would be difficult 
politically to allow the national 
computer company to be broken 
up," said one analyst. 

The sensitivity of the issue 
could be blunted by the retention 
of a blocking stake by the state, 
in conjunction with France Tele- 
com. Less problematic solutions 
may also emerge from proposals 
by potential investors or by the 
creation of a network of signifi- 
cant, but not dominant, share- 
holders. as sought by Bull's 
chairman. 

But time is short prospective 
candidates have until December 9 
to submit their offers, after 
which a selected shortlist will 
have six weeks to perform a 
detailed study of Bull before 
making binding proposals. 

Ultimately, the state-share- 
holder is fared with the fact that 
beggars cannot be choosers. As 
befits Bull's troubled history, 
however, the choices may prove 
painful. 


Kemper and 
Conseco 
drop merger 

By Tony Jackson in Now York 

The S2.4bn merger between 
Kemper and Conseco, the US 
financial services groups, has 
been abandoned by mutual con- 
sent. The failure of the deal 
appears to open the door to other 
suitors, from GE Capital to Bean 
Witter Discover, who have also 
expressed Interest in Kemper. 

It is understood that the chief 
obstacle was Conseco’s difficulty 
in securing finance. The merger 
has been beset with problems 
since it was announced in June, 
with Ctmseco first delaying it for 
lack of finance, then reducing its 
price from S2.7bn to $2.4bn. 

Kemper's board will be under 
strong pressure to arrange an 
alternative deaL It is thought the 
share price could fall to $40 in 
the absence of a bidder, thus 
opening Kemper directors to 
legal action by their sharehold- 
ers. Mr David Mathis. Kemper 
chairman, said yesterday: “Our 
board remains committed to the 
goal of maximising value for our 
stockholders, and we plan to 
explore all possible alternatives 
as expeditiously as practicable." 

Until now, Kemper has been 
prevented from pursuing an 
alternative deal by its undertak- 
ing to pay Conseco 9100m if it 
backed ont. However, Kemper 
said yesterday that as the termi- 
nation was mutual, the $!00m 
was not now payable. “The slate 
is dean, and we start from here 
tomorrow morning. " 

One of the most likely bidders 
Is G£ Capital, whose earlier offer l 

for Kemper at S60 a share had / 

been camped by Conseco’s initial 1 

bid of $67. However, Couseco's 
bid bad been subsequently scaled 
down to $60 as well. It is 
believed that GE’s interest has 
been reawakened in recent 
weeks, along with that of other 
potential bidders such as Dean 
Witter and SunAm erica. 


This week: Company news 


COMMERZBANK 

Germany set for 
small offerings 
in ‘big 3’ results 

Commerzbank kicks off the autumn 
reporting season of the big German 
hanks on Wednesday with its 10-montb 
results. Like other international banks, 
those in Germany have suffered from 
the downturn in bond markets which 
was triggered earlier this year by rises 
in US interest rates. 

Germany’s “big three" Frankfurt 
banks all produced half-year results 
which showed the effects of the turmoil. 
This mainly affected their profits from 
trading on their own account 

Commerzbank suffered a 68 per cent 
drop in trading profits foarite m _ 
account to DMSTm ($5K30m) m the first 
six months, but this was partly 
cushioned by a 15 percent^ Jn bad 
debt provisions to DM7l0m. Ml 
operating profits (including own 
account trading and nonnalbaok 
business) were 11 per cent h&herat 
DM43Sm- Deutsche Bank reported a l 
^cenirise in AiD operating profits, 
also suffering a sharp fell \ m 
own-account trading results. 

^merzbank, which is sm^erthan 
Deutsche Bank and Diesdner Bank . - 
wSchproduce their resists in the next 
two weeks - has already put out a brief 
Sement of its performance ojerffie 

KBCSSSS"' 

"sssssseeE- 



change aim ° 

Serose by W per centto 
With an improvement in the 
«t margin, net inter^tmeome 
51 mna Rhn. Net 


Kwasdom while 
costs were 48 per cent 

^ bank said its total group 
* DM286bn at the end of 
■ up slightly from DM285bn 
tier 31. Total lending, solely m 
credits, was 2.6 per cent 

mdOfilin 


Commerzbank 


Share pries (DM) 



Sourra Danstmam 


STORA/MODO 

High hopes of paper 
groups tearing ahead 

A picture of an industry in a strong 
recovery phase should emerge this 
week when Stora and MoDo. two of 
Sweden's leading pulp and paper 
groups, report their nine-month figures. 
Expectations are high, not least because 
AssiDomSn and SCA. their two main 
domestic competitors, both raised their 
foil-year profit forecasts last week. 

Pulp and paper groups worldwide are 
benefiting from higher demand and a 
strong rise in prices after three difficult 
years. The impact has been felt all the 
more strongly by Swedish companies 
because of the weak krona and 
impressive productivity gains. 

Stora. Europe’s biggest pulp and 
paper group, is expected to announce a 
nine-month profit of around SKr2bn 
(3275m) when it presents its figures on 
Wednesday. The figure will be inflated 
by capital gains and reduced financial 
costs, but it will also show a stronger 
underlying performance. One difference 
from the six-month result is that the 
group should finally be feeling some 
impact from the price rises that took 
effect in the first half. 

MoDo, which reports on Thursday, 
will feel the price effect more strongly 
because of its big exposure to pulp and 
fine paper where prices have increased 
most Analysts expect a profit of up to 
SKrfSOm. The company is also expected 
to confirm it will go ahead with a 
SKr2bn investment In a new newsprint 
machine at Braviken. 


OTHER COMPANIES 

Japanese banks pay 
price for poor loans 

Results to be reported this week for the 
six months to September will show 
Japan's leading commercial banks still 
in the mire. They are expected to report 
- on Thursday and Friday - yet 
another decline in recurring profits, 
before tax and extraordinary items, and 
in net earnings, marking a record 
four-and-a-half-year profits decline. 
Non-performing loans will once more 
have to be written off. a legacy of the 
explosion of lending, backed by 
over-valued properties, just before the 
1990 collapse in asset prices. Sluggish 
demand for capital, due to corporate 
Japan's reluctance to invest in new 
equipment, has bit lending volumes. 

■ Kyocera: The world's top maker of 
ceramic packages for integrated circuits 
will produce more cheerful news when 
it produces interim results today. 
Recurring profits are forecast to rise 
from Y17.39bn (Stti.Mnu to vaobn, due 
to a sharp rise in demand from the 
electronics industry. 

■ Nintendo: The producer of video 
games and software is expected today 
to show a recurring profits decline, 
from Y61bn to Y&lbn. Like its rival 
Sega, which produced a profits Tall a 
week ago, Nintendo has suffered from 
fallin g prices and demand and is hoping 
that a new generation of game 
machines will ensure a recovery - 

■ Tokyo Electric Power The world's 


largest electric power company is 
expected to announce a small fall in 
recurring profits on Tuesday, from 
Y58.5bn to Y58bn, despite the summer 
heatwave. Kansas Electric Power, the 
world's second-largest power group, 
will report better results on the same 
day. Analysts expect Kansai's interim 
profits to rise from Y49bn to Y65bn. 

■ ANZ: The reporting season for 
Australia’s big banks closes on 
Wednesday when ANZ unveils profits 
for the year to end-September. After the 
sharp recoven' in Westpac's fortunes 
and the record result from National 
Australia Bank, analysts say that ANZ 
should manage a near-tripled profits 
figure of AS6SOm-AS690m (US$5 19m). 

■ Granada: The UK broadcasting, 
leisure, rental and business services 
group, is expected on Wednesday to 
report pre-tax profits for the year to 
end-September of at least £250m 
(S-UOmi, up from £17Gm. Earnings per 
share are forecast at around 30p, and 
the dividend is expected to be 14 per 
cent ahead at lOp. 

■ Thorn EMI: After promising 
first-quarter figures from the music and 
rentals group, analysts expect a 17 per 
cent rise in pre-tax profits to £135m for 
the six months to September 30. 

■ Vodafone: The LHC's largest cellular 
phone group is expected to report 
interim pre-tax profits of £i75m-£185m, 
only a few percentage points ahead of 
last year’s £l74.5m, as start-up costs for 
overseas licences start to bite. Overseas 
losses could reach £50m. 


Companies in this issue 


BZW 

17 

HNVA 

ia 

On* 

19 

CMOS 

18 

Hanson 

18 

Pioneer 

19 

Conseco 

17 

Heron 

18 

RlCOh 

19 

Deutsche Telekom 

19 

Hrtiinger 

19 

SCA 

19 

Dunnes Stores 

18 

Japan Totucco 

19 

Skoda 

19 

Ertl 

IB 

Kemper 

17 

Standard Life 

18 

Glaxo 

16 

Leic-esiershire Co-op 

IB 

vw 

1, 19 

Groupe Bull 

17 

Nippon Shinpan 

19 

Western Mining 

19 


myo n mupofmortw^ 


EL 


JINHUI 

JINHUI SHIPPING AND TRANSPORTATION 

LIMITED 

OKcotporascd m Bermuda tutb Untried HabtitiyJ 

Private Placements of 20,370,370 Shares 
of Nominal Vhlue U.S.S0.50 each 

Arranged by 

Nomura lntp rn3rin n.il Christiania Foods AS 


Global Initial Public Offering of 26,057,971 Shares 
of Nominal Value U-S.$0.5O each 
and 

Introduction to the Oslo Stock Exchange 


International Offering of 24,057,971 Shares 
at an Offer Price of U.S.$1.80 per Share 

Public Offering of 2,000,000 Shares 
at an Offer Price of NOK12.20 per Share 

Jotnl-Global Coordinators and Lead Managers 

Nomura International Christiania Ponds AS 

International CO-managers 

Credit Lyonnais Securities Asia Jardine Fleming 

N M Rothschild and Smith New Court Swiss Bank Corporation 








— :^-*2232sm 




18 


FINANCIAL TIMES MON DAY NOVEMBER 21 1 994 


COMPANIES AND FINANCE 


Scheme to reduce penalties for early redemption of policies 

Standard Life’s surrender bonus 


By Alison Smith 


The move by Standard Life, 
the UK’s largest mutual life 
insurer, to offer higher surren- 
der values to customers who 
cash in long-term life assur- 
ance or pension policies prema- 
turely has aroused far more 
interest than expected among 
independent financial advisers. 

But the policy of giving a 
better deal to customers whose 
plans lapse within a few years 
- at the expense of a small 
reduction in maturity value - 
has sparked controversy 
within the life sector. 

Some companies believe that 
improving early surrender val- 
ues can be unfair to Investors 
who stay with a policy for its 
duration. They also fear it 
could undermine the very idea 


of the policy as a form of 
long-term saving. 

Mr John Hylands, Standard's 
head of marketing, said the 
programme of presentations to 
independent financial advisers 
- through whom the company 
makes most of its sales - had 
been extended to the end of 
this week. 

The company had originally 
expected about 2,000 indepen- 
dent advisers to attend, but 
now expects as many as 4,000 
will have been to the road- 
shows by the presentations' 

finish 

Other life companies, includ- 
ing those which also sell pri- 
marily through independent 
advisers, are particularly irri- 
tated that Standard is improv- 
ing its surrender values with- 
out cutting the commissions it 


pays to those, selling its prod- 
ucts. 

Competition among those life 
companies is expected to inten- 
sify as a result of regulatory 
changes. 

Under Standard's new sys- 
tem, which comes into effect in 
January, the company will 
finance the initial cost of pay- 
ing commission - so the 
adviser will still get paid - and 
then deduct the total out of 
premiums paid over the whole 
life of the policy rather than 
just taking it all Cram the early 
premiums. 

To finance this change. Stan- 
dard will move about £50m in 
the first year from its free 
assets, which totalled £5.7bn at 
the end of last year, into policy 
reserves. 

Mr Hylands said that total 


would rise over the following 
few years and would stabilise 
at the transfer uf "a few hun- 
dred million pounds of capi- 
tal". 

Throughout the life assur- 
ance industry, companies have 
been adjusting their policies 
and the way they pay sales 
agents and advisers in prepara- 
tion for the new regulatory 
regime, which begins in .fanu 
ary. 

Standard also has an addi- 
tional factor to cope with next 
year in the loss of its former 
relationship with Halifax 
Building Society, the UK's larg- 
est, under which Halifax sold 
only Standard Life financial 
services' products. 

The Halifax is setting up its 
own life assurance subsidiary 
in January. 


Battle for Dunnes ends with 
brother Ben selling stake 


By John McManus 


A two-year battle for control of 
the Republic of Ireland's larg- 
est retailer, Dunnes Stores, has 
ended. Mr Ben. Dunne, the for- 
mer executive chairman and a 
19 per cent shareholder in the 
company is to be bought out 
by his brother and two sisters 
for a reported IfilOOm (£93J3m). 

In return Mr Dunne is to 
drop his legal action to have 
the family trust, through 
which the company is owned, 
broken up. The case was expec- 
ted to be heard by the Irish 
High Court last week but was 
repeatedly adjourned while a 
settlement was hammered out 

If he had been successful in 
breaking up the trust Mr 
Dunne planned to bring a sec- 


ond action to force his family 
to buy him out or sell their 
shares to him. 

Mr Dunne brought his action 
after being removed from the 
position of executive chairman 
in March 1993. He was voted 
out by a board made up of his 
brother Frank and three sis- 
ters. Mrs Margaret Heffennan, 
Miss Therese Dunne and the 
now-deceased Mrs Elizabeth 
McMahon, who supported him. 

Mr Dunne was claiming that 
the trustees' decision to extend 
the trust after it was due to 
expire in 1985, was improper 
and had no legal effect 

A break-up of the trust 
would have allowed the shares 
in the company to be sold, but 
could also have exposed the 
beneficiaries of the trust. 


including Mr Dunne, to capital 
gains tax liabilities. 

The details of the settlement 
have not been released but it is 
understood that Mr Dunne 
could receive up to I£100m In 
phased payments over a num- 
ber or years. 

He is expected to agree not 
to set up in competition with 
Dunnes Stores for at least 12 
months. Despite this, shares in 
Dunloe, Mr Dunne’s property 
concern, jumped by 5p to 35p 
last week prompting it to issue 
a statement denying it was in 
any commercial negotiations 
that might explain the rise. 

Dunloe has been suggested 
as the possible vehicle by 
which Mr Dunne could set up 
in competition with Dunnes 
Stores. 


NEWS IN BRIEF 


APTA HEALTHCARE rights 
issue has been accepted in 
respect of 14.1m shares or 74.4 
per cent. 

BETTERWAJRE has sold a 
property in Hampshire for 

ERnv 

BM GROUP has been allowed 
to extend its offer for the 
Blackwood Hodge preference 
shares to allow holders enough 
time to consider further infor- 
mation on Blackwood. 


FOREIGN & COLONIAL 
Emerging Markets Investment 
Trust offer of 30m C shares has 
been taken up in respect of 
28.7m shares. 

MALAYA: Recent open offer 
received applications for 25.3m 
shares (42 per cent). 

MEDIA TECHNOLOGY'S offer 
for Faxcast Broadcast declared 
wholly unconditional after 
receiving valid acceptances for 
81.7m shares (67.9 per cent). 


Offer remains open until fur- 
ther notice. 

METRO RADIO Group: Radio 
Authority has re-awarded AM 
and FM licences for Bradford/ 
Huddersfield area to Pulse FM. 
group's Bradford-based station. 
Licence runs for eight years 
from early December. 
NEWPORT HOLDINGS has 
sold residential properties in 
Hove and Eastbourne for 
£ 682^00 cash. 


Co-operatives 

consider 

merger 


By David Blackwell 


Two Midlands co-operative 
societies are considering merg- 
ing to form one of the largest 
co-operatives in the UK with 
an annual turnover of more 
than £600m. 

The Central Midlands Co-op- 
erative Society and Leicester- 
shire Co-operative Society have 
established a working party 
which is expected to come up 
with proposals by the end of 
next month. 

The merged societies would 
have a, 000 employees and cover 
Warwickshire. Leicestershire. 
Derbyshire, Nottinghamshire. 
Staffordshire, and Northamp- 
tonshire as well as Oxfordshire 
and Buckinghamshire. Last 
year the CMCS achieved pre- 
tax profits of £8.8m. while the 
LCS made £3.5m. 

The CMCS said that both 
societies were financially 
strong, and the merger would 
be a consolidation of strength 
that could lead to further 
expansion. 

The new society would have 
170 food stores, including 14 
superstores, and would be a 
leading regional dairy, bottling 
lm pints of miik a day. It 
would also be the Midlands' 
largest funeral director, with 
42 funeral homes. 


Hanson 
abandons 
flotation 
plans 
for Ertl 


By David Wlghton 


Hanson has been forced to 
abandon tbe flotation of Ertl, 
its US-based toy maker, 
because of difficult stock 
market conditions. 

The conglomerate had been 
hoping to raise about S200m 
i£l30m) from the partial US 
flotation as part of its debt 
redaction programme. It is 
thought it will now try for a 
trade sale, though a deal is 
unlikely to be clinched for 
some months. 

When Hanson announced 
the plan in August it was 
hoping to sell 63 per cent of its 
holding, at S 16 a share, 
valuing Ertl at about S216m. 

Even at that stage analysts 
viewed it as a full price for a 
company which had pre-tax 
profits of S 14.1m on sales of 
SI 86m in 1993. The price 
represented 21 times historic 
earnings. 

Ertl, a leading US toy 
maker. Is best known for its 
die-cast tractor models and 
Thomas the Tank Engine. It 
also makes the successful 
Bumble Ball toy. 

Hanson acquired Ertl with 
Kidde in 1987 after a proposed 
S89.5ra sale to Tonka 
collapsed. 

A trade sale is likely to be at 
a lower rating than the 
planned flotation. But it would 
enable Hanson to sell all of the 
equity rather than retain a 
stake as is customary for such 
a flotation in tbe US. 

The proposed deal had a 
similar structure to the Beazer 
Homes USA flotation, 

Hanson's US housebuilding 
business, which was completed 
earlier this year as part of the 
group's strategy of reducing 
debt by disposals. 

Following last year's £2. 2 bn 
acquisition of Quantum 
Chemical, Hanson’s debt 
jumped to £3.4bn, pushing its 
gearing to 86 per cent. 

But because of disposals and 
good operating cash flow 
analysts expect debt to have 
been cut to about £2.5bn by 
Hanson's September year-end, 
for gearing of about 50 per 
cent 


HNVA offer for 
near to winning 



By Simon Davies 


Shareholders, hanks and 
bondholders will have already 
decided the fete of Gerald Rea- 
son's collapsed property 
empire, given tomorrow's dead- 
line for proxy votes, and Mr 
Steven Green appears set to 
emerge as the new proprietor 
of Heron. 

There have been s mall voices 
of dissent - unsurprising, con* 
sidering Investors have seen 
the value of their investments 
fall by about 85 per cent in the 
past 18 months - but the con- 
sensus is that Mr Green offers 
the best escape route. 

Bankers to Heron Interna- 
tional have not yet formally 
submitted head office approv- 
als for acceptance, hut it is 
understood that this is agreed, 
following an independent anal- 
ysis of Heron's value. 

Mr Green's Investment 
vehicle. HNVA - he is execu- 
tive chairman - offered the 
highest bid in an auction 
which attracted only limited 
interest. 

One of the other bidders said 
last week: T think it is a spec- 
tacular deal for bondholders, 
and if they can get this offer, 
good luck to them." He said 
HNVA’s valuations for Heron's 
European properties appeared 
high. 

The directors of Heron have 
also rallied to the HNVA 
cause, claiming that the only 
alternative, receiver ship. 



backers and hinted^t the-jesds- 
tence of on alternative' buyer 
which seems unlikely, consfcfc 


ering the limp- response to the 
auction and the close deadline 


Steven Greece likely to emerge 
as group's new proprietor 


would realise £4,433 per £10,000 
of debt, versus an HNVA offer 
worth £4J364. The post-receiver- 
ship funds would also take a 
long time to resolve. 

finally, those who feel that 
HNVA is getting a bargain are 
invited to participate in the 
advantages by taking equity in 
the new investment vehicle. 

Mr Gary ETesch, a specialist 
in distressed debt, has been 
one of few bondholders to 
stand up and oppose the deal, 
urging fellow investors that 
"there is still value worth 
fighting for". 

He raised the issue of the 
precise identity of the HNVA 


for the HNVA offer. 

, .HNVA has stated that its 
backers include high profile 
shareholders such - as ' Mr 
:Rupert Murdoch' , and Mr Craig 
McCaw; chairman of MeCaw 
Cellular Communications. Mr 
Green .has also bimsetf 
through his turn-around ^ of the 
• Samsonite business- - . - * * 

A more important issue for 
prospective: takers of. the 
’ equity should; be the feet that 
: an enforced change in Heron's, 
articles of association -will 
remove most standard, share- 
hdlder rights. 

Remuneration * will; . be 
decided by. the directors; there 
will be no requirement for non- 
executive directors; and pro- 
posals which. .- previously 
required 75 per emit share- 
holder approval will now 
require only amajority,- Which 
Mr Green will controL 
This means that r future 
investors would need to feel 
extremely confident in the 
integrity and ability of (he new 
management — 

Merchant bankers connected 
to the deal suggested that the 
equity take-up would fall below 
30 per cent hut . that the, 
buy-out would succeed. . 

Even Mr Elesch admitted: "I 
think this deal will go 






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Raiffeisen Zentralbank Osterreich 
Aktiengesellschaft 

RZB- Austria 

( until Ociebtr ZnJ, W4)i Gen.»*rn*c tufdk be ZtnnJIwnli AkliaagwfltcluhJ 

U.S. $100,000,000 

Perpetual Floating Rate Subordinated Notes 


For the six months iStfi November, 1994 to Ukh May, 1995 the Notes 
will cam' an interest rate of 6.4575% per annum with a coupon 
amount of U-S. S16I.83 per U.S. $5,000 Note, and U.S. $1,618.32 
per U.S. $50,000 Now, payable un ISchMay, 1995. 


BankersTrust 
Company, London 


Agent Bank 


Midland 

£250.000,000 
Siiwrdinated Floating Rate 
Notes 2001 

For the three months from 
November 18. 1994 to February 
20, 1995 the Notes will carry an 
interest rate of 6.1% p.a. On 
February 20, 1995 interest of 
£78.55 will be due per £5,000 
Note and £785.48 in respect of 
£50,000 Note lor Coupon No. 35. 


Citibank. NA (tower Service], 

Agent flank 


CROSS BORDER M&A DEALS 

BIDDER/INVESTOR 

TARGET 

SECTOR 

VALUE 

. COMMENT 

BASF (Germany) 

Unit of Boots 
(UK) 

Pharmaceuticals 

QBSOm 

Boots to focus . 
on retail 

Browming-Fenia 
Industries (US) 

Attwoods (UK) 

Waste 

management 

£391 m 

Increase too 
finely tuned? 

Thomson Corp 
(Canada) 

Medstat (US) 

Electronic 

publishing 

2207m 

Strengthening 
sector presence 

Shawmut (US) 

Unit of Barclays 
(UK) 

Banking 

2177m 

Barclays con- 
■ . .tinues US sales ' 

Royal Dutch/Shefl 

(UK/Netherianaq 

MonteaheU (Italy) 

Of refining 

E95m ’• 

Montedison 

restructuring 

Siabe (UK) 

Triconex (US) 

Measuring -- - 
equipment 

2SSm 

Recommended 
tender offer 

Araer (Finland) 

Atomic (Austria) 

Sporting 

goods 

£S1m- 

Strengthening 
core business 

Polygram (UK/ 
NattnalandB} 

RAL/Def Jam (US) 

Music 

pubHahtng 

E20m 

Buying hatf of • 
rap label 

GE Capital (US) 

Sabra (UK) 

Financial 

sendees 

28.4m 

Union Discount 
rafts leasing 

TRW (l^J/Tategfobo 
(Canada) 

Joint Venture 

Mobile telecoms 

rVa 

SatafiHe 

odyssey 



. ' * 


-V 


f,” ’ ' : 'K /£ '$*■: •&, 

YJi - •' - -v . *•; V - ;CT i’X 




Li: , 


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If you would like to receive further 
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0171 236 8000 (extension 2239). 


Programme of events: 

1995 Finance Bill 
31 January 1995 

Doing business in the 
single market 
6 April 1995 

Are you properly packaged? 
6 July 1995 

What worries the Inland 
Revenue? 

3 October 1995 


Morgan Guaranty Trust 
Com parry of New York 


US$200,000,000 
Range floating rate notes 
22 February 1996 


The rate of interest for the period 
22 August 1994 to 22 November 
1994 has been serai 6" per 
annum. Interest payable value 
22 November 1994 will amount 
to US$NlLperUSSl0.000nole 
ant/ USSNIL per USSI0Q, 000 
note. 


Agent: Morgan Guaranty 
Trust Company 


JPMorgan 



. .. 

In accordance with the Terms and Conditions of 
the Notes, notice is hereby given that for the Interest 
Period from 17th November 1994 to 17th February 
1995, the Notes w9 beer a Rate of Interest of 
a0625% per annum. The amount of interest 
payable on 17th February 1995 will be £7d40 per 
£5,000 Note and £764.04 per £50.000 Note. 

AGENT BANK: CHARTERHOUSE BANK LIMITED 

A Mentor efthe Securities and Futures Authority 


CHARTERHOUSE 



U.S. $75,000,000 

Floating Rate Notes due 2000 


Nnrice .» . hereby given due for the Interest Period iSch November, 
rf- 6 1S7 2 5% Febnwry ‘ I9 95 rhc Notes wifi arTy a Ra lc of j nKTCSC 
n Tbe Intense Amounts payable will be 

SliS P ?u U i S ' No,tf U.S. $1,685.59 per U.S. 

$100,000 Note. The Interest Payment Date will be 1 1st February 1995 


□ 


Bankers Trust 
Company, London 


Agent Bank 


i .< 




r « 


'#r 




item 


Mir 




w 1 


“ r- 

o 

r. ■_ 


► j 

*1 


J 4 * — ' -V. 

! f * : : ' 

1 

i 


NISSAN CAPITAL OF AMERICA, INC. 

<*Kv^x)ral8ti Mmtad BabXty w the Stem ol De&mam) 

YEN 6,000fi00fi00 FIXED/HEVEflSE FLOATING RATE NOTES DUE UK 
ftee ~SorlM A NOteS”) 

TEN *,000,000,000 RXEQ/FLOATWG RATE NOTES DUE 1996 
fflle "BMtaa B Helm") 

Nolice is hereby 
amount of “ 

No. 6 has been fund nt 1 nvl ik, intomi poyublc 



1995 " ofVen 10,0 


10,000,000 


NowftnJier 2J, 1994 . London 
frCiflwnk. NA Issuer Services), Ago* Bonk 


CITIBANK} 


DO YOU WANT TO KNOW A SECRET? 

TbQ I D -S. Gam Semina' wB show ytxj how the markets REALLY work. His amarine 
** laaencte ' y WD - Qam ran Iwwm your profis and contain ytw 
toS3a3 Hoiy7 Thafclhg secret Rhig 061 4740080 to book your FRgpteca. 




CITICORP O 

U.S. $250,000,000 

sSSSSSS- n . 

poyoblo on the relevant fcfemif favnumt °T^ •*“» the interest 


V.. 




JtSAKURA FINANCE HONGKONG LIMITED 
U.S. $100,000,000 
Guaranteed Floating Rate Notes due 1997 

Glia ranged a , to payment of principal and in tere9t by 

Jr the sakura bank, limited 

coupon amount of U.S. S1M.2H ? rlth _ a 


coupon amount of US skvw , iVl 7 ** nnnun ‘ with a 
mm fLiMirAMi*,.. ^ ^ 


I Bankers Trust 
I Company, London 


oaiuiM* i n j j 

INDEX L 




A 












i \ v 



.-.. . " r '71: . 


■ : ■ »"4 

. lit- 



•-V/R7 


loyal Bank 
(Aland Group p» 


SfiRA!TV&:w 




teoree .vj 


s; * S lVv -''^' 

srK' 





Si - ^ 








TIMES 


MONDAY NOVEMBER 21 1994 


19 


COMPANIES AND FINANCE 


Deutsche Telekom sell-off 
decision expected today 


Fisher 

•n Frankfort 

aw^teSdecbionTin^h ^ eerUy 
»ent baSg woHd^ mvest ’ 
ted to beSL^STS 15 ex P ec - 

K-FlpS 

ssaSSSb 

^an telecoxnmunicaaons ££. 
^tefcrthesale^SS 

^rational inves- 

KuJ &chs of **■* US 
L fh- fevou «d candidate 
fo J? 3 role * whic h will involve 

woriong with the two big ££ 

S iw? - Deutsche Bank 
ana Dresdner Bank - exuected 

g^» to head the^SS! 


However, other US and Euro- 
pean banka are strongly in the 
running. 

European banks have made 
clear their feeling that the post 
of global coordinator should 
go to one of them and not a US 
institution. 

Altogether, 22 foreign banks 
from the US. Europe and Japan 
put their cases (in a so-called 
beauty contest) in Boon to the 
government and Telekom. 

Among those whose chances 
are also rated highly ore Mer- 
rill Lynch and Morgan Stanley 
of the US and S.G. Warburg of 
the UK. 

Also to be decided is the role 
of adviser to the government 
on the Telekom issue. 

CS First Boston has put itself 
up for this position only, 
though other banks are inter- 
ested. 

The chancellor is scheduled 
to meet this afternoon with 


Telekom and the finance and 
postal ministries. The decision 
is expected to be announced 
quickly. 

Apart from the global coor- 
dinating role, other banks will 
be chosen to manage the 
regional consortiums for north 
America, Europe and Asia. 

Telekom has said a British 
b ank could well have a senior 
consortium role because of the 
importance of the UK stock 
market 

Although the sale or 25 per 
cent of Telekom's shares will 
not take place until early in 
1996, with another tranche in 
1996, the issue will have impor- 
tant consequences for the 
development of German finan- 
cial markets and domestic 
investment in equities. 

About half the shares are 
likely to be sold to German 
institutional and private buy- 
ers. 


UK paper war hits Hollinger 


By Barnard Simon in Toronto 

Tbf Daily Telegraph’s decision 
to Join the UK newspaper price 
war last spring has taken a toll 
on the third-quarter earnings 
of Hollinger, the Canadian 
holding company controlled by 
Mr Conrad Black, the Tele- 
graph’s proprietor. 

Hollinger 's net earnings 
dipped to C$4.6m ($3.4tm), or 
five cents a share, from 
C$6£m, or nine cents, in spite 


of a 47 per cent jump in reve- 
nues. 

The latest figures include a 
foreign currency loss of 
CS2.Gm. against a C$7.Tm gain 
last year, due mainly to fluctu- 
ations in the value of cash 
deposits held in sterling. 

The increase in revenues, to 
C$3 16.9m from C$213.7m, 
mainly reflects the acquisition 
of the Chicago Sun-Times ear- 
lier this year as Mr Black’s 
North American flagship 


paper. Hollinger has a 57 per 
cent stake in the Telegraph, 
which earlier reported a fan in 
third-quarter earnings to £ 2 . 6 m 
(US&L26m) from £8.1m. 

Third-quarter income before 
unusual items, taxes, minority 
interest and foreign exchange 
adjustments, totalled CS30.5m, 
up from C$2 1.6m. Equity earn- 
ings, mainly from Australia's 
John Fairfax Holdings, which 
is 25 per cent-owned by the 
Telegraph, rose $15Jm. 


Western Mining sees profits rise 


By NBdd Tail in Sydney 

Western Minin g Corporation, 
one of Australia’s largest min- 
ing companies, has forecast an 
“appreciable” increase in first- 
half profits for 1994-95. 

It said if improved prices for 
its metal products continued 
into the second half , the full- 
year should also see higher 
results. 

Da the financial year to the 
end of last June, WMC made a 
profit - after tax but 
before abnormal items - of 
A$119.7m (US$88- 6m) down 273 
per cent on the previous year’s 
figure. 


"At the annual meeting in 
Kalgoorlie, Sir Arvi Parbo, 
WMCs chairman , said the East 
Spar gas field off the 
north-west coast of Western 
Australia was to be developed 
at a cost of A&Sflsn. WMC is 
operator of the joint venture, 
and holds a 30 per cent interest 
in the field. Sir Arvi said the 
•field had reserves of about 
350bn cubic feet of gas and 25m 
barrels of condensate. Develop- 
ment of the project will take 
place over the next two years. 

Hie chairman said WMC 
wanted to become a much 
larger producer of copper - its 
nuTTi operations are at Olym- 


pic Dam in South Australia 
and Nifty in Western Australia 
- and was exploring in the Phi- 
lippines and Chile as well as 
its home country. 

The company hoped to 
expand its European talc activ- 
ities and was considering the 
production of high analysis fer- 
tilisers f or Australia. 

• State Bank of New South 
Wales, which the state govern- 
ment is planning to sell to 
Colonial Mutual Life for 
A$576.5m, announced operat- 
ing profits of A$70.5m 
before tax. 

After-tax profits rose 87 per 
cent, to A$40Jm. 


SCA lifts 
forecast 
after strong 
nine months 


By Christopher Brown-Humes 
in Stockholm 

SCA Sweden’s second largest 
forestry group, has raised tts 
1994 profits forecast after dou- 
bling profits to SKrlJS9bn 
($2 17m) in the first nine 
months. 

The improvement came in 
spite of a much weaker perfor- 
mance from MBlnlycke, SCA’s 
hygiene division, which has 
been hit by competition in the 
European nappies market 

The company has had to cut 
nappy prices and lift market- 
ing costs since the US group 
Kimberley Clark altered the 
market, adding to the competi- 
tive pressures Imposed by 
Procter & Gamble. It has 
maintained market share but 
says competition in France is 
getting tougher. 

Excluding one-off items, 
SCA’s profits after financial 
items rose to SKrl.42bn from 
SKr788m on a 5 per cent rise 
in underlying sales to 
SKr24.7bn. The resalt was 
driven by higher volumes and 
prices In SCA’s traditional for- 
est industry businesses and 
lower financial costs. 

Earnings from the group's 
graphic paper division tripled 
to SKr228m from SKr76m, 
while the forest and timber 
unit doubled profits to 
SKr559m from SKz267m. Pack- 
aging operations improved 
slightly to SKr53lm from 
SKr526m. 

MOlnlycke’s operating profit 
fell 19 per cent to SKr663mu 
The unit which did much to 
sustain SCA during the down- 
turn in Die pulp and paper 
cycle, has become its main 
source of concern and a 
savings programme is 
planned. The difficulties are 
entirely related to the nappies 
segment. 

The full-year profit forecast 
has been re-estimated at 
SKr2.1bn to SKriLSbn against 
an earlier SKrl.9bn to 
SKr2.3bn prediction. 

The company says the 
improving European business 
climate is helping price 
increases feed deeper into the 
paper product range, spread- 
ing from “raw material sec- 
tors” to “more refined prod- 
nets". 


VW revises Skoda production plan 


By Kevin Done, 

Motor Industry Correspondent 

Volkswagen, the German 
carmaker, has agreed to raise 
the production capacity of 
Skoda, its Czech affiliate, to 

340,000 units a year by the late 
1990s from about 230.000 at 
present. 

The deal. Initialled by VW 
and the Czech g ov er n ment an 
Friday, has won Prague's back- 
ing for a revised development 
plan for Skoda and includes a 
commitment to develop further 
the Czech car components 
industry. 

It opens the way for Volks- 
wagen to raise its 31 per cent 
minority holding to 60.3 per 
cent by the end of December - 
including the conversion of 
preference stock into ordinary 


voting shares - and to TO per 
cent by the end of 1995. 

VW win have paid DMl.4bn 
in three tranches for the 70 per 
cent stake - DM200m ($129m) 
to the Czech government for 
the acquisition of part of its 
holding and DML2bn in new 
equity capital for Skoda. 

Renegotiation of the con- 
tract, which was agreed m 1991 
and gave VW management 
control, was forced by VWs 
withdrawal, without warning 
last autumn, from a DML4bn 
project finance facility for 
Skoda. 

The move caused consterna- 
tion in Prague, which has been 
seeking reassurance ever since 
about the level of VWs com- 

ml f i pfnt tO 

In early 1991. VW had said it 
planned capital investments 


totalling DMSibn for Skoda by 
the end of the decade, that it 
would more than double 
Skoda's production capacity to 
about 390,000 cars a year and 
would build a new engine 
plant 

Under the revised deal VW 
has won. approval for a more 
modest capacity expansion, 
and has dropped the engine 
plant plan. The current capital 
spending plan totals around 
DM3.7bn from 1991 to 2000, but 
this could be reduced If VW 
can find additional investment 
cost savings. 

Under the new agreement 
VWs plans Include: 

• Development of a second car 
range for Skoda due fen: launch 
in 1996-97, code-named A+. 

The larger Skoda range will 
be derived from the VW 


group's so-called ’A’ platform, 
which will also form the baas 
for the nest generation VW 
Golf is the late J 990 s and be 
used initially for a new range 
of small Audis - the group’s 
up-market brand - due for 

launch in mld-1996. 

• A new paint plant at Skoda's 
main production facility at 
Mlada Boleslav. It will have a 
capacity for 1,300 cars a day, or 

307.000 a year. 

• A new assembly plant for 
the second car range with a 
capacity in the first phase for 

70.000 cars a year, which could 
be raised to 90.000 a year. 

• Development of Skoda’s 
r rioting all-aluminium 13 litre 
engine for use in its planned 
car ranges and for possible use 
by Seat, the VW group's Span- 
ish s ubsidiar y, 


Orix, Nippon Shinpan advance 


By Gerard Baker In Tokyo 

Orix and Nippon Shinpan. two 
leading Japanese finanriai ser- 
vices companies, reported 
slightly higher profits for the 
six months to September in 
spite of fells in operating reve- 
nues. Both said their Unproved 
profitability was a result of 
efforts to reduce funding costs. 

Orix, the country's largest 
leasing company, saw recur- 
ring profits - before extramdi- 
nary items anrf tax - rise 6-2 
per cent to Yl7.9tan (SlQ2.4m) 
from the same period a year 
earlier. 

In spite of the continued 
weakness of capital expendi- 


ture at home, the company 
recorded an increase of 2.6 per 
cent in outstanding operating 
assets, to Y4.0tm. Total turn- 
over fell 6.2 per cent to 
Yl57.0bn as interest rates were 
lower during the period than a 
year earlier. Expenses fell 7.6 
per cent to Yl39.0bn, because 
of lower borrowing costs and a 
greater emphasis on diversify- 
ing sources of funding. After- 
tax profits fell L4 per cent to 
V9Jbn- 

The company forecast an 
increase in recurring profits of 
52 per cent to Y36bn for the 
full year to next March on 
turnover ahead 1.7 per cent at 
Y33Hm. 


Nippon Shinpan, one of the 
leading credit card operators, 
reported recurring profits of 
Y5.02bn for the half-year, 0.7 
per cent higher than a year 
earlier. Operating revenues fell 
(L3 per cent to Y188.6bn while 
after-tax profits rose 7.2 per 
cent to Y2-2bn. 

The company said the 
improved profits were attribut- 
able to reductions in costs in 
order to develop new loan ser- 
vices. Nippon Shinpan is diver- 
sifying its activities from shop- 
ping credit to housing and 
consumer loans. For the fall 
year to March it forecast a rise 
of 4 per cent in recurring prof- 
its to YlShn. 


Pioneer slips into red at halftime 


By NBchiyo Nakamoto 

Declining revenue from sales 
of karaoke equipment is call- 
ing the tune at Pioneer, the 
Japanese manufacturer of spe- 
cialist audio-visual electronics. 
The company made a net loss 
in the six months to Septem- 
ber, and indicated that some 
1^300 jobs may have to go dur- 
ing the next five years. 

A strong yen and falling 
prices in the consumer elec- 
tronics market, and lower 
demand for karaoke equip- 
ment, combined to help push 
Pioneer to a consolidated net 
loss of Y76fcn ($7.8m) in the 
first half, compared with a 


profit of Y7.7bn at the same 
stage a year ago. Revenues 
slipped to Y129.2bn from 
Yl30.9bn previously. 

Recurring profits - before 
extraordinary items and tax - 
feH to Y3.7bn from Y7.9bn, 
although last year's figure 
included an exceptional gain. 

It plans to focus on car navi- 
gation and audio systems 
which are expected to be more 
promising than karaoke and 
laser disc systems. 

• Japan Tobacco, the Japa- 
nese cigarette monopoly, 
posted a rise In Interim earn- 
ings thanks to declines in raw 
material costs, writes Emiko 
Terazono in Tokyo. 


The company, listed on the 
country’s leading stock 
exchanges last month, said 
recurring profits for the first 
six months to September rose 
7.7 per cent to Y66flbn as a 
result of a fall in tobacco leaf 
costs due to the higher yen. 
The company increased the 
amount of imported tobacco 
leaves gi™» the domestic prod- 
uct costs three times as much. 

Sales fell 0.5 per cent to 
YL372.4hn. The company lost 
1.6 points of its share in the 
domestic market to foreign cig- 
arette makers while the overall 
market only grew 0.6 per cent. 
After-tax profits rose 3.1 per 
cent to Y41.4bn. 


Ricoh ahead 
despite slack 
investment 

By MteNyo Nakamoto In Tokyo 

Ricoh’s lead in digital copiers 
mid its cost-cutting measures 
helped it to raise nan-consoli- 
dated profits strongly in the 
first half, in spite of sluggish 
capital investment 

The Japanese manufacturer 
of office automation equipment 
posted a 63 per cent rise in 
recurring profits - before 
e xt raor di nary items and tax - 
to YlQ.lhn (Sl03m) from Y6.2bn 
a year earlier. The increase 
wimp on the back of a 3 per 
emit rise in sales to YSGfcibn 

from Y295.2. 

Ricoh suffered from slack 
private capital investment in 
Japan and the impact of a high 
yen on exports. Nevertheless, 
It was able to increase sales in 
most of its leading product, 
lines. Sales of copiers, account- 
ing for 68 per cent of the com- 
pany’s sales, increased at home 
and overseas, climbing 8 per 
cent in total 

Information equipment 
enjoyed a rise in demand both 
in domestic and export mar- 
kets, with sales increasing 5 
per cent overalL 

The company forecasts folk 
year sales to rise 3 per cent to 
Y616bn from Y596R and recur 
ring profits to rise 40 per cent 
to Y20-5bu from Y14.6bn. Net 
income is forecast to increase 
77 per cent to Y12.7bn, com- 
pared with Y7.2hn 


FT GUIDE TO WORLD CURRENCIES 


Tha mbio below trims tho Mast araSabie mfos of aBtehanga (rounded!) against tour key currandas on Friday. November is, 1994 . In some caooa Hie nae fa nominal. Mario* rajas are tlie twerau* of buying and wttig rates two** 
wmm they are shown to t» ometwba. In come caaea martuH rates hw bean catai we d from those of torafri cuwndes to which ttwy are Had. 


MS MW* 


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tt aanl sn d S indh Krone) 
fiECw* 
. . 0004*1 

am (Us! 


2S613B 

1*038 

296861 

1*883 


131*23 

40*98 

2*401 


EUn«a (Fi> 

Q U Iw s Oh aMl Prt 

OmniB lOwwtS 

Haft (Ooudoi 

Hondima (LomptoO 

****** 




31*677 


2.6918 

0*36 

1*601 

66.1654 

533*97 

5*170 

247*01 


837*70 

2.1441 




13(1007 

1*068 

637*70 

837*70 

661*50 

13*674 

128037 

1*5720 

48S2JSm 


T*S85 

129*81 

82*171 

08276 

633*87 

assurr 

415.137 

6*133 


0*435 

201673 

3*183 

1.7324 

0*3B 

00465 

41*629 

343iA8 

37443 

160183 

1668*4 

34348 

0*794 


2-0287 

541.707 
1*15 

31*885 

4.7808 

2.7322 

0*488 

1*012 

851637 

641.707 


fcaq 

Mi Rap 


i Krona) 

#*4*tt 

ma* 

Mdm 


Wrt 
PMrtcaif) 
Japan ftal 

Jonkn Moidanlan CM) 

231*03 Kaji ftanjdBMng 

Mbfiaff pUdManh 


93*643 


34X48 

34548 

267.177 

5470 


837*70 

254.438 

637*70 


0.7470 

458130 

0J3BJ 

276*66 


0*736 

31605 

400454 

635087 

162.168 

333*87 

57264 

00009 

0470 

27*678 

00770 

177*07 


04398 

3601*8 

267.727 

34548 

104*68 

34048 

3*887 

0*431 


3832? 7 

641 .707 
1*87 

131*23 

84.1616 

0*4 

041.7(77 

541.707 
421*69 

8*41 

840*81 


Kama north . . 

KonaSotfi (Won) 

0O***4U Ona) 

ftawKW 


Lama (UbarionD 

Ubya lAyonDM) 

Uocmwafct (SMmRJ 

Uhuaata 9M4 

Luxambaijiy Lux Ffl 


409485 
541 JOT 
164* 
S41J1W 
5*144 
1*143 


21*088 

3821*00 


13*112 

2308*3 

2264*0 


19*126 

50116 

114*05 

1J36S 


s®— "S3 

wn a— 1“*™ 

3S& wjS 

K- pSU 
gjls£“ igijf 


157314 

637*70 

18.4888 


1*0 

95961 

22368 

TJf&B 

95737 

897*70 

8*737 

168*16 

637*70 


57844 

633*07 

12*211 

54165 

06373 

9*773 

1*247 

4*633 

(UNO 

633*07 


1457/44 

2.1334 

58400 


254070 

5160 

160*70 

2J367 

14*186 

*342*7 


Mean* 

MoRMqua 


04101 

3*110 

00160 


07*706 


94346 

94348 

54948 

624701 


541.707 

12.6078 

64076 


08468 

0168 

1*481 

4*246 

5417 

841707 

5417 


MCI t 
#»ort 6*a*M 
ftwachg) 
fawn 

(Uaur Rupaal 
MrtcanPBaoi 

£53 

& 

IDkiwi* 


152080 

24370 

1607*0 

1*0 

375764 

9*381 

4*338 

BJ737 

1*690 

6*317 

158541 

18047* 

221*58 

29*331 

14*042 

12.1*0 

in*«7 

108*90 

49*160 

3475*1 

2762*0 

06762 

1*147 

4.7986 

2496.49 

49*487 

154*61 

1*887 

754982 

2JMB 

3*712 

1248*5 

04698 

119033 

08000 

2601*2 

55430 

1*600 

0*604 

2*840 

8*720 

301368 

12*218 

686048 

249*71 

207883 

4*938 

157970 

837*70 

05786 

8*737 

704*20 

202318 

34165 

9*737 

09797 

830*88 


90036 

1*537 

1024*6 

0*378 

230403 

00773 


53308 

1 

3.7563 

087.712 

12713* 

141*1 

190778 

01741 

7.7312 

109328 

67*887 

31*677 

217566 

1754* 

0*684 

OB4S7 

50338 

158005 

31.7887 

80*210 


92388 

I 

050*36 

04101 

164.184 

50116 

1.7383 

34048 

0*493 

57047 

642.114 

8182*5 

80*806 

122782 

00043 

4*757 

704607 

43*974 

201076 

140066 

112003 

03804 

04162 

1*5W 

102528 

S34074 


96383 

1*771 

1038.75 

0*489 

243X87 

OIW 

2.7387 

5417 

1*13 

50427 

1012*8 

12804* 

143*28 

193641 

93118 

7*472 

111.17 

099157 

31*385 

220935 

179083 


491183 

1*180 

2.1488 

785*25 

0*892 

720*42 

05401 

1857.05 


03671 

1*154 

3*074 

31*538 

7*808 

3807.7 

159745 

17*741 

2*638 

11*023 

533*B7 

03874 

6*308 

184*47 

17*034 

34521 


401.714 


641*07 


PARanrt 

Nftiula fti D— an ft 
Napai W apUaai DM 
I)a 6irt an6> fOuAUrt 
N-ndAmdM (MUdai 
Maui Zaabnd ftZS) 

Nteanva #3oW CaMrt 
Moar Bap (CPA Fn 

Mgrta (NaW 

H0KH1 pta. Krone) 

Oman (RH Omani) 


13*782 

100898 

Uaoa 

2*682 

77*003 

2.7320 

2*067 

26148 

10*760 

837*70 

34*180 

106736 

08041 


98438 

8415*3 

uses 

13188 

40*105 

1.7412 

1.7086 

1.0028 

£5855 

533-607 

21*602 


0385 


30*888 

0*487 

1*826 

512.163 

0.1838 

403.731 

0*627 

1067*3 

93701 

0*436 

02288 

06406 

95727 

205861 

51383 

23B137 

109166 

10*688 

1*513 

7*785 

34348 

now; 

94348 

78*31 

11*803 

22217 

34348 

94348 

269538 

1.7385 

58918 

412921 

22781 
0*487 
31 7407 
1 1208 
1 1512 
1*315 
4*022 
34348 
14.1684 
4J7BT 

02477 


06664 

90781 

181986 

322485 

100081 

07084 

490415 

13386 

2.1BQ0 

807.789 

03037 

731*56 
0*683 
1882*3 
3*887 
1*15 
(U825 
12352 
4*374 
32 4335 
91005 
3861*4 
161.128 
172303 
2*044 
12.1114 
541.707 
0273 
5417 
125*02 
19283S 
3X04 
6417 
S4I7 
407.743 
2.7387 
98787 
661223 

958B7 
1*386 
500507 
1 7873 
1*158 
1 8388 
7.7005 
541.707 
22.3284 
90048 

08808 


Pntaun 


Pnnamo 

RMtxrt 

Paouo MBwatfoeo (Hh* 


(Qua™* 

Rum 

P*»3ol) 

PMfopVKO 

JPBM 

PttcxHm tv 

UiawrfcBl 

(NZ* 

Pohmd 

cwy) 

Ponvad 

<E«C«W 

PuanoHco 

|U6 ti 

Qam 


nsurtn b. da (a (RFtj 

(tanm 


RimandB 


Si CMnoptwr 


StlWano 

n 

SI Ludo 

ffC-rSJ 

St Plum 

FmnetiFf) 

SI Www 


SanMnlno 

(ttnSai Lira! 

Sao Tivreii 

(Dolnu 

SowaAiBUs 


Swiagol 

KFar) 

SeycnoOa ■ 

P>SHM 

Shvia Leone 


Sfcigeptnu 

W 

as-at. 

Ptawl 

Sownrta 

ITotol 

Smomon la 

ES 

Scunrfl nap 

(SWno) 

Sauai Africa 

P«1 


490403 

1*880 

1*M4 

3010*6 

34842 

392006 

1*0 

2*148 

372691 

249077 

1*660 

97080 

93737 

2754*8 

219200 

42336 

1*0 

42336 

9*7*7 

42BB 

246948 


30*164 

1 

1.184 

181978 

2.1824 

2442 « 
0*379 
1*028 
23764-5 
159745 
1 

3*367 


1756*8 

137.765 


19.7056 

06435 

0-7401 

1234* 

1.4045 

197223 

04101 

1*319 

182944 

102.180 

0*435 

2*405 

34346 

1130*6 


0*379 

2*982 


Spam F*w (a) 

WaB m 

MAMca (SpPtoaM 

GnLortm fflirpMfl 

Sudan Wp (WnoO 

SwMn lOuadai) 


8*851 

037*70 

7.7302 

940*00 

2*061 

491880 

192*35 

91430 

410918 

maair 

948729 


Sw nden 

SMtzadand 

Syria 

TUmi 

Tarrarifcj 


O&ona) 
CFO 
« 
0) 


Port) 


77*747 

497848 

S18204 

95490 

11*017 

2.0640 

090640 

412758 

243*84 

392985 


20862 

1593*5 

827*39 

27508 

533*97 

4*288 

5098)8 

14891 

31*505 

122-712 

3X77B 

3818*3 

3*386 

4.1218 

129*81 

129*81 

491284 

31*801 


1.7395 

04101 

1.7385 

34348 

1.7306 

1025*6 

S32.7SB 

2414 

04X48 

91708 


31*779 

1*16 

1.1813 

1947*7 

2*151 

24.7958 

96480 

1*268 

24120* 

101.U0 

1*18 

3*012 

5417 

1782*4 

139*85 

2.7387 


7*305 

1*154 


28*071 

937*57 

25*082 


0*4S 

20.1787 

78*757 

2.1066 

168912 

2*761 

2*527 

83*879 

892879 

31.6152 

20*027 

212*7 

227B1 

4.7178 

0*466 

14703 

10*300 

340029 

16*958 


17387 

9417 

217307 

161996 

640264 

3*071 

541.707 

6*007 

609617 

14012 

31*21 

124*54 

9*27 

2657*3 

3*897 

4.1837 

131*23 

131*23 

49*807 

31*465 

339348 

3*837 

74406 

1*352 


28.7010 

549726 

25*846 



COFAF6 

837*70 

633*97 

343.48 

B41J07 

Tonya Is 

Fa-amp} 

2*002 

1*188 

0*487 

1-33116 

TiMMncVrobago 

(3) 

90200 

96214 

3.0176 

97057 



1-5426 

OMBO 

08326 

90861 

Tutiav 

9431 

57329* 

38638* 

23516* 

37087* 

Tuda 8 Cakw 

(USti 

1*080 

1 

0*435 

1*18 

Tum4u (feomnanS) 

2*802 

1*188 

0*487 

1*386 

Uganda ftwMrt 

M4£56 

019414 

591.722 

039213 

Uaatms KmmnM) 

133436* 

-.5WM 

54734* 

863222 

U A E 

(BWisnfl 

97003 

10713 

2*028 

37264 

LWsod Mngdom 

(Q 

1*0 

0*373 

0*101 

0*480 

United 

(USB 

1.5690 

1 

00435 

1*15 

Uugwy psso UnXMV>) 

8,7024 

5*484 

35888 

5*287 

Umueoi 

OH 

176*07 

112*06 

72.4012 

114.105 

iWum 

pnl 

WBB.40 

1500*5 

102929 


tauudl 

IBoSwvJ 

200*18 

169065 

100*23 

172*14 

Vlemon 


17368* 

1 1000* 

7131*5 

11447* 

Wgki to-BrtWi 

(IKS) 

i*aao 

1 

0*435 

1*15 

Vfcgn ta-US 

«JSS) 

1*600 

I 

0*435 

1*16 

Western Samoa 

ffiW» 

3*716 

2*312 

1*201 

24092 


<fm 


58*770 

392106 


Vemen Slap 08 



0-4387 


04453 

Yugoelwta (New Dnv) (1J 





2bbs Rep 

Paw 

4160*0 

2B4132 

1702*9 


2mj*m 

•“3 

1056*0 

873-6 M 

433529 

683724 

OnootMe 

130222 

92086 

93415 

84242 


■ 1M p. Jjiifcifl 'raiinmuriar- £0*31718 OdaJffimaa 01487^1 Oeraiany paxtgnos Japan V143*84 Eumpaan Oumncy Urtt R«aa Novmrbw 19 lflea UnOad Ktopdom BL7B4746 (Mad Sato 51*3009 Qantwiy DM131 426 Japan 

VJSns&i _ ^ ^as m Con«m«dm ma ; M CoWad naae W EMeoda) Iwportai W Rnonaal ram: to BdwtK C Won eonanerew hok B miaJd BuW>fl rtw S li way Bpc e tc W MohaX M K_M PiiMc ffoia acTliin npK M 

/UlUUrtllnnr w ftm ftft. w Mh w — — T n *-*1T -*~* H ■ f * n.— "-to. »— x «- I«a rvMi-fai — • « n»p <« >n itadn 7a na. n> VUnontoi Omar rata nit. Ch wlaa mr 31-3*a Hi 

- ) CUMNO SPOT RATES 9 M* ol Amadca, Eonnomlcs DepartmaM. London TTaXg Crnaia. thquMi 071 834 438019 


A ine ncanAirifnes’ 


From January 1st 
our members can broaden 
their horizons. 

Airlines 3ivj American Ajriines are Jinking their frequent flyer 
progmirmeij. Coli any locol office Tor full details. 



Japan Airlines 

A WORLD OF COMFORT 


Notice ot Partial Ftedamption 

ANSETT AIRCRAFT 
FINANCE LTD 

usot85.ooo.aoa 

Floating Rata Notes due 2001 
Notice is hereby given tha? pursuant 
to paragraph 6.(0) "Mandatory 
Redemption by the Issuer in Pad by 
Certain Interest Payment Dales" of 
ttw Terms and Conditi on s ol Notes, 
(he Mowing Bonds in the principal 
amount of USD 104KU)Q0 have 
been drawn by lot and are due tor 
redemption at 100% plus accrued 
interests at the offices of the principal 
paying agent on ihe Interest payment 
date 28th December, 1994: 

No. 1296 to No. 1388 included 

aid 

NO. 1665 to Na 2054 (nduded 
Interest wtfl cease on the Bonds 
called tor redemption on and after 
tha Redemption Dale. 

Payment wa be made upon 
presentation and surrender of the 
Bonds, together with all appurtenant 
coupons maturing subsequent to 
ihe Redemption Date. 

The nominal amount remain in g in 
□mutation after 28th December. 
1994 amounts to USD 141370,000. 

The Fiscal Agent 

Banque Natkmale de Paris 
(Luxembourg) SA. 


AmMNTMENTS ADVERTISING 

affem <o rte UK ftfithn 
cwiMrtiy effamby 
art b He Iwsnwlomd edWMntiy Friday 
c«g tofr cr ii fl nnt iON 
fteaaecaU: 


871 87337M 


8711234 


To the Bondholders ef 

Bank d Tokyo (Cbbgso) 
HoUogB.V. 

u 8-1 

NOTICE B HEREBY OVEN to the 
hoklmrtliwUS.SlIXUXiqOOOnoBtney 

fiwd Bute (wBincrlmi Bonds due 2001 

(the “BondOol BwikrtTrtyoeOnnss^ 

HMbiz N.V,* Netoa toatbA adfacor- 

theOxspmyhasdeSMtORdeeiivaate 

netf tnicnrt Kaymert Dsie UEne an O- 

artcrS 1994,4) BoH, 

standing at die pdndpsl anwunt tbenoi 

IWntt t/Se prinqpsl anmxtt of 

69di (5 fteUond* wffl be iredeosor alter 

Decanter 5, 1994 open 


■rtttwBo rvte_l^ B her vribtS 

offlrerf The Bank rfTotaoThrt Q»- 

pany. lOOBmichmy, New rakNeW Yo* 
lOOfe at st the prindpil office in fee city 
indicated of *ny oifme ioltoarinj Paying 


The! 


f Tokyo (Scb 

nkafTrtyob 


Ihe Basic afTnlno 


UdLBnneW 


0* 




The Bank efTakyo,W,' 

7bc notion foe i . 

Dtaaiberi l994fhonld bedetadmdsnd 
presented lor paymcrt in the osoal na- 
me. 

ON AND AFTER CECEMBEK 5, 1994 
INTStOTOhnHEBONnSWILLCEAa 
TOACCSUE 

® BeAifT(*yB(CpaH 

BaMqLV. 

Be TtegrtiiinotTi’ nrtfl aapsy 
ofFbaSAgeat 
am d: Nown*er2l,»94 


Banqjje F ranck S-A. 

Group*: JuhttntMi International 


WE ARE PLEASED TO ANNOUNCE THE 
APPOINTMENT OF : 

MASON DE CHOCHOR 

TO JOIN PATRICK GIGON'S 
SWISS MANAGEMENT TEAM 

Banque Franck S.A. is a Swiss Private Bank; 
established in Geneva in 1965, and wholly owned by 
Johnson International, comprising more than 30 
banks and financial institutions. 

It is part of the Johnson Wax Group, which was 
founded in 1886, and employs over 15,000 people in 
45 countries. 


Banque Franck S A 
1, Rue Rodolp he-Toep ffer 
P.O. Box 3254 

1211 Geneva 3/ Switzerland 
Telephone: (41 22) 347 5588 Facsimile: 347 9690 


NEXTFLC 

Notice to the Holders of Next Pic (the “Company") 

S 3/4% Convertible Boodx doe 2003 (“die Bonds”) 
NOTICEZS HEREBYGZVEN chat, in accordance with Condition 3(b) of 
the Bonds, the whole of the Bonds outstanding will be redeemed at their 
principal amount together with accrued interest (in either case after the 
deduction or^ withal ding ofany cues or duties in accordance with Condi don 
11 of the Bonds) on 15th January, 1995 (the “Redemption Date") when 
interest on the Bonds will cease ro accrue. 

Payment of principal a nd interest as above will be made against surrender 
of Bonds (or Optioned Bond Receipts] or Coupons os a ppropriate,a t the 
specified office outside the Uni ted States of any of the Paying and Conversion 
Agents. PayrnmuwUl be made in areiUng by * sterling chcqnc drawn on, 
or (at the option of the bolder^ by transfer toa steriingaccouartritb j honk 
in the City of London. 

Bonds should be pre s ented for redemption together with all unmanned 
Coupons appertaining thereto, failing which thefacc value of the milting 

unmanned Coupons will be deducted from die mm due for payment. The 
amounts totkduaed will bepstda^xuiststimndn-of therefewntCbapons 
within twelve yei r» of the Redemption Da Be. 

Bonds and Coupons will become void nnlesspnsei red for pg/nauwidua 
periods o! twelve years and six years respectively from the Relevant Date 
as defined in Condition 11 of the Bonds. 

Copies of this notice can be obtained from the specified offices ef die Paying 
and Conversion Agents at set out bdowi 

PrioopaJraying *nd Convection Agcnc 

UoydtB«nkPk l UoydsBatikRcgtsU«t* > 

Rec«i«iiigBtaJtSrfviee^AndialsaHois^71QfleeR5ciTct,LinideaEC4N’15L 

PaytegandCoammaAgent*: 

KteditttenfcSALtQKinlionrgeohe, 

43 Boulevard Roy jd,L- 295 JLmemtxnrg 
Morgan Guaouny Trust Company of New York, 

Avenuedea Arts 5S,B-1040 Brussels 

Swjm Bank Corporation, 

1 Amchenwntadt; 4002 Hot ie.SwitzerUnd 

21st November 1994 
























20 


■q^^TT 

T^r^T^T ^^*5 ^ v +’ 


I NG At) BANK 


■ j ;i ia?d>tk! IfcSR ; 




FINANCIAL TIMES 


MARKETS 


FINANCIAL TIMES MONDAY NOVEMBER 21 i 994 


Best Erne ming 
Markets Bank 


THIS WEEK 



It is Thanksgiving Week in 
both the US and Japan, and 
currency markets mil have an 
opportunity, over the turkey 
and the sake, to review the lat- 
est developments in the strug- 
gle for the dollar. 

Last week, the ailing cur- 
rency received assistance from 
two quarters. 

The Federal Reserve's deci- 
sion to raise short-term inter- 
est rates by 75 basis points on 
Tuesday was backed up by the 
release of trade figures on Fri- 
day showing a slight fall in the 
US deficit with Japan. But 
after a brief rally on both days, 
the doubts set in again, and 
with good reason. 

The key to any dollar recov- 
ery remains the disequilibrium 
in' the balance of payments 
between the US and Japan. 

That imbalance creates, in 
turn, a mismatch between 
world supply of, and demand 
for. dollars. 

The US currency’s over- 
supply is caused principally 
by a growing funding require- 
ment in the US balance of 
payments and a lack of 
demand for the dollars that 
are consequently being poured 
out into the world’s financial 
markets. 

Without either a sharp fall in 
the supply of dollars or a sharp 
increase in demand for them, 
there will be no respite. 

It is worth examining the 
development of this supply/ 


demand disequilibrium is 
some detail 

The US current account defi- 
cit declined at the end of the 
1980s, as slower growth cut 
Imports. 

In 1991 the deficit hit bottom 
- in fact it was almost elimi- 
nated - thanks largely to once- 
only transfers received during 
a nd immediately after Opera* 
tion Desert Storm. But since 
then, the gap has widened 
a gain. Last year it was back in 
12 figures, and in the first half 
of 1994 was Sfflbn. For the full 
year it is expected to reach 
$150bn - its highest since 1987. 

The primary cause of the 
deterioration, has been the 
unsynchronised nature of the 
global recovery - the US econ- 
omy. growing at an annual 
rate of more than 4 per cent for 
nearly two years, has sucked 
in imports, while US exporters 
have struggled in weak over- 
seas markets. 

This decline in the trade and 
current accounts has meant 
dollars have been flooding the 
currency markets. 

But while in the past those 
outflows have been funded by 
long-term capital inflows, the 
capital account has now added 
to the funding gap. 

Even at the peak of the defi- 
cit in 1987, net inward direct 
investment and portfolio 
investment accounted for 
almost two thirds of the cur- 
rent account deficit. But last 


Global Investor / Gerard Baker in Tokyo 

The fight for the dollar 


US Japan trade: out of balance 

Current account balance (&xi) 

150 - - - 


Total return in local currency to 17/11/94 



-100 


-200 

1987 89 91 93 

Source: Oatastrearn 


1987 89 91 93 


Yen against tba $ 

- 

US 

Japan 

% change c 
Qermanv 

mr period - 
France 

ttaty 

tac 

ao 

Cash 








Week 

0.10 

0.04 

0.09 

0.10 

■ 0 . 16 ' 

0.00 

■f 00 _ . J 

Month 

0.42 

0.19 

0.41 

0.45 

0.69 

Q .47 

f 

Year 

3.69 

Z 19 

5,38 

5.93 

836 

5.44 

110 - . 

Bonds 3-5 year 







1 

Week 

- 0.25 

0-15 

- 0.14 

-009 

-CL 57 

. 0.46 

I 

Month 

- 1.19 

0-41 

- 0.05 

0.10 

1.02 

0.69 


Year 

- 3.11 

-035 

038 

- 0.76 

2.10 

0 . 18 " 

U ir 

Bonds 7-10 year 






1 *® III k n 

week 

- 0.17 

0.29 

- 0.50 

-033 

- 0.77 

0>40 

J H |y 

Month 

- 1.77 

0 SZ 

- 0.83 

- 0.55 

035 

0.45 

140 •• 

Year 

- 7.53 

- 2.31 

- 4-26 

- 7.09 

- 4.19 

- 4.08 

1 *{ 

Equities 







isfll"”" H ■ - 

'Week 

- 0.1 

0.9 

0.8 

13 

-13 

0.9 

1 1 

Month 

- 0.7 

-34 

05 

4.1 

-02 

as 

160 * ■ 1 1 9 I— 1 1 1 1 

Year 

3 u 0 

' - 0.7 

0.1 

- 3 L 1 

13.7 

4.0 

1887 89 81 93 

Sauce; Cash 4 Bonds - Lehman Broffwra. 

Ef?M»s C NjnWrrJ Securfltes. 


* sift months 


The FT-AcBmes World mdces Bra jWnOy owned by The Rnanad Tanas LMtad. 
Qaktman Sacra & Co. and NattVsst Securities United. 


year, for the first time for more 
than a decade, both portfolio 
investment and direct invest- 
ment represented net outflows. 

The combined eEfect of 
deficits on both the current 
and long-term capital account 
left the US with an exter- 
nal funding requirement, met 
by inflows of short-term, "hot" 
money, of more than JlSObn, 
a figure much higher than 
at any time in the deficit 


years of the 1980s. 

The counterpart to all those 
dollars is, of course, a scarcity 
of Japanese yen. In Japan the 
picture is a mirror image of the 
US problems. The current 
account surplus, though falling 
slightly this year in yen terms, 
is rising still in US dollars as a 
result of the J -curve effect - 
the higher price of exports ini- 
tially outweighing the slight 
fall in demand for them. And 


in the past three years the 
absence of Japanese investors 
from world markets has meant 
the country has been running 
an additional surplus on its 
capita] account. 

With no early sign of a sig- 
nificant slowdown in demand 
growth, US imports will con- 
tinue to grow until well into 
next year. And even though 
rising demand abroad will help 
exports, the high level of 


capacity utilisation in the US 
will make it difficult for 
exporters to respond to those 
opportunities. So the trade def- 
icit seems set to rise further. 

More troubling in the longer 
term is that the rest of the 
current account is being weak- 
ened by large outflows of 
investment income. The United 
States' change in the 1980s to 
the status of debtor nation 
means that for the first time 


since 1914 the volcaneofdebts - 
overseas wiQ, posh the US into 
deficit on this account T hy 
about $5bn this year and more 
in the years aheacL 

Iu Japan, 'the trade surptas ts 
set to fall only gradually. 
Strong growth overseas, parti6 ‘ 
olarly in Asian markets, is' 
helping exports, and will, 
largely offset higher imparts as 
the economy recovers. Over* 
jgfwss investment adventures in 
the 1980s will produce a signifi- 
cant surplus on the investment 
income line of the current 
account - as much as $80bn a 
year by the end of the decade, 
according to same estimates. . 

Since the current account is 
unlikely, therefore, to show 
any sharp improvement in the 
next year or two, the dollar’s 
movement depends on the capi- 
tal account That account is, of 
course, both the problem and 
the solution to it If foreigners, 
principally Japanese, can be 
persuaded to invest in. stocks 
and bonds in the US, there is a 
chance that the weight of 
excess supply wfll be dimin- 
ished. But can they? 

Two things will make Japa- 
nese investors return to US 
assets - either a further fall in 
the dollar to the point from 
which they believe it can only 
rise, or a higher relative return 
on US assets. While yields on 
US bonds and even equities 
have been rising as prices have 
fallen, the relative increase has 


been much smaller, as 3apa~ 
nese yields have also risen. 
The -return on the U£ long 
bond has risen by- a Httle under 
3 jer cent in - .a year.-'hot iii 
Japan, the yield, on .the equiva- 
lent bond has gone by 
ne arly 2 per cent. The differeo- 
rial yfold on egtritiesis-smllar, 
since in the past four months, 
Japanese share -prices have 
fallen faster than US ones, - ■ 
But surely higher shorMesm 
rates in the US will entice Jap- 
anese : investors; In Ihe past, 
acconfing to Mr Honald Levten 
of Morgan Guaranty in New 
York, a short-term interest rate 
differential between the US 
and Japan of at least 300 basis 
points has been necessary to 
prompt a sustained upturn in 
the dollar. Last week’s move 
by- the Fed put the spread, at. 
just above that level But the 
current steep US yield -curve 
acts as a disincentive to Japa- 
nese investors., who heed a 
much flatter yteldcurra if they - 
are to currency-hedge any 
bond purchases' A 
More important,' Japanese 
institutional investors have 
become much more risk-averse 
since fheir debacles overseas in 
the late 1980s. Many of them 
continue to see the weight of 
dollar supply as too large a 
downside risk far dollar assets. 
They prefer to wait for a fur- 
ther foil in the US currency 
before they are prepared to end 
thefr investment strike. ' 


Options open up at IPE 


As traders at London’s 
International Petroleum 
Exchange await news from this 
week's ministerial meeting of 
the Organisation of Petroleum 
Exporting Countries in Bali 
they will have a more efficient 
tool available for responding to 
market-moving developments. 

Today sees the introduction 
of a market makers' scheme 
for the Brent crude option con- 
tract, which, according to IPE 
chief executive Peter Wild- 
blood, -will increase accessibil- 
ity" to the contract 

Initially, three market mak- 


ers - credit Lyonnais Rouse. 
Society Generate Options UK 
and City of London Options - 
have undertaken to staff the 
options pit at all times and to 
provide a bid and ask price on 
a continuous basis "within cer- 
tain parameters laid down by 
the exchange” for a minimum 
number of lots. 

The IPE expects other mem- 
bers to join the scheme later. 

“This initiative by the 
exchange is a necessary com- 
plement to our successful 
futures contract, which is now 
recognised as the predominant 


International benchmark for 
crude oil" says Mr Wildblood. 
• Other events this week 
include the release today of 
October production figures by 
the International Primary Alu- 
minium Institute. This should 
give an indication of whether 
last week’s heavy drawdown 
from LME warehouse stocks of 
the metal - which helped to 
drive London Metal Exchange 
prices to four-year highs - can 
be expected to continue. 

The stocks fall of nearly 
50,000 tonnes announced on 
Friday took the total for the 


week to about 64,000 tonnes. At 
1.91m tonnes the exchange 
stock pile is now down by 
about 28 per cent from the 
record level reached in June. 

In Washington tonight the 
US Department of Agriculture 
will issue its latest wheat situ- 
ation and outlook summary. 

In London tomorrow Futures 
and Options World magazine's 
Investing in Commodities sem- 
inar will be held. Speakers will 
include representatives of the 
World Bank, the London Com- 
modity Exchange and the Secu- 
rities and Futures Authority. 


This announcement appears as a matter of record only. 



Vina Concha y Toro S.A. 

(Incorporated under the laws of the Republic of Chile) 

Global Offering of 

2,840,000 American Depositary Shares 

listed on the New York Stock Exchange 

Representing 142,000,000 Shares of Common Stock 


2,305,444 American Depositary Shares 

This portion of the offering lias been sold in the United States by the undersigned. 

Baring Securities Inc. 

Nomura Securities International, Inc, Prudential Securities Incorporated 


534,556 American Depositary Shares 

This portion of the offering has keen mid outside the United State* and Chile by the undersigned. 

Baring Brothers & Co., Limited 

Nomura Securities International Prudential-Bache Securities 


Global Coordinator 

Baring Brothers & Co., Limited 



BARINGS 


October 1994 



Two world 
wars and the 
great depres- 
sion of the 
first half of 
the century 
were caused 
by the failure 
to cope with 
the arrival of the US, Ger- 
many and Japan. The impact 
of a re-invigorated China 
could be as disruptive. 

Three considerations are 
relevant to assessing that 
impact: the scale and nature 
of China’s prospective eco- 
nomic interaction with the 
rest of the world; the extent to 
which that interaction might 
be manipulated by the Chi- 
nese government for political 
ends: and, finally, the degree 
to which the economy will 
give China the basis for 
enhanced military power. 

By 1992, mainland China 
bad become the most impor- 
tant single developing country 
in world merchandise trade, 
its two-way trade being 
$165.6bn (see chart), which 
was 29 per cent of total world 
trade. But China's total trade 
was behind that of Belgium, 
let alone the US, Germany or 
Japan. Meanwhile. China’s 
share of world trade in com- 
mercial services was less than 
1 per cent. The combined 
trade of China, Taiwan and 
Hong Kong was $3S3.4bn, 
which put the "Chinese eco- 
nomic area” above Italy. But 
this indudes trade among the 
three entities. Furthermore, 
the Chinese government does 
not control Hong Kong's 
trade, let alone Taiwan’s. 

Between i960 and 1992 the 
volume of China's exports 
expanded at an average 
annual rate of 119 per cent, 
while the volume of US 
exports expanded at 3.8 per 
cent If those rates of growth 
were maintained, China would 
become tbe world's largest 
single exporter by 2015. Chi- 
na's exports could conceivably 
grow this rapidly. But things 
would have to go perfectly, 
which is highly unlikely. 

Meanwhile, despite high 
rates of national saving. 


Economic Eye / Martin Wolf 

Managing China’s 
emergence 

How the trading powers rank, 1992. - : ■ 


Total 


Trade 


(Stm, exports + bnporti) 

% of GDP 

• % of GNP' 

US 

1302.1 

16 A 


' 1741 ‘ 

Germany 

seas 

. 46-9 


•; 50 - 5 - 

Japan 

573.1 

15.6 


22 J 8 

Fiance 

475.4 

36.0 


4 i’r ■ 

UK 

411 ^ 

45.6 


42.6 

Italy 

366.7 

300 


- ■.■•wv- 

Netherlands 

273.7 

, 85 l 5 


102 ^ 

Canada 

2633 

. 53 ^ 


’. ■, 48l7 / ' 

Belgtum-Lux 

243 . Q 

106.6 


117 ^ 

China 

166 . 6 - 

- 32.7 


.• 

Spain 

164.1 

28-5 


aii 

Korea 

1564 . . 

515 


. :. 406 -: ■ ■ 

Source: GATT, WoridBar* 


# tf"puyiMafai 0 Pa M ^re | 1 ty 


China is unlikely to be a large 
exporter of capital for decades. 
China is, however, a large 
importer of capital. By 1993, it 
had attracted almost $60bn in 
over 70.000 enterprises. 

How Ear could the govern- 
ment manipulate China’s 
growing presence in the world 
economy for political ends? 

China's most successful 
exports have been light manu- 
factures. By 1992, for example, 
it had become the world's 
largest exporter of clothing, 
which accounted for 20 per 
cent of its exports. Yet China 
has no monopoly power in 
such markets. It is its import 
market that gives it leverage, 
as does the Inward foreign 
investment. The value of 
these chips was made clear by 
China’s victory in its conflict 
with the US over renewal of 
mast- favoured nation treat- 
ment. They would also be 
effective in any struggle over 
trade and the envi ronment, or 
trade and labour standards. 

A country’s ability to use 
access to its import market as 
a weapon depends on how sig- 
nificant imports are to its 
economy. The US derives 
leverage from the fact that it • 
is the world's largest trader. 


bat has a fairly low ratio of 
trade to GDP. Measured at 
market prices, China's econ- 
omy is about as open as that 
of France and twice as open as 
that of the US. Measured at 
purchasing power parity, how- 
ever, it is the least open of the 
economies shown in the chart 

How is this to be inter- 
preted? The low productivity 
services that bulk large in 
GNP at PPP depend little on 
trade. But, without trade, 
rapid growth would, also be 
unfeasible. China is not 
dependent on trade if it is ocm- 
tent to stay poor, but it does 
need trade for rapid growth. 

What about China’s military 
potential? The economic bases 
of military power are man- 
power, industrial output, tech- 
nology, and the ability to 
divert resources from civilian 
uses. The first China has in 
abundance. But its industrial 
output is about 10 per cent of 
that of the US. Even if it were 
to sustain growth at 10 per 
cent a year, it would take a 
generation for China to match 
tbe US. Even then, the coun- 
try’s technological level is 
almost certain to lag behind 
■ those of the, US (and Japan). 

Such lags might be still 


more important in determin- 
ing relative military capacity 
then than they are today. 
Finally, refor m has itself been 
eroding the government’s 
capacity to obtain resources. 

What are the conclusions? 
First, it should take at least 20 
to 30 years before China 
becomes a genuine super- 
power. Even then the US is 
likely to remain more mili- 
tarily capable and economi- 
cally influential 

Second, even to achieve this 
China must sustain its perfor- 
mance of the past' 15 years. 
But, as Susan Shirk points out 
in her important new book, it 
would be wrong to assume the 
transition from communism 
to the market economy will 
continue to go quite 
smoothly.* Among other prob- 
. lams, . the opportunities for 
wealth and influence now 
afforded to official* are them- 
selves an important obstacle 
to further reforms. 

Finally, China's emergence 
needs to be managed intelli- 
gently. The most important 
requirement is for the indus- 
trial countries to engage the 
Chinese within international 
arrangements for whose prin- 
ciples they themselves show 
respect to that way, norms of 
civilised international living 
should be incorporated within 
China, as a result of changes 
in its own laws. 

Thus, even if last week's 
summit of the Asia-Pacific 
Economic Co-operation forum 
does not lead to free trade by 
2020, the forum can play a 
valuable role in bringing 
China closer to its neighbours. 
China should also be accepted 
as a member of the World 
Trade Organisation provided 
it adopts rule-based and trans- 
parent trade policies. 

Finally, China already 
seems a more obvious candi- 
date for the group of seven 
leading industrial countries 
than Russia. 

*Susan L Shirk, How China 
Opened its Door The Political 
Success of the PRC's Foreign 
Trade and investment Reforms 
(Washington DC: The Brook- 
ings Institution, 1994). 


FT-ACTUARIES WORLD INDICES 


SlT^ 0 ' "" F "" e “ a *‘™ n ' S “"’^ * 01 ““ ^ 11 — »» M «, FUMW. 

RBMOHAL MARKER FRIDAY NOVEMBER 1, 190, FHUFDOAY NOVEMB81 17 ISM DOLLAR*. 


NATIONAL AM 
REGIONAL MARKETS 
Figures in parentheses 
show number of lines 
of stock 


US %chg Pound 
Dote sfcwe Starting Yen 
Index 31/13/93 hide* Index 


Local Local % Gross 
OM Currency dig from Div. 
Jndailndex 31/12/93 Yield 








Canada (103) 

-...129.38 

Denmark (33) 

250.04 

Franca (1021 





1 retard ( 1 *) 


Italy (99) 

Jaoan (4681 

77.B9 

Malaysia (97) 

.—519.07 - 

Nethertand (19) 


New Zealand (14) 

Norway (23) 

75^7 

— 196.58 

South Africa (59) 

Spam (30) _ M 

..^337.40 

Speden 06) 



■—1G2.C7 

Tlwiand (46) . 



USA (515} 

-..186.73 

Amadora (B04) „ 




Norrfle(!ig . 


Po&Bc Baa&i (793) .. 


Euro- Pacific (1501) 

10735 

Norm America (BIB) 

Europe Ex. UK (504) 

—18505 

...15253 

Pactfic E*. Japan ( 335 ) 

WorWEft. US (17DB) 

WPW Ex UK <2020) 

-^56.10 - 

....109.15 

World Ex. Jtpan (1756) 

—190.83 

Ow Wcrid Index (2224) 

-17*42 


-02 

-4.1 

2.3 


1 57.37 103.73 134J58 14008 -10.7 

107.55 110.44 14126 14X52 -14.0 

1S7.26 103.65 134.45 131.16 -9.0 

- 109.30 111.59 144.75 276.73 

-4.7 12225 8058 104.52 128.04 -1.8 

*' 23x25 155.72 -201.99 206.09 -9.5 

18092 119.25 154.09 191.02 27.0 

15604 104.17 135.12 140.03 -14.1 

134.72 80.80 116.18 115.10 -9.0 


US Pound 
DoBar Starting Yen 

index Index 


i.i 

55.4 

-5.0 

1.7 


9.5 191. BO 12629 183.82 184.78 
13.B 73.59 4651 02JK 92.07 


■ ' “ 1 — ■ — i icor.io imiM.au: r>KXMJ> 

6.7 200 £7 132.27 17158 18679 

10.8 71.12 4688 0081 64 .06 

94 1BS.73 122.42 15680 181.51 

7.0 371.48 244 SB 317.63 26619 

26 3 ■ 318.87 210.18 372S4 304.00 

1.0 -133.77 88.18 114.38 13678 

23A 22&.5& IJffl.84 196.41 26250 


-02 
5.7 
5 2 


3.90 

1.14 

421 

0.75 

667 

1.44 

674 

3.00 

ISO 

3.17 

648 

1.70 

0.80 


Local 

Ml Currency 52 week 52 week 
Wex Index Hgh Low 


1 W -89 1 55-38 102.36 132.78 14601 lag ic .iru 
1 j™ 110.3a ,£;!! S ]S'S 

1MS2 m ft 2S!£ 134,38 131 - 05 17704 151-70 

174.15 114.72 14682 28637 

i 3 SS SK » sis M 

sssshS » 

■S5 SS ’«:3 TfS -5 »S SS 

SS SS 22 SS S JS 


-4.4 

-0.0 

- 1.0 

-23 

214 

-60 

63 


— — '(RAW 'Wi-M AWARJ 0-1 

1.8 153.70 101.31 131.41 132.07 -160 

- . 162.15 106.88 130.64 10658 


642 

453 

1-B2 

1.58 

2.12 

C22 

1.52 

1.83 

2.09 


— ~ y- ioo.ri 

- 0-6 17632 117.54 15&46 18673 

- 16657 109.70 142.42 14654 

1-7 101 SO 106.72 138.43 15645 


214.31 132 ^ '«*** 

74.81 70.45 ' 2 £ ^ 

198.BS 1BS.20 122.00 158.28 180B8 

39670 37658 24611 liaei IS* 21174 1B5-K 

336.1, 31&68 SS »» 

141,39 133.10 07 72 342,00 Zt&fi5 

240.70 226S l£5 ™ 128 - 88 

^ S3 SS SS s is !SS ss 

j g S S as S sa as 

- §■*? rrreo iob^s 109.93 14201 14757 

-7.7 607 171.89 161.07 100.04 i£ls1 " 

60 1.38 229.75 21030 142 « 17 «-M 154.79 


3.4 


156 . 12 . 104.22 135.10 125.01 - 2.7 1.38 18620 150.40 107,56 17aB 8 1 34.78 

174.84 11555 149.49 18457 - 0.7 2*0 18689 17*08 lisff l *- 23 iSffl 

144.12 94*9 12622 131*5 -72 ZA7 153.09 144,17 S IS*! 19273 17 5 . 0 l 

24138 1 S 6 S 0 20690 228.00 -153 2-68 25036 241.89 Hi ' 16 13534 


170 -S 9 15531 


230 


iq^jTWa 


^ * Co. MOVnr Erortte UrW*l 1887 ‘ W 

3,1 1994 = iaa4a "* 5 “*«• ie4J > 7 *** a-** ^c*-*-* w *0 

RowtA (France). N 







FlNANC, AI . TlMrs 


MONDAY NOVEMBER 2J 1994 


2J 


EQUITY MARKETS: This Week 



Jhanksgjving 
,s unlikely to 
halt uncertainty 

^ ■'« ^pen, 

stock market wWl a volatile 

MSsSir 5 ®^" 

the year 7 f ^ b]ow ** weeks or 

■iaySS and 

r“* oy-aay see-sawing as the market 
proved unable to sustlita a 

E:t ni,reif w BffiisSit^nd 

£rSS?5® , -3k 

T£**« j SsKSssaf- 

SSnK^ nuses a,ld P«wion.ftind 

contributions into the hands of 

Bui even Mwt bullish for 
at£ut?E are BenwrUly pessimistic 
ad °^, t ™ next several months. 

m a seasonally strong 
tune of year, which could lead to a 
short-term rally phase, but if that 
happens it will only postpone weakness 
down the road.” says Mr Richard 
McCabe at Morrill Lynch. 

A^o contributing to last week’s 
market gyrations was the Fed's 
decision to increase the Ted hinds target 
rate by a larger-than-expected 75 basis 
points to 5*'. per cent. The move left 
both the stock and bond markets 
unsettled because the door Is open to 
another rate increase later this year or 
early in 1995. 

Even figures showing inflation to be 
in check for the moment have done 
nothing to calm fears of inflation down 
the road. At every turn both the stock 


Dow Jones Industrial Average 


3350 - 



and bond markets have soon only the 
worst in generally positive numbers. 
For example, presented last week with 
news of a decline in the Philadelphia 
Federal Reserve Bank's index of 
business activity, the markets drew 
pessimism from a sub-index that 
showed an increase in prices paid by 
manufacturers. 

While a strong economy is generally 
good for the equity market, stocks have 
taken their cues from bonds recently as 
company profits suffer when interest 
rates rise. 

What does the Fed's move mean for 
this week's markets? “We're one week 
closer to the next tightening," Mr 
Thomas McManus at Morgan Stanley, 
responds dryly. He joins a host of Wall 
Street economists who are predicting 
another interest rate increase in the 
short-term. 

Mr McManus advises avoiding the 
stock market until there is a significant 
decline. He believes some investors 
have neglected the fact that higher 
interest rates may draw some 
investments away from stocks and Into 
the fixed income market. 

Rising interest rates will hurt 
equities by deterring corporate 
borrowing and put pressure on 
earnings. 


Soft landing 
back in vogue 
after rate rise 

Soft landing and hard landing were two 
of the most common phrases during the 
late iHSOs as fund managers pondered 
the imiiact on the economy of the series 
of Interest rate rises implemented to 
cool an overheating UK economy. 

In the event there was no soft or hard 
landing, more a crash landing. Now the 
phrase soft landing is making a 
comeback as the market tries to assess 
the likely impact of last week's move by 
the US Federal Reserve to raise US 
interest rates by 75 basis points, the 
sixth time the Fed has lifted its rates 
since February. 

US and European markets gave a 
muted response to the Fed’s action but 
in London both gilt-edged stocks and 
equities built on a strong start to the 
week and fairly galloped ahead. As they 
did so another buzz word, which pops 
up regularly made a re-appearance. The 
magic word is decoupling and it ivas 
one of positive arguments still being 
put forward about the UK equity 
market. 

The UK is said to be lagging the US in 
terms of tlic interest rate cycle and the 
next moves in UK rates are perceived as 
upwards as the Chancellor of the 
Exchequer and the governor of the 
Bank of England demonstrate their 
determination to keep an iron grip on 
inflation. 

But there is no talk of a hard landing 
here. Most of last week’s news 
confirmed manageable trends in the 
economy: underlying inflation still at 
its lowest level for about 27 years, wage 
costs under control and no evidence of 
an upturn in consumer spending. The 
economy's ability to shock came with 


FT-SE-A All-Share Index 


1.570 



news that UK gross domestic product 
expanded rapidly during the third 
quarter. 

Nevertheless, the UK equity market 
is still transmitting some bullish 
signals. Turnover, stuck in the 
doldrums over the past couple of 
months, has suddenly quickened, 
helped by a liaudfuJ of one-off deals 
such as the Boots buy-back, and the 
Guinness stake sale. 

According to Derivative Securities’ 
Technical Review, the reaction of the 
US bond market to the Fed’s action on 
interest rates “has shown some 
independence of spirit. This has to be 
good Cor UK equities". 

In Behind the Balance Sheet, the 
latest strategy document on funds (low 
and debt risk from Credit Lyonnais 
Laing, the securities house describes 
UK pic as “in fine fettle" and highlights 
record cash inflows, gearing at 
long term lows and interest cover at a 
high level. 

The broker forecasts trading cash 
inflows of $5.5bn and asks the question 
“what will UK pic do with the money?" 
CLL says some will go on share 
buy-backs, special dividends and still 
higher levels of capital expenditure and 
adds: “The prospect of an acquisition 
boom remains an obvious use." 


OTHER MARKETS 


ZURICH 

Tomorrow brings the long 
awaited showdown between 
the directors of Union Bank of 
Switzerland, the country's 
largest bank, and the maverick 
Zurich broker-fund manager 
Martin Ebner, writes Ian 
Rodger. 

A UBS extraordinary general 
meeting of shareholders starts 
at 230 pm in Zurich to consider 
the board’s schema to strip the 
registered shares, which have 
a par value one fifth of that on 
the bearers, of their extra 
voting power. The stated aim 
is to undermine Mr Elmer's 
challenge of their governance 
of the bank. 

BK Vision, an Ebner 


controlled investment fund 
which holds lg per cent of the 
registered shares, has been 
trying to rally a majority of 
votes to force substantial 
changes to the UBS board and 
business strategy at the next 
annual meeting in April. 

The board’s proposal calls 
for exchanging all existing 
shares into a new class of 
bearer shares with a par value 
of SFrlO. The existing bearers 
would be exchanged at the rate 
of 10 for one, the registered at 
the rate of two for one. 

Uncertainty about the 
outcome, reflected in highly 
volatile trading of both classes 
of shares since the EGM was 
announced on September 29, is 
heightened by the fact that a 
two-thirds majority of shares 


represented at the meeting is 
needed to carry the motiou. 

Both UBS chief executive Mr 
Robert Studer and Mr Ebner 
say they are confident of 
winning. Asked privately if 
they would admit it if they 
thought they would lose, both 
replied with a straight face, 
"yes”. 

• Wednesday brings 10-month 
sales figures from Nestle, 
whose shares have picked up 
in recent sessions after a 
period in the doldrums. 
Currency considerations 
remain paramount. The 
strength of the Swiss franc 
depressed first-half figures by 
about 6% per cent, and 
analysts say that it is likely to 
depress the 10-month outcome 
by about 8 per cent 


FRANKFURT 

The Bundesbank Council 
meets on Thursday but, says 
James Capel. what little news 
that has come out since the 
last meeting is unlikely to 
prompt any move in rates. 

The German chemicals 
companies, reporting this week 
and next, will conclude the 
European interim results 
season. Figures come from 
BASF on Thursday, followed 
by Bayer on November 28 and 
Hoechst on November 30. 

Hoare Govett says that after a 
strong set of figures from fCf, 
DSM, Akzo Nobel and 
RhOne-Poulenc, it expects a 
sound improvement in pre-tax 
profit from the Germans, 
although reported figures may 


be tempered by managements’ 
reluctance to reveal the extent 
of the recovery with wage 
negotiations pending. The 
broker adds that BASF and 
Hoechst will show the 
strongest improvement from 
last year’s very depressed 
profits. 

Commerzbank is expected to 
start the banks' 10-month 
reporting season on 
Wednesday. Merrill Lynch 
expects operating profits to 
improve slightly over the first 
half of the year, but warns that 
core income may be 
weakening. The investment 
bank says the banks appear 
undervalued in the context of 
the German market, but fair 
value in international terms. It 
also points out that the banks 


International offerings 


US influence in Europe’s 
new issue business grows 


The German government is 
poised to announce which 
hank is to lead worldwide sates 
of Deutsche Telekom shares 
when the company’s DMlObn- 
plus capital raising exercise 
goes ahead in 1996. 

Deutsche Bank and Dresner 
Bank seem assured of a role in 
the sale, but if - as is widely 
expected - a US bank is 
awarded the role of “global 
co-ordinator” it will confirm 
European fears that the Conti- 
nent's banks are losing out to 
US rivals in business stem- 
ming from the wave of new 
European equity issues. 

Goldman Sachs has this year 
been "book-runner" in five sep- 
arate European deals and after 
selling eight tranches of shares 
worth a total of about £L5bn 
sits at the top of a league table 
of European issues, compiled 
by IFR Securities. Deals 
include IN’A. the Italian 
insurer and - with UBS - Tele 
Danmark, the Danish telecom- 
munications group. 

Other US banks are also 
prominent in the table. Leh- 
man Brothers, for example, 
was book-runner in the sale of 
Banca Commercials I tali ana, 
the Italian bank. 

Morgan Stanley - with CSFB 
and Warburg - shared a simi- 
lar role in the sales of KPN, 
the Dutch telecoms company, 
and (with CSFB, Warburg and 
Goldman) led the sale of End* 


tend to outperform a falling 
equity market but 
underperform a rising one. 

Deutsche Telekom, the 
state-owned group, is expected 
today to name the banking 
consortium that will handle its 
privatisation, the largest in 
Germany’s post-war history, at 
the start of 1996. 

NORWAY 

A thin week is in prospect as 
the market squares up for 
Sunday’s EU referendum. 
Investors will be watching for 
any weakening in the position 
of opponents of membership, 
who have the upper hand 
which would, most likely, 
provide a fillip for the 
market. 


esa, the Spanish energy hold- 
ing company. Merrill Lynch 
has led sizeable equity issues 
for a number of Scandinavian 
companies, and is global co-or- 
dinator for the safe of Enel, the 
Italian energy company. 

European banks continue to 
be strong in their domestic 
markets. The French banks 
have won chunky deals in 
France (Paribas heading sales 
of Elf Aquitaine and UAP, BNP 
leading on Renault). 

On the Continent as a whole 
US influence seems to be grow- 
ing. Goldman's market share of 
European deals has doubled 
since 1993. 

Bankers say that in some 
earlier privatisations UK banks 
have been asked to advise the 
government and a US bank to 
lead the sales effort. But that, 
too, could be changing. Morgan 
Stanley, for example, will 
advise the Italian government 
on the sale of Stet, the telecom- 
munications concern. 

European bankers say gov- 
ernments have been too easily 
impressed by US bankers’ 
claims they can more easily 
access US investors, especially 
at die retail level. 

They also suggest that 
Europe has been the important 
source of demand for sales of 
European equities, with Lon- 
don-based fund managers mak- 
ing many of the important 
decisions. 


HONG KONG 

The removal of one 
uncertainty on Friday 
afternoon, when local banks 
lifted interest rates by 0.75 per 
cent, will do little to cheer or 
inspire investors this week, 
writes Louise Lucas. 

The banks had been widely 
expected to. raise rates 
following the US Fed’s move 
last Tuesday and concern over 
follow-through in Hong Kong 
drove the colony’s share prices 
lower In the latter part of last 
week. 

The hesitant mood is likely 
to continue into this week on 
fears of a further Interest rate 
rise. US trade data tomorrow 
will be keenly scrutinised in 
Hong Kong, as any inflationary 


Against that, US banks claim 
their success reflects recent 
investment in training, 
research and sales. 

“US banks are covering the 
sectors on a global basis, if you 
look at investment the US 
banks have put in place in past 
five years it is is multiples of 
what any European bank has 
done. That is not lost in the 
eyes of a government.” says 
one US bank executive. 

US bankers also argue that 
they ore more familiar than 
their European counterparts 
with book-building, a tech- 
nique for distributing shares 
which has long been common 
in the US but relatively new in 
Europe and being eagerly 
embraced by governments 
embarked on privatisation. 

One European banker says 
that US banks promise “the 
earth" and then “try to man- 
age expectations after they 
have won the mandate". 

Nevertheless, he says US 
success is principally a product 
of better research and a more 
tightly focused approach. 

‘They also have a relentless 
focus on the transactions they 
want. They have nailed down 
every individual in the deci- 
sion-making process for a long 
time," he said. 

Richard Lapper and 
Martin Brice 


signals will once again be 
sufficient to spook bond and 
stock markets. In the absence 
of corporate news, local issues 
this week are likely to be 
dominated by rumour. 

TOKYO 

While the interim results 
season peaked last week, 
companies including Nintendo, 
the banks, and electric power 
utilities are scheduled to 
announce their first-half 
profits this week. 

Activity on the overall 
market is expected to remain 
sluggish, exacerbated by the 

nq tjnnai holiday on 
Wednesday. 

Compiled by Michael Morgan 


EMERGING MARKETS: This Week 



The Emerging Investor / John Pitt 

Looking for a year-end finale 


The world’s emerging markets 
largely discounted last week's 
action by the US Federal 
Reserve as thoughts remained 
focused on whether there will 
be a fina l rally to end the year. 

The markets have managed 
to recoup almost all of the 
losses triggered by the Fed's 
first rate rise of 1994 back in 
February, with the IFC’s com- 
posite Index having virtually 
returned to its January 
starting point 

However, the performance 
has not been even; Latin Amer- 
ica has far outstripped Asia, 
while Europe's emerging mar- 
kets - which include Turkey 
and Poland, two of the disap- 
pointments of 1994 - remain 
caught in a downward tre nd . 

While the prospect of a fur- 
ther tightening by the US Fed 
remains, and forecasts vary 
between the end of the year or 
early in 1995, ftind managers 
and strategists take a more 
measured long-term view. 
Indeed, with so much capital 
now tied up in emerging mar- 
kets, especially from US pen- 
sion funds, a sudden change of 
strategy is highly improbable 

According to Mr Michael 
Howell of Baring Securities, in 


a speech delivered in Tokyo 
during the summer, interna- 
tional money managers allo- 
cated more new money 
throughout 1993 to the emerg- 
ing stock markets than they 
did to North America and 
Japan combined. While the 
flow of funds has slowed some- 
what during 1994, the annual 
inflow of new money is fore- 
cast to be between 340bn and 
$50bn, against some $63bn the 
year before. 

US monetary policy has been 
the main factor determining 
investment attitudes towards 
emerging markets throughout 
this year. Consequently Mr 
John Legat. senior emerging 
markets portfolio manager of 
GT Unit Managers in London, 
has been pursuing a policy of 
diversifying away from the dol- 
lar bloc markets, which 
Includes most of south east 
Asia, and concentrating on 
markets in India, Africa, east- 
ern Europe, Turkey and SraziL 

However, each time the US 
Fed had lifted rates he has 
been buying back the dollar 
bloc markets on expectations 
that long bond yields would 
start to fell - good news for 
financial markets in general. 


Index y fiQ Par cant 

520 — ■ S& 

1FC 

Composite 
Index . 

4.5 

480 


Investing in eastern Europe 


500 



•Jan 1994 
Source: Oataafream 


Nov 


Ten beat performing stocks 


i Use 
Tyres 

fico 

’eruano Suiza 
Wersal Holcings 
rctos Itau (Pfd) 

Efektrik 

Sektrik 


coofty 

Rktoy 

ianuM 

Weak orr nee) 
S 

> change 
% 

Turkey 

0-1300 

0.0287 

28^7 

Turkey 

0-5063 

0.0681 

15.53 

Brazil 

0.0484 

0.0046 

10.55 

Peru 

1.0172 

0.0823 

890 

Peru 

32.9897 

2.5131 

k25 

Malaysia 

5.5729 

0.4106 

7.95 

BrazS 

a7177 

0.0490 

7.33 

Turkey 

0-2381 

0.0162 

7.32 

Turkey 

0.2025 

0.0135 

7.16 

Brazfl 

D.5203 

0.0308 

5.29 


Source Bartag Seortto 



Mr Jean de Bolle, of Foreign 
and Colonial Emerging Mar- 
kets, comments that be does 
not believe the US long bond 
has yet peaked, something that 
Is unlikely to occur before the 
second quarter 1995, he thinks. 

For this reason be is looking 
to invest in smaller emerging 
markets during 1995; countries 
such as Peru for instance. He 
is also keen on Turkey, in spite 
of its lacklustre showing this 
year, and Brazil, which, he 
believes, has great potential 
over the next 12 months. 

Turkey has aptly demon- 
strated the volatility that can 
so often characterise the short- 
term performance of emerging 
markets. Following a gain of 
some 200 per cent In dollar 
terms in 1993. the financial 
markets came under a wave of 
selling as its foreign debt rat 
Lng was downgraded in mid- 
January and the Turkish lira 
collapsed against the dollar. 
Inflation then rose into triple 
digit figures for the first time 
in 14 years, hitting an annual 


The surge of financial 
investment into the former 
communist bloc is continuing 
with the decision by Invesco. 
the fund manager, to raise an 
extra $75m for its East Europe 
Development Fund, writes 
Nicholas Denton. 

The new injection will take 
the money raised by EEDF 
since its foundation in 1990 to 
8115m and will lift the 
resources of funds focused on 
the region close to SI bn. 

EEDF's net asset value will 
rise to abont $l70m. propelling 
it into the top two of emerging 
market funds specialising in 
eastern Europe, nearly match- 
ing CS First Boston's Central 
European Growth Fund. 

The Baring group, which is 
issuing and placing the new 
shares, is marketing EEDF as 
the best performing regional 
institutional investor. Micro- 
pol, the fund measurement 
company, has named EEDF as 
the best performer in its group 
over one and three years. 

An early move into the 


booming Polish market helped 
EEDF’s net asset value double 
between September 1993 and 
March 1994 and the fund has 
held on to most of the gains. 

More recently launched 
funds like Baring Emerging 
Europe Trust and Central 
European Growth Fnnd 
invested into markets that 
were coming off their peaks. 
Their short-term performance 
has inevitably been mixed. 

Specialised emerging mar- 
kets funds have been more 
active than pension funds in 
eastern Europe and especially 
the former Soviet Union. Stock 
markets in the region are 
Immature and the regional 
funds have been more willing 
to make unquoted invest- 
ments. But even venturesome 
Investors tike the regional 
funds have been deterred by 
Insecure custody and settle- 
ment in Russia. 

Fund managers say it is tbe 
largest single deterrent to 
financial investment in east- 
ern Europe's largest market 


rate of 117 per cent in May. 

The market made a partial 
recovery during the summer, 
as the government introduced 
an austerity package, but by 
the end of last week it was still 
down nearly 40 per cent in dol- 
lar terms on the year to date. 

Looking ahead Mr Susbil 
Wadhwani. a Goldman Sachs 
strategist basc-d in London, 
believes Asian markets in gen- 
eral offer good potential over 
the long term, and appear an 
even more attractive proposi- 


tion than Latin America, even 
if the US Fed acts more deci- 
sively next time round. 

Mr Mark Mobius of Temple- 
ton Worldwide, which has 
some S7.2bn invested in emerg- 
ing markets funds, believes 
that prospects for the next six 
months remain generally good. 
“However, while a number of 
markets have moved up sub* 
stantially and have recovered 
from the decline in the early 
part of the year, many are 
overpriced,” he says. 




Markets offered Thanksgiving breather 


; face a fairly on the likely future direction of interest 
injoying only rates. That said, few observers are 
iwing to the expecting an imminent rise in rates. A 
maintenance of the status quo - the 
inch a deluge discount rate at 4.5 per cent, and the 
a monetary repo rate at 4.85 per cent - seems the 
>d to generate most likely outcome. 

In the dollar. The background to the council meet- 
icy event will ing will be provided by M3 money sup- 
ii meeting on ply, and consumer price inflation fig- 
now the Ger- ures. The lack of data will not stop the 
>n scrupulous market from pursuing its current pre- 
tarkets a hint occupation; namely, whether the dollar 


is now in a bull-phase, or merely seeing 
a retracement within an ongoing bear 
phase. 

The dollar’s response to the 75 basis 
point rise in short term rates was 
strangely subdued. The dollar finished 
in London on Friday around DM1.5550 
and Y98.6G, almost exactly the levels at 
which it stood half an hour after the 
Fed announced higher rates. 

Mr Steve Hannah, head of ivsKtrch at 
iBJ International in London, com- 
mented: "The dollar has mail** useful 


headway in recent weeks. But the move 
has simply broken the downtrend - it is 
premature to say that a new bull mar- 
ket is in place.” 

A survey conducted on November 17 
by IDEA, the financial analysis group, 
illustrates that the market remains 
very unsure about the outlook for the 
dollar. Asked to forecast two months 
ahead, respondents predicted median 
values fur the dollar of DM1.57 and Y SS. 
Forecasts ranged, however, from 
DM1.44 to DM1.6425. and Y92.5G to Y105. 


■ Jakarta 

The Indonesian stock market 
is forecast to rally in 1995, 
according to PT Standard 
Chartered Indonesia, agencies 
report. 

‘The market will continue tp^' 
strengthen and we expect total 
upside of 20 per cent over the 
next 12 months, on the back of 
what we expect will be the 
strongest earnings growth rate 
among the Asean markets," 
the brokerage said. 

Standard Chartered added 
that it was expecting strong 
1994 corporate earnings growth 
of about 24 per cent 

■ Tanzania 

Delegates from donor agencies, 
Tanzania’s government and 
private business met earlier 
this month to discuss regula- 
tions for forming a stock 
exchange and capital markets. 

Participants included offi- 
cials from the World Bank and 
the International Finance Cor- 
poration. 

The country's parliament 
enacted a capital markets law 
early this year which allowed 
for the formation of a stock 
exchange. Since then, the Bank 
of Tanzania has been trying to 
find a framework for setting up 
a stock exchange. 

E Casablanca 

Morocco’s stock market fore- 
casts a record turnover of more 
than $lbn by the end of the 
year, an official of tbe conn - 





News round-up 


try’s bourse said. This will 
nearly double the 1993 turn- 
over figure. 

Foreign investment 
accounted for more than 70 per 
.cent of bourse activity. 

Morocco plans to privatise 
112 companies by the end of 
1995. 

■ Istanbul 

The Istanbul stock exchange 
withdrew from the manual 
hoard system, in use since 
November 1987, to prepare for 
full automation or all 174 
stocks today. 

■ Seoul 

South Korea approved foreign 
investment worth $1.16bn in 
the first ilf months of the year, 
a 44JJ per cent rise on the same 
period of last year, according 
to data from the finance minis- 
try. 

Japan topped the foreign 
investment list with $361m 
during the period, followed by 
$356m from EU countries. 
Investment by the US, how- 


ever, fell 6.3 per cent to *282m. 

New foreign investment was 
$5SSm, while the remaining 
3573m comprised additional 
investment by existing foreign 
companies in South Korea. 

■ Lima 

Foreign investment on the 
Lima stock exchange rose by 
47.7 per cent to $1.67bn in Octo- 
ber compared with $1.23bn in 
the previous month. 

Most of the investment came 
from the US, followed by the 
UK, Chile and Luxembourg. 

According to data from the 
stock exchange authorities, for- 
eign investors preferred to buy 
shares in Compania Peruana 
de Telefonos, Banco de Credito, 
Backus y Johnston and 
Southern Peru Copper Corp 
and -Buenaventura. 

Equity prices on the bolsa 
rose by an average 8.7 per cent 
in the same period. 

• Edited by John PitL Further 
coverage of emerging markets 
appears daily on the World 
Stock Markets page 



rjties em 

Week on week movement 
Actual Percent 

Month on month movement 
Actual Percent 

Year to date movement 
Actual Percent 

World (301) 

Latin America 

— 17754 

-3.00 

-1.67 

-9.97 

-5.53 

+8.83 

+5^4 

Argentina (20) 

97.84 

-5.88 

-5.66 

- 12.88 

-11.88 

-17.44 

-15.11 

Brazil (21) 

233-80 

-6.33 

-2.63 

+4.74 

+2.07 

+94.15 

+67.42 

Chile (12) 

222.27 

-2.96 

•U1 

-6.70 

-2.93 

+74.73 

+50,65 

Mextco (25) 

135.85 

-1.67 

-1.21 

-19.62 

-12.62 

-25.42 

-15.65 

Peru(16) 

902.98 

-49.33 

-5.18 

-36.44 

-3.88 

+326.89 

+56.74 

Latin America (94) 

....16&27 

-4.03 

-2.37 

-10-93 

-6.17 

+17.03 

+11.41 

Europe 

Greece (16) 

81.80 

-1.14 

-1.38 

-4.13 

-4.80 

-1.29 

-1-55 

Portugal (18j 

12031 

-2.43 

-1.97 

-1.78 

-1.45 

+8.68 

+7.74 

Turkey (21) 

81.96 

+0.26 

+0.32 

-0.57 

-0.69 

-79.76 

-49.32 

Europe (55) 

99.23 

-1.44 

-1.43 

-2.33 

-2^9 

-13.00 

-11-59 

Asia 

Indonesians) 

148.05 

-1.95 

-1.30 

-7.58 

-4.87 

-22.99 

-13.44 

Korea (23) 

180.65 

-3.58 

-2.18 

-5.13 

-3.09 

+50.95 

+46.44 

Malaysia (23) 

225.53 

+2.87 

i-t.29 

-12-37 

-5.20 

-27.52 

-10.87 

Pakistan (11) 

108.16 

-1.88 

-1.71 

-9.11 

-7.77 

-3.53 

-3.16 

Philippines (12) 

293,50 

-4.28 

-1.44 

-9.15 

-3.02 

-2837 

-8.98 

Thailand (25) 

267.37 

-2.46 

-091 

-7.47 

-2.72 

+3.81 

+1.45 

Taiwan (32) 

164.64 

-4.74 

-2.80 

-11.77 

-6.67 

+104M 

+7.12 

Asia (152) 

.—219.49 

-1.56 

-0.71 

-10.31 

-4.49 

•1.92 

■0.87 


fij n 5 icimgi Jinuaiy Tat ISShlm Sans Bartag SaanUkia 


Emerging routes: 

Vsncocvar-tondcn-Kewi Delhi. Torcpto-ifantSuvcr-Spoat. ToronW- Osaka' 







PC? 


FINANCIAL TIMES MONDAY NQVEMBER 21 1994 


WORLD BOND MARKETS: This Week 


NEW YORK 


Jackson 


LONDON ^ T^tl ■ FRANKFURT 


Andrew Fisher IK TOKYO 



Even though Last week's rise in 
the discount rate was sharper 
than expected, the bond 
market is by no means sure 
the Fed has finished yet 

The economy remains rather 
too strong for comfort, 
particularly in terms of 
consumer spending and retail 
sales. 

In spite of the aggressive 
nature of its move, the Fed 
pointedly made no comment on 
plans, and long bond yields 
actually rose slightly. 

The next FOMC meeting is 
not until December 20, so no 
further action is expected at 
least until then. 

In the meantime, however, 
the market has found 
something else to worry about 
the risk that the Republicans, 
rampant after their election 
victory, will cut taxes ahead of 
their ability to control 
spending. 

However, this should be a 
quiet week, with the 
Thanksgiving holiday on 
Thursday. 

Tuesday brings the Federal 


IIS 

Benchmark yieW cwve {%T 
18/11/94— - Montfiago e=] 

&25 - - - 

7J5 * = 

6.75 "■ ■ “ 

5.75 I/ 

525 fl. • - - 

4.75 C 1 

0 10 years 20 

7W yMcfe ae mwkei convention 


Source: Manffl Lyncfl 


budget figure for October, 
expected to show a deficit in 
the $33bn-$35bn range. 

On Wednesday come durable 
goods orders, where continued 
growth in civilian spending 
should be mostly offset by 
continued cutbacks in defence, 
resulting in growth of about 1 
per cent or a little above. 

October figures for sales of 
existing homes, due on Friday, 
will be looked at for evidence 
that rising mortgage rates are 
finally taking effect 


Traditional pre-Budget 
speculation is likely to shape 
sentiment on the gilts market, 
which was strengthened last 
week by positive UK economic 
data- Nevertheless, gilts 
continue to be buffeted by 
international trends, 
particularly following last 
week's US interest rate rise. 

With next week's Budget 
likely to reduce substantially 
the public sector borrowing 
requirement, gilts are expected 
to perform well over the 
coming weeks. A survey last 
week indicated that City 
economists now expect the 
PSBR to fall to £32bn this 
financial year, and £23bn next 
year. 

Speculation is mounting that 
the Budget might introduce an 
open repo market which would 
make the market more liquid 
and take the kink out of the 
yield curve that has made 
longer dates yields lower than 
those at the medium term. 

In the meantime, last week's 
economic data, which 
suggested that UK inflationary 


Benchmak. yield curve (%)' 
18rt1/94 «— Month ago <= 


years 20 25 


■AS ytekls ora market convention 
Saxos. Memfl Lynch 


pressures remained subdued, is 
expected to strengthen the 
market. 

Mr Nigel Richardson, of 
Yamaichi International said: 
“We go into the budget with a 
relatively favourable tone to 
the market - the background 
to gilts is good on an 
international basis.'* 

As Merrill Lynch points out, 
the spread between UK-US 
yields has narrowed recently, 
and its economists predict that 
it could narrow further. 


After watching to see how far 
US short-term rates would rise 
last week, the German band 
market will have Its attention 
more sharply focused on 
domestic matters hi the next 
few days. 

The rates of money supply 
growth in October and 
inflation in November are 
expected to show a slight 
improvement when announced 
tins week. 

M3 should ease to an 
annualised growth rate of just 
above 7 per cent, with yearly 
west German inflation likely to 
slip to 17 per cent 

However, this does not mean 
Thursday's Bundesbank 
council meeting is likely to 
decide on a small cut in key 
interest rates before raising 
them again in 1995. 

The Bundesbank, as Mr Hans 
Tietmeyer, its president said 
on Friday, wants more 
progress by the government 
towards solving its fiscal 
problems and more moderate 
wage rises to squash, 
inflation. 


Germany 


Benchmark yteki curve 
18/11/84— Worth *90 <=. : 



5250 7 


4J5Qi 1 1 1 ■ ■ - 

0 10 yi* 20 

‘Alyteirfasv rota£ ccawtfon 
Source: Mend lynch 


The 75 basis point rise in the 
US federal funds target did not 
help the case of those looking 
for one last German rate 
cut 

Nor has the criticism by the 
government's council of 
economic advisers (five wise 
mp-n) of the Bundesbank's 
pragmatic monetary policy. ■ 
Its latest report said there 
was no scope for more interest 
rate cats in 1995; slight 
increases would probably be 
necessary. 


Weakness in the Tokyo stock 

market is expected to underpin 

the b ond market this week. 
ProGt-takmg by overseas fund 
managers before the year-end 
settlements is depressing share 
prices while stock buying has 
so far been limited to public 
funds. 

With an forteasing number ' 
of analysts expecting the 
Nikkei 325 index to breach the 
psychologically important 
support level of 19,000, ’ 
longterm interest rates are 
expected to see underlying 
support 

The bond market may see a 
brief rally as a result of 
increased trading from the new 
sec urities house subsidiaries of 

the «*n»nTrierr-tel which 

start operating on Thursday. 

Meanwhile, there has been 
an increase in straight bond 
issues with longer maturities . 
and an easier yield curve at 
the longer end is prompting 
companie s to turn to debt ■ 

with maturities of over five 


■Jail 




250 hr 


vly-S;,' . 


‘ -A* yfatoare oy*rt'acBt«b&ft • j: : 


years. 

Until recently they preferred 


to Issue bonds with maturities 
cC less than five years because 
long-fennyields were expected 
to decline and to attract, retafl 
investors. - ' 

AJthoagb companies may 
revert toshort-term debt, to 
attract retail investors ahead ... 
of the winter bonus season, a 
rise in demand fbr tonfftenn ' 
bonds with higher coupons 
among institutional Investors 
is likely to support the case for 
a continued increase in . . 
longterm debt ' 


Capital & Credit 

Confidence returns to the gilts sector 


The UK government bond, or 
gilt market is in a confident 
mood. It swept aside last 
week's figures showing acceler- 
ating UK economic growth and 
rallied in the face of Tuesday's 
three-quarter point rise in US 
short-term interest rates. 

It may soon face more seri- 
ous tests of its new-found 
confidence, however - a 
turn upwards in UK inflation 
and the next rise in UK base 
rates. 

It is no secret that this has 
been a difficult year for gilts. 
Fears that economic recovery' 
in the US and Europe would be 
Inflationary and lead to 
sharply higher interest rates 
around the world have sent 
bond prices tumbling, and gilts 
have suffered particularly 
badly. 

This was partly because the 
UK's economic recovery was 
further advanced than that of 
its fellow European countries 
and partly because of the UK 
authorities' poor track record 
in controlling inflation. The 
large size of the UK govern- 
ment bndget deficit, and the 
enormous amount of new gilt 
issuance this implied, also 


weighed heavily on investors’ 
minds. 

The price of 1 0-year gilts fell 
by more than 19 per cent from 
their highs in January and 
yields climbed by almost 3 per- 
centage points to a peak of 
around 9 per cent in Septem- 
ber. 

Since then, however, there 
have been encouraging signs of 
a recovery in gflts, at least in 
relation to other countries' 
bond markets. 

Yields have dropped back 
only slightly, to around 8.6 per 
cent. But the yield spread 
between US and UK 10-year 
government bonds, having wid- 
ened to more than 150 basis 
points in the summer, has now 
narrowed to about 60 basis 
points. 

The reason for this is contin- 
ued good news on inflati on. In 
spite of economic growth of 
over 4 per cent, inflation - at 2 
per cent - remains at a 27-year 
low. 

The financial markets suspi- 
cious all year of the govern- 
ment's willingness and ability 
to keep a tight reign on price 
rises, are storting to believe, 
albeit grudgingly, that maybe 


it can and will. The fall in 
yields is reflecting this. 

“Gilts have rallied in recent 
months as expectations about 
inflation have slowly 
improved," said Mr Gerard 
Lyons, chief economist at 
investment bank DKB Interna- 
tional. “Investors are now 
becoming more willing to com- 
mit money to the gilts mar- 
ket." 

Mr Lyons believes there is 
now an asymmetrical relation- 
ship developing between the 
US and UK government bond 
markets. 

“It will be difficult for gilts 
to put on further gains in isola- 
tion from other markets, par- 
ticularly the US,” he said. 

“If Treasuries rally then gilts 
will be pulled up with them, 
but if Treasuries fall then gilts 
will be supported by the UK’s 
favourable domestic condi- 
tions.” 

Those domestic conditions - 
the strength of the UK recov- 
ery. infla tion and interest rates 
- remain the key to how the 
gilt market performs over 
re maining weeks of 1994 and 
into next year. 

"The question that has to be 


answered is whether this 
recovery is any different from 
previous ones, in which 
renewed growth has triggered 
inflation, higher interest rates 
and balance of payments prob- 
lems." said Mr Lyons. 

Although inflation rem ains 
subdued, there are signs that 
inflationary pressures are 
building up in the economy. 

Mr David Miles, senior UK 
economist at the US invest- 
ment bank Merrill Lynch, cal- 
culates that spare capacity in 
the economy is dwindling rap- 
idly. 

“If the economy continues to 
expand at its current rate, it 
will start to overheat and be 
heading towards inflationary 
territory by the end of next 
year." he said. 

He points to the rise in pro- 
ducer input prices as a sign of 
future inflation. 

Rising commodity prices 
have pushed up costs to many 
manufacturers, yet producers 
have not passed these rises on 
into output prices, thus squeez- 
ing their profits. 

“Companies may try to to 
recoup that squeeze in profits 
by raising prices over tbe 


coming year.” said Mr Miles. 

Wage settlements, currently 
rising at about 3% per cent a 
year, may also start to acceler- 
ate as unemployment contin- 
ues to fall, putting further 
upward pressure on costs and 
prices. 

All this points to a rise in 
UK interest rates. The consen- 
sus among City analysts seems 
to be that it will come early 
next year. However, when it 
does it may not be bad for gilts 
- certainly the last rate rise, in 
September, was generally 
enthusiastically received as a 
well-timed move to head off 
future inflation. 

In the meantime, the gilt 
market has something else to 
occupy its attention - next 
week's Budget on November 
29. 

Mr Kenneth Clarke, the 
Chancellor of the Exchequer, is 
expected to reaffirm the 
improving state of the nation's 
finances and cut his forecast 
for next year's public sector 
borrowing requirement This 
would be yet another lift to the 
gilt market's confidence. 



V'"'* 7- ~ v W'V', 4 *! 

;■* - .. 

5 * 3 . V 

/ It ' 

M;-7aar 





AkoW. 


Graham Bowley 



INCREASED CASH OFFERS 

by 

CS FIRST BOSTON LIMITED 

on behalf of 


International 


Eyes now turning to Latin America 


BFI ACQUISITIONS PLC 

a wholly owned subsidiary of 


BROWNING-FERRIS INDUSTRIES, INC. 

to acquire all the outstanding Ordinary Shares and 
American Depositary Shares 
of 

ATTWOODS PLC 

and all the outstanding Convertible Preference Shares 

of 

ATTWOODS (FINANCE) N.Y. 


CS First Boston Limited ("CS First Boston") announces on behalf of BFI Acquisitions pic ("BFI (UK)") that, by means 
of a formal offer document dated and despatched on 18th November, 1994 (the “Offer Document"), CS First 
Boston is making increased cash offers (the "Offers") on behalf of BFI (UK) to acquire all the unconditionally 
allotted or issued fully paid ordinary shares of 5p each in the capital of Attwoods pic ("Attwoods'') (including 
Attwoods ordinary shares of 5p each represented by American Depositary Shares (each an "ADS")) ("Attwoods 
ordinary shares") and all the existing unconditionally allotted or issued fully paid 8.5p guaranteed redeemable 
convertible preference shares of 5p each in the capital of Attwoods (Finance) N.V. ("Attwoods preference shares") 
in each case not already owned by BFI (UK) and any further such shares which are unconditionally allotted or 
Issued while the Offers remain open for acceptance (including any Attwoods ordinary shares unconditionally 
allotted or issued pursuant to the exercise of options granted under the Attwoods pic 1985 Share Option Plan and 
the Attwoods pic 1 992 Overseas Employees Share Option Plan). 


The Offers are made on the following bases: 1 16.75p in cash plus a pro rata entitlement to a contingent cash pay- 
ment (the "Contingent Cash Payment"), if any, for each Attwoods ordinary share not represented by an ADS; 583.75p 
in cash plus a pro rata entitlement to the Contingent Cash Payment, if any, for each ADS; and 92p in cash for each 
Attwoods preference share, in addition. Attwoods ordinary shareholders would be entitled to retain a final 
dividend of 3.25p that has been recommended by the Attwoods Board of Directors. 


The foil terms and conditions of the Offers are set out in the Offer Document (including details of the Contingent 
Cash Payment). 


Latin American debt has been 
among the worst casualties in 
this year’s bond market melt- 
down. However, most observ- 
ers say the sell-off has been 
overdone and recommend buy- 
ing around current levels. 

-We believe these markets 
are now very cheap," says Ms 
Ingrid Iversen. senior econo- 
| mist at Morgan GrenfelL “The 
I fall has been overdone by 
whatever measures you apply,” 
she says. A recent study by 
Morgan Grenfell states that 
■'current Brady bond prices dis- 
count default risk at a rate 
which verges on the paranoid”. 

Latin bonds have been bat- 
tered by rising US interest 
rates, heavy selling early in 
the year by leveraged accounts 
and a variety of domestic prob- 
lems. As a result, the average 
stripped yield spread of the 
four largest Latin markets over 
US Treasuries has more than 
doubled to some 950 basis 
points, from 450 basis points at 
the beginning of the year. 

In Brazil, uncertainty ahead 
of the October elections over- 
hung the market most of the 
year. However, bonds derived 
support from the implementa- 
tion in July of the Real Plan 
and the election of Fernando 
Henrique Cardoso, enabling 
them to outperform all neigh- 


bouring markets. According to 
J.P. Morgan. Brazilian Brady 
bonds have posted a total 
return of some 62> per cent in 
the year to date. 

Mexico, too. was dogged by 
political worries ahead of the 
August election, exacerbated 
by the assassination of Presi- 
dent-elect Donaldo Luis Colo- 
5io in March. Mexico was the 
region's second-best performer, 
although total returns there 
are down 11.5 per cent in the 
year to date. 

Argentina suffered from con- 
cern over its fiscal position and 
jitters ahead of elections in 
May. Although President 
Carlos Saul Menem is expected 
to be reelected, “people have 
been rattled by politics this 
year and are shy of countries 
with political uncertainty”, 
says Mr Patrick Beeley, who 
runs the emerging markets 
bond sales desk at JP. Morgan 
in London. Argentine bonds 
are down 21.61 per cent so far 
this year. 

Venezuela, meanwhile, has 
been the worst hit, posting a 
negative return of 32 per cent 
amid growing Investor scepti- 
cism of the populist Caldera 
government 

After getting badly burnt in 
the initial February sell-off. 
many investors moved into 


taOf America Boodl Endfar 

• V. ...... 


1 Total Batons f 

A. iiaaatoiaMaaw i 

&0—F- W*> Year 10 data -1*46% jf 


20D|»— t-*| •. r 


IflO ’ — 


' 160* 1 : 

• MnflS 1804 

Source JP Morgafl 


cash or money market instru- 
ments. But although US 
mutual funds withdrew bil- 
lions of dollars from bond mar- 
kets, few accounts have pulled 
out for good, and observers say 
there are large pools of cash 
waiting to get back into bonds. 

Moreover, new Latin Ameri- 
can investors, such as Argen- 
tine and Brazilian pension 
funds, are expected to move in 
next year, says Ms Susan 
Segal, head of emerging and 
capital markets at Chemical 
Bank in New York. 

And even among US inves- 
tors, many of whom have 
sought safety in equities this 
year, “we are beginning to see 


more professional money rew- 
eighting back to the bond 
side”, she says. 

“We think people will get off 
the fence soon, and expect to 
see a significant pick-up in 
activity in December," agrees 
Mr Jonathan Prior, head of 
emerging market debt trading 
at ING Bank. 

Brazil remains a favourite, 
especially after last week's 
state governor elections which 
gave President Cardoso the 
support he needs to implement 
his reforms. 

Some analysts are also bull- 
ish on Mexico in the hope that 
its credit rating will be raised 
to investment grade in 1995. 
Argentina is seen supported by 
solid long-term fundamentals. 
And Venezuela - given that 
most people believe it will con- 
tinue to service its debt - “is a 
screaming buy”, says Ms SegaL 

In spite of their supportive 
fundamentals, Latin bonds 
remain inextricably linked to 
US Treasuries, whose erratic 
trading pattern they track slav- 
ishly. But “while the opposing 
forces of weak US Treasuries 
and strong regional fundamen- 
tals will persist, I feel the latter 
will prevail sooner rather than 
later," predicts Mr Beeley. 




- /■ T. 


•' 


Conner IVIiddeXmann 


This advertisement is not being published or otherwise distributed in or sent into Canada and persons reading this 
advertisement (including, without limitation, custodians, nominees and trustees) should not distribute, send, transmit 
or mail this advertisement, the Offer Document or any related documents, directly or indirectly, in or into Canada 
and doing so may render invalid any related purported acceptance of the Offers. 


NEW INTERNATIONAL BOND ISSUES 


The Offers, which are made by means of the Offer Document, are capable of acceptance in accordance with the terms 
set out or referred to in the Offer Document- The Offers extend to all persons to whom the Offer Document and any 
related documents may not be despatched and who hold Attwoods ordinary shares or Attwoods preference shares, or 
who are unconditionally entitled to have Attwoods ordinary shares or Attwoods preference shares allotted or issued to 
them. Such persons are informed that copies of foe Offer Document, Forms of Acceptance in relation to foe Attwoods 
ordinary shares (not represented by ADSs) and Attwoods preference shares. Letters of Transmittal and Notices of 
Guaranteed Delivery in relation to the Attwoods ordinary shares represented by ADSs will be available for collection from 
CS First Boston, One Cabot Square, London El 4 4Q) during normal office hours during the period of the Offers. 


Bommr m. 

USDOU/WS 

team iMstneor Bat* ZOO 
SMUSO^TraiCtalt 47 

SUM* Co. fefeUnnta 1*122 
Saqpo ConU<4S SO 


YW Land Book nuts 
* amtftfi 


flaw# 
m. K&rtjr 


1994-2, Alffl** 5872 
W0H.T IKK- 2. 100 


HBSLT 1894-2. 
HaMcfeptoc 
Ontatfyta 
landrtrf. Batata* 
tamtam 
Certra Terata GuemesM 
ClkMttUito 
Bat* of Souti tastrataftt 
HW ML HnancB, Detom 


Dec. 1 890 7.75 
taf.1986 (blj 
to.1996 61 J1 
NW.2001 2J5Z5 
5apk2014 tfl] 
SepJOM ffij 


HW.1309 9.755 
Drc.1997 775 
Dsc.1997 7.625 
ltar.1997 11« 
to. 1996 12_QM 
ta.1B95 1525# 
NN.1999 (HI 
MW20M 825 
Dk. 1999 UO 
Dsc.1997 7.875 
Dec. 1899 8.1 E 
Dec.107 1125# 
DK.1999 840 
Dk 20D4 (R0 
ltar-1S98 1050# 


tae^tt&lBntas L-fhanca 400 


This advertisement is published on behalf of BFI (UK) and has been approved by CS First Boston, a member 
of the Securities and Futures Authority, solely for the purposes of Section 57 of the Financial Services Act 
1986. CS First Boston is acting for Brown ing-Ferris Industries, Inc. and BFI (UK) in relation to the Offers and 
no-one else, and will not be responsible to anyone other than Browning-Ferris Industries, Inc. and BFI (UK) 
for providing foe protections afforded to customers of CS First Boston nor for providing advice in relation to the Offers. 


The directors of Browning-Ferris Industries, Inc. and BFI (UK) accept responsibility for the information contained 
in this advertisement and, to the best of their knowledge and belief (having taken all reasonable care to ensure 
that such is the case), the information contained in this advertisement is in accordance with the facts and does 
not omit anything likely to affect the import of such information. 


Earn tin* tads SO 

BBSfcPBwtamco. 3oo 
tawdo Brass, fid Ctyom 100 
Untanr ZOO 

tab moM) ML Bk.1 ISO 

Bsntacknai 100 

VBj 

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Swafcti Expat Cratt* ign 
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tatte* Sairtnd* 10M 
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JtfSCtftar soar 
feputoollBy J25bi 

WW faCapiafod 1U* 
toira 9a* M Trcti Iffva SM 
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7.765 >7(0 ABN tan Bart 

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9.773 tlUM Stf CSttSdawa BtoBbs 
7445 BOB 

7.883 +15fo%-9n Houn/ Stan Fta. 
l1SB*^7ywnOaBe tamtont Baft 
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8740 +218TT-M* Cttnk MbMMM 
JP Itopi Saartte 
8.418 Dnsdterf GMogo 

B.10B sjrt s Hagai Sratn 
7311 +32(7W7) CBask htowfcta 
8.138 +23(W3r1 EIKUJ> Mora® 
10CW +29O(73 B V07} Ctsmfal to. Bask 
8.103 *15 (W Sfi Deobds tty UBS 
MorpnasfcyUL 
11.40 CBuft 


™WU 200 Dk.1999 7.125 

fflammwcs 

Mbi* LynchS Ox ita Oec.1999 1125 

fTttiMURE 

SudM GtoMi ACN|tata19bl DacJ 996 10.75 




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ginnsi 


19 DetZOQO 100 


99S97H 7.199 ♦17<6V*^g) ferpn Sbifcy 
"WOW 8.1B0 4S3(S> t %4E| Marl 
101.1B IQlOB - 
"*78B 1048 tllfS^VOO) Wood 6u* 


3W Dk20D2 JSC 
3» DK2000 730 


OSH 7*38 riWMBtfN tan) 6ft* 
»53B 7-500 WG 8»* 


n 17? Dk1999 1125 

teopan Qwrajftj 85 DecJBOl 8275 

WSTCMU/W DOLLARS 

ta* SSi wgeg Tmajap,* iqq hniml 
tawtondltasuyCwp.* 100 Kw.1997 4 


S2S5 ***** bzw 


8240 
87533 8382 


Dk. 1999 450 
1W2005 550 
Ma.2005 til) 
NW.1997 173 
Dte.1998 am 
DCC198B im 
Dsc.1997 330 
D6C2004 530 
002014 550 
482005 (hi)# 
FK2Q00 w 
UV2000 (0) 


4511 *29KSM# Mart l ytiskfl. 

Nonas fctaiBbm 
Kmoaktatoatf 
1734 Norm HBwfliK 

3391 ftlHlttlU. 

4509 NOfMlttl U. 

1904 +1183*371 tan# Noon ML 
5.060 +29(4yHX] tan Bmpe 
5500 *39pvi4] Dabnr Norm ML 
Safcron antes ML 
tom HI 
Nosnfai 


21 November, 1994 


CS FIRST BOSTON LIMITED 


Mta^WflSjnianhit 100 


Dk.1999 s 


HSBCMartats 


Bnpaotoabntotakn I5bt Nonage 1030 

sues roes 

190 Dec.1907 53 ft" 

9W S Co, Trade 3t SO Hmr.1996 WB 

aw & Oj 1Wa.nart.3t 250 ND.. 1 W m 

■Wtaft 200 DK2000 5375 

masBouRsnwcs 

taUfctftotop ta Jn2005 825 

ftsrtfcoirwrt an £1 

flna ton. B«I B4« I 

bj te tart nuga. % 0 nntWa. 

prta.rt Grtetfe on 1 
S-nfth UMr tIStn. c|Cn L 

■nuitaiiMi to Smi 13737%.’ 2 

■k Uns. Hi) 1 -nn (Mr+23r ^ 

7711/94 m kmasal to S300n, 

gaBbRtarti GM Ecu nwrs. ht CNItto'm 


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10123 10.48 


102J0 4538 

100X0 

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JP iftxpn Sdue 
JP Morgaa Stasaa 
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IfD M 7 710 


awscaTisBctazt 205 
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- Na ncial times momday November 21 1994 


?a. 


THE WEEK AHEAP 


" 




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5:?5t 

o-.r-; 

: *'V'r>, ' • 


1 America 


. -■* 

• 'j 

- ~ . - • 
_ . . > ■ :•*. 
- S'-' 1 




H ••: ' 

.-r» v -- 

AJ'.tr '• • 

A'>* r 

M** ■-■• 

WtS 1 — - fc 


’ -M# 


5!y[9§^Dsur^EREST 


PAYMENTS 


* todav 

Bemrose 4.7 P 

Bar* FRN 199J 

wSaSS? 7 **^' 

£ venue Estates 11 % 
2014 

Q raham i.75p 
Hickson Int 2.85p 
Iceland 1 32 p 
KlearfoW S0.01 

MBE Rn. Tranche A Gtd Dual 
^sis Bd. 2004 $29062.50 
Jto- Tranche B S288tM.17 

"™cfeva l.ip 

& Commercial Inv. 

pYoVv?^ 1 996 $72.50 
£36^5 % CV ‘ Bd - 2003 

Quarto Grp. 2 p 
Renishaw 4 . 4 p 
S & U 3p 
Suter 3.5p 

Toyobo FRN 1 999 Y67934 0 

^“““Sy 12, ^% 2003/05 £6.25 
Walls Fargo $1.0 
Wensum i. 5 p 

Yokohama (City of) 8% Gtd 
Bd- 2001 $400.0 

■ TOMORROW 

trust High Inc. Tst 1 .4p 
Badgerline 1.5p 
Conversion 10 % % iggg 
£5.125 
Doeflex 1.6p 

European Inv. Bank 10%% Ln. 
2004 £259.375 

UK COMPANIES 


■ TODAY 

COMPANY MEETMGS: 

London A Strathclyde Trust Ganmore 
House, 16-18 Monument Street. E.C. 
2J30 

BOARD MEETINGS: 

RnalK 

MMi Inv. TeL 
Diploma 

r i iia h Qrp. 

Foreign & Colonial Emerging Markets 

trw. TaL 

Unigraup 

Interims: 

Crltcbiay 

Cropper (James) 

EMAP 

Hewetson 

Nororoe 

ft Mienehnrnmih H dj fc 
Southnewa 

South StafTortbNre Wider 

VMj TtlpiaU 

■ TOMORROW 
COMPANY MaETtNGSE 

Bates Offord Japan Triad; 1 Rutland 

Carat, EcEntugft. 1Z30 

Smiths foduutrise, 765 Rnchiey Road, 

Chads ML N_W_ 12.00 

BOARD MEETINGS 

finals 

Abtruof Wgli too. Tbt 
McLeod Ruasal 
Tadpole TKhnotogjr 
interims: 

AppSad HotatFMMn 

Baring Stratton la*. T«L 


Flash Ser. Zeta Seed. FRN 

2000 Y680417.0 

Mitsui Step-up Nts. 1997 

Y750000.0 

Sherwood 1.15p 

TSB Offshore Inv. Ptg. Rd. Pf. 

Blue Chip & GUt Edged 

0.6995p 

Do. European 0.079p 
Oo. Gilt & Fxd. Int. 1.406p 
Do. Int Bd. 4.57p 
Do. Int Equity 0.038p 
Do. Sterling Dep. 1.08p 
Do. UK Equity 2.05p 
Treasury 2^% I.L 1999 
£2.1762 

Treasury 14% 1998/2001 £7.0 
Utd. Inds. O.lp 

m WEDNESDAY 
NOVEMBER 23 
Brent Int i.6p 

Cardiff Auto Receivables (UK) 
No.3 Class A FRN 1998 
£146.82 

Do. Mezzanine FRN 1998 
£170.14 
Laporte 7.9p 
Merrill Lynch $0.23 
Sunderland (Borough of) 

11%% Rd. 2008 £5.875 
Trafford Park Estates 2.2p 
Trinidad & Tobago (Rep of) 
1214% Ln. 2009 £6.125 
Watts Blake Beame 3.9p 

■ THURSDAY 
NOVEMBER 24 
Abbeycrest i.2p 
Atlas Converting Equipment 7p 
Bradford & Bingley Bldg. Scty. 
Sb. FRN 2005 £155.01 
British Data MngmL 3.75p 


Bkkdateftp. 

CML Wcraeystama 
Cathay Ini. 

Cftam tnw. Tet 

Hope* 

Gartrooro Stmd Equity TsL 
Qer tmo re Value bm. 

KmU Systems 
Lowndes Lambert 

LIm4l«ei | n tutde 

Nonnom rooui 
Parksldo bit. 

PIBdngton 


CIS Hldgs. 0.4p 
Clarkson (Horace) Q.75p 
David Brown 2.25p 
Denmark (Kingdom of) FRN 
1998 £135.48 
Development Sec. Q.DBp 
Domestic & General 18.5p 
East Midlands Electricity 85p 
Erith 0.75p 

Grampian Hldgs. l.7p 
Ipeco 1.3p 

Leeds Permanent Bldg. Scty. 
FRN 1997 £141.15 
Northern Rock Bldg. Scty. FRN 

1994 £143.36 
Prudential 4.9p 

Prudential Money Fds. Ptg. Rd. 
Pf. Mngd US Dollar $0.2374 
Do. Mngd Sterling 2.86p 
Do. Sterling Dep. 1.1 2p 
Do. US Dollar Dep. $0.1362 
Royal Bank of Canada C$0.29 
VSEL 12p 
Yule Catto 2.8p 

■ FRIDAY 
NOVEMBER 25 
Adwest 5.4p 

Allied Irish Banks Und. Mar. 
Rate NIs. $161.46 
Alpha Airports 1.6p 
Aluminum Co. of America 
$0.40 
BTR6.5p 

Bradford & Bingley Bldg. Scty. 
FRN 1996 £142.41 
British & American Film 4.8p 
British Fittings Ip 
British Polythene 4.5p 
Brooks Service D.75p 
Cadbury Schweppes 4.6p 
Capital & Regional Properties 
0.6p 


Mortand & Co. 
Tata A Lyle 
Interims: 

Aaprey 
Chloride Qnv 
DCC 

Rrat Iraiand hw. 
Foster {John} 


Rtekrt tat 
Staling Inds. 

Thom EMI 
Vodafone 
Went Tat 
WMteoroft 
YortaMre Water 

■ WEDNESDAY 
NOVEMBER 29 
COMPANY MEETINGS: 

Dairies (D.Y4. 3 Paradse Road. 
Richmond Surrey, 11-00 
Exmoor Dual Ink. Tst, Chamber of 
SHpptag. Carthusian Sate. Cmtftahm 
Street E.C., 12.00 
F 8. C US Smaflor Ctfs, 8th Hoor. 
Exchange House. Brinnaa Street ECL. 
1220 

d ra >»taw> The touflaae of Otadat Pad 
lid. &W, 1030 
BCMRO MEETINGS: 

RnaiE 

Amber IndL HUga. 

Fendmrch 


National Grid 
Rood Emcutam 
TR Mgh bw-TsL 
Wodctoflton (John) 

■ THURSDAY 
NOVEMBER 24 
COMPANY MEETINGS: 

ECU Treat 26 Co petal Ammo, EC, 
1230 

The Hong Kong tamebnent Treat inn 
floor, Knbhtsbridga House, S.W., 10.30 
GaMford, The l-Uton National Coventry 
HotoL Coventry, 12.15 
Lloyds Chemists, New Court KM. New 
Court lane, BersweL Wanrida, 1030 
BOARD MSTMGS: 

Finals: 

Concentric 

Handareon Strata hw. 

Netawri Euro Priva t i sa tion taw. TsL 
Moriend A Co. 

Scottish In*. TsL 

Tonridnaone 

Interims: 

Ataed Damacq 

Dabeocfc U. 

Duaum Post 
CPL Aroma 
Caiarinnhi tarn. 

Chembaribi Phipps 
CAy ol London PR (kp. 

CtesatanOTM. 

Dart Qrp. 


Delyn 0,5p 

Eaton $0.30 

FAI Insurances AS0.01 

Rne Decor 2.7p 

Fujita Inv. Gtd. FRN 1998 

$1362.71 

Gaflrford 0.5p 

Gartmore Scotland Inv. Tst. 

2.8p 

Do. Units £7.0 
Great Universal Stores 9p 
Greenacre O.lSp 
Haggas (John) 2p 
Hampden 0-2p 

Highlands & Lowlands MS0.04 

Instem i.4p 

Irish Life IRO.IIp 

Kerry Grp. IR0.5p 

Laing (John) 3p 

Do. A N/Vtg 3p 

Lllleshall l.85p 

Lloyds Eurofinance Gtd. FRN 

1996 £70.12 

Murray Int Tst. 2.7p 

Partco 2p 

Proudfoot 2p 

Ruberoid 1.8p 

Sanwa Fin. Aruba Gtd. Sb. 

Perp. FRN Ser.3 $742.71 

Sappi R0.30 

Thornton Pan-European Inv. 
Tst. 0.3p 
T & S Stores 2.6p 
Treasury 6’A% 2010 £3.125 

■ SATURDAY 
NOVEMBER 26 

Forte 6T4% Sb. Cv. Bd. 2008 
£33.75 

Tay Homes 5.1 p 
Treasury 6%% 2004 £3.375 


Fleming High fnc. hw. TsL 

IWPInL 

ML Hldgs. 

Macdonald Mortal OtstHtaries 
Martin Currie Euro hw. TsL 
Osborne & LitUa 
RPC 

Rothmans hiL 
Secure Re ti rement 
South West Water 

■ FRIDAY 
NOVEMBER 25 
COMPANY MEETINGS: 

Maunders (John), HoBday inn Crowne 
Plaza Haul. Peter Street. Manchester. 
72.00 

Pochki’s. Brooks Lane. Mtddetach. 
Cheshire, 12.00 

Tay Homos. Tho Queens Hotel, City 
Square, Loads, 230 
BOARD MEETINGS; 

Finale: 

Abtroat Emorgktg Economies hw. TaL 
London Sec. 

TR Far East Inc. TaL 
interims: 

Bristol Evening Post 
Drayton Bhje Chip TsL 
Stoddard Sahara 
Syttone 
Vtatee ftp. 

Watah Water 

Company msefings ore annual general 

mootings unlois otfmnnso atotad. 

Please note: Reports and accounts are 
not rxxmaly avstataia ursl appnrdmately 
weeks after the board meeting to 
approve tta protnunary rpsutts. 





TheFi 



Times 


Christmas Bc^^eview 1994 

within FT 

on Satnrday-^^|>eceiiibex; 

It w3l contain reprf^wa of some of the 
best books of thejna^iobliidiQg fktkm. 

biographifefe £&& leisune. 

For ante de tails dt Wtc?trve your space 
in this fcatff&^pKase call 

Robert Hunt 1 eic ft Melanie Mites 
071 873 4418 072 8733349 

Fax: 0718733064 


Reud the following pubiicuiions Trom the Financial Tiroes. 

East European Markets 

including; 'Moscow Bulletin" and 'The Changing Union* 

Finance East Europe 

m 

East European Business Law 

East European Insurance Report 
• 

East European Energy Report 
For a Free sample copy 

Please contact: Simi Bansal. 

Financial Timet. Newsletters. 

Marketing Department. Third Floor. 

Number One Southwark Bridge. 

London SE I 9HL. England. 

Tel: (+44 7I)87.T 3795 Fax: (+ 44 7 1 1 873 3935. 

nralauuiiMpMik «nll hr hrUhi u> Ml ni) he mV k. nUxr >dnl 
4 MK 7 n i n moo I.. Maili n g im 


FINANCIAL TIMES 
Ntmlciters 

ITUrat>l«.inu,lilllitA«inniir Nnlw Ih. >Auk B.«hv. SLI ««n. r» 

llitw,Ml»y VWM VAT H.. CB *»*«>! >1 


HUNGARY. 


CONTRACTS & TENDERS 


INVITATION TO TENDER 

Air Traffic and Airport Administration 

and 

Komptex Thtding Company Ltd. 


s5l.*d * M \ XMA « ; 1 4 « W.Vi tl miMiM 


Id (be name of the Air Traffic and Airport Administr ation of the Ministry of Transport, Communication and Water Management of the 
Republic of Hungary, (he KOMPLEX Trading Company Lid. invites bids for the supply, installation and commissioning of the Eo-Rouie 
Navigational Equipment (DVOR/DMEJNDB with Remote Control and Maintenance System) in Hungary. 

The Republic of Hungary has signed a finance contract with the European Investment B&nk/EIB/ for the partial financing of the project. 

The tender is open, under the same conditions, to all firms (natural persons or corporate bodies) from at least the member countries of the 
European Unkm/EU/ and Hungary. 

The complete tender documents will be available starting November 21st 1994. 

KOMPLEX Trading Company Ltd. 

H-1807 Budapest VI 
Andrass; at 10 
Hungary 

(Attention: Dt Novfifc Lqjasn£, Head of Department) 

Telephone: (36-1) 132-0592 
Fax: (36-1) 131-6527 
Telex: 22-5957 

The tender documents may be consulted oo the premises of the KOMPLEX Trading Company Ltd. between 09.00 and 14X10 on workdays 
and purchased against payment of a non-refundableof USD 1000 (or. in case of Hungarian companies, of the equivalent in Hungarian Forint 
converted at the current official exchange rate). Payments must be made either in cash or into {Complex 'Hading Go. Lid’s account no. 
219-98564/0100-100913-001 at the Untebank R.T. Budapest 

Bids, in English and accompanied by a bid security for 10 percent of the bid amount, shall be forwarded to the Komplex Trading Company 
Ltd. at the above mentioned address before 13.00 oo February 6th, 1995, when the tenders will be opened by the tender board. 

The tender results will be made public on March 14th, 1995. 


CONFERENCES & EXHIBITIONS 


NOVEMBER 24 
Israel - Trade & Investment in 
an Emerging Market 
Major international conference ia 
association with the Israeli Embassy 
following tbe successful Cassablaaca 
summit. Speakers include Government 
MhrisnsB & Companies already raaNMiwi 
in Israel. Topics cover Major Capital 
Projects, Privatisation. Financing and 
TectariaMaaocs, Regional Co-operation. 
INTBRFORUM Tel: 444 (0) 71 386 9322 
F«: +44 (0)71381 8914 
LONDON 

NOVEMBER 28 
FT Financial Reporting In 
the UK 

This year’s conference will provrde 
essential ^ridanoo for preparers and mas of 
tceomxs on Interpreting die complexities of 
existing and emerging ASB standards, 
banes io be covered will include: 
Accounting Cor off-tnfaoK tired finance; 
merger end aoqttisSion accconnngj valuing 
naangSotes and brands; derivatives. 

Enquire* Financial Tiroes 

Tfcfc 081 673 9000 Fare 081 673 1335 

LONDON 

NOVEMBER 2B& 29 
Strategies for Buying and 
Selling Companies 
Tbe past year has witnessed an increase in 
M&A activity, unparalted since tbe ntid- 
80'a. This conference will covet the 
strategic, legal tax and accounting faswa 
that need to be considered when baying or 
selling a public and/or 
Cbotecc Acquisitions Monthly - Tbl: °171 

123 8740 ” ^' lqMPON 

NOVEMBER 2D-S 
Global Emerging Markets 
Investment Management 
Mnior International conference on 

JK cmejrging deMaod 

Smrfces booking* OS. 

gaSB SBffltfC 

ffassnssa 

allocators and dnergios mtonca 


SSrt Alteon Elgar, Dow Jones 
Teb 073 832 9532 F**= 0T |^^ 

NOVEMBER 

Positive Man^emontrf 
vmrttforceR^uctortng^^ 

work&acc reatuetenag. 


But managed WHO 

wod ^ re»uct»rn«. 
akffl. tbe impact on tta 

< h°dW l E" ed 10 u,n ** ,mle 

TBt07l637«SJ. LONDON 




TraiSpntyatiw^ pUoDiog. 

orglUtaoal 
This tw«wl»y. 


lod^w^^^k^nasfan of 


DECEMBER 1 
)ntematlonaBsalkxi:PraNer& 

Energy Services. The Business 
OpparheMies for IK Companies 
Key speakers from industry and 
commerce, win outline current and ttnure 
strategics for maxnniaiqg etas potential of 
the world industrial power market. 

Details from; Judith Mackenzie. Tho 
Instime of Energy, 18 Devonshire Street, 
London WEN 2AU 

Tet 01,71 580 0008 Fare 0171 SS0 4420 

LONDON 

DECEMBER 1 & 2 
PosbAcqubWon Management 

Up to 70% of acquisitions fail to achicvo 
their objectives. TMs workshop provides ■ 
uni quo opportunity to learn how to 
successfully handle bnsinesa strategy and 
human resonrees problem*. Integra non aod 
cnltnral differences. This could make the 
difference between success and failure. 
dDOlacc Aiap uai frMis Monthly - Tel: 0171 
823 8740 Fate 0171 581 4331. 

LONDON 

DECEMBER 1 

Europe and the Arab World - 
•Bteaidng T?» Bantam - New 
FoBBcal & Business Opportuntfes 
A one-day conference sopponed by the 
League of Arab States and CAABU 
involving major European and Arab 
figures. Conference Includes a European 
grants workshop. 

Fell details from MEC Conferences 
Ttt 071 9M2980RncO7l «2<299? 

LONDON 

DECEMBER 2 

Currency Risk Management 
Workshop 

Understand and Identify exposures, and 
learn the icctaniqecs of cnrrcncy risk 
management. Spot and Forward FX, 
Standard and Tsaoric* Currency Options. 
Zero Premium Strategics. Conwy Swaps. 
1275 1DAY 

Contact: Flirpkaee Banking A Financial 
Training Tel; 071 3290595 

LONDON 

DECEMBER 2 
TheTextila institute 
Parliamentary Lurch 

Discuss tames affecting the textile industry 
and vail [he Galleria at the Houses of 
Parliament. Lnndt sponsored by Gary 
Waller MP. 

Contact: Sally Pearson. The Textile 
Institute Teh +44 (0) 171 580 8289 
Fax +44 (0)171 580 9535 

LONDON 

DECEMBERS 

Homy Laundering -Tbs Las, 
R&sponsIbdftiBS & Procedures 
The Criminal Justice Act places now 
papoosibiflrics on Onancts] hudnukos and 
(fair. This o»e>day course will Address 
Definition, Identification, Regulation. 
RspOBtibilkia^ and the rok of Sttpcrviamy 
Bodies with practical mnpke, 

Contact: Fiirpiact Banking A financial 


LONDON 


Ttt 071 329 0595 ' 


DECEMBER 5-6 
Treasury Sales Workshop 

Tbe stie of Tlcastiiy Products is now a key 
area (or many banks and financial 
institutions, and can help build profhaWe 
client rclaiionabips. Topics covered 
include: Planning and Developing Saks 
Initiative. Instruments Available to 
Manage Risk. Corporate Hedging 
Tech ni q ues - Cross Selling. £400 - 2 days. 
Contact: Fairptae* Banking A Financial 
Training 

TWj07l329n59S 

LONDON 

DECEMBER 6 & 7 
Lobbying The European Union 

This conference a addressed to tho* who 
know something of Brussels and need io 
stay np to-date wkh the changes that are 
cmrently taking place. 

Further details from International 
PrafcssioojrJ Conferences Lid 
Tet 061 445 8623 

LONDON 

DECEMBER 7 

Advanced Software Solutions 
hi Manufacturing and 
Engineering 

Seminar for business and technical 
managers showing use of practical 
applications of logic programming 
software in manufacturing and 
engineering, including problems of 
intelligent scheduling. , Leading 
international companies present suue-of- 
Ute-art systems. Includes panel discussion 
and vendor displays. 

Contact: Al Roth, tel: 0253 3SSUKI 

LONDON 

DECEMBER 7-8 

Succeeding with Teams: 

dia^n fljr ifadg pin^ bnpfcmcming 
and driving the team-based orgarusatinn. An 
international mo-day conference sp eci fically 
designed to hdp senior executive. unfeoJaral 
the hnahmental tano hNahal in Jesenn^ and 

hi^Ji |iis iiuig aR^|eJ»fli'iiniyfiatiifdi. 

Omtaa; Busbms Intdligtaw 
Tel: 081-543 6565 Fuc 081-544 9020 

LONDON 

DECEMBER 8 
The UK Economy 

Prospects up la and beyond the next 
General Efecuoa. 

This Henley Centre Conference is urn 
annual look at the UK Economy and Ik 
prospects for the medium term. 

Cose £350 + VAT 

Contact: Amu Hannan al 

Tbfl Henley Centre Tel: 071 353 9961 

LONDON 

DECEMBER 8 
Developing IT and 
Communications 
A BA Spoedwing workshop to identify the 
iqfonjowti ncbnokgy sohuJoos yon need 
linking Item to basinets goals. Unsure 
hardware, software and networking match 
your needs, find out what Superhighways 
are - whether they'ic relevant. 

Contact: Nick llatnillon. West London 
TEC U 081-814-3240; fax: 081-S70-9QW 
LONDON 


We’re famous for our facilities 

Many renowned organisations choose 

the BlC for conferences and ElillMim fcW 

exhibitions. These superb, purpose BbhM||mE Ifcf;; 
built facilities and friendly helpful stiff | 

ensure your function runs smoothly 

and successfully - Ideal for up to 4000 |L' -V ‘ 

delegates. . • 

Get tbe facts mo*v —there's much natch 
more to tbia mrivaMud lacatkm. 

Conferences • Exhibitions - Seminars • Meetings 


DECEMBER B A 9 
Empowerment Through The 
Line Manager 

Often a va*lly under used resource, line 
managers represent the keystone to 
achieving radiial anil immediate 
performance improvements. Thin event 
consist!, of case studies illustrating 
empowerment of line managers to run 
teams, manage day-to-day crisis and lake 
greater responsibility for tbange. 

For further details contact Rachel TJwraa 
or Sarah Williams. 1BC rcdmical Soviets. 
Tet: 117 1 6J7 4383. Fas 071 <01 3214. 
LONDON 

DECEMBER 9 

Successful international Trade 
Payment and Finance 

In ft&Yiation with Unek Court dumber. 
Different types of payment and finance; 
mechanics of lulrcis of credit; 
discrepancies in documents; standby 
credits, pcrfornuncc bonds and demand 
guarantee*: financiers security: fraud; 
litit^iion. I’-asc study. CfU b hours. 
Contact: Altana Bradky. 1BC 
Tel. 071 637 43H3 Fax: 1171 631 3214 

LONDON 

DECEMBER 12-14 ” 

The Future of European 
Research, European 
Commission's Fourth 
Framework Programme. 

Conference and WinkhlHips im individual 
Research A Technical Development 
programmes. Meet potential partner* £ 
experts speakers from the EC. Industry £ 
R&D who wilt identify the objective* A 
application puoaJuna widun the frame work. 
INTERFORUM Tel: +44 1«> 71 38 A 9322 
Fax. +44 fill 71 381 8914 

LONDON 

DECEMBER 13 

Energy Seminar - Transition or 
Maturity? A Review of Current 
Policy and Development 

Tins CRl seminar examines recent 
regulnliMV leviews, compel ■ I inn 
development, consumer interests and 
kumpean energy policy. Speakers from 
OHiAS. MM:B. NtiRA, British lias. 
Itaxtriiiiy r<>4. Ckc l ureamass CoundL U£A. 
C.«ti£?«+VAT 
Cuniasi: Ixigh Sykes. CRl 
TO: 071 .VJ5 Niil Fax: <f71 iNS S>C5 

LOND ON 

DECEMBER 13 

Advanced Documentary Credits 
and Trade Finance 

An intensive one Jav conference that loots 
at the key mm's around UC1* SMI, ftxtases 
oil Letters of tYedil M»l Dills of lading 
aod furfailing- and reviews the treatment ..f 
fraud in documenurv umlil lwnfcjcftnns. 
Cuoiaci: IntufiifU'n Sen, ico> I Jd 
TO; 44 71 3W. Y352 

LONDON 


DECEMBER 13 

Beating the Money Launderers - 
Attention Lawyers! 

Aflwnoon Sentinar 

Your UK statutory obligations; your 
vulnetahi lilies; practial policies and 
procedures for compliance; Compliance 
Surgery - gel answers to your own 
questions. Speakers; Monty Raphael and 
Michael Hyland. Monica Bond, Grant 
Thornton. CPE 2J hours. 

Cooucr: Helen Ho usem a n , 1BC 
Tel: 071 637 4383 Fax: 071 631 3214 

LONDON 

DECEMBER 13 

Beating the Money Launderers - 
Attention Accountant s ! 

Homing Seminar 

Your UK statutory obligations; your 
vulnerabilities; practial policies and 
procedures for compliance; Compliance 
Stnpary - gd answers to your own, questions. 
Speakers: Michael Hyland and Monica 
Bund. Grant Ttunnoo. KAEWCFE 63 pts. 
Can tael' Helen Houseman. 1BC 
Tel: 1171 637 4383 Fax: 071 631 3214 
LONDON 

DECEMBER 13 & 14 
The Lean Organisation 
Identifying And Competing hi your 
Own DtotincHvo Capabilities 
Being lean involves standing back and 
stripping the organisation down In its true 
suengths - hs distinctive capabilities. This 
entails looking al the organisation as a 
whole and radically rethinking every 
aspect of operations. 

f'Wvi- Rxbd Thoms, IBCTccfenkai Services. 
Tel: 071 637 4383 Fax: 071 631 3214. 

SOLIHULL 

DECEMBER 15 
Business Opportunities in 
Scotland 

Sponsored by Kdmbargh District Council, 
TSB, Arthur Andersen A McGrigor 
Donald and features Loid Thomson, Sir 
Ian Wood, Tom Farmer. John Lord. 
Discusses prospects for economy, 
investment. energy. agriculture, 
matin banting and service. 

Details: Cilyfnrum Ltd 

Tel- 0225 466744 Fate 0225 4424U3 

LONDON 

JANUARY 16 & 17 

Risk Management Systems for 

Banks 

This practical two day conference aaprincs 
huw banks cut evaluate buihj and implement 
a wand mugpaiett risk msaqganeiK syScm. 
Learn how |p successfully tnrpkroctu in 
bouse and bmighi syshans and link dopuate 
iiiuciurcs from both a managerial and IT 
iwjwcrivc. Speakers rnxn eight major bints 
and fixu syaems leaders. 

(.'tmtocl: Sophie Bezgei, A1C Conferences 
1cl:ini 242 1548 

LEMERID1EN. LONDON 


JANUARY 24 & 25 
Re-engkwerlng the LT. 

Function: 

Ke-atigniug LT. Cnltnra, mp a bUlrin and 
•kills lo deliver radical business 
performance impmvmat. 

An international two-day conference of 
leading experts and practitioners which 
explcres the tau ud u aire af new st rat e g ie s , 
development nf new organisations and 
management structures id arable LT. to play 
a key role in transforming the btanxK 
Contact: Business intelligence 
Tck 0181 S43 6X5 Fax: DJ81 S44 9020 
LONDON 

JANUARY 25-27 
Digttai Images 

Europe's first major conference and 
exhibition photography, digital image 
capture, manipulat ion, storage, archiving, 
proofing and electronic delivery. Speakers 
from ail over the world share their 
experience. There are also 56 special- 
interest sessions which may be booked 
iwttvktoalljr. 

Dctafls: TTie Hammond Oigmsariim 
+44 081 M3 9700 

LONDON 

JANUARY 26 1995 
Strategy Update 
In today's increasingly oncnplac and hostile 
madam it is no longer sufficient to rely on 
past experience. Managers most think 
strategically when developing and 
implementing plans which will impact 
their company's competitive position. Yet 
most managers devote less than 3® of their 
rime to strategy dev el o pment . Tha seminar 
aims bo rodreat the balance. 

Contact: Elaine Parocki at Cranflcld 

School of Management 

Tel: 0234 751122 Fax: 0234 750 070 

CRANFIELD 

JANUARY 26 & 27 
Valuing International Companies 
This event is held in response lo ever 
brooming pressure to place realistic values 
on foreign companies in a variety of 
contexts. Company executives, bankers 
and other professionals will study 
valuation techniques in practice, as well as 
the passible problems encountered fat real 
life scenarios. 

Contact Acquat'iioas Monthly - Tel: 0177 
823 8740 Fax: 0171 581 4331. 
LONDON 

JANDARY31 
Strategic Reward Policies 
A critical factor tor business 
success 

This practical programme for senior 
executives will show how Unking reward 
policies to strategic objectives can have a 
mensurable impact on the successful 
im p lementation of output die strategy. Ron 
by Oranfield School of M ana g eme nt and 
The Wyatt Company. 

Contact: Jane Reed TeL 0234 751 122 
Tbe Institute of Directors. 

LONDON 

FEBRUARY 6 

7th Annual One Day Conference 
Regulation 1995 - Practical 
Cc«i^3fiaix«fcrBdRO t PlAAAUTRO 

SIB update; enforcement and discipline, 
pension transfers. Parallel sessions for 
IMRO and PlA/LAUTRO members - 
cBimi issues, training and compet ence, 
handling the Regulator. Law Society CTO 
5 house. PtA CFO 53 boon. 

Contact: Linda McKay, IBC 

Tet; 071 h37 4383 Fax: 071 631 3214 

LONDON 


FEBRUARY IS 
Still Protecting the Media 
in association with Richards Butler. 
What’s new in libel; latest in copyright; 
breach of confidence issues; conseque n ces 
of contonpt of conn; civil liberties and the 
meifia; remit of the BCC; insurance- errors 
and omissions; what about the PCC7 
Speakers indnder Carlton Television, BC 
C BBC, News btemdmml. CTOS boms. 
Contact Adrina Bradley, IBC 
Tettm 637 4383 fiuc 071 631 3214 

LONDON 

FEBRUARY 17 
Local Authortty Financing 
LAs and ultra vires; bank's p er s p ective; 
deferred pot riiM ca and odrer agreements; 
borrowing options; consequences of ultra 
vires actions; LA perspective; what LAs 
need and what they can offer. Speakers 
from Bcvan Ashford, Clifford Chance, 
Integer Treasury Services. LB of 
Hammersmith A Fulham, McKenna & 
Co, Morgan GrenfeO, Norma Rose, Public 
Works Lou Board. CPD 5 hours. 

Contact: Helen Houseman, IBC 
Tel: 071 637 4383 Fax: 071 631 3214 

LONDON 

FEBRUARY 20 

Direct Marketing and The Law 

In association with OiHafd Chance. Presort 
and pcadme UK law; Eiaiytau C Uihiumm i 
update; am protection conce rns; regulating 
global direct marketing; what's happening in 
US; new techniques and technologies; 
Cbmpfiance Surgery - qoutkas ASA, MPS, 
DMA, FEDIM, tCSTTS- Law Society CPD 
4.5 hours. Contact: Linda McKay, IBC 
Teh 071 637 4383 Fax: 071 631 32U 
LONDON 

FEBRUARY 22 

Incorporation of Professional 
Practices 

In association with dark WhireWD. Post 
1997 taxation changer, protecting assets 
and reducing liabilities; professional 
Indemnity issues; managing chugs; 
remuneration packages; market valuation. 
Essential forum far senior partners, 
managing partners, tax partners, finance 
partners and advisers. CPD 5 boms 
Contact: A thina Eradley, IBC 
Teh 071 637 4383 Pat 071 631 3214 
LONDON 

MARCH 1 ™" 

Achieving ‘Secure’ Guarantees 
Nature and construction nf guarantees: 
Exploring the options: utilising other 
instruments; understanding the risks; 
avoiding (he pitfalls; unique Guarantee 
Surgery. Speakers from Allen & Overy, 
Clyde A Co., McKenna A Co; 
Metropolian Police; Tarlo Lyon*; Wilde 
Sapie; Essex Court Chambers; 3 Greys Inn 
Place. CPD 4 hours. 

Contact: Helea Houseman, IBC 
Tel: 071 637 4383 fine 071 631 3214 

LONDON 

MARCH 20 

Travel Law and Practice 
Official Pnbticaiioa: Travel Trade Gazette 
UK ft Ireland. European issues; corporate 
and personal liability; establishing QA 
systems; current enforcement pitfalls and 
proBBcmloas; haadHog the aedai ATOL 
Regulations; airline intJastry/toar operator 
relationship; legal checklist for the travel 
product. Speakers tncfadn DanteUa Heaae- 
Wafinea-, Exec Dir, ETCW. CPD 5 bouts. 

Contact: Linda McKay. IBC 

TeL' 071 6374383 Fas 071 631 3214 

LONDON 


DECEMBER 1-4 
EXPO-PafdstarcTrarfeFalr 
A un i qu e uppuitimMy for harness a at t i rr a 
and to we the extensive atny of Paktatvft 
products: textiles, jewellery, ceramics, 
sanitaryware, onyx, giftware, carpets, 
sports goods, hmxLerafied funatue etc. 
Contact: Mr MAtharTOm; 

Jftkman Hj jh fijiH—sMiii 

Fax: 071 235 8731 10.00 A.M. to 6.00 

P .ML dally Admission free. 

BARBICAN, LONDON 


INTERNATIONAL 


NOVEMBER 29-30 
The Teleshopping Explosion: 
Creating Aslan, Nortti American 
& European Partnerships 
MIMA International, in conjunction wkh 
MIP Asia, presents its first Asian 
Teleshopping Conference on electronic 

rrfaiHi^ r 

Contact; Vivien Wallace, Lippin Wallace 
Teh 71 -630 9977 fine 71-630 9806 

HONG KONG 

DECEMBER 5-6 _ 

Compettttve Intelligence 
Seminar for managers who want to learn 
how Competitive Intelligence supports 
both operational effectiveness and strategic 
pomtiofiiqg. Topics jnrth wte ah— and role 
nf intelligence in firms, collection 
methods, analytical techniques, 
organisation, and counter-intelligence. 
Principal lecturers are former professional 
intelligence officers. 
fWnaty 0 BBPCTI Rcttudi Qronp 
Teh 022 929 1900 Fax: 022 788 0824 

GENEVA 

JANUARY 25 & 26 
Beyond Reengineering 
This conference will explore how 
organisations can increase global 
competitiveness by improving or 
innovating business processes to be more 
customer focused; msximiting workforce 
potential and Incorporating change 
management principles. Keynote 
presentation by Martin Bangematm, BC 

Qxuaa: Kathleen Smart-King. 

+ (32) 2675 54 05 (Telephone) 

+ (32)2675 03 95 (Fax) 

BRUSSELS 

JANUARY 26 & 27 
Technical Assistance & 
Economic Aid to the Former 
Soviet Union, Central & Eastern 
Europe: The Way Forward 
Examining the business opportunities 
within EC aid programmes fPhnre A 
TACIS). With representatives from EC, 
World Bank. Know-How Fond, industry A 
consultants. Tune allocated for individual 
meetings between participants, aid 

WrrERFORUMTaL +44 (0)71386 9322 
Fa* +44^0) 71 381 8914 

BRUSSELS 

MARCH 27-29 

“Sub-Saharan OH & Minerals” 

Speakers include Cabinet Ministers from 
over 30 African countries. Co-boned by 
the SA Chamber of Mines; Gabonese 
Ministry of Mutes ft Energy, Nigerian 
National Petroleum Corporation; 
Soungol; SA Ministry of Mineral ft 
Energy Affairs and Europe Energy 
Environment. Please contact Europe 
Energy Environment. 3 Hayne Street. 
Loudon ECLA 9HH, let 44-71-600 6660, 
fax: 44-71-6004044. 

JOHANNESBURG 



>W-s 
5*+-; -a*- 







24 


FINANCIAL TIMES MONDAY NOVEMBER:?! 1994 


WORLD STOCK MARKETS 


>/- HMi lm WS WE 


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SP 1 

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024 

2,780 

1 J 40 

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545 

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804 

392 

182 

1® 

327 

847 

470 

3,770 


+16 2 , W 0 1.750 2.6 

+ 31 J 70 7 B 0 10 

834 397 IX 

-10 *390 2.430 OS 
-4 1.773 1.190 1.7 
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744 643 

+2 1067 Mi IX 
-2 1.050 835 02 
— *38 38 S 16 
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-fi 1.180 
-8 408 
+1 791 
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171 33 
874 ~ 
312 14 
548 24 
430 1.7 


-10 4.340 3.411 10 


ffiMMMnUBttMMflfaMB/FraJ 


Mmm 4455 
MUM 7440 
MOM 5.140 
ML 4470 
BMnLx 15475 
BCM 41 22400 
frqWB 37.129 
8 te» 2.435 
Bsklt 23.460 
ORGbn 12400 
CMS 2470 
rww»n %won 

eSff 200 
CaOyt 7,150 
antes ijoo 
B uctt 9 .M 0 
BfnAC 2415 
Fort* 2405 
SSL 3415 
GBLnfr 3490 
eeea uee 

OBflBnq 7420 

warn mo 

(Mol 4400 
MKOU 2485 
Krdbnk 6 J 40 
KWAFV 0270 

Menwr 0100 

Mosaic 1472 

panUn 20400 

PWia 9.330 

Pndhi 2400 
Redd 474 
RyOek; 4.770 
MAW 4.050 
SocOnB 2.175 
savw 34=5 
Sodra 11200 
9 MG 1495 
somv 14450 
Irt 3 tn 9.510 
IJOJ 24.700 
UnWn 2470 


_ 4,450 3,705 14 
-SO 8490 7,350 32 
- 405 J 004 XOO — 
+164460 3490 44 

1 S 4 B 01 S 4 G 0 2.8 

-100 26.050 22425 24 
+1754247934400 S 4 
-35 2,950 2.105 14 
+50 2180020450 1.7 
+ 100 134751 1 J 75 3 .U 
+30 0700 2.190 34 
... 0200 5400 4.2 
.... 215 164 05 

...8400 5,100 1.7 
_ 1450 1.196 2.1 
+20 8420 5.110 74 
+ 103,781 2470 4.7 
...24701380 
+10 4490 3426 54 
_ 4470 1550 54 
+ 21.680 1400 24 
+20 9.180 7.140 54 
+4010800 5.720 1.9 
+ 15 5450 4,140 27 
-5 1 B 8 S 2,750 5 .T 
+40 0200 6410 14 

- 7460 6490 14 

- MM 5400 4 J 
... 1430 1.350 64 

+ 100 20400 18400 — 
-70 10775 9420 34 
+10 3.060 2420 44 
-fl SOB 420 17 
+15 0200 +.250 44 
_ 1830 4-320 44 
-IS 2.630 1025 54 
... 2438 2416 54 
+50 11700 12450 4.0 
._ 1475 1,450 04 
-25 IUM 13.750 44 
+OD I 14 W 9420 44 
+350 29 . 1 W 22 JV 1 24 
-60 1330 2440 4.7 


MM 380 
MM 878 
LVW 836 

Unaf 13 

LrtTnd 0 X 20 

— Lew* 36140 

— LvSan 474 

— lUM 21340 

— Mdterar 10S 

— NsrtOT 999 

— FtfEtf 127 

— Orssn 200 

— pom 36340 

— PMtefl 36190 

— PBCtete 10480 

— Pmflfc 32 £ 

s 

— mull'd 897 

— ferfMi Sli 
-- tome m 

Frail 181 
toBlW 13640 

sr a 
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— SaDSA 936 
~ Stems MO 

— Snico 490 

— SHtR 2.149 

— socam «n 

— SDOmA 1400 

— sweet 259.10 

— SttezCf 296 

— Srn*i JOO 10 

— TMfln 1520 

“ (w*? ]giS 

rotate 333.30 
-- IMP 14540 

— UfflUKT 418 

_ IHbte 47240 
_ IMfflFf 44050 
... V*» 276 

— vatic 278 

— Worms 24640 


... 670 340104 
-640 700 488 7.4 
-5 902 681 II 
-B 491 M 377 3,4 
147 7010030 _ 
+8 |J 96 1409 04 
-50 7,160 1480 04 
-0203894021031 .... 
- 7.10 824 4 J 8 34 
-140 27420710 1.1 
— 1.10 U 8 G 0 3750 17 
-21 1448 688 8.0 
_ l&M 11110 8.1 
_ 200 164 .._ 
-40 626 315 *4 
+.90 935 30140 84 
—140 234 1*60 3.1 
+ 7.40 371 28360 64 
-11 938 752 14 
-8 1.005 785 . 
+ 31.150 806 14 
-1 GO 43 S 2.10 
_ 207 10510 32 
-340 18718060 __ 
_ 157.40 11360 18 
-3 732 542 1 4 
-32 945 850 24 
+3 1290 1360 14 
+7 734 57 B 3.4 
+14 1,709 1440 34 
+3 46880 337.10 27 
-20 800 472 13 
-200 61030060 7.1 
.. 700 382 84 
-ID 2470 1,790 
+* 792 523 17 
- 1216001.710 24 
+110 52023110 .. 

-1 377 228.40 44 
-140 29760 183 ED 14 
+ 7 G 3.120 1261 14 
+140 214 13210 54 
+.00 36 * 50 an. 10 3 * 
+ 1.40 224601=150 11 
404 333 16 
S 50 C 7 SO 66 
800308.50 75 
300 221 35 
33 S 240 14 
395 227.10 4.6 


33 *ten 


-440 

+.50 


-a on 


(Nov 18 / Dm.) 


-4019838 1 M M 
+3 B 3 S 490 13 
+20 1,446 1.000 1 3 
-161011 1122 0.6 
+l 3 sSI 575 10 
+18 1,191 
+15 1 /E 5 


700 .... 
81 B 1.1 
276 16 
43 S 14 


DBBUflK (Nov 18 / Kr) 


AaPA 590 __ 700 565 IS 

Btoten 190 - 3 S 1 I 7 B 2 J 

CMA 200 ... 333 250 1.1 

Codai 5.48383 _ 7.600 5,300 0 0 

CVS 12 A 10*241 +1241 IJUWKJXH 05 
Onkoo 217 +1 22817550 13 

DenOsk 


F 1 S 8 

GINcrt 

ESS 

JWWR 

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MU AS 

IMMB 

ftodUB 

SoptnA 

SopMB 

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FHO/Uffi (NOV 18 / M 3 ) 





307 3 0 


140=0 + 1 = 030=5 

140 6.1 




615 





643 

445 2 = 


160 

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27 b 

159 IJ 



388 

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330 2.1 


900 


050 

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468 17 




432 

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615 

407 OB 


523 

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-4 

405 

321 2.4 


323 

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300 


720 

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510 1.4 


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AEG 15520 
ASMdV 523 
AatenRs 7.040 
AIIR 1424 
MWH 038 
Aahfl 760 

A*fl« 090 

BASF 31160 -14034360 
PWiMk 499 +1 510 

Mgn 35050 -ISO 486 34550 15 
Biw 3 * 3.80 -131 MAW 50 10 32 
Bn&H 411.50 - 1.70 52 BKA 50 3.5 
SKfer 787 +2 9*8 639 1.0 

469 +2 573 395 18 

1.054 +4 1.105 816 1 * 

29050 -.5034150 136 10 
396 -1 S 2 B 574 3.7 

B*W_ 039 -S 951 750 16 

CXACP1 801 -19 14130 735 1.4 

CKAfi 1170 -23 1030 1 . 1*0 08 

Onmz&k 329.30 - 3.70 390 20250 3.6 
Comte 227 -1 299 212 141 

DLW 424 -2 800 38050 O.L 

DBHdr 780 SO —SO 904 609 1.0 
Dousra 440 -.70 566 428 IJ 

DfBab 23 BS 0 - 1.10 2 * 6 *J 210 — 
DachBk 7 S 7 -SO 08750 65950 11 

dkWih isaso +130 tea 131 ub 

DdubB 428 -7 607 

Dijvrk 302 ... 337 

DrnEh 41170 -.00 4 G 6 SP 
GEHfc 555 -5 810 

OmtUII 233.50 -ISO 307 
attach 820 -5 828 


3,140 *40 4.510 1876 ... 

9,685 + 80 1 1 . 700 8.700 38 

sm aaao +i 90 iieMian ss 

SAstBP 1000 +40 2,730 1 ,392 1 5 

Ttetetel 4.350 +55 5 . 1 M X 383 ZM 

TffoAa 23.400 + 5 M 3530022 J 5 C IS 

TQSffr 17.900 + 10 Q 24 JW 163 CU 11 

_. UteCten 10390 - 00 18.700 9,065 1.3 


- IcnBUHDS (NOV 18 ( Rl) 


ABfWte 61 J 0 -SO 73.70 54 * 7 

ABKN 1 D 9 S 0 ...111600020 3.4 

AMU 62 -.10 51*0 4180 22 
AK 20 N 197 JO -JO 229 157.50 33 
BoftNh 3180 +J 50 47 X 0 3250 18 
BoMR 38 +20 52 34.60 11 

CSM 87 JO —.70 77.00 62 j 80 - 
094 138 -SO 15650 10160 1.1 

DaeMte 107.70 -1 JO 20817170 16 

ir.eo +. 1 O 1 BL 5 O 14 J 0 .. 

14 X 0 -.10 25 13 X 0 SX 

73 X 0 -JO 8140 8650 4.3 

92 X 0 10 B 5 D 88.10 4.3 

45 X 0 + JO 50.30 41,40 2.9 
140 JO - 1.1015750 123 — 
251 X 0 +1 £0 25*20 20850 1 4 
277 _ 33850 204 15 

79 J 0 M . S 3 48 X 0 5 S 
75.30 - 14093 X 0 06 X 0 13 
4130 -JO 45.70 34.70 2 X 
7120 —80 94.707110 OX 
85.70 -.10 98 X 0 74.70 13 
4840 -.40 57.30 40 X 0 2.2 
60.10 +X 0 6160 42.10 OX 
54 X 0 -.70 S 847 XO .... 
40 X 0 -20 57 X 0 4130 32 
6 BJ 0 -.40 86.30 47.70 10 
81.50 -2010020 T7 Ifi 
90 — 9140 K 7 S .... 

7 HJ 0 -.10 BBXO 65.50 2.9 
S 320 -SO 59-30 40 OX 

75 X 0 -X 0 84 X 0 70.80 IX 
Rabeeo 11320 +20 131111*0 3.1 
to*neo 5 a 70 +X 8840 X 0 62 
RDIM 116 X 0 +.101354011380 17 
Fkvsnl 0140 -.10 10 OSB 81 60 S J 

RDutsn 188.70 -1 21640 184 X 0 4.0 

StcrtdV *320 -1 5030 4030 IX 

(MOD 190 H - 1 X 0 23617840 3 X 
VNU 179 X 0 -SO 20310450 10 
VnOODfl 48 -80 50.50 45 22 

WHOpR 124 + 1.10 1315010120 12 


» 304 +14 460 302 3 0 

811 -9 SSI. 7 ^ -J 

—3 19014190 I 9 
... 991 000 10 

-10 1 X 75 1,400 2.1 
+8 1.417 1.063 10 
-3 175 11130 .. 

„. 1.738 1.190 4.4 
♦ 10 6 . 6*0 3.570 .. 
_ 703 178 8.5 

1.540 1 X 01 .... 

Rctra IJXOO +100 110*0 10,075 0.4 
RrfiwGn 5 X 65 -S 7.770 6,160 06 
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£KH 0 r 717 -2 1 X 55 tM 1 e 

SMRRg 100 SO -ISO 277 148 1.2 

“ Sndtflr " 


304 

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_ LanGfiq 740 
... WCOB 1.880 

was in 

RcnmBr 1230 


-0 770 583 _ 
+ 3 615 515 
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335 250 .. 
... 950 737 . 
-40 2.460 1.700 .. 
+30 7.780 1,150 

907 732 .... 
773 b 03 


- SeWJ 

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.... SMltt 

... sko 

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+14 863 646 Va+ew 


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GBrfipB 

ssasr 

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712 
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900 
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.... MtaBr 799 

_ GteORg 797 

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839 

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-4 531 345 4 0 

-2 259 106 4.7 
23 819 584 U 
.22 817 SIS 13 
-5 088 735 . 
- 1 . 5031.056 17 
-5 832 564 25 
-4 1,815 1.125 1.0 


- PACIFIC 

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-5 707 V>1 
573 *75 2.0 
-3 523 31 B - 
-10 1.250 1 X 10 .... 
+5 845 406 
-10 3 X 00 1220 .. 

+10 7.620 5 X 80 . - 
-2 555 375 12 
♦ 2 869 730 ... 
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-20 2 X 60 2.400 .... 
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1.230 788 _ 
- 201.340 960 0 9 
-15 9 CT 512 - 
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-1 S 0 O * ifi .. 

. . 900 730 10 

-2 463 321 .... 


381 
7 X 00 
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2. *20 
970 
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1.190 
1,110 
412 
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347 
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488 

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SwiSnk 1,730 

-- SunCtvn 573 

" SwCa 991 

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A*wto 

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— mokwav (Nov ta / KranaO 


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BHFBk 


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... IIS 68 44 
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- 71 B 4 J 0 124 4 X 
+ 50 81 72 X 0 28 

91 70 10 

97 72 6.7 

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— MXO 17 X 0 ... 
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1 X 90 
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MKN 1890 
“ M 99 S 1 J« 
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1130 
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1.750 
2830 
1170 
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_ AaaWC 
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BnyuRi 
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“ CasoC 
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MoesOi 


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HeMZm 1153 
KnKa 6 > 539 
HVtz 324 
Mocha 305 
IfCttt 32 * 
Humv 045 
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346 3 J 
403 1 J 
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590 1.7 
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... SMm(H 0 tf 18 /PtS.t 


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_ 601 562 1.7 

_ 440 307 11 

—3 1 X 99 BS 7 IX 

- 1388 J 028420 21 
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-1 313 264 19 

339 +150 *33 325 14 

166 -1 168 X 0 131 _ 


AmerA 

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EEffjnA 

EnaoR 

Htiai 

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Kotete 

KoaaB 

MfltraB 


MtfctaP 

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100 
130 
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3330 
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540 
130 

152 

153 
108 
190 
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197 1 0 
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ModcW 133 —2 179 10=70 3 X 

Lahmyr 655 +6 BOO 815 ZJ 

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LkwH 317 -5 410 311 =X 

LufttW SC - 1 715 X 0 15750 _ 

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MAN 421 + 6 X 0 4/0 37 B 1.7 
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Manrem 411 X 0 + 5 JO 488 X 0 369 II 
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RWE 450.50 -XO 52950 383 16 
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Rhnmpr 222 _. 287 200 16 

Rjnthj 231 -4 313 225 16 

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5.110 3.400 17 
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-1 815 595 5.9 
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msiip 1.470 

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Dateyo 738 

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FRANCE (Nov 18 /Fra.) 


Stemns 

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ACF 

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22480 
611 
706 
423 
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675 
20310 
549 
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195 X 0 
2 X 58 
160.90 
Chrora 1174 
CU 4 U 430 
CCF 23220 
OKwf 700 
CrtlCJ 408 
CrtacF 40180 
CrNat 434 
Daman 5 X 40 
748 
697 
307 
670 
501 
603 
371 X 0 
320 
25710 
720 
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768 
3*50 
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0.76 
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STB 
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305 
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555 
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846 
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+190 330 217131 
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— 97 58 X 0 BX 
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— 30752050 1 J 
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11325 ‘ +7 120 72 rX ■ 

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732 . -2 164 102 12 

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sun + 3 X 0 625 Q 25 1A 

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OL'M +44 01 770 0770 vki+MM 770 HQ. 

MitehMaUMMllaU.tetel 0 


■ TOKYO - MOST ACtIVN STOCKS: Friday, Novantwr 18. 1994 



_. 1270 815 __ 

-1 560 tell _ 

-7 1 . 0*0 770 . .. 

.... 3 X 00 =250 1.1 
♦ 10 1.710 753 — 

-3 372 £ 8 * _ 

_ 1.700 1230 ... 

♦30 2 X 70 1.790 as 
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♦5 990 575 ... 

+2 1,110 748 1 * 

- 1,240 999 — 

+ 101 X 90 1*80 — 

+40 5 X 10*440 OJ 
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-8 744 000 _. _ 

— 4220 1900 0.4 60 X LendU 
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+10 3240 1190 MayntN 

-7 582 390 12 _ Heft* 
♦8 610 430 7.7 — NAB 

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♦5 704 515 ... _ 

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-20 1150 1.010 — — 

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-8 603 *15 ._ _. 

♦IB 1 X 00 870 — 

_ 7200 6 X 60 as — 

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— WtsaTri Haavy . 

— Mppon Paper. 

3 Sorry Gorp 

— Kayabaind 

— Tfippoo Steal _ 


Stocks 

Closmg 

Change 


Stocks 

CkMing 

Chrage 

Traded 



rncQS 

on dky 


Haded. 

Price* 

on day 

5 Joi 

750 

+2 

MfcMMJne 

3.8m 

446 

+7 

4 . 1 m 

74 S 

+6 

Manauahita 

3 . 4 m 

1^40 

-40 

* 0 m 

5*60 

-310 

Konfca 

2JBm 

770 

+17 

34 m 

664 

+1 

Nfaaan 

Z 5 m 

. 304 

♦a 

3 . 6 m 

333 

-3 

Toshiba 

2 . 0 m 

708 

-a 


ZSSSm 



INDICES 


US INDICES 


Any time any place 
any share... 


Instant access to up^to-the-minute share prices from 
anywhere in the world 

Whether you’re doing business in Berlin or hatching deals in Hong 
Kong, FT Cityline International can link you with all the UK stock 
market information you need: 


Nov Nm Nov 

til 17 16 




*1984 


Lor 


Nw 

18 


Nov Mv 
17 18 


-1994 


NM 


M (Mrariesfl/lfflt) 

M HHtfWIQ 


General ( 2012 / 77 ) 17845 X 3 7803257 1848122 254 ) 0*0 IfiQ 7778050 20 M 

19220 19214 18403 254060 3/2 1322 X 0 18/11 

9702 9 KL 3 991.1 113815 3/2 904 X 0 5(5 

386.17 38814 387.16 4 GDXB 2/S 37894 25710 

1034.13 1025 X 2 1031 X 8 D 82 J 5 1/2 1011 X 8 8 (B 

1391.46 138927 139325 1542 X 6 90 133838 7/10 

471 ZL 0 *8737 X 499980 6611000 13/9 3800 X 0 30 


PC (Nov 1978 ) 


OadB AMm( 3 Qn 2 N 4 ) 

Traded Mtep/l/Ol) 


CSS WK>fd S 3 
CBS M St? (Em) 83 ) 

c^ionraw) 

QriaSahKVt/ 83 } 


248521 2510*1 2881.17 8(2 


4384 4385 439 * 454 X 0 31/1 
Z 73 B 275.1 275.7 2 BU 0 31/1 


2052 X 6 204821 203802 24388 * 3(2 


10 KB* 1057 X 3 105872 1211.10 28(2 


196733 20 U 


BEUSn/IAI) 

Brad 

BQKSpS ( 29 ( 12183 ) 


MHa CUnp ( 2 / 1 / 85 ) 2913.10 2904.10 2901.45 330837 4/1 


Z 1/6 

257 X 0 ZW 


19 ( 5 X 1 11/7 


980 X 1 21 AS 


2507 J 3 V3 


Met* HM 4 fl 97 S 
C*rposfc+ ( 1975 ) 
( 471 / 83 ) 

CMa 

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CdpertiKpSEOfl/ 83 ) 

AM 

HEX Qa»te( 28 / 12 fl 0 | 


SBF 250 Ol/UON 

GAG -40PV1 2/87) 


FAZ fWH431fl238) 

om ii immm i/iaias 

DAX (30(12/87)} 


AKERS 5531/12(801 

Hpob Koto 







BTA(tS 77 ) 

29382 


29100 

322860 18/2 

291230 2 M 

ray*?? 

3933 JB 

395889 

427882 20/10 

329806 204 

apm 






411*50 

414330 

4171.70 

46 DBB 0 230 

395950 24/8 

SES M-ffporeca l V 75 ) 

99868 

571 X 7 

570 X 8 

641 X 1 4/1 

92129 4/4 

3001 X 7 

200836 

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2182 X 9 1/2 

168848 28(8 

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J 5 E (Md ( 3 BAV 7 N 

21380 V 

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111846 

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30221 

301.79 

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■ RATIOS 










Nov 11 

Nov 4 

o a 28 Year ogo 

Don Jones tod. Dtv. Ytefc) 

178 

2.78 

170 

171 



Nov 16 

Nov 0 

Nov 2 Year ago 

3 8 P Ind Dtv. ytted 

2J8 

2.39 

139 

138 

SAP Aid. P/E ratio 

19.03 

20X3 

20 95 2188 


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FINANCIAL TIMES 


tong S«* 3 i/ 7 «fl 

9427.44 

951028 

95812412201 X 3 4(1 

8389*4 4/5 

tab 

BSESamftSTq 

W 

4168.19 

411179 

482857 12(9 

34 S 400 5 fl 

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JEora QrvOOMa 

509 X 4 

51246 

514.14 

61288 5(1 

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1828.44 

1841 X 5 

1840.71 

2082.18 ion 

18 M 34 in 

M» 

Baca Oxnm BN ( 19 / 2 ) 

84359 

h-TH Wj 

84041 

817.17 UW 

888 X 5 HYI 

MB Grad ( 4 / 1 / 94 ) 

10410 

1034 X 

1036.0 

131100 106 

moo W 

W*Bl 2 ffi( 16 ffH 9 ) 

1830156 1933057 15306 X 02331 X 1 13* 

173 S 9 J 4 4 (1 

WM 30 Q ( 1 / 10 ( 82 ] 

27173 

anjG 

28021 

31171 13 AB 

2 E 8 J 2 4 /I 

npix( 4 /i(Bq 

152147 

1527.61 

1525 X 0 

17073 13 C 

M 4 BX 7 4/1 

aid SecOan ( 4 / 1 BQ 

21 47 JO 

218029 

2150 X 5 

254265 OTl 

187333 4 ft 

■htayth 

KLffiOoomWBQ 

10 * 8.88 

105148 

106115 

131448 VI 

92033 4/4 


TtBksy 
b&rtu Cn* 4 Jai 1988 ) 

mu 

MS tep/HW (1/1(700 


Z 7 Z 3 SBB 27001 J 27421 B WHIRR 13/1 1298030 24(3 


6257 8253 6284 848X8 2H I B9IA « 


BidUbcA 100 ( 26 ( 10190 ) 1344 X 6 135 DX 9 135869 154819 31/1 128848 5/10 

BmT(te- 100 ( 2 S«K; 118=87 119153 120070 1311 X 1 2/2 1138 X 8 510 

JCapeOUBpl/ 12 / 88 ) M 335 X 8 338 X 2 39816 50 29028 21/3 

BBrtflS ElMfl( 7 /UB 9 177 X 4 179 X 9 17938 WTJ 9 2 S 9 141 X 5 21 M 

■ CAC -40 STOCK IWPCC WJTW 1 ES (MA 7 IF) 



Open Sen price 

Change 

High 

Low 


Dec 

464.35 48120 

• 1.15 

466.10 

480.70 

81532 

205.410 

Mar 

466.60 466*0 

- 1.10 

467 80 

* 63.90 

6 X 29 

34 J 77 

Jui 

• 47050 

- 1.00 

47190 

487.86 

369 

4.305 

Open rtwss flgwss or ter previous day. 







Open 

Sett Price Change 

High 

Low 

Eat vot Open lm. 

NOV 

1940.0 

1935.0 

1941 X 

19110 

16/913 

21 Ml 

Ok 

1949.0 

194*0 

1948,0 

1925X 

1X13 

25,471 

Jan 

1957.0 

T 662.0 

1957X 

1835.0 

- 

237 


Q» tauran Sgurea tar pranu day. 


- Sal Not i£ Tnfwrm Wdgned Pita (cj : Kona Comp Ex me JO Bra wbw of te Mew am 100 auea^b AuaMe AH Onftwy M 
Mrw *9 - SB; AuaUa TraOed. EISJO HEX Qen. MS On. 56 F 2 Sa CAC*a Ban Tcp- 10 a BEQ Ow* Toranta ConpAlettea A 
Utaanla and DAX - a* T.OO&. JSE Gold - 255 . 7 , JSE 20 MuatrHa - 204 J; NYSE Al Oamon - a and SUndard M Poofs - ia 88 
Maneste. ♦ Trana (e) Orad 04 UiUvbJoUo. i BBWX ufter+oirs Mac Nov 18 - 208848 -148 


■ MEW YORK ACTIVE STOCKS ■ TRAOMC ACTIVITY 

FtKtay 

Spat* run 
Gen Kabo 
WN-Mat 
Merck 
TNetme 
AJBT 

RJR Kabtaco 
CSkap 
SWM 4 R 
Mn Co 


Stods 

Oocs 

Change 

eaded 

price 

on day 

7560 JW 

24 

+5 

7 , 106 X 00 

37 H 

-1 

5 X 67,100 

22 b 

+W 

4 X 48,300 

37 * 

+fv 

* 381,300 

SOU 


4 ^ 09,500 

szh 


1296,400 

SM 

—Vi 

2 , 752,600 

43 H 

-H 

2 . 700 JOC 

24 


2300 X 00 

1 BW 

+)4 


• Votume (mJMorO 

Nov 18 Nov 17 NM 16 
Nw. IteV SE 356 X 95 321188 286 X 73 
Am* 17.064 1838 18132 

MEMO M 317215 27 RRM 



INTERNATIONAL 


NYSE 


issues Traded 

1923 

2 X 32 

3 asn 

toes 

794 

743 

1.035 

Fate 

1,409 

1.482 

1308 

Unchanged 

721 

727 

677 

New Hgfts 

21 

23 

22 

Hot Low 

219 

=04 

183 


t OonwOoa ■ Cafcteaad m 1000 GMT. • Eadwtep band* x tatabH. pta U»tta. nnonoa ra Tnym.iim 
4 Du OJ ML Max thaoraocte dayra HiYb and tarn am lha mragea el As raghw. wd Iqvmi mca'iMmam. ik+ ^ h. I 

during Wi day. (Tlw igwta in brachaU ot protoua daYa f Subtea to ofltaal raetfaJatorv ™ W *“* 


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WNANCIAI TIMES MONDAY NOVEMBER 21 1994 




• - 'V- 


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Vm 


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«*. :v. 


«'* *V 



25 


CURRENCIES AND MONEY 


DOLLAR SPOT FORWARD AGAINST THE DOLLAR 


WORLD INTEREST RATES 


: 


S •. 

ts 


V-j 


• v," 

v .’V ■ 


It-* 
— : - 


&np« 

Austria 
ScJjjdum 
Dewnark 
FkHand 
Franca 
Germany 
<*ww 
IrHand 
Italy 

‘JJ’WtWlOurq 

NfiOtertanw 

Norway 

Portugal 

Spain 

Sweeten 

Switzerland 

UK 

Ecu 

SORT 

American 

Argentina 


(DKrj 

IFmi 


*5361 


,p w 7 JLBo H??" 316 '** 

- !SSS:B 

141 ■ »s» 


. "-I 2-WB.50 


IFT) 

^Kr) 10.6736 
lEui M3.071 
202.999 


3 ATT »« - ms 

2/320 *0.0371 308- 334 


,SFn j'TTl; 520-113 

2 0640 *0.0163 637 - 652 


" _ ’■ 2301 +00003 732 - 8oa 

- 0 93t7T8 . 


Canada 


’ 563? -0.0043 635 - £»6 
,Rn l 31 ’ 7 *0 0011 038 - 135 


Mexico (NewpfS ?!??! 0028 - 449 

USA 5 41 65 -0.0167 139-200 

Pae “ efl **** eoSam^ 5690 -°«**eeB-6» 

Australia (A* 2 0&&2 -0.0239 680 - 703 


Hong Korn 
Intfia 
Japan 
Malaysia 
New Zealand 


‘ *s 


(MS t®, 081 507 • °» 1P4.700 1&AB70 154.171 

n!£2 -0.0117 242 . 276 4JB2S 4.0161 

(*2 JaSf ^°!£r 122 ' 173 2 5250 2.5112 2.5195 

Saudi Anuaa i^n 5S* 'Q*®* *25 ■ ’66 384200 382420 

e. laMI 5 6851 -0 0197 Ml - ftco c c 

CSS) 


Qhymq 

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Bank of 

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BWifcf for 

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DM month ' 

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WPA 

Rata 

%PA 

Rate 

%PA Eng Indox 


mld-poW 

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npraari 


low 

Rata ‘ 

MPA 

Rata 1 

MPA 

Rato 1 

MPA 

ran 

17 1379 17.1080 

17.156 

03 

17.1442 

0.4 



115.2 

Etreopfl 

Austria 

CSch) 

10.9375 

+0-047 

350 ■ 400 

109845 10 9175 

10.93 

08 

109135 

09 

10816 

1.1 

1040 

502570 50.1110 

50.1008 

-06 

50.0258 

08 

49 0308 

1.0 

117.0 

Btegtum 

(BFr) 

31J8SSO 

+0,125 

600 - 600 

32.0900 31 88C0 

31035 

08 

3i«re 

08 

31.69 

00 

106.0 

9 5698 

9-8316 

9.5337 

03 

95484 

-05 

9.528 

0.1 

1166 

Danmaric 

(DK»J 

fi.0780 

+0.025 

765 ■ 795 

8.1010 

60645 

6.0773 

0.1 

8083 

-03 

6.1015 

-04 

1050 

7 4900 

7.4485 

. 


- 



- 

B8.6 

firtand 

(FM) 

4.7633 

♦0007 

48S-S65 

4 7837 

4 7460 

4.7508 

0.7 

4.7485 

0.4 

Are 

-Ol 

82.0 

82380 

83645 

83745 

-01 

03866 

03 

8-3126 

07 

109.9 

Franca 

(FFrl 

6J372 

-00189 

365 - 378 

S0585 

5.3230 

5.BS3 

02 

nrmA 

04 

50077 

06 

108-1 

24456 

7.4355 

2637 

05 

2.4335 

0.7 

2.4038 

1.4 

1261 

Germany 

(W 

1,5639 

+00059 

536 • 541 

1.5650 

1-5500 

10532 

05 

1-551 

07 

1-5349 

10 

107 0 

376CB8 374 161 

. 

. 

- 

- 

- 

- 

_ 

Graacn 


233300 

*1.1 

400 - 600 

+33 090 238.700 

23)77 

-14 

34032$ 

-1.4 

242.475 

-10 

88.3 

1 0201 

10134 

1.0145 

02 

1.0142 

02 

1.0150 

-01 

104.0 

Ireland 

CQ 

1.5462 

-0X017 

456 - 488 

10311 

1.5378 

1.5484 

-02 

15469 

-02 

1.5425 

00 

- 

2593.06 2460.00 

25052 

-2.7 

2S16 5 

-2.7 

2604.76 

-2.8 

742 

Italy 

(U 

1593-10 

+5.1 

260 ■ 360 

1508.00 158025 

isd.es 

-2.7 

16030 

-2.7 

1637.6 

-28 

7*0 

502570 501110 

S0.1E08 

-06 

500358 

as 

49-6308 

1.0 

117.0 

Lutembourg 

(LFO 

31^350 

+0.123 

500 - 600 

32.0900 310800 

31035 

08 

31-E87S 

OB 

31.63 

OB 

1080 

17381 

27305 

2.7309 

05 

2.7273 

0.7 

2.G078 

1.3 

1208 

NtehMIanOa 

(F^ 

1.7413 

+0,0065 

408 < 418 

1.7485 

1 7375 

1.7405 

06 

1.7383 

07 

1.7226 

1-1 

105.7 

10 7087 106439 

10.6738 

00 

10.6753 

-01 

10 C742 

00 

85.5 

Norway 

(>K»J 

6.8030 

+00265 

015- 045 

68435 

67732 

60112 

-1.5 

6029 

-15 

BRASS 

-08 

95.7 

249 19t 248576 

250801 

•83 

253.981 

-7.9 


. 

- 

Portugal 

(Ea) 

158.750 

+0.79 

700 - 800 

159.170 158.210 

159.325 

-40 

160.45 

-O 

184 

-30 

952 

20X558X3570 

20334 3 

-2J 

204804 

-20 

206.044 

-1.9 

85.7 

Spain 

(Ptet 

129.385 

+0-405 

360-410 

129660 128370 

1296 

-20 

130X22 

-20 

132135 

-21 

80.7 

11.5905 11.4911 

115207 

-2X3 

118632 

-2.1 

11.7077 

-16 

76. a 

Swoden 

(SKr) 

73308 

-00104 

263 - 353 

73823 

73195 

7042 

-18 

2.3688 

-2-1 

74858 

-21 

B10 

2060 

20522 

2.0607 

1.9 

2.0537 

2.0 

2.0133 

2.5 

1205 

Sudtzadand 

(S Ft) 

10155 

+00147 

150- 160 

10195 

13065 

10134 

20 

10089 

2.0 

10855 

23 

1070 

- 


- 

- 

- 

- 

- 

. 

70.7 

UK 

m 

1J69Q 

'00052 

686 - 633 

1.5722 

15642 

1^631 

-0.1 

10689 

OQ 

1.5662 

02 

B80 

12333 

12787 

12B 

OO 

1-2005 

-a.t 

1.2741 

OA 

- 

Ecu 


1 2257 

-0.0044 

252 - 262 

1-2385 

1.2207 

10267 

00 

1226 

-0.1 

10292 

-03 

- 


" 

* 

“ 

“ 




- 

SDRt 

Americas 

■ 

1.46871 

“ 

* 


W 

“ 

" 

“ 

“ 

“ 

• 

“ 

15735 

f.5659 

- 

• 

- 


te 

- 

- 

Argordtoa 

Peep 

1.0002 

+00008 

001 -00? 

10002 

09998 

- 

• 

- 

- 

- 

- 

— 

1 3144 

1-3045 

- 

- 

- 


- 

. 

- 

Brad 

(RB 

08360 

+0.0035 

360 - 370 

0 8370 

08350 

to 



- 

- 

- 

“ 

2.1490 

2 1389 

21431 

06 

2.1418 

□ 4 

2 1404 

02 

86.6 

Canada 

(CSJ 

1.3666 

♦0.0028 

663 - 668 

1.3635 

1.3650 

10883 

00 

1368 

02 

107tl 

-03 

83-1 

£ 4250 

£ 4020 

- 

- 


- 

- 

- 

_ 

Mttrico (Now Peso) 

3,4523 

+0 0009 

508 - S3B 

3.4538 

3.4508 

3.4532 

-03 

3.4551 

-03 

3.4625 

-00 

- 

1 5722 

1.5642 

18631 

-0.1 

1.6669 

O.Q 

1.5602 

02 

6 25 

USA 

(9 

■ 

. 



- 

re 

- 


- 

- 


95.7 










PacMc/Mddto Eaat/Atricn 












208C3 

2 0678 

2.0713 

-12 

2.0741 

-0.9 

2.088 

-0.0 

- 

Aiatraha 


1.3189 

-00108 

184 - 183 

10280 

1.3184 

10197 

-07 

10215 

-08 

1.3342 

-10 

880 

121547 

12.0331 

12.1273 

0.9 

12.117 

04 

12.0718 

05 


Hong Kong 

OIKS) 

7.7316 

-0.0005 

310 * 320 

7.7328 

7.7307 

7.7295 

00 

7.7283 

02 

7.736 

-0.1 

- 

493120 49.0730 

- 

- 

- 



- 

- 

India 

(P* 

31.3688 


650 - 725 

310725 31.3650 

31.4388 

-2.7 

315838 

-27 

- 

- 

- 


MONEY RATES 

Nowautoar 18 Over 

rtgtn 

One 

month 

Tina 

toBia 

She 

mm* 

One 

ywr 

Lorrb 

Inter. 

Ds. 

rats 

Repo 

rata 

Bnfalum 

4» 

43 

5ft 

5»4 

6*4 

7.40 

400 

_ 

weak ago 

4% 

«S 

6ft 

5K 

6’A 

7.40 

4.50 

- 

Franca 

St 

5ft 

5M 

5% 

6M 

500 

+ 

6.75 

*raek Ago 

5ft 

5ft 

554 

5% 

6M 

5.00 

- 

6.75 

Germany 

403 

405 

5.15 

525 

500 

500 

400 

405 

week ago 

400 

4.SS 

&15 

S05 

5.60 

500 

400 

4.85 

Iratod 

Si 

5W 

SM 

Bft 

7ft 

- 

- 

605 

araak ago 

5ft 

5% 

5H 

6ft 

7 i 

- 

- 

825 

any 

at 

8ft 

84a 

Oft 

oik 

- 

700 

820 

water ago 

84 

8ft 

8ft 

83 

99 

_ 

700 

3.20 

MKharfancfa 

4,84 

5-04 

504 

507 

578 

- 

525 

- 

weak ago 

404 

504 

505 

508 

5.78 

— 

505 

- 

Swrttzeriand 

3 

3M 

33 

4ft 

4M 

6.625 

350 

- 

wa*k ago 

3M 

3M 

4 

4% 

4Vb 

6L625 

3.50 

- 

US 

SV, 

5ft 

SM 

6ft 

Sfa 

- 

4.75 

- 

weak ago 

43 

5ft 

5% 

6ft 

85 

- 

A00 

- 

Japan 


2M 

3ft 

2ft 

23 

- 

1.75 

- 

water *30 

2% 

2M 

2tt 

2ft 

23k 

- 

1.75 

- 

m SUBOR FT London 








Iterate* Ffcrtog 

~ 

5 % 

53 

6ft 

69 

- 

- 

- 

weak ago 

- 

5M 

53 

8M 

8fa 

- 

- 

- 

US Dalar CDs 

_ 

500 

5.76 

&oa 

8.72 

- 

- 

- 

water ago 

_ 

500 

550 

5.86 

6.50 

— 

- 

_ 

SDR LUMtlOs 

- 

3» 

3ft 

3M 

4 

- 

- 

- 

week ago 

- 

3M 

3ft 

3M 

4 

- 

- 

- 


32 

-2P 


153.186 3.C 148.241 4.1 

2.5287 -22 2.5406 -.13 


5 8851 -0 0197 833 - 868 

2 3051 -0.0114 (Mo - 061 

5 5490 -0.0044 466 - 514 


if „ 1 


Singapore 

S Africa (Cam.; rRj 

-3 js ^5:-s 


Taiwan 

Thailand 


58969 5.8676 
33137 2.2997 
5.5577 55361 
65167 6 4375 
12S1 31 124455 


41^/59 -0.0134 557 - 961 41 3504 41.1619 
taWrenwik.^'.i 39 ' 2395 -0.1391 150 - 639 39.3420 39.1520 
martlet bui m hn*J, y* 303 " aw Potwd Spot rata enow only mo ik* Wren dmn 

fawla, By w» Date of Errand 

*P« mttes domed bom THE VWLflEUItRS CLOSING 6P07 RATFS Sam 


Famenj ranu we not daacay quoted 10 Hm 
1383- ICUOW, attar and Mrd-rnra m Dote 
tee rounded try m> F T. 


Japan (V) 965250 

Matoyskt (MS) 25860 
Hew Zeeland (NZS 1.8028 
PWlppmos (Pmo) 24,4300 
Saudi Arabia (SR) 3.751O 
Singapore (SS) 14682 
S AMcfl (Com) (R) 3-5368 

SAMca(F1n.) (R) 4.1220 

Soum Korea (Won) 796.850 
Taiwan (TS) 263080 

Thoiand [BO 26.0100 

TSOH rate tor Nov 17. BUMfar apraw 
out are fcwiad by curare raaraar raw, 


*038 

* 0.0012 

-0.0047 

*0.08 


000 - 500 98.5500 960500 91255 03 97.835 16 34.65 09 


1S1.1 


ecu united Os mid om 1 note MS: 3 nteK 33: 6 rnaiK Bi, 1 year, an* 8 L80R rnartraft Mng 
mat are odared rates far Si Dm quoted lb the nariw by fate rteara nc a bates at llam each eorlwig 
day; he bates am Be rtram Trim, Bmft of Tofao, Bacfaa and Manorial WtPmcar 
Md rates mw aaown far tfw demaaac Money Ram, US $ Cfio and SOR Linked Deposaa (Cm 


655 - 60S 

015 - 041 


2-5675 2.5850 
1.6067 1.6015 


2.563 1.4 2.5585 12 25885 -02 
1.6037 -0.7 16062 -08 15152 -0.8 


800 • 800 24.4800 24 3000 


07512 07507 
1.4720 1.4685 
3.5390 OS23S 
4.1500 4.1050 


- 507 - 512 
-00033 688 - 695 

*0X08 360 - 375 
-0.033 120 - 320 

- BOO - 900 796.000 79S.3C0 
*0X1792 010 - 150 26.3150 262420 

-0.005 000 - 200 25.0300 25.0000 
9 aiOteDoBar Scot tea show enfj ma tea n 
. (JK. batted A ECU are ousted tn US tenancy. 


3.7546 -1.1 3.7615 -1.1 3.776 -0.7 

' 1.4678 7.3 1.4642 7.4 1.4477 1 . 5 

35523 -52 2L5844 -5 4 3.7493 -60 

4.15 -82 4.t94S -7.0 4 432 -7.5 

79685 -46 B02XS5 -3a B20S5 -3.1 

26328 -09 2636S -09 - 

25.0395 -1.4 25.1305 -1.9 25.535 -61 
M dscmal beat Forward races am nor dMcsy qucaad to die inartat 
JR. Uugn normal atocea Her 17. Baa »wag» 1990*100 


EURO CURRENCY INTEREST RATES 

Now 18 Short 7 days One Time 


term 


month 


Six 

months 


One 

year 


Btegen Fianc 
Danish Krona 
D-MoV 
Dutch GuUer 
Bench Banc 
Ponuguoae Esc. 
Spansfi Posed 




CROSS RATES AND DERIVATIVES 


EXCHANGE CROSS 

Nov 18 Bf r 


FT GOLD MINES INDEX 


Ji - 
4:.’ 


Bteghin 

Denmerk 

Prance 

Qerraony 

koUmd 

Italy 

NeOwtanda 

Norway 

Portugal 

Spain 

Sareden 

Switzerland 

UK 


RATES 

OKr FFr 


Kcbg 


NKr 


E a 


Pta 


SXr 


SFr 


Ecu 


US 

Japan 

Ecu 

Danish Kramr. 


(Bft) 100 
(DKrj 52.57 
(FBI 59J7 
(DM) 2057 
K) 4644 
04 2.006 
(Pi 1635 
(NKr) 46.98 
(B) 20.13 
(Pta) 24.71 
(SKr) 4359 
(SB) 3429 
(£> 50.13 
(C^ 2638 
(S| 31.95 
(Y) 32.45 
39.18 

French Franc. 


U 31/12A3 17 tto 


% el 

8a* MktCap Cato Coax 1 


52 1 


yfaldk. m* Ura 


Swiss Banc 
Can. Do&ar 
USDoaar 
ttaAan Uia 
Yen 

tow SSng 
Shwi wtd tans 1 


S«2 
sH-4>j 
5-4S 
53*-5>4 
9-8% 
7h-7\ 
5%-5Jb 
3% -3% 
5A-S 
5ft -Si 
9-7% 
2*4 -2*1 
2% -2% 
tote farm 


4 SI - 4« 
5% - 5^2 
5-4% 
5i-4J2 
&. 7 *-5A 
9%-SS 
7\ - 7 A 
5*2-5% 
3i-3ft 
5%-5A 
5ft - S,», 
8A ■ 6ft 
2ft -2ft 
3ft -as 

US Datar an 


4U-4H 
5% - 5^2 
5-4% 
5% - 5ft 

Sft-Sft 

9% -9% 
7ft - 7,4 
5% -5ft 

3ft « 

5% - 5% 
5% - 5*2 
8ft -Bft 
2ft -2ft 

3% .3% 
van. omcre 


5% - 5% 
8*4-6 
5ft -5ft 
5% -5ft 
5% -5>2 
tola - 9% 
7i2-7S 
8ft -SB 
aS -312 
5%-S% 
5S-SU 
8% - 8*2 
2 % - 2 % 
3<2-3% 
two days' 


5l 2 -5% 
K*s ■ 6% 
5ft - 5ft 
5% - 5ft 
5%-5% 
10ft - 10% 
8 % - 8 % 
BB-BU 
4% -4 
6 % - 6 % 
6*4-6% 
oft -eS 
2% - 2% 

3% - 3% 


6 % - 5 
7% -7 
5% - 5% 
512 - si 
8%-G% 
10 % - 10 % 
9% • 9 

iLS 

9% - 9% 
2 % - 2 % 
4% -4 


1902 

16.70 

4061 

2.023 

4965 

O4S0 

2108 

486.7 

404.7 

22.94 

4.117 

1.995 

4277 

3.130 

■mi 

2.553 

GtM Mon fads (34) 

2019.18 

-9l5 

2M8.74 4923 

yman 

214 

236748 178202 

10 

8.780 

20S6 

1.063 

2621 

2 ms 

11.19 

261.1 

212.B 

12.06 

2.164 

1049 

2048 

1045 

162.0 

1.343 





11.39 

10 

2011 

1211 

2985 

3063 

12-74 

2874 

2420 

1373 

2.465 

1.194 

2061 

1074 

1840 

1.529 

■ Wagfanre terra 








3013 

3436 

1 

0416 

1025 

1.121 

4078 

102.2 

8328 

4.719 

0.B47 

0.410 

0 880 

0044 

63.40 


kkka I1R 

330104 

-0.1 

334401 

i<;9q 

3449 

4.15 

3711.97 2304.45 

9.404 

8057 

2.403 

) 

2484 

2694 

1052 

24&6 

200.1 

1104 

2038 

0.988 

2.114 

1047 

1524 

1083 

ftaataOsa P) 

2647. JJ 

-07 

2651.42 

853 

1306 

ISO 

3D13B9 2171B6 

0.382 

0335 

0098 

0041 

100, 

0.109 

0427 

9.964 

0 119 

0.460 

0083 

0040 

0086 

0.083 

6.182 

0.051 

(farm America |11) 

1544.96 

-170 

157509 

2568 

52.15 

067 

2B39.ES 1468.11 


MOSmi EURODOLLAR (ftftO Sim points at 100% 


6490 

8537 

3.830 

4.700 

8592 

4.620 

9.536 

4.448 

6078 

6172 

7.450 


6065 

7547 

6383 

4.127 

72*1 

4.057 

6373 

6905 

5537 

6418 

6541 


Narvwgffln Kramr. and Snadfeh 


0893 

2584 

0.979 

1501 

6119 

1.781 

6437 

1.137 

1553 

1.677 

1504 

Kronor; 


6371 
0.950 
0.407 
0500 
0882 
0.497 
1514 
0473 
0546 
0.656 
0792 
m 10: 


914.7 

2342 

1004 

1232 

2173 

1211 

2499 

1166 

1593 

1617 

1952 


1 

2.560 

1.097 

1.348 

2476 

1534 

2.732 

1574 

1.741 

1.768 

6134 


3.906 
10 

4585 

5559 

0278 

5.170 

1067 

4.977 

0801 

6.906 
8536 


91.14 

233.4 
100 . 
122.7 
2165 
1206 
2495 
1161 
1667 
1812 

194.5 


fltepten Rone. Yea Escudo, Lire and Peseta 


7427 

1902 

81.49 

100 . 

1764 

9820 

202.9 

94.64 

129.3 

131.3 
1585 
per 100. 


4.209 

1078 

4518 

55G8 

10 

5.572 

11.50 

6364 

7530 

7.443 

6984 


0755 

1534 

0829 

1517 

1.795 

1 

2.064 

0963 

1516 

1536 

1.813 


0568 

0937 

0402 

0493 

0570 

0484 

1 

0486 

0637 

0.647 

0781 


0785 

2509 

0.881 

1567 

1.884 

1.038 

2.144 

1 

1.368 

1588 

1.675 


0574 
1.470 
0630 
0.773 
1564 
O 760 
1569 
0.732 
1 

1516 

1226 


5656 

144.8 

625S 

7615 

1345 

745S 

1545 

72.06 

9647 

10O 

1207 


0.469 

1200 

0514 

0631 

1.113 

0.620 

1.280 

0597 

0616 

0.B2S 

1 


CappigRL the P reen ed Trero* LnM 1094. 

Rpm to bnxKea mow nunfacr of co ni puren . Baste US Mat Bate VJCuee: 100QJB 31/1892. 
Aadocesaor Gate Una Mac; No> (8 . 256 A water's Cttaipr 4L3 pars; Year an a St 55 



Open 

Stetpnce 

Change 

Mgh 

LOW 

Eat «ri 

Open hrt- 

Dec 

9308 

S309 

♦001 

9300 

9306 

134016 

395,061 

Mar 

8309 

9309 

. 

93.31 

9305 

221.125 

448.080 

Jun 

«.75 

82.72 

-003 

92.77 

92-70 

150032 

314,093 


■ usTmASiiiiYmu.PunmES(A04)Simperioo% 


LONDON RECENT ISSUES: EQUITIES 

Issue Anti MM. Cose 

pnee paid cap 19M price 

p up Km I Ugh Low Stock p 


Dec 

9A4B 

94.49 

+002 

9400 

94 46 

2094 

15042 

Mar 

9308 

8308 

+001 

93.89 

9365 

1.857 

9.473 

Jun 

93.37 

9305 

-001 

9307 

9302 

1.164 

2002 


* 1 - 


N« On. Gra 
tSv. ecu. |k> 


P/E 

net 


Ml Opal Mmst Sgx era tor prawns Ay 


- FJ» 

- FJi. 

- BP. 

- fJ>. 


052 

174 

258 

112 


6% 4 APTA Writs. 

88 70 Abma Lteai Am 

S3 51 Do Warrants 

187 180 *Adwe Pmtg 


6 

87 

5? 

186 -1 


0269b 61 14 109 


■ P-MARK RTTUBES gta<) DM 125500 per DM 


• •• *■ ™ ^ 

" -n • 



Open 

Sett price 

Change 

Hgh 

Low 

Eat.nl 

OsenlnL 

Dec 

0.6459 

00430 

-0.0030 

06450 

00415 

23035 

91,815 

Mar 

06450 

00443 

-00031 

06467 

06434 

1068 

7059 

Jun 

- 

00468 

-00031 

00470 

0646S 

48 

1033 


■ Pound In New York 


»AV-K. 

• - A^C-T'' 


■ SWISS PBAWC FUT1JWS JMM) SFr 125500 per SR 


Movie 

--Ctofa — 

-Rev. Cte 

Eaprt 

15860 

1.5718 

1 mth 

15660 

15715 

3 nth 

15861 

15718 

i yt 

15633 

15688 


FT GUDE to WORLD CURRBK3ES 


The FT Glide to World Cunendes 
table can be found an the Co mp ontoe 
& Finance page to today's addon. 


i. ; 

r. +■• 


Dec 

07688 

07587 

•00104 

07888 

07562 

15030 

62.177 



• ■* — ■ 

liter 

07700 

07823 

-00104 

07700 

07620 

283 

2097 

j- _ 

a . ter •• 

• S te 17 “ 7 • 

Jun 

- 

07870 

-00103 

07718 

07880 

23 

284 




■ JAPANESE YEN FUTURES (IMM) Yen 125 par Yen 100 


LONDON MONEY RATES 



" .o*; Ws ■ 


Open 

Sea price 

Change 

Vftgh 

Low 

Estvoi 

Open tot 1 


- 

Dec 

10804 

1.0173 

-00034 

10206 

1.0159 

14,032 

73037 


• ■ > 

Mar 

1.0288 

10262 

-00034 

1.0204 

10248 

659 

9.183 

[Jt 

“ 

Jim 

. - 

10373 

-00034 . 

10990 

. 10990 . 

.. 68 

816 


■ STBRLBIO FUTURES PMhQEa250P ptrE 


Dec 

10718 

10668 

-00056 

1072B 

10850 

11.498 

47.381 

Mar 

1-5720 

15808 

-00056 

10730 

10840 

118 

946 

Jim 


T58B0 

-OOQ54 

10724 

10880 

4 

20 


1 y place 
re... 


Now 18 

Oner- 

ra^rt 

7 days 
notice 

One 

morth 

Tina 

months 

ax 

months 

One 

Matter Stertng 

5i-S% 

5% -4% 

5% -5% 

6-5% 

8% -Bfl 

7*4-7% 

S ttrilng CDs 



5% M 

6U-#J 

B%-6A 

7A-7 

Treasury BAs' 


- 

5. r 4-5% 

SS-5% 

- • 

- 

Bank BUb 

- 

- 

5S-5% 

51! -5 ti 

e.\ - 6A 

- 

Local authority depe. 

4H-4H 

5A-4ft 

5%-5,'a 

6-5% 

«-6A 

- 7A 

Dtscotnt Mario! daps 

4% -4 

S%-5 

- 

- 

■ 

- 

UK denrtig trank baee lending rale 5% per cent from September 12. 1094 
l* B 1 1-3 3-6 6-0 

month month months month* 

9-1? 

monlltt 


100 

FP. 

880 

93 

85% BZW Ccmmocfims 

88 


. 


_ 

- 

. 

F.P. 

6.10 

47 

39 Dql WiB 

39 


- 


- 

- 

. 

F.P. 

6X4 

104 

65 +fCsftna 

99 

-1 

- 

-h 

- 

— 

280 

FP. 

303 

287 

280 CtvgcnA China 

285 


RN9J6 

22 

40 

130 

63 

FP. 

12.1 

68 

65 Erwremfa 

68 


RM0.71 

S3 

IA 

a 2 

- 

F.P. 

491.0 

495 

491 FkJefity Spec unts 

491 


- 

- 

- 

- 

_ 

FP. 

700 

168 

108 FTtionlc CTek 

168 

+11 

RN0.75 

2£ 

00 

555 

too 

F.P. 

11.1 

101 

100 Fsteay Srrtr C 

101 


- 

ra 



100 

FP. 

1182 

102 

101 For A Col Errrfl C 

101 


- 

-w 



- 

FP. 

10T 

35 

22 Group £X Cap We 

23 


- 

-w 



- 

FP. 

280 

62 

56 Ifandaot ten Aafan 

56 


- 

to 



_ 

FP. 

2.70 

30 

27 Do WBnard* 

27 


- 

to 



too 

FP. 

300 

102 

98 Hove GowK 1000 

101 


- 

- 



_ 

FP. 

29.7 

100 

90 NVESCO Kama C 

99 






160 

FP. 

1875 

223 

205 Irish Parnate 

220 


iMJ) 

2_9 

50 

7.7 

215 

F.P. 

690 

232 

229 JJB Sports 

230 


RN&O 

2-4 

03 

14.1 

- 

FP. 

502 

483 

475 ProMcIncAA 

485 

-1 

- 

to 

- 

- 

135 

FP. 

620 

155 

138 Servtsak- 

155 

+6 

MLS 

U 

01 

251 

115 

FP. 

224,4 

128 

117 UG 

126 


WN&fi 

ZA 

30 

151 

170 

FP. 

190 

173 

168 Teie-Cfoe Ced 

168 


RHSM 

22 

40 

110 

- 

FP. 

801 

62 

67 MtsfafsBCh 

80 


RN125 

3+0 

20 

125 


RIGHTS OFFERS 

Issue Amount Latest 
price pold Renun. IBM 
p up date Hfeh Low Stock 


Ckatog *or- 
price 
P 


310 Nl 20/12 41pm 18pm Kenwood Appl 

27 W 28/11 3%pm 2*ipm Marito Ml 

26 M 22/11 %pm %pm Novo 

85 Nl 23/12 15pm 10pm Pmaac 


25pm -3 

3pm 

%pm 

10pm -1 


■ PHKAPBLPIKASEt/SOPYlOMl £31 260 (oerlte per pourn» 


3 1 ! 


Strike 

Price 

1525 

1560 

1575 

1500 

1525 

1580 


Dec 

445 

2.49 

157 

055 

057 


CALLS 

Jan 

456 

358 

1.79 

0.92 

0-41 

615 


Fab 

528 

663 

257 

1.44 

051 

0-42 


Dec 

616 

053 

1.71 

643 

553 

758 


PUTS 


Jan Fab 

050 1.03 

120 154 

2.43 255 

.699 *48 

5.96 632 

612 634 


Carta of Tax dap. £100.000) 1% 4 3% 3% 

Certs te Tan dap. under C100.000 te 1*spt Depotete UIMm to catei %pc- 
Maa. tanrto ran te decotrel 55238PC. ECGO toed tale Sag. Bpotl Rnanca. Uako up day Oa 31. 
1904. Agreed rare to period Now 28. IBM to Dec 2S. 199*. Schemes UU 7-ZJp c Refarantel rmm to 
period Ott 1. IBM to Oct 31. 1984, Scheme* Itf » V I968pc Finance House Boo Htee ape Vren Nov 
1. IBM 


RANK OF ENGLAND TREASURY BILL TENDER 


Previous day's vM. Cafe 3,708 Alto 6422 . Ban toy's open M, Cato 3B7.197 ftiw 338.177 


mte share prices W 
s world 


RANK REniRN 

BANKING DS’AHTMO'fT 



Nov 18 

Nw 11 


Nov 18 

Nov 11 

Bfc on oter 

S350m 

E3S0m 

Top arraptert ids 

56555% 

58755% 

Tab! of arpneataB 

£1368n 

C1310m 

*» refa of Hacoat 

50238% 

50468% 

Total aflocafad 

E350iti 

ESSOrn 

taoaoeyfatd 

57038% 

5.7272% 

(An. aocepted bid 

286580 

£98065 

Offer re next tinder 

£350ra 

£350m 

Moment a n*L leva 

5» 

501k 

Ufa. reap. tM 182 ifays 




increese or 
No ve mb er 16. 1994 d ecr eaa o ter week 


V " i 
*> 


Capital 

PubHc deposits 


e 

14556000 

158150*528 


-36034519 


BASE LENDING RATES 


J 




Reserve and other accountt 

3057071074 

-580,014040 


% 


5.791.161.779 

•695.168053 

AAed Trial Bre*... 

...-5.75 

Government aoeunttes 

10*4,154.788 

3059045,119 

+5.730000 

-1041029096 

•Harry Anteteror- 

..!-5.75 

Pramtee. eqtrfpmefTt and other aeca 

Notes 
j Coin 

1079073.161 

7.730.498 

168012 

-039082,180 

+1,072,193 

-21,130 

BsneaBOrac Vtaya_-S.7S 

Bw* of Cyprus 0.75 

BsAofbteand 0.75 


5,791,181,779 

-505,168053 



tsfilE nCPARTMENT 




.,..075 


Brtt BkolNSO East. 

...075 


Nous to dretiaaon 
Notes to Banking Paper want 


16242268502 
7,736498 


♦36927507 

+1572,193 


18250506000 


+40500.000 


&rcV- 

SrtBT'C 


Other Government aeewklea 
Other SecurWes 


11,061.886444 

7.188514558 


■ekWiSNptoySC&LM 675 
CLBenkNcdariond ...5.75 

CttsonkNA 675 

tSyriBadato Bat* -5.75 

Tho CpepeMhD Bank 575 

Octets & Ca 675 

Qwa L^mate 675 

Cyprus Poptear Back - 675 


Duncan l.meio 675 

emttrBankUnkad ..5.75 
Rranctoia Gan Bank j 65 
•Robert Fleming 8 Co .. 5 75 

QtrobBflk 675 

•Gifoneaa Mahon 675 

HahtoBarStAGZtech 675 

Ha mbroaBarti 675 

NertaWe & Gen ton Bk. 575 

■HBSamute. — 675 

C. HoareSCo 675 

Hongkong & SharghaL 675 
JuBanHoOgoBa/* .... 575 
■UcpddjQeech&Scn: 675 

UoydsBark 675 

MeghraiBarkLJd 675 

MteondBar* ...675 

•MotedBankhg 8 

NteWosbntoGter ... ...575 
•Rh Bmhers —.575 


* Rntugha Bank Lid is 
no longer autoorised oa 
ebartdng intefcteon. B 
Royal Bko( Scotland . 575 
•Qrrtto&WWnanSeca 575 

IBB 575 

•United Bk Ol Kuwait -. .575 
UnkyTiusiBantnc ..675 

Weston Troet ... 575 

WNtoawayLoWaw... 575 
Yorionre Bara -675 


• Mombereof London 
Lrareaenenl BanMng 


’ toaontobtaaon 


nMSSk?- •>- 
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n&T 





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Brii12%PC l 8* - — 

HSSS=: 


112 
103 II 
113% 
107% 

m 


1200 

-2 6350 

214 

1500 

-.1 6*0 

770 

61 1.160 
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02 3*B 
04 1288 

0 3 1J“[ 
02 81700 
02 

02 5® 

04 3^0 
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05 1^0 
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0.4 935 

M W09 

06 IS 

06 3250 

M IS 

07 5900 


My17Mvi7 
MBSJfiS 
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1*159*15 
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JtoSJyis 

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11.10 1345 
2081204 
2621271 
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70101298 
1551305 
2791300 
10.101268 
10101240 
309 - 

1661302 
1571253 
2671341 
2001260 
136 1273 
246 - 

2601331 
>7.101306 
2401308 
17.101259 
861347 

220 1284 

17.101288 
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ftreans3>2pc 1999-4_ 
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7%SC2006tt 

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Treas 11 lipe 2BB-7 — 

baas 8h9B 2007# 

)3%pe 2004-8 

Tram 9pc 2008# 

Hew Bpc 2009 


74A 

10 

5*3 Jat4jyi4 

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105% 

09 

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1091246 

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00 

8000 1828 IMS 

20104490 

98*. 

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2.4C0 Jr70e7 

— 

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121^ 

00 

2200 Ih21 fM21 

17.101295 

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10 

3000 wasra 

20 - 

950 

10 

2000 4p50eS 

101334 

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08 

1150 J*22Jf22 

1&BI293 

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as 

7.197 JhieJyfO 

081339 

128% 

08 

1050 IftMSaSS 

2281301 

103A 

08 

5021 Ap13 0t13 

801343 

950 

10 

3.100 f*S3o2S 

1081336 


Jpc'96 P75) 

4^pc'98# 11*« 

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IJsPCW# — (*358) 

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20011 

0.4 

1000 MIGSaia 

10*1313 

107, J 

00 

BOO 4pS7 0e27 

200 - 

166A 

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1*00 IK4Se24 

16*1316 

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1.300 Uy29Nv20 

17.10 1317 

10WJ 

04 

1000 t%Cl 0C21 

149 - 

168,1 

ox 

1*50 Jal9Jy)9 

11* 1314 

152h 

00 

1.750 U|20 mzo 

17.10 1319 

157% 

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2.100 Fe23M33 

18.7 1319 

130 

03 

2000 f«16Aul6 

11.71320 

iso,; 

03 

2.700 426 JyX 

20* 13 21 

132% 

03 

2.750 M160C1B 

SB 1322 

no,; 

03 

2050 Je17jyi7 

1061323 

too,; 

03 

1000 Ja16Jy22 

155 - 


months prior to issue) and have been adjiatad to reflect retMSlng 
at RP1 to 10D In Febtirerv 1967 Convwslan facto 3646 RPI tor 
March 1994: 1426 and for Ocsobte 1094 14ST. 


Oto RttatoYeaa 

1 Tree GIMpc 7010 - 

81 b* 

80 

4JSQ - 

19.10 - 

Csor Bpc Irt 201144 — 

104% 

OB 

5073 Ja12 JylZ 

16*1245 

TmepczBirn- — 

10*U 

10 

6,151 Ft* Du6 

30*1701 

. Tiara S%pc 2006-1244 - 

7«ft 

OB 

1000 RIO Salt) 

4*1330 

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&n 

1.1 

5050 H27S427 

22* - 

7ix2012-13tt 

93% 

12 

BOD JtajfiS 

20$ 1332 

TnuSApc 201744 

IBM 

10 

7050 Fa25to25 

19.71662 

fitoiipe 2013-17 

130JW 

09 

1000 J912DH2 

7.11 1280 


sassS--> 5 g 

TrwrasR*’ 1 ® 9 *35 

Tm» ’SL 2 ® 0 — ■““ 
1CPC2001— - 

&: 


t.79B My22Hy22 17.I013C 
+ 500 SrJeS(0e 2.V - 

So Je7M7 - - 

H3S«3 2871244 

5171 J8M*M 
4,405 FB6W6 
4350 WfifW 
R527 Ffi7 «a7 
WWJ6WW0 
2503 185 S«B 
£ao hi9Sb» 


Other Fixed 

Interest 




fatal Oev 10% pc 2009.. 

. no,; 

06 

100 

IIT24 5<24 

Y93 - 

Btbsi nhix;2tn: nfi% 

- 

45 



mraodcaes»2pfio — 

* 

-5 

303 

Dpi Oct 


Gpe Cap 1968 

ino 

-1 



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13PCW-2 

. 107% 

_ ra 

315 

AplOel 

*931428 

Hjdn0iaeaei5pe20ii 

. 141% 

as 

40 

My3lHv30 

NTS3 - 


761299 coKUto 


» 7,afl rarUsn3boctt. 


an 

26 1261 Dwobawe— 


1561280 Ira*. z*3». 


«% 

03 

359 Fetfai 

27*1239 

41 M 

08 

1000 Jsi Del 

25.191352 

58% 

20 

119 falOd 

25*1243 

34% 

17 

56 Sp5 0c5 

101324 

2 SA 

14 

275 5JafaJ)ac 

101238 

29% 

10 

473 faldcl 

2581315 


Irate 13*2HC 2006 

Uyan03%pGiRa — 


nbfic 2007- 


1» 
36 (1 
32 % 
113% 


4%|*l.2024 


132 

126% 

136*2 


5 fJMpJeOc 603 - 

26 iJeJeSeDe 893 - 

6 ApKOdS 3333OT 

25 tolSel F83 3361 
£0 J430JT30 >'933465 

50 - 753 - 

SO 1815(1 993 - 


1 notHflek** 1 * 8 on 


roan 1 !***'-*— 

• Tap" rt«4 tt Tax*t* “ 

STOCK INDICES 

.A tov 17 to 16 Npr 1SBM l« _gp 


ypwbt E Aacflcn hrain. ad Ex dfridond. Ctaobg mkS-prtcea are show In pom*. WbeHy (mcareage change* are cakteeied on a Friday 10 Fifcfay baato 


-19M- 
Low 


W> Low 


Kur 18 Nw 17 HD* 16 Hw 15 Mw 14 


— 1991“ 
High ura 


Shoe 


corep. 

ura 


FT-SE 100 

FT«w>iao 
FT-SE m 

^ a Sw IT ‘ 

fr-seA**®*® 


51 ^ 531 354 30953 35203 29708 3 S 2 IU 9809 FT^ Einmk 100 

SSp teuan 358 G 7 3538.1 41526 33834 ilffii 13754 FT-S 6 to*a* ao 

SS 3 S 8 & 35612 3541 * 4 HD 33814 4 W 0 J 137&3 FI Onto, 

Twar ina? 15706 15526 177U 14516 17786 6845 FT GDvt Sa 

,7^ I7abr » W- 77 1777312mm ittim aaout ubltv ftfm 
tsM 17SL8* 1761.31 1 77762 2660J1 174358 206872 1363,79 FT to 

]SSS« 6 aa ,55i90,s;r7jn 


1 1784.11 144185 17W.11 61.32 


Secrete 
ton 
Uhn 
PrtdeeeareCoMiinB 


1354.70 135058 1358.88 1354.70 
141593 141243 142162 141533 
2408.4 24007 241&E 2408.4 
9163 9152 9160 91.83 
10782 10834 10822 I07.S2 
201818 2049.74 2066,09 2078.00 
257.8 2575 2506 2576 


1347 63 1848.19 ia6.« IS*"- 11 
1403.121507.(0 1335 SS 1607.10 
237H.7 27110 22555 271U 
9162 107414 B9 54 12760 
10766 13887 ”»50 13887 
2067.45 235761762 02 235760 
257.4 2936 1»0 734.7 


900.45 
33862 
49.4 
4519 
SO S3 
922.18 
436 





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The ruitarred vaiua of manggemm teeotes b tooeotoig otor a Sow 1993. Already the 
raiteMT of ceres h IBM tea supereed me mol far lost tote. 

In rai ktosarintey corepam* onirtormt far dates, i «■ be fltose piMEto verem capU 
compotes vdfoh can atreebae kna0artvs deto nMdi «• preute ora Bane na vrefl ter me pbn 
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CaUKTQPMSaQN.SCOTLftMB 


J>emWN Of JOHNSTON PRESS pit 
FOR CONFIRMATION 
OF REDUCTION OF 
SHARE PREMIUM ACCOUNT 


Is a ftuboe praacaied to the Caste aTSasnl at 


Ibr inteater o( J uhnm B Picas pic. a Goopsay 
iMdto- 


asapcnicd obder tec Creapsolia Area and l 
id! « Rcpxad Office re $3 MaaM Place, 
dUmjt (or Q "f~ m i win at HeOaebaa al 
Share Piaaslaa Accosat, the (oOowiag 
M tefacatot eras erooouced an November lufc 
1W4> 

-The Lards harfas heard Cotasel for (he 
PateDBeis. anMbi ffc MhoB ro be fatimared on 
die WsBs ia awaaa tons; jpponttlhc opoR o( 
Ibe Pdiriaa tohe adsenhed once fa the Bfiitanf* 
Game rad ooct In eadrafiba ^aomra*. Tie 
BerekT rad *finacu] IfaraT toiwiui Hd 
appUai any party dilrefag hrterea to lodge 
Aoswcis thereto, if so adrifad, with* aevend^i 
nficr inch BrtrtUoa sod mice.* 
cd adUi urimaiica ta hereby pnui 
MACSOBERIS 
Sobrifan 
27 MeMne Street 
Edinbugb 

AcHn&mflKftrttanro 



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in adOHon to remytenK tka pcHore 
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naarireta and Om forestry Mflthy, 
this survey «riO are nine the 

co m a nn ao D ai fat ih rediB oMho vote 
h raaflibwskip of tha EnropMn 
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FINANCIAL TIMES MONDAY NOVEMBER 21 1 994 , { /^' + v 


























































































































28 


FINANCIAL TIMES MONDAY NOVEMBER 21 1&4 




LONDON SHARE SERVICE 


BANKS 


«N*JWR.. 


ELECTROMC & ELECTRKAL EQPT - Coat EXTRACTIVE UfflUSTRES - Cont 


msk nr nr dmu ust act 


art art jntd il to 


MfilakfifiC! J*C 35 


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a s^mcvr mw 1 


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07 J teJrf 012 


07 ns 11 *iq>M 1ES S4(1 MHtt MO 


imw 27 Oefma 158 at taWhd 
58 0t7JS 1.7 JnJa 



... 08 1355 BASF DM 

08 014K *0012*&M4IHC -W 

Mffim 2JJrtoJ**p rffl - BTP . — 

IM ZOteMcJ* 18 - Bayer DM □ EMI 

uwn 12 JraJd 108 1360 BBS. 

11 BM 38 Jd0 17.10 1740 UfehV* 

09 9%% - 

1.1 S%% 

-8 WOE 18 ... 

18 DIM 17 00 «J - WfllfiA 

as 033% - tty 5*83 - CBBrtwto 

02 HOc 52 Jot an 5U7 o«oa 

-8 18 - Utr Aug 157 8571 Mm 

1.4 8» - JdJn 08 »W ftgdlardS 


CM — CALS 

VH Or Dh DhidMds lad QQr ^ *112?® ^ 22 

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FINANCIAL TIMES. 


4 pm dose toasmber 18 


NEW YORK STOCK EXCHANGE COMPOSITE PRICES 


ISM 

n p imbm 

17^8 12% AAR 


mn a upm 

Dte % E WM Mgh low tbnte But 

0.48 18 21 193 124t 12% 12% 4% 


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ACM Manx 1JH 13.1 
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72% 48% AMR 108 3380 51% 50% 

S 3%ARX 12 85 3% 3% 

K%38%ASAx ZOO 13 30 517 46% 46% 

33 25% AUAL 076 23 17 8922 32% 32% 

15% 11%AMMPr 0.50 30 II 110 12% 12% 

23% 1 7% ABM M 052 25 12 12 28% Sfo 

is iftAqxncra 10 109 14% 13% 

31 22ACEU8 044 10 22 01 23% 23 

12% SACMGvt hx 109122 7 1381 9% « 


46% 46% +1% 


201 8% 8% 8% +% 


15% fttemrfta 044 18 23 42 


11% 6% Acne BBS 13 533 13% 12% 13% 

28% Z3AcoH*a 080 2-1 14 Z7uffi% 28% 28% 

13% ft Acton 036 18 2 211 3% 9% 3% 

16% <1% Acorn 27 1583 17% «% 16% 

18% 16% Aflac &pr I 068 42 0 129 16% 16% 16% 

M4S%MHfeni 300 S5 14 54% 54% 54% 

31% iftAdriBe 300110 87352 25% 24% 25% 

B% SAdKdQp 018 20 16 384 5% S% 5% 

20 15Ad»he 0.10 05 17 16 18% 18% 18% 

64 4ft Aegon ADR 1.47 23 12 24 63% 62% 63% 

05% 44MBL ZK 60 6 2837 45% 48% 45% 

3ft 25% AflBX 048 M 12 702 34% 34% 34% 


8% 8% 
11 % 11 % 
12% 13% 


Mfh LowSUdi 
48% 34%Bffl*0 

ft saeflft 

22% 13%BMm 
63% 50% MSB 
5ft ift 8* A I 
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19% 13%U«9» 
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10% BBMyPtt 

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55% 5D%BeMinHx 
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53% 42% BaC L 

21% 11% Btacnfl 
32% 22 0hdflgm3 
25% 18% Neck 
22% i7%mmHPLa 
10% 7%aonkAftx 


1U. W Bi . 

Hr t E TOi Bp bn M i 

074 10 15 2250 47% 47 47 

038 05 12 10 5% 5% 6% 

276 u 15 7339 51% 58% 50% 

040 10 14 178 22% 21% 22 

2.78 14 1810631 92% 51% 61% 
080 1.1 18 58 54 53% 33% 

034 10 17 317 24 23% 23% 

430 05 3 90% 00% Soh 

1.72 4J 9 454 37% 36% 38% 

047 10 15 5 25% 2S 25% 

004 S0 15 083 B 6% % 

048 20 12 511 18% 18 18% 

27 270 19900 19800 13900 


Berry FW 040 30 70 148 10% 10% >0% 
BMBH 40 3088 43 42% 42% 


20 WMwtac 


64 46% Aegon ADR 1.47 20 12 24 63 
85% 44/MM. 276 80 6 2837 45 


38% 25% Aflacx 

22% 16% Atom 


It IftAforanx 0.88 S3 9 4667 16%riB% 16% +% 

4 l%ABCB1kB 1 6B 1% 1% 1% +% 

jg 38% AlrPrC 098 12 22 1498 45% 4S% 45% % 

i 18 Anna Fit x 030 10 91798 19% 19% 19% ■»% 


ffl% 18% Ahfpslnc 
17 14% Attaaa 
39% 21% AjrFUi 
18% 13% AMmAfe 1 

21% IftARaOf hi 

17% 13% Aftml 
28% 19% ABClfl 
24% 17% ARUir A 


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8% 6% BA* can; 
18% 9% BMCM 

STlSSS' 

2ft 9% Benin a 
18% interims 


200 06 20 26% 28 26 

500 M 30 50% *0% 30% 

040 24 66583 17%d16% «% 

1.44 11 21 IBS 47% 46% 46% 

18 9138 15% 15% 15% 

0.10 as a is ift ift 

040 10 20 868 Z2%«*% 

040 10 21 2719 25% 

1-32 09 11 32 19% M 19 

073 90 135 7% 7% 7% 

075 122 697 6% 8 8% 

070 04 1015 8% 8% 8% 

105 10 28 2985 41 3ft 41 

012 10 16 8% 8% 8% 


008 05 15 ZZ7 15% 15% 15% 
100 22 1511074 «% 44% 44% 
060 2.6 S 3456 23% 23% 23% 


33 95 2B% 2ft 26% -% 18% 11 Mm 

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I 1.2 30 352 18% 18% 18% 38%18%BfiBRfl 


2B% 18% McnAlj 
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03) 10 30 352 18% 18% 18% 

035 10 24 664 18% 18 18% *% 

020 1.4 18 1191 14% 14% 14% ■% 

028 1.1 18 175 25% 25% 25% % 

028 1J 17 2B8 23% 23% 23% -% 

044 10 20 5608 29% 29% 29% •% 

030 12120 6023 25 24% 24% *% 


070 ZB 4 238 26% 28% 26^ 
0 10 05151 894 20 19% 191 


17AJk0hUM 048 25 79 1714 19% 18% 


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30*4 20 Anapar x 

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27% 17% Akne Cop 
16% 9Akna 
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40% 33% AASu X 
11% 8% Mnw 
29% 24AHCIP 
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35 21% AAhhbi 
99% 84% Alcoa 
36% 1 7 Aba Qp A 

11% 7AmGtNhc 
8% 8% AfflPmdi 
B% 6%AircnQJ 
25% IftAoutettad 
52% 44 AndaHa 

9% 8% AoAi|R 


154 80 10 1253 20% 20% 20% 

m 016 05 22 1150 25% 24% 25 

IX 0.44 15 171B71 2B 28% 38% 

1 27 % a % 

Cap 1.84 87 10 218 19 18% 18% 

a oia ao 229 b% 9% 9% 

1 030 35 13 7100 23% 23% 23% 

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14 1783 27% 27 27% 

150 15492 7513 84% 82% 83% 

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I 008 M 12 1988 6% 6% 6% 

M OS2 25 12 113 21% 20% 21% +% 

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22 22*8 -% 


23% +% 
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25% 19%/bnOuM 000 35 12 378 20% 20% 20% 

8 6% A»CtpkKX055 9.7 272 6% 8% 6% 

20% 16 An On Bd 154 81 29 127 17% 16% 16% 

23% 18% Am Cap CV 108 50 0 24 18% 418% 18% 

168% 42% ArnQfln 155 15 39 4621H10A 100% 100% 
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33% 25% Anfigx 090 25 1117094 31 30% 30% 

30% 24% AmfinX 1.16 4J 20 3462 27% 26% 26% 

9% 5% An Boh to 07713.1 221 8 5% 5% 

27% 18% Am Mb Pf 2J0115 47 230 20% 19% 19% 

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06%81%MQfl 046 05 14 5574 94% 93% 94% 

11% 6% AnOppInc 150113 704 7% 7% 7% 

30 22% AnAani 089 17 11 174 23% 23% 23% 

34 19 An Rank X 040 15 10 212 24% Z4% 24% 

8% 7% AkRnlEa 0.44 09 4 157 7% 7% 7% 

27% 31 AmStar 049 1.8 14 1733 27% 27% 27% 

22% 18% Am HKi 9* x 1.25 7.4 7 17% T? 17 

32% 26AnNtfr 158 41 II 102 26% 26% 26% 

<3% 38% Arakh 152 45 198478 40% 40 40% 


34% ♦% 
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7 11 85 IB 17^ IB 

7 13 4484 65% 64% 64% 
1 47 10 iC% 2% 27, 

5 14 5574 94% 93% 94% 


43% 38% Amrkh 
43% 32Anennbe 
18% 11% Anokik 
64% 50% Anoen 
9% 5% AnpcaPB 
5% 3% Amine 
34% 28% Amsooth 
4% 2% Anxnp 
58% 42% Anatno 
36%23 %/Mdo 
29% 24% AnpSso 
55% 47% AnBsdi 
34 19% AnSxn 


23% 23% 

24% 24% -% 

27% 27% -% 
r7 17 
25% 26% -% 
40 40% -% 


024 TJ 66 850 19 17% 17% 

220 18 IB 7310 01% 61% 61% 

Old 10 8 4 7% 7% 7% 

012 21 63 694 U5% 5% 5% 

M2 5.3 9 TOG 29 28% 23% 

9 432 2% <S% 2% 
030 07 48 2487 44% 43% 43% 
27 7H 35% 35% 35% 


094 3.6 18 BO 26% 
1.60 32 12 4742 50% 
24 111 33 


18% 14%fntanflR 044 20 15 29 17% t?l 


35% 30AmCp 128 4.1 11 1424 32 31 31% -I 

29% 22% Apacta Ctp 028 1.1 34 4468 25% 24% 24% •% 

10% 7%APHMMFX 072 80 774 8% B% 8% ♦% 

25% 14% APH 30 161 24% 23% 24% 4% 

7% 2% Apptd Mug 1 2BT 3% 3 

25% 16% AppfPtrAX 012 05 19 304 24% 24 24% +% 

29% 21% AEilOn 015 00 20 96171129% 28% 28% -% 

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17% -% 
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29 22%/bMX)Z1P Z10 02 


57% 39% ArmW 
46% 33% Amm Bee 
7% 3% AM Op 
33% zaAnlnbtf 
34% 21%AWCB( 


1.M 11 121371 41% 

13 669 37% 

1 103 4 

076 10 14 SD3 25 

040 10350 7022 28% 


22 % 22 % 
40% 41% 
37% 37% 


31% 22% AM CM X 046 10 34 179 


44% 33%Ae«» 1.10 09 121189 38 37% __ 

S% 1B% ASaPacF 027 10 209 17% 18% 16% 

3% 1% Am bw 028112 5 956 2% 2 2% 

38%28%A»Mtba 012 03 30 2001 38% 38% 38% 

57% 49% AT5T 102 20 1737760 52% 52% 52% 

263% 226% AS Adi 2 X 180 1.1 2 247 247 W7 

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104 11 9 381 


112% 92% Alflcn x S60 S3 61 2370 104% 103% 103*2 
W 3Ab* 1 4903 3 02% 2% -% 

20% 16% Atms Eos x 002 50 17 24 17% 16% 18% +.18 

12% 8% AtMtsAOR 034 30 691171 9% 9 B 

24% 17%AoBtex OIB 09 U 398 18% 18% 18% -% 

12% BAbHiH O10 10 385 8% 8% 8% -% 

68% 47% AutMl 000 10 23 1337 57% 56% 57% 

ao% 13% Anmca 044 10 11 57 14% 14% 14% -% 


24% 17%Aqjtez 
12 % BAbMiH 


68% 47% AutM 
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19 7% MU 
49 30% Amt 
63% 48% AmPrx 
14% t o^g M* 1 Carp 


U» 04 19 192 9% 

OBO 10 14 585 37% 37% 37 

200 12 17 1601 62% 62% 62 

ID 13 11% 11% It 

11 1900 6 5% 6 


aSsK: * 

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37% 37% -% 


38% 31% BCE 208 

9*2 8% BET ADR QJ21 
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17% 14% Sato Fort x 030 
22% 17 BotaaH 048 

27% 21% BaUorEte 048 
30% 24%BMCp . 060 

15% 8% BMH 005 
3% 8% B*, 

mh 20% bbrge 102 

20% 13% BbI BrtccpX 020 
38 25% BdCftW 124 

S 20%BanBiV 004 
0% BarcoCenH 0.72 
34% 24% BajMemB x 104 
1% % BancTem 

93% 49% Banks 000 
50% 38%BanMrax 100 
98 81% Bnrit Bostx S48 
29% 22% BKBSBI 108 
49% 448kBnetnPx 300 
33% ZSBatMIY 108 
00% 42% BaMm A 125 
95 TOBankAnB 800 
84% G8%Bnh7kr 300 

4o aoaciqs 100 

30% 22%BBrt(CRI 000 
39% 20% Banes ftp 1.40 
48% 39% Bsift 104 
13 8% BaBM 005 
53% 30% Baa* OOB 


53% 30% Baa* O0B 
2B% 21% Bator 10B 
28% 23BWSO** 1.46 
22% 16% am IBM 1.72 
23*j 15 BorGbeax OBO 
50% 43BHiSm 123 
37% Z7% BBartngsx 072 
32% 23Badnmhr 0.40 


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40% 39% 38% 
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28% 25% 36% 
44% 44% 44% 
29% 29% 29% 
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15% 15% 15% 
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34% 34 34% 

30 29% 29% 



CORINTHIA PALACE 


When you slay with us 
in VALLETTA (Malta) 

stay in touch - 

with your complimentary copy of the 



iSE: 


104 10 51 80S 57% 56% 58% -% 


60% 50%Brt4Sq 

74% 54% AM 
54% 39 ere Gat 

86% 65% BPx 
27 18% BP RUhoa 
27% IS BOM 
71% 53% BT 
28% 21% BkMAI 


006 (U 39 318 18% 18% 18% 

20610.4 9 6213 21% 19% 19% 
USA (U W 6212 18% 13% 13% 

105 50 6 34 22% 22% 22% 

000 24 27 945 2S% 2S » 

027 00 888 34% 33% 33% 

2.« 70 14 25 30% 30% 3D% 

1.00 ID 8 444 33% 33% 33% 

23 7843 Z2% 2 0% 

292 40 1511476 59% 59% 59% 


1.77 20 13 18 61% 61% 61% 

240 S1179 588 47% 40% 4B% 
108 20 48 1636 80% 79 79% 

104 90 10 238 19% 018% 19 

002 10 48 830 24% 24% M% 
177 60 141702 61% 61 B1% 

105 60 12 458 22% 22 22% 


38% 32%8nw6p 
8 5%Bmn8h 


I . GO 50403 188 32% <02 32% 


8 5%BnM(8h 
31% 26%ftiM 
32% 24%Brf«r 
4% 3% BHT 


002 4.9 3 24 6% 8% 6% 

009 15 13 268 29% 28% 28% 

D 68 2.4 IB 3884 !m ® » 

35 X100 3% 3 7 b 3% 

0.44 2 A 14 3117 18% 18% 18% 

002 11 14 192 15% 16% 15% 

200 80 8 59 341, 33% 33% 

11 458 11% 11% 11% 

100 15 11 2435 48% 48% 48% 

a 55 10 31 3240 37% 36% 38% 

1.44 90 16 289 15% 414% 14% 


4% 3% BHT 
25% 17%BmsMkx 
18% 13% Brati wan 
41 32% Boctoie A 
28% 10% Bull CM 
66% 47 BurH 

48% 36% Bute Rate 
19% 15% Burma ft 


35% Z1%CAx 
72% 50% CBSx 
25 19% CMSEn 
82% S9%CNAPn 
64% 44% CPC 


- c - 

148 14 23 628 21% 420% 20% 
0.40 0.7 15 2044 56% 55% 55% 
004 30 10 774 22% 21% 22% 


18 148 84% 64% 64% 
106 16 24 1881 53% 52% 92% 


14 CPI Corps 008 20 27 143 20% 19% 


55% CSXx 

31 19% CTSOup 140 1.3 13 13 3 

24% 17% CMSMIba 004 30 17 1890 1: 


1.7B 10 12 3321 67% 66% 66% 
140 1.3 13 13 30% 30% 30% 


S3 33 QMbm 
20 24% CbMCx 


25 2140 50% *9% 50 

006 20 14 378 Z7% 27 Z7% 


18% 18% 
49% 50 


23% 16% Crtot QSGx 116 1.0400 640 18% 416 


21% i0%CamcaDisn 
50 35% CaetaaW 
Z% 1% ColfteXE 


13 2244 43% 
1 27 1% 


19% 15%Ctfro 
15% 9% 04 Fed 


CaftaiQn ai6 1.4 29 378 11% 


S 20 % 
43 

41% 1% 

11 11% 


17 621 17 18% 16 
0 977 10% 10% 10 


25% l7%CaanKCD 0.40 11 30 42 19% 


«S% 34% OnptXS 104 17 18 4032 D« 45% 45% 
\1 %CanMlte 58 7827 U \ 

16% 14%CanPac 002 11 401065 15% 15% 15% 
85% 60% CapCtt 020 02 21 3575 84% 83% 84% 

14% 10% Qttl 106 « 1 08 110 298 11% II 11% 

37% 18% Capsid 10 100 70 6 20% 20% 20% 

42% 20% CapddMgs 302140 6 157 23% 22% 22% 
26% 15% Cmnarfl 004 00 17 8812 18% 17% 17% 

35% 30% Cafflox 080 14 14 17 32% 32% 32% 

24% 18% Carata □ 11 8684 21% 21% 21% 


19 19 

flS «% 

It 11% 


35% 30% CartOox 
2«% iB%Camlcaa 


13 8%CarataaFr 000 10 10 211 


30 22% CaPSL 
6%54%CMr7 


26% 9% CateWI 
19% 12%CBnltlt 


21% 18%CasaCp 
10% 7% Cash An 
60% S0CX«A 
19 10%C0ICBtp 


CsPSL 100 07 11 874 25% 25% 25% 

CtxflrT 140 40 11 58 56% 58% 58% 

OrMUM 003 20 22 083 13% 13% 13% 

Curate N 6 096 70 19 Q 13% 13% 13% 

CataCp 000 10 11 2207 26% 1S% 83% 

Cash Anar 005 00 14 977 8% 7% 7% 

Cnp* 060 1.1 13 7121 58% Si% 55% 

COiCBrp 19 614 17% 18% 17% 


36% a% Carter FaX Z25 70 10 195 
13% 9%CanCa OBO 9.4 1 1308 


45% 20% Codex 020 10 5 808 20% <120% 20% 

30% 22% COT Mm 208 BJ 8 77 24 23% 24 

25% 20% CemrUxfl 1.46 80 10 23 21% 21% 21% 

15 10% CBdrlMta 090 70 9 180 12% 12% 12% 

30 24% Cm Map 006 11 16 83 27% 27% 27% 

22 12%Oet4rVM 1.42104 10 210 13% 13% 13% 
30% 20%CaatSW 1.7D 04 1 1 23B8 20% 20% 29% 

32% 21% Cenbaytl 032 10 19 849 31% 31% 31% 

27% 18% Certte 1472404 28% 28% 28% 

40 280inpl1 000 00 345437 34% 33% 33% 
12% 7%CIM«M 020 25 15 ZI00 7% 7% 7% 

15% 5%DWTKm 10 288 9% «% 0% 

40 30%QnaeM 100 40 5 8908 38 35 35% 

8% 1%CtaraaB 2 220 5% 5% 5% 

21%10%ChCifi, 55 281 20% 1B% 19% 

38% 30%aanadx 204 S0 17 58 33% 32% 33% 

42%33%ChatA 1.7B SO 613149 35% 38 35% 

11% 7%QimHtalte 000 21 31 1557 0% 9% 9% 


34% 34% 
2 % 2 % 
21% 21% 


27% 18%aaRCt 
40% 20% Orest Or 
47% 86%ncp 000 14 
28% 34% CMq«Ll2 208 90 
90 71% QcpPOAdX &00 04 
KD% 83% CtepPBAd x 700 00 
17% 12% CGU IMA 
17% UOmUBB 102 T10 


35% 22%Cheape>lA 072 13 34 386 31% 30% 31% 

47% 39%ChMnx 105 40 2013881 42% <2% 42% 

58% 40% CM Fond 145 11 137 47% 48% 46% 

19%11%0*8trx 000 14 744 13% 13 13% 

8% 5 Chock RA 8 39 6% 6 6 

41% 32 010* 13 2DB 35% 35% 35% 

34%34%OxWm 37Z100 32% 32% 32% 

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83% 68% CtUbb 104 18 11 1779 70% 70% 70% 

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i Hpve yoiw FT hand delivered in 

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32 


FIN ANCIAJCi TIMES MONDAY NOVEMBERS FI 994' 




MONDAY 


TUESDAY 


UN targets organised crime Kuchma meets Clinton 



Ministers and senior officials from the 
world's justice and interior ministries 
attend the first United Nations World 
Ministerial Conference on Organised 
Transnational Crime in Naples (to Nov 
23). They will attempt to forge a more 
coherent global strategy to combat the 
increasing threat. 

UN secretary-general Boutros Bout- 
ros Ghali, Italian prime minister Silvio 
Berlusconi and president Oscar Luigi 
Scalfaro will be present See People. 

Opec meeting: Saudi Arabia is to 
ask the Organisation of Petroleum 
Exporting Countries to extend the cur- 
rent production ceiling of 24.52m bar- 
rels of oil a day for the whole of 1995 to 
underpin soft oil prices. 

Ministers from the 12 Opec members 
are in Bali. Indonesia, to discuss pro- 
duction levels (until Nov 23). Other 
Opec ministers want a roll-over, but 
some may favour three or six months. 
Iran says it will consider all options. 

European Union transport 

ministers begin a two-day meeting, and 
are expected to agree on a series of 
measures to tighten up safety at sea. 
They will also be looking at the list of 
big trans-European infrastructure pro- 
jects in road, rail and air transport 
which are on the agenda of EU leaders 
at next month's Essen summit 

Reform of the World Bank and the 

International Monetary Fund is the 
subject of a conference in Washington 
which will bring together parliamentar- 
ians from 18 nations. 

Speakers will include Larry Sum- 
mers, Treasury undersecretary, and 
Stanley Fischer, first deputy managing 
director at the IMF. Massachusetts con- 
gressman Barney Frank, who called the 
conference, hopes influential parlia- 
mentarians will agree to push for an 
end to secrecy in the multilateral banks 
and for linkages between bank loans 
and environment and labour practices. 

Railtrack sell-off: 

Brian Mawhin- 
ney (left). 
Britain's secre- 
tary of state for 
transport, is 
scheduled to 
announce tftg 
multi-billion 
pound sell-off of 
Rail track, the 
body that owns 
the UK's rail- 
way track and 
stations. New legislation is not 
required to privatise Railtrack because 
the powers are already enshrined in 
law. But Labour will launch a fierce 
attack on the plan, particularly because 
a minister promised during the passage 
of the Railways Bill - which privatised 
train services - that Railtrack would 
stay in the public sector “for the fore- 
seeable future”. 

FT Surveys: Germany and World 
Nuclear Industry. 


Ukrainian 
president, Leo- 
nid Kuchma 
(left), begins a 
state visit in the 
US. He meets 
President Bill 
Clinton, other 
senior US offi- 
cials, and 
Michel Cam- 
dessus, IMF 
director. With 
new economic reforms on course and 
the nuclear Non-Proliferation Treaty 
ratified last week, Mr Kuchina expects 
a warm welcome from Mr Clinton. He 
will ask for continued US support to 
soften the blow of economic reform, 
ease nuclear disarmament and promote 
fbreign investment 
Mr Kuchma will present a new plan 
to shut down the Chernobyl nuclear 
power station. Ukraine will seek west- 
ern financing of $ti.49bn (£3.95bn) to 
hind projects including the decommis- 
sioning of Chernobyl and the building 
of two western-type units on its site. In 
turn, Ukraine would cover up to $6bn 
in other costs associated with shutting 
down Chernobyl 

Finland’s president Martti 
Ahtisaari starts an official visit to Ger- 
many (to Nov 25). 

Greek cotton scandal: 

« European Com- 
mission officials 
hold talks in 
Athens with 
Greece's agri- 
culture ministry 
on cleaning up 
cotton farming. 
Greece is being 
asked to repay 

up to Ecul20m 
(SlOOm) and 
accept regular 

EU checks on its cotton gins in order to 
prevent a repetition of what local news- 
papers call the Great Cotton Scandal of 
1991-92. Cotton production figures were 
allegedly Inflated by about 10 per cent 
that year so that growers could claim 
extra subsidies. 

Boxing boycott: The Mexico 
City-based World Boxing Council 
begins a boycott of all world title fights 
in California for four months. The 
move is in protest at a recent state ini- 
tiative that would bar public aid to ille- 
gal immigrants. Mexicans are expected 
to be hit most by Proposition 187, 
which will affects state health, educa- 
tion and other social services. 

Meanwhile, enforcement of the mea- 
sure has been temporarily blocked by a 
judge in Los Angeles on the ground 
that it may be unconstitutional. 

The In sti t u te of Directors holds its 
annual dinner at Grosvenor House, 
London. 

Holidays: Lebanon (Independence 
Day). 


WEDNESDAY 


Countdown to WTO 

The preparatory committee of the 
World Trade Organisation meets in 
Geneva to take stock two weeks ahead 
of the Implementation conference that 
is due to set a January 1 starting date 
for the WTO and the Uruguay Round 
global trade accords. However, nothing 
will be decided until after next week's 
crucial votes in the US Congress on 
Uruguay Round ratification (Nov 29 
and Dec 2). 

South Korea and China are due to 
sign a memorandum of understanding 
in Beijing on the possible construction 
of two South Korean-model light-water 
nuclear reactors in China. The two 
countries also plan to sign a protocol 
on co-operatiqn in nuclear safety mat- 
ters. If the project goes ahead, it will be 
the first time South Korea has built 
nuclear reactors for China, North 
Korea's last r emaining ally. 

German economy: Revised official 
tax estimates will be published which 
German finance minister Theo Waigel 
hopes will show that he will need up to 
DMlObn <S6.7bn) less than the DM69bn 
he expected to borrow to round off this 
year’s budget 

European Union fisheries 

ministers will try to agree terms for the 
full integration of Spain and Portugal 
into the Common Fisheries P olicy . 
Madrid and Lisbon made full CFP 
rights by next year a condition of their 
approval of fish-rich Norway joining, 
along with Austria, Finland and Swe- 
den. 

US economy: Durable goods figures 
for October should show a modest rise. 
Although volatile transport orders have 
caused this indicator to fluctuate in 
past months, analysts say a recent sur- 
vey of purchasing managers indicates a 
rise of about 0 A per cent. 

Animal health; The UK parliament’s 
agriculture select committee of MPs 
publishes the findings of its inquiry 
into the effectiveness of health controls 
introduced for the traffic of live ani- 
mals in the European single market. 
The report will also consider the UK's 
anti-rabies quarantine arrangements 
for domestic pets. 

National Tree Week: 

>agpg- Britain com- 

yGgsjsp mences a 

laxST nation-wide fes- 

rival of trees 
organised by 

' tVmft 1116 ^ Coim- 

^2iS!lK rn cil (to Dec 4). It 

a ims to high- 
c- light the impor- 

tance of trees in 
I I the environ- 

i t ment and to 

promote tree- 
planting and good management. 

FT Surveys: Mexico. 

Holidays: Japan (Labour 
Thanksgiving Day). 



Britain's national lottery enters its second we ek with chancellor Kenneth Clarks pock efi no muons 


THURSDAY 


Channel tunnel rail link 

Draft legislation for a £2_7bn ($4.4bn) 
rail link between the Channel tunnel 
and London is due before the UK par- 
liament. The link should cut 30 minutes 
from the three-hour journey between 
London and Paris. Work is due to start 
in early 1997 and end in 2002. The desig- 
nated route passes under the river 
Thames near Gravesend to enter Lon- 
don from the east via Stratford. 

Turkey’s foreign minister MAmtaz 
Soysal travels to Bonn for meetings 
with his German counterpart Klaus 
KinkeL Germany occupies the rotating 
presidency of the European Union and 
Turkey’s fraught negotiations over cus- 
toms union with the EU, due to come 
into force on January L 1996, are likely 
to feature high on the agenda. 

French economy: The recovery 
should be confirmed in gross domestic 
product figures for the third quarter. 
Economists expect a rise of about 0.8 
per cent, reflecting improved industrial 
production and consumption and 
strong performance by exporters. 

Saleroom: A blue teddy bear called 
Emil, bought two years ago in a Ger- 
man flea market for the equivalent of 
£1.50, is expected to set a record price 
for a teddy at an auction of toys and 
dolls by Sotheby's in London. The 
record is £55400. 

FT Surveys: Italian Banking and 
Finance- 

Holidays: US (Thanksgiving Day). 



FRIDAY 

Last data before Budget 

The Confederation of British Industry’s 

monthly survey cf UK manfactoring 
trends will be about the last piece of 
UK economic news before Kenneth 
Clarke's second Budget on November 
29. Although recent CBI surveys have 
been bullish in tone, analysts would 
not be surprised to see signs of some 
slowdown in future growth of manufac- 
turing output 

Ro-Ro ferry design: Britain’s Royal 
Institution of Naval Architects spon- 
sors a one-day symposium in London 
on recent research into the survivabil- 
ity of roll-on roll-off femes, following 
the Estonia ferry disaster m September 
which killed more than 900. The institu- 
tion believes the open car deck system 
of Ro-Ro ships cannot be justified. It 
has called for changes to ferry deagn to 
allow passengers and crew more time 
to disembark in the event of a sinking. 

Betty Maxwell, widow of disgraced 
British tycoon Robert Maxwell, pub- 
lishes her book about their marriage, A 
Mind of My Own. 

In Sep tember two Labour MPs failed 
to persuade Sir Nicholas LyeU, the 
attorney-general, to block publication 
of the book on the grounds that it could 
prejudice the forthcoming trials of Rob- 
ert Maxwell’s sons, Ian and Kevin. 

Cricket: The first of five Test matches 
between Australia and En gland begins 
in Brisbane. England hope to bring 
back the Ashes when the tour ends in 
February. 


; WEEKEND > 

Uruguay elects a president 

On Sunday, Uruguayans indulge in a 
frenzy of voting, electing a president as 
well as both chambers of congress, and-. 
19 governors. Of the 21 preridential can- 
didates there are four front runners — • 
two from the governing wianm party, - 
one from the opposition Colorados and 
one from the Encuantro Progresista, a 
broad left-wing coalition. 

The elections will determine whether 
Uruguay pushes ahead with the free- _ ■ 
market reforms hntiated.by m r rc mt 
Blanco president, Luis Alberto LacalLe. 

Rugby: Wales play South Africa in 
Cardiff on Saturday. . - 

Argentina’s two main opposition 
parties, the Radicals and the Frento 
Grande coalition, on Sunday nnmTnatn 
who will challenge Carlos Menem in 
next May's presidential elections. One . 
of the two Radical pre-candidates is - - 
considering an electoral pact with the 
Frente Gremde, a tactic that might force 
May’s elections to a second round. 

Voting starts In Norimv oh Sunday 
in a national referendum, on. European 
Union membership. 

Norway is the last of the four coun- 
tries due to join the EU next year to 
hold a referendum on its accession 
treaty. Getting a yes from Norway's 
sceptical voters, who narrowly rejected 
membership in 1972, is considered the 

hardest rhaTfeng e 


Compiled by Patrick Stiles and Jan 
Holdsuxnth. Fax: (+44) (0)171 873 3194. 




>iys»< : y 




mm ' 




■* ECONOMIC'OIARY 




Other economic news 

Monday: If the City consensus 
Is any guide, Britain's trade 
deficit with non-European 
Union countries In October 
should be barely changed from 
September’s £349m shortfall. 
However, the £350m average 
forecast reflects estimated defi- 
cits ranging from £200m to 
£500nL, leaving room for sur- 
prises. 

In Italy, provisional Novem- 
ber figures are expected to 
show subdued consumer price 
inflation of 3.7 per cent, 
increasing prospects that the 
annual rate will fell below 3.5 
per cent early in 1995. 

Thursday: The Bundesbank 
council is expected to leave 
credit policy unchanged when 
it meets in Frankfurt 

During the week: German 
money supply growth, as mea- 
sured by annualised and sea- 
sonally adjusted M3 based on 
last year’s fourth quarter, is 
expected to slow in October to 
73 per cent from September’s 
7.8 per cent 

German federal states will be 
reporting November exist of liv- 
ing Indices. Preliminary 
returns for western Germany 
are expected to show a slight 
weakening of the year-on-year 
inflation rate to 2.7 per cent 
this month from 2.8 per cent in 
October. 


ACROSS 

l Met with aggro, sadly, in con- 
veyance (8) 

5 Roman emperor's rule in bark 
( 6 ) 

9 On the 5lst of February you 
retire from protection at sea 
(4.4) 

10 Bird without bill in Poland (6) 

12 Full of trite sentiment, not 
yet set aside? (5) 

13 Ornithologist's catalogue? 
(4J>) 

14 Remove from (bad punD sail 
(6) 

16 Under a mountain peak heat 
is diffused (7) 

19 Almost completely ready to 
fight when given warning (7) 

21 Penultimate variety of spirit? 
(6) 

23 The contents are bound to be 
nonsense without approval 
by spirit (9) 

25 Arrived with round medallion 
(5) 

28 Shelter for umpire to turn 
back for example (6) 

27 A flower in Its place, the first 
one (8) 

28 Poison requires remedy - 
bring in heavy guns (6; 

29 Minister reaches the 15th let- 
ter, or as for as the 14th (8) 


Statistics to be released this week 


□ajr 

Ratoued 


Ec o n omic 

Statute 


Median 

Forecast 


Denmark 


Sep perso n al consurnp fn teqaend -0.3% 

Oct trade, ax BJ -£350n 

Nov cities consumer price tndx* 04% 

Nov dttea consumer price jn dx** 3.7% 

Oct consumer price Indx* 0.3% 

Oct consumer price IncbC* 2.1% 

Sep wholesale trader 1 % 

Oft TraaswySut^et -SS5bn 

Johnson fledbook. wfe Nov 19 . - 

Sep coincident lndx. 80% 

SBpleaflngtflffijglonladx 54_S% 

Oct consumer prtca lndx final* 

Oct consumer price lnd x fhaT* 

Oct consumer price Incut, a8 items* 02% 
Oct consumer prtoa indx , all Rems** 0.3% 
Oct consumer price ind x. ex fd/en**ai% 

Sep industrial prodf 83% 

Oct durable oretera 05% 

Oct durable shipments 

Sep industrial prodr 03% 

Sep current account SKrO.Sb 

Oct motor vehicle regsf 3.5% 

3nd qtr gross domestic prod proton 08% 

Oct house consumpttonr 0.3% 

Sep lrm securities transactions C$2. Ibr 


Dey 

raw ed Country 


Nov 25 US 


Economic 

StalMlc 


Medan 

Forecast 


Previous 

Actual 


During the week... 
Japan 

Germ any 

Germany 

Germany 

Germany 

Germany 

Germany 

Germany 

Germany 

Italy 

Italy 


3rd qtr stocks, realf 

Ml, Wte Nov 14 SI bn 

M2, w/e Nov 14 S3bo 

M3, wfe Nov 14 S4.8bn 

Oct existing home sates 

Nov consumer price ln dx, Tokyo'* 1.2% 

Nov cons umer pri ce fridx, expe’sh*’ 0.6% 

Nov consumer price Inctx. nation" 0 .9% 

Nov consumer price indx, expe'sh** 0.6% 

Nov CSI trends sway 

Oct Industrial prod price Indx* P.2% 

Oct trade balance 

Nov trade balance, 1st 10 days 

Sep trade balance DM6bn 

Sep current account -DM4.1 bn 

Oct Import prices* 0.1% 

Oct Import prices” 1.9% 

producer price Index" 0.1% 

producer price Index ” 09% 

Oct M3, from 4th qtr base 73% 

Oct priv credit. 6-mth annuafeed 8.3% 

Oct balan ce of payments 

Oct M2-3. monthly av’ge” 5% 


-N2Sl52m 


OM7.1bn 

-OMfiJSbn 


Leave London 
before lunch and 
arrive in Sydney 
for supper.* 


DOWN 

1 Ill-will to a degree and false- 
hood without number (6) 

2 Free editor ran out of ques- 
tions for the electorate (9) 

a To follow the godhead a place 
of worship is pointless - it's 
all talk (5) 

4 Joke about browbeaten gar- 
dener's aid (4,3) 

6 Land of Hope - melody 
ascends about anti-Catholic 

being beheaded (9) 

7 Sheep must be firm during 
injection 15) 

8 it sounds as though little 
Eleanor’s bare of capital (33) 

U Climbing town needs food (4) 

IS Psalm guru composed for tea? 
(4.5) 

17 Sailor has some dominion 
over a student of the belly (9) 

18 Savage, except with lawyers 
in charge (8) 

20 Some editors retire to con- 
sider (4) 

21 Cattle enthusiast a lot short 
(7) .. 

22 Caribbean island to secure 
love (6) 

24 The present queen gets away 
first (5) 

25 Trainee acted badly (5) 



"month on month, “year on year, tseasonaUy adjusted Statistics, courtesy MMS International. 


MONDAY PRIZE CROSSWORD 

No.8.616 Set by CINEPHILE 

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JOTTER PAD 




















'Uhq •tarts in Norway ;j-- 



j-~ - 





; , ;• -* 




FINANCIAL TIMES SURVEY 


GERMANY 



d Gerrnar >y may be in for a spell of indecisive 
9 vernment. But that could culminate in a new 
P itical consensus, writes Christopher Parkes 

In search of a new 
consensus 


Monday November 21 1994 


before lobbying hort«“ 
including Bundesbankers 
industrialists and economists - 
up to swamp the return- 

IhA !^ V ! ruinenl with adviceon 
the contents or its agenda for 

the German Bundestag's 13 th 

legislative period & 

HvAmL th , ough the wnserva- 
Live /liberal coalition was com- 
ing hack to power in a consid- 
erably weakened state, and 
promptly subjected to specula- 
tive attacks that it would not 
hold together through the four- 
year term, the lobbyists' 
demands remained as rigorous 
as ever. 

Mr Klaus Murmann, presi- 
dent of the BDA employers' 
association called for nothing 
less than the restructuring of 
the DMl.ODObn annual social 
welfare budget which was 
threatening to “crush us all”. 

The list presented bv Mr 
Heinrich von Pierer. Siemens 
chairman, started with a call 
for budget consolidation, and 
closed with demands for politi- 
cal support for business plus 
coherent energy and telecom- 
munications policies. Mr Hang 
Tietmeyer, Bundesbank presi- 
dent, said the government 
should not rely on the cyclical 
recovery in the economy to 
make good the nation's struc- 
tural deficits. 

Mr Edzard Renter, chairman 
of Daimler-Bent, urged Chan- 
cellor Helmut Kohl to pluck up 
the courage to tell the popula- 
tion that he faced a *pfie of 
unpopular tasks,* inclu din g 
the need to cat spending: 

Although the nhmre of items 
largely reflected the petition- 
ers' peculiar political or busi- 
ness interests, they were also 
pointed reminders of crucial 


issues, still unresolved, from 
the previous government's 
agenda. 

An immediate outcry against 
Mr Murmann, esp ecially from 
his natural allies In the ranks 
of Mr Kohl's Christian Demo- 
crats and the Bavarian Chris- 
tian Social Union, served as a 
warning that governing with a 
majority of 10 instead of 134 
required rather more subtlety 
than Mr Murmann seemed to 
appreciate. 

Despite Mr Kohl's claims of 
having a “perfectly good work- 
ing majority." his hand has 
been significantly weakened by 
the shrinking of the coalition's 
Bundestag majority, the enfee* 
blement of the Free Demo- 
cratic Party (FDP), the CDLTs 
and CSlTs liberal partners, and 
the consolidated supremacy of 
the Social Democrats in the 
Bundesrat or upper house. 

The view across the wider 
political landscape has also 
been distorted by toe gains of 
the Party of Democratic Social- 
ism. successor to the East Ger- 
man communists, which took 
nearly 18 per cent of toe vote 
in its home region despite 
being dabbed “fascists painted 
red” by Mr KohL 
Against this background, 
observers believe toe govern- 
ment must expect conflicts 
with the FDP which has effec- 
tively lost its roots in regional 
parliaments and has fewer 
seats Hmm the Greens in the 
new Bundestag. Analysts say it 
must either raise its own lib- 
eral profile - at the risk of 
friction with its conservative 
partners - or lose its identity. 

They also point to the danger 
of conflicts within the CDU 
from prominentmembers jock- 
eying for toe leadership as Mr 
Kohl approaches the expected 
end of his parliamentary 


career at the next elections. 

Such considerations, they 
say. may lead to the paralysis 
of domestic policy-making. 
Rather than struggling with a 
strong opposition and a tiny 
majority to implement conten- 
tious legislation on welfare 
spending cuts, for example, the 
chancellor may prefer to turn 
his attention to his "historic” 
responsibilities in toe foreign 
field, including the further 
development or the European 
Union. Mr Kohl intends to play 
a leading role in the EU inter- 
governmental conference in 
1996, with the aim of giving 
new gravitas to his honorary if 
rather faded post-unification 
title of “Unity Chancellor". 

The possibility of govern- 
mental neglect of domestic eco- 
nomic and fiscal affairs is fur- 
ther aggravated by mounting 
public confidence that after the 
short-sharp shock of recession, 
everything is coming quickly 
right again. 

Trade unions are already agi- 
tating for “real" wage 
increases this year although 
the Bundesbank has warned 
that years of restraint are nec- 
essary if Germany's pay-to-pro- 
ductivity ratios are to be 
restored to internationally 
competitive levels. 

Certainly, Germany is 
emerging with unexpected 
speed from the steepest slump 
since the war. Unemployment 
started falling far foster than is 
typical at the end of a cyclical 
recession. 

Company profits are boom- 
ing in many sectors. Business 
confidence is high - mislead- 
ingly high, according to the 
inftiipntfal DIHT federal cham- 
ber of trade and industry. 

' A recent-check on the mood 
among 25,000 of its members, 
in toe form of its annual 



Symbols of the new synthesis: a Communist-era mund In the city of Dresden overlooks the casino 


autumn confidence poll, con- 
cluded that while the recovery 
certainly reflected the inherent 
strengths of the economy, it 
was now tending to conceal toe 
severity of the structural weak- 
nesses exposed during the 
slump. 

For example, although unem- 
ployment is down from its 
peak early in toe year, a third 
of those without work have 
been jobless for more than 12 
months and half have no voca- 
tional qualifications. Even the 
most stoutly conservative fore- 
casters predict little substan- 
tive rhnng t* in the labour mar . 
ket for at least 18 months. Only 
9 per cent of the DIHT survey 
sample planned to take on 
staff, while 28 per cent said 
they were still cutting their 
payroll. 

Companies also stress there 
are no grounds for euphoria 
over profits. In the engineering 
industry, for example, net 
return on sales this year is 
expected to be only 0.8 per cent 


compared with a negative rate 
of minus 0.7 per cent in 1983 
and a “normal" level for toe 
industry of 2^ per cent, accord- 
ing to recent surveys by the Ifo 
economics institute in Munich. 

But industry's main concern 
is that its efforts at restructur- 
ing in the past two years may 
be rendered fruitless if federal 
government and regional and 
local authorities foil to consoli- 
date budgets and reduce the 
burden of taxation and welfare 
contributions on businesses 
and consumers. 

Business leaders argue that 
unless the whole economy is 
subjected to a rigorous slim- 
ming cure - and the govern- 
ment accounts for half of GDP 
- they will be obliged to go 
through the entire restructur- 
ing process again when the 
nprt cyclical slump occurs. 

At the heart of government’s 
problems, and the single most 
important source of concern to 
the Bundesbank, is Hn» burden 
placed on the fu t ure by moun- 


tainous public debts. The total 
is expected next year to exceed 
DM2400bn for the first time. 
At an pgrtmated DM2,150bn it 
will be more than twice as 
Wgh as the national debt in 
1990. the fateful year of unifica- 
tion. 

Despite misgivings, toe gov- 
ernment has made progress, 
and this year launched a con- 
solidation programme intended 
to cut some DM90bn from the 
federal budget by toe end of 
1996. 

One result was that federal 
debt was not increased this 
year and the total public sector 
deficit fell slightly from 1993’s 
record DM182bn. A more sub- 
stantial darling. to less than 
DMISObn. is already pro- 
grammed for next year. 

Bonn haa also made an effec- 
tive start on reducing and stan- 
phfytng corporate taxation, but 
the levy on retained profits is 
more than double that in the 
UK. 

It has chipped at statutory 


Picture: Tony Andrews 


payroll costs by reducing the 
charge for pensions insurance. 
But a new levy to cover the 
costs of care for the elderly, 
coming in next January, will 
cancel this out More than 20 
per cent of German wage costs 
are accounted for by statutory 
insurance and other "social 
state” benefit charges which 
are three times as high as in 
Britain. 

As management has shown 
in industry there is no short- 
age of scope for economies and 
new ideas. 

Most strikingly, it has dem- 
onstrated in the past two 
years, in which radical and 
painful changes have been 
introduced without any trace 
of industrial unrest, that in 
Germany it is still possible to 
build consensus and compro- 
mise in the most unpromising 
circ ums tances. Which gives 
grounds for optimism that it 
may be much to soon to be 
worrying about toe onset of 
political paralysis. 


HHiS SURVEY 

POLITICS: Helmut Kohl’s 
slim new majority casts 
doubt on haw long he win 
stay on top Page 2 

EASTERN VOTERS: chang- 
ing the face of German poli- 
tics. Profile: GREGOR GYSi, 
hero of the reformed com- 
munists. Key facts ... Page 3 

ECONOMY: it. is recovering 
but the bounce has gone. 
Profile: HILMAR KOPPER, 
Deutsche Bank chairman. 
Boardroom rumbles: corpo- 
rate restructuring — Page 4 

SAVINGS: Germans hate to 
speculate. Finance: Frank- 
furt traits London - but the 

gap narrows Page 5 

UNEMPLOYMENT: jobs 
increase, but too slowly. 
Machine tools: back from 
the brink ..... Page 6 

GUEST COLUMN: expect 
surprises, says ALBRECHT 
SCHMIDT Page 7 

PRIVATISATION: spotlight 
falls on utilities. Lender and 
Lufthansa — Page 8 

TREU HAND’S FINALE: last 
days of the sale. Profile: 
BIRGIT BREUEL. the Treu- 
hand chief Page B 

POLLUTERS’ FATE: chemi- 
cals are thinned out Land 
after communism: a private 
-free for aU .... — — .—Pago 10 

TELECOMMUNICATIONS: 
birth of a gigantic market 
Deutsche Telekom v. the 
Rest -Pages 11-12 

UNIVERSITIES: students 
blunt big funding cuts. 
Media: oligopoly rules not 
OK Page 13 

EXPORTING JOBS: manu- 
facturing in ex-CommunIst 
countries Page 14 

EMBRYO SUPER-BANK? 
report from Frankfurt Capi- 
tal m a r k e ts: borrowing stays 
high — . Page 15 

FOREIGN POLICY: curbed 
by history. Foreign travel: 
national obsession .Page 16 

BditoriaJ production: 

Maurioe Samueison 


• ■ . " ir- • . 


Today for Tomorrow 



production, freight transport 

Bremer Vulkan Verbund is a technology group with 
a maritime emphasis Research and development are of crucial 
importance to us - for solving the problems of today, tomorrow 
and the day after tomorrow. 



BREMER VULKAN VERBUND AG 







FINANCIAL TIMES MONDAY NOVEMBER 21 L9ft4; 


GERMANY 2 


„cP5«- 


M r Helmut Kohl's nar- 
row victory In the 
German elections, 
with a majority of Just 10 seats 
for his conservative-liberal 
coalition, was a personal tri- 
umph for the Carman chancel- 
lor. 

hi less than nine months, he 
transformed a lame-duck 
administration, trailing several 
points behind its opponents in 
the polls, into a winner. 

He did it very largely thanks 
to his own reputation and his 
own efforts. Yet his victory 
may prove to have been more 
Pyrrhic than real. Many are 
already speculating about how 
long the current coalition can 
last 

On the one hand, the very 
narrowness of the victory has 
done wonders in concentrating 
the mtnria of the c oplftinn part- 
ners. The usually Interminable 
negotiations between Mr 
Kohl’s Christian Democratic 
Union (CD ID. its Bavarian sis- 
ter-party, the Christian Social 
Union (CSU), and their minor- 
ity liberal partners, the Free 
Democratic Party (FDP), have 
been completed in record time. 

Trouble might well have 
been expected from either of 
the small parties. The FDP. in 
particular, in spite of being 
decimated in the election, with 
a drop in support from 11 per 
cent in 1990 to under 7 per 
cent, nevertheless holds the 
balance of power in the Bund- 
estag. It desperately needs to 
gain an Independent profile. 
But Mr Klaus KinkeL the party 
leader and foreign minis ter, 
went along with a strategy of 
papering over the cracks. 

The CSU. now the second 
largest party in the coalition, 
might have held out for bigger 
and better jobs at the expense 
of the FDP. But Mr Theo Wai- 
gel the CSU leader and finance 
minister, also played it cooL 
They afl agree on the broad 
outline of government priori- 
ties. an the need to cut back 
public spending from the pres- 
ent 51 per cent of gross 
national product, to reduce the 
budget deficit within the guide- 
lines of the Maastricht treaty. 

Ail this must be done while 
continuing to finance the bur- 
den of German unification, 
requiring massive public trans- 
fers to restructure the east 
German economy, to pay for 
the continuing high unemploy- 
ment, finance the local govern- 
ment administration which 
still lacks any reliable tax 
base, and pay for large-scale 
investment in all forms of 
infrastructure. 

As for foreign policy, it is 


Mr Kohl has triumphed again. But for how long, asks Quentin Peel 


Chancellor of unification 



■ gw 

V-'/ ■■,'! %.!■ xi. Ifs js 


The Bundestag Is opened by Ha senior MP, former refugee writer Stefan Heym, of the Democratic : 


also broadly agreed, with a 
strategy of enlarging the Euro- 
pean Union to the east linked 
with further clear steps to 
greater integration in the west. 

On the other hand, the diffi- 
culties will lie in the detail in 
the tactics, rather than the 
strategy. Precise details of the 
promised reforms of corporate 
taxation, of social spending 
cuts, and of measures to com- 
bat rising crime and illegal 
immigration, could all upset 


the applecart Foreign policy, 
too. may not be as straightfor- 
ward as it looks, with differ- 
ences between the parties on 
the pace of opening to the east, 
and on European integration. 

The problems for Mr Kohl 
certainly look fairly daunting. 
In the first place, he heads a 
tired team, urgently in need of 
fresh blood, but with little 
available to revive iL His new 
cabinet looks depressingly like 
the old one. Mr Kinkel has 


emerged from the election cam- 
paign looking like a loser, and 
may indeed be replaced by his 
party next year, if it can find 
an alternative. Mr Waigel has 
also failed to stamp his author- 
ity on his own party, having 
failed to become prime minis- 
ter In Bavaria last year. 
Remaining in Bonn is obvi- 
ously his second choice. Both 
return to the cabinet with their 
former jobs. 

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government, are relatively 
junior. : in the CDU, Mr Mat- 
thias Wissmann, hitherto 
transport minister and before 
that briefly nsearch minis ter, 
has shown himself competent 
and an effective communica- 
tor. In the CSU, Mr Horst See- 
hofer, as health minister, was 
also one of the success stories 
of the previous administration. 
The freshest new face is that of 
28-year-old Ms Claudia Nolte, 
who has shot straight into the 
cabinet as minister for women, 
youth, families and the elderly, 
combining two former minis- 
tries. Overall there will be 17 
ministers, two fewer than 
before. Chancellor Kohl has 
compounded his personnel 
problems by giving mHmgtinnc 
of his own mortality: he let it 
be known during the election 
campaig n that he would not 
stand again in 1998. That 
seems certain to unleash a 
debilitating succession strug- 
gle in the not-too-distant 
future, unless he goes back on 
his word. 

In his own party,' his natural 
successor, Mr Wolfgang SchSu- 
ble, the CDU parliamentary 
leader, has &e severe handicap 
of being wheelchair-bound fol- 
lowing an assassination 
attempt in 1990. Mr Volker 
RQhe, another erstwhile crown 
prince, has not enhanced his 
reputation as defence minis ter, 
and is thoroughly unpopular in 
his own party. Mr Kohl’s 
instinct for political survival 
has ensured that most poten- 
tial rivals for his position - 
like Mr Kurt Biedenkopf, now 
state premier in Saxony, or Mr 
Heiner Geissier. the former 
party secretary-general • have 
been banished from the corri- 
dors of power. 

The succession struggle may 
only begin in a couple of years. 
But the chancellor faces a 
more immediate problem: how 
to rule not only with a paper- 
thin majority In the Bundes- 
tag. but against a hostile 
majority in the Bundesrat, the 
second house of parliament, 
representing the 16 federal 
states. 

The Bundesrat never oper- 
ates entirely along party-politi- 
cal lines, representing a com- 
plex mix of state governments 
which range from grand coali- 
tions between the CDU and the 
opposition Social Democratic 



■W 

# ,r ? 


O 0 C 


is*-.- 






Chancellor Helmut Kohl (right ) and finance minister Thao WalgeJ Bstai to Stefan Mayra'S opeaiag speech 


Party (SPD), through ‘‘rain- 
bow” coalitions of many par- 
ties - SPD. Greens and FDP, 
for example - to single party 
rule in a minority of states. 
The SPD’s leading role in a 
majority of the governments 
mwins that it hag the capacity 
to block legislation, above all 
where finance is required. So 
Mr Kohl faces the prospect of 
having to rule in a de facto 
grand coalition with the SPD 
in the Bundesrat, as well as 
with his FDP and CSU partners 
in the Bundestag. This really 
Tr ^ng that Germany's states 
will continue to wield consider- 
able power in Bonn - as when 
they were able to win substan- 
tially increased influence over 
European Union decisions in 
the process of ratifying the 
Maastricht treaty. They can 
trim the ambitions of the fed- 
eral government, and upset 
plans for strict spending con- 
trol 

Mr Kohl is a past master at 
the consensus-building 
required by such a political 
stalemate, but it does mean 
that decision-making becomes 
enormously time-consuming 
and unwieldy. 

Perhaps his greatest problem 
win be the unpredictability of 
his junior coalition partner, 
the FDP. The liberals, mem- 
bers of almost every Bonn 
coalition, were punished by 
voters for their lack of policy 
profile, and their lack of per- 
sonalities. 

They only managed to scrape 
back into the Bundestag 
thanks to a large number of 
second votes - in favour of a 
party list, rather than individ- 
ual candidates - transferred by 


CDU supporters, who calcu- 
lated (correctly) that without 
the FDP in parliament, the 
coalition would have no major- 
ity at aQ. The temptation how 
will be to seek that profile by 
distancing themselves from 
their coalition partners. 

Mr Kinkel is committed to 
the coalition: he fought the 
election on that ba sis , and 
fought the doubters . in his 
party. But there are clearly 
those within its ranks - includ- 
ing Mr JQrgen MSllematm, the 
former economics minister, 
and possibly Mr Hans-Dietrich 
Genscher, the former leader 
and foreign minister, who 
remains very much the father- 
figure - who mi ght be tempted 
to bring down the. coalition in 
mid-term, with an eye to the 
next elections. 


O ne strategy would be to 
force the CDU and SPD 
into a grand coalition, 
as happened in 1969, leading 
ultimately to a change in 1972 
to an SPD-FDP coalition under 
Chancellor Willy Brandt. 
Another, much less predict- 
able, would be simply to switch 
allegiance to the SPD in a rain- 
bow coalition with the Greens. 
With the FDP desperate to 
recover its lost electors, any 
such strategy may be possible.. 
Mr Kohl will do his level best 
to keep them on board, 
because he knows that the 
alternative of a grand coalition 
with the SPD has never proved 
healthy for his party In the 
past 

It allows the Social Demo- 
crats to demonstrate that they 
can be worthy and reliable 
members of a government, to 


overcome the conservative 
German electors’ innate misi 
trust As foe the SPD itself, the 
party leadership has adopted a 
strategy :of ^wait-and-see;. The 
election result .was a disap- 
poinfanentr but in the end not 
a disaster. Mr Rudolf- Scharp- 
ing, the. youthful leader, has 
moved from his provincial base 
in tfainz^ wfaexe he was state 
premier, . to' the Bundestag, as 
parliamentary leader, giving 
himself the national platform 
he needs to prepare for a possi- 
ble change of power. He knows . 
that the pressure is on Mr Kohl . 
and his coalition rather" than 

on the opposition. 

He has problems on two 
fronts: her must ensure that his 
main rival far the party leader 
ship, the . smoother and more 
artkralate Mr Gerhard Schro- 
der, state premier in Lower 
Saxqixy , cannot mount a chal- 
lenge. As he was closely 
involved in the SPD election 
strategy, he. cannot distance 
himself .from blame; for the 
defeat The other problem is to 
oppose the Chancellor, without 
being seen to be totally nega- 
tive: the SPD majority in the 
Bundesrat must be used with 
care. That is the in-built pres- 
sure in the German system, 
towards consensus. 

Nothing is entirely predict- 
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in German political life. But 
the consensus-building system 
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producing entirely clear deci- 
sions, but still finding accept- 
able solutions. It is really .more 
a system of non-government, 
than strong government, 
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★ 




We’re no pushover. 
Politicians are told 


gtos&'Krs 

returned to power, albeit with 
a majority of io sea^T 
The Free Democrats the 
iumor partner in the coalition, 

^SVt! 0 jump the 5 per 
omt hurdle - due to tactual 

~ whlch «*M allow them 
m the coalition. The 

h5rf , ?«f l ° n Social Democrats 
had their share of the vote 
“creased by nearly 3 per cent 
}? 36.4 per cent. And the 
Greens/BUndnis 90 got 7.3 per 
cmt. l per cent more than the 

E ^ e “ the Party of Demo- 
cratic Socialism (PDS). the suc- 
cessor to east Germany’s for- 
mer communist party, got 4.4 
per cent of the vote on the fed- 
eral level, and nearly 18 per 
cent in eastern Germany itself. 

Yet behind the smiles and 
jubilation lies one fundamentkl 
problem which unites all the 
west German political parties: 
the election results clearly 
showed that if there is to be 
genuine political unification, 
the parties must work hard to 
establish themselves in eastern 
Germany. The elections results 
there explain why. 

In eastern Germany, the 
CDlTs share of the vote fell by 
&3 per cent to 38^ per cent; the 
FDP’s fell by &9 per cent to 4 
per cent; the SFD’s vote rose 
by 7 per cent to 315 per cent; 
the Greens/BUndnis 90 
remained almost the same at 
5.7 per cent; and the PDS’s 
share of the vote rose by 6.6 
per cent to 17.7 per cent. 

The lesson of these results is 
that a political culture is evolv- 
ing in eastern Germany which 
could point towards polarised 
voting. 

At one end of the spectrum 
is the CDU. At the other la a 
divided left, with the east Ger- 
mans deciding over the next 
few years whether the region's 
legitimate left-wing party will 
he the PDS, success or o f the 
communists, or . the SPD, the 
western-based Social Demo- 
crats. 

The SPD, against all the 
odds, did better than expected 
in the five eastern states. After 
all. it was the only political 
party which had no "block" 
party which before German 
unification had been sanc- 
tioned by fee ruling commu- 
nist, or Socialist Unity Party. 
As a result, since 1990, the SPD 
had to start from scratch in 
building up a local grass roots 
organisation. 

It made no significant head- 
way over the past four years, 
for example by winning over 
PDS voters. One reason was 
that the SPD lacked personnel 
More important, as fee central 


party organisation in Bonn 
moved towards the centre this 
had the affect of creating a vac- 
uum in eastern Germany 
which the PDS gradually filled. 

Moreover, fee SPD fa Bonn, 
under Mr Rudolf Scharping. 
failed to sense the shifting 
political alliances in eastern 
Germany, particularly after the 
elections fa June fa the eastern 
state of Saxony-Anhalt when 
the SPD managed to dislodge 
fee governing CDU/FDP coali- 
tion from power by forming a 
minority government with the 
Greens/BUndnis 90, but with 
support from the PDS. 

Saxony-Anhalt represented a 
turning point, it showed that 
the SPD in eastern Germany 
needs fee support of the PDS if 
it is to dislodge the CDU from 
power, and if it is to make any 
inroads into the left-wing vote. 
But the SPD in Bonn Is not 
prepared to allow another 
Saxony-Anhalt model to 
emerge in the eastern state of 
Mecklenburg-Vorpommern. 
There, Mr Harold Ringstorff, 
leader of the SPD, had consid- 
ered trying to form a minority 
government wife the backing 
of the PDS. Mr Scharping 
staunchly opposed this and 

A political culture is 
developing which points 
to polarised patterns of 
voting between Germany 
east and west 

insisted that the SPD instead 
form a coalition government 
with the CDU, the largest 
parly. 

This pressure from Bonn is 
seen by SPD officials in eastern 
Germany as counter-produc- 
tive. "We will never establish 
our own roots and identity if 
the SPD federal leadership 
does not recognise that eastern 
Germany is different , fen* our 
political culture is different, 
and that we need support, not 
instructions from Bonn, to help 
us establish ourselves as a gen- 
uine left-wing party here," a 
Mec klenburg-Vorpommern 
SPD official said. 

Yet as this battle for the 
left-wing vote will almost cer- 
tainly intensify over the next 
four years, with the PDS deter- 
mined not to lose the momen- 
tum, or remain a protest, or 
“anti-wessi” (anti-west Ger- 
man) party, the FDP and the 
Greens will have to reconsider 
their entire strategy in eastern 
Germany. 

The FDP foiled to jump the 5 
per cent hurdle fa the east, and 
Tailed to get re-elected fa the 
eastern state governments of 
Saxony-Anhalt, Saxony, Thu- 
ringia and Mecklenburg-Vor- 
pommern. The Greens came 
under immense pressure as 
well Although they jumped 
the 5 per cent hurdle through- 
out eastern Germany, they 
foiled to get back into the state 
parliaments of Saxony, Thurin- 
gia, Brandenburg and Mecklen- 


burg-Vorpommern. 

Thee voting trends for the 
fee FDP and the Greens Indi- 
cate two things: the centxe/lib- 
eral political culture has failed 
to become rooted in eastern 
Germany; and second, the 
question of environmental 
issues and the need for an 
alternative voice representing 
greater accountability in the 
German political system car- 
ries practically no weight in 
eastern Germany. The political 
liberal/centre and alternative 
political parties do not yet 
exist. 

The FDP explains its misera- 
ble performance in the east by 
pointing to the absence of a 
Mittclstand, the small and 
medium-sized enterprises 
which form the backbone of 
the FDP in the west But FDP 
officials also add that libertar- 
ian values of civil rights, easier 
access to citizenship, more 
rights for foreigners, an immi- 
gration law, fee protection of 
civil rights, and curbs on 
police powers, have little rele- 
vance to fee east German 
voter. "A section of the east 
German voters want strong 
leadership, a government 
which will provide security, 
combat crime, and reduce 
unemployment,” an FDP offi- 
cial said. Perhaps, when the 
economy in the east picks up, 
the fledgling Mittelstand might 
shift to fee FDP. But at the 
moment, the PDS has captured 
part of this constituency. 

The Greens/BUndnis 90 are 
even in a more difftailfc situa- 
tion. They are handicapped by 
a tiny membership. But their 
policies, which focus on envi- 
ronmental and ecological 
issues, touch few east Ger- 
mans. More disappointing for 
fee Greens is that fee in spiring 
and energetic spontaneous 
movement of “people power" 
which emerged in the autumn 
of 1999, and whose immense 
pressure led to fee collapse of 
the Berlin Wall and the com- 
munist system, has disap- 
peared. 

The wish - however idealis- 
tic - for a political system 
based on the local and popular 
level has either given way to 
rtidHiisinmngnt , or else some 
of those energies have been 
channeled into fee PDS. 

Perhaps time, coupled with 
an economic upswing, will 
allow the FDP and the Greens/ 
Bfmdnis to regroup and reor- 
ganise in eastern Germany. 
But as officials across fee polit- 
ical spectrum in eastern Ger- 
many admit fee east Germans 
are politically tired, while 
those with any political energy 
do not want interference from 
Bonn. 

"There is a yearning to make 
our own politics. To find our 
own way." an SPD official in 
Mecklenburg-Vorpommern 
explained. “If we cannot do 
thin more of our voters will 
drift to the PDS. We have 
much to do over fee next four 
years,” he added. 


Ill 

GERMANY 3 - 



Rower power Alternative Party members at the November 10 opening of the 13th partiament in the Borin Re ic hst ag buBdhtg Picture: Reuter 


■ Profile: GREGOR GYSI OF THE PDS 


Democrat of the left 


He charms fee elderly, he 
listens to the unemployed and 
he tries to capture the imagi- 
nation of the youth. He Is 
witty, twists difficult ques- 
tions to his advantage, and 
convincingly states the case 
for the east Germans. “He 
seems all things to all people, 
bat what does be really stand 
for?” asks a supporter of Mr 
Gregor Gysi, the 46 year-old 
parliamentary leader of the 
Party of Democratic Socialism, 
the successor to the east Ger- 
man communis t party. 

Mr Gysi, a former civil 
rights lawyer and son of a far- 
mer east German- minister of 
Culture, has few illusions 
about what he wants to 
achieve over the next four 
years. He wants to make the 
PDS the main left-wing party 
in east Germany and even to 
get the party rooted in west 
Germany as well, where the 
left wing is dominated by the 
Social Democratic Party (SPD). 

So far, the dapper, small 
man who alternates his smart 
suit wife black denims and 
shirt, seems to be succeeding, 
at least in the east The PDS 
won nearly 18 per cent of fee 
vote in east Germany during 
the recent federal elections, 
and nation-wide it captured 
4.4 per cent. Not bad for a 
party whose membership is 
stigmatised for its common ist 
past and pilloried by the west 



PDS leader Gregor Gysi 


German media and established 
political parties for being “fas- 
cists painted red*. All this is 
grist to Mr Gysi’s mill. “It 
means the establishment is 
taking ns seriously,” be says. 

But the next few months are 
crucial for Mr Gym and the 
PDS. For one thing, he has to 
shake off allegations of having 
bad unofficial contacts with 
fee Stasi, the former east Ger- 
man secret police. If docu- 
ments can be found to dis- 
credit him, then the PDS will 
almost certainly lose the one 
politician who can make it 
into a modern social demo- 
cratic party. 

To achieve his goal Mr Gysi 
will have to isolate the Com- 
munist Platform, a hard-line 
Leninist wing which believes 
in the centralised state and 
economy. He and Mr Andre 


Brie, his campaign organiser 
ntiH ‘'ideologist” of the party, 
want to address tins issue at 
next January's PDS confer- 
ence. 

He also wants to make cer- 
tain that the PDS moves away 
from being a “protest party”, 
which attracts fee unemployed 
and those disappointed with 
unification, to one which can 
interest the younger genera- 
tion. “The PDS could became a 
short-lived phenomenon if fee 
economy picks up and if the 
SPD really establishes itself fa 
east Germany,” said Mr Brie. 
Above aO, Mr Gysi wants to 
give fee party respectability. 
Hie (act feat the PDS now sup- 
ports the minority coalition 
government of the Social Dem- 
ocrats and the Greens fa the 
eastern state of Saxony- 
Anhalt, suggests that it wants 
to learn what power with 
responsibility means. 

However, he knows that 
time Is not on his side. He 
faces elections in B erlin next 
year, where fee SPD is desper- 
ate to dislodge Chancellor Hel- 
mut Kohl’s governing Chris- 
tian Democrats from the 
Rathans, or mayor’s office. If 
the PDS, which won four seats 
fa Berlin at the federal elec- 
tions, fares hadly in 1995, it 
will be Mr Gysi who will have 
to carry the can. 

Judy Dempsey 


KEY FACTS 


Area 

Population 

Head of State 

Currency 

Average exchange rate 


356,733 aq km 

81.2 minion 

Dr Roman Herzog 

Deutsche Marie (DM) 

Dec. 1993 $1=1.7007 DM 
.Oct 1994 $1=1.5209 DM 


ECONOMY 

IMS 1904 


Real GDP growth (%) \ 

-1.7 

2 JZ 

Real GDP growth (%) * 

Components of GDP (%) ... 

-1.1 

2.8 

Private consumption. 

55.7 

55.5 

Total investment .... 

18.9 

19.2 

Government consumption. 

17.9 

17.4 

Exports 

31.8 

32.5 

Imports 

-2A2 

-24.6 

Annual average % growth in. — 
Consumer prices (%) 1 ~.. ... 

4.1 

32 

Consumer prices (% ) *. 

8.9 

3.4 

hid. production (%) 1 . 

-7.0 

2.1 

bid. production {%) *. - — 

8.6 

21-5 

Retag sales volume (%) 1 

-3.8 

-1.4 

At end period. 



Unemployment rata (%} 1 

9.0 . 

9.2 

Unemployment rate (%) 4 . 

1&2 

14.1 

Share price growth {%) * 

44.5 

-2.8 

Discount rata (%) — — 

5.75 

4.50 

Lombard rate (%) 

6l75 

6.00 

14 Day repo rate f%) 

6.00 

4.85 

10 year govt bond yield {%). 

Trade (DM bn) «. _. ._. 

5.54 

7.58 

Current account balance... 

-35.2 

-19.5 

Merchandise exports—.. ... 

624.7 

331.7 

Merchandbe imports 

564.9 

295.2 

Trade balance. 

59.6 

36.5 


(1) Western Germany {2) Eastern Germany (3) Pan Germany 
Golcknan Sacha GDP growth forecast for 1994 
Average growth over year to date (September) for Consumer 
prices. Industrial production and retafl sales volume, 

(4) Annual % change in FTA index to end Dec 93, Oct 94. 
Unemployment Dec. 93, Oct 94. 

Interest rates. Bond yield at end Dec. 93, Oct 94. 

(5) Trade figures first half 1994 only. 

Sources: IMF, Bundesbank, Goldman Sachs. 


I 

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t 


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FINANCIAL TIMES MONDAY NOV3EMBER 


I 



The economic recovery may mask structural faults, writes Christopher Parkes 

Pessimists question euphoria 


Although mwip of the bounce 
has pne out of Germany’s eco- 
nomic recovery, the debate 
over its speed and direction is 
as lively as ever. 

There are two clear schools 
of thought over the outlook. 
The most popular - promul- 
gated vigorously by govern- 
ment and the business estab- 
lishment during the latest 
federal election campaign - is 
that the recovery will continue 
uninterrupted, taking the 
country into an extended 
period of stable growth. 

Less popular, but equally 
persistent, are the views of the 
dissidents who warn that the 
recession and its aftermath 
have distorted the real situa- 
tion. They say that despite (he 
apparent rapid recovery, a 
combination of current weak- 
nesses and the underlying 
structural faults in economic, 
fiscal and monetary policy 
indicate a rougher ride than 
that seen by the optimists. 

There is no disputing that 
the sequence of events so far 
this decade, starting with unifi- 
cation in 1990, has been 
extraordinary. The uniting of 
the two Germanies created a 
unique economic “micro-cycle" 
as a result of which the inter- 
national recession very nearly 
passed Germany by. In the 
event, pent-up demand for 
western goods and services In 
the former GDR effectively 
kept the slump at bay until 
mid-1992. Then, as partner- 
economies were starting to 
show real recovery. Germany 
slipped into its steepest cycli- 
cal decline since the war. 

Executives and economists 
who at the time admitted to 
being surprised by the down- 
turn are now confessing to 
being equally surprised by the 
speed, breadth and momentum 
of the upswing. 

The recovery has been 
driven from the start by power- 
ful export demand which has 
raised pan-German manufac- 
turing industry's output by an 
estimated 3.5 per cent this 
year, following the 7 per cent 
nosedive recorded in 1993. 
Although differing over the 
finer details, most forecasters 
reckon on a further 4 per cent 
increase in industrial produc- 
tion in 1995 which should feed 
through into 3 per cent growth 
in gross domestic product fol- 


Mamifacturfng industry 

index • 

T3C — : “ 


Quarterly figures 


125' 


120 


no ■* 


105 -*■' 


V-.* 


I West Germany 





“T 


- 

GERMANY 

1 903-87 

1987-Q2 

1993 1964 

1995 

NHt 

♦z zn 

*02% 

-7J% ♦aw* 

*SJS% 

Enllmt 

- 

- 

-7j0% *«£% 

*CJ}% 



94 change pw annum 




•100- ■ 

1088 

Sourojc VfntLB - 


1990 


1991 


1992 


1994 


West Germany: reed GDP 

DM bOBon {Fully adjusted in 1991 prices) 



850 


1992 1993 

Source: FedsntffliaUsoca Offloa and esttrnatn 

lowing 2L5 per cent this year. 

The main assumptions are 
that- 

• private and public demand 
will remain muted as a conse- 
quence of falling real incomes 
and political commitments to 
budgetary restraint; 

• exports will continue to 
grow, although less dramatic- 
ally than this year, and. cru- 
cially. 

• increasing corporate confi- 
dence will lead to a rise in cap- 
ital spending to the benefit of 
the domestic plant and invest- 
ment goods industries and 
their myriad suppliers. 

A key factor behind Dresd- 
ner Bank’s estimate of 3.1 per 
cent GDP expansion in 1995. 
for example, is an expected &3 
p er cent rise in expenditure on 
plant and equipment after a 
cut of 13.8 per cent in 1993 and 
an increase of a mere 1.6 per 


1994 


1996 


cent this year. 

Dresdner is also counting on 
an upturn in commercial con- 
struction to counteract the 
slowing pace in house-building. 

Which is where the pessi- 
mists join the argument. They 
claim that the hmising boom, 
which led to an increase of 
almost 30 per cent in new 
mortgages in the first eight 
months or this year has been 
choked off by a 2 per cent 
increase in long-term interest 
rates. 

These rates, they argue, will 
act incr easing ly as a brake on 
capital investment within 
industry. 

Last month's traditional 
autumn assessment of the out- 
look from Germany's six lead- 
ing economic institutes (see 
page 7 table) dwelt at length on 
the issue. A majority opinion 
(excluding Berlin’s Keynesian 


DIW institute) noted that the 
international recovery and 
increasing demand for invest- 
ment capital had pushed up 
long rates sharply and quickly. 
As a result German business 
found itself faced with high 
borrowing costs at an unusu- 
ally early stage in the recovery 
process. 

However, the institutes said, 
industry was undeterred. 
Investment had increased 
clearly from the middle of the 
current year as profit expecta- 
tions improved. Restructuring 
and rationalisation undertaken 
during the recession had low- 
ered break-even thresholds. 
Low pay deals and greater 
labour-force flexibility had 
reduced unit labour costs to 
rates prevailing at the start of 
1991, and capacity utilisation 
was once again back at 
long-term average levels. All 
these indicators pointed to 
investment in new capacity. 

The DIW, on the other hand, 
believes that high long rates - 
a result of the anti-inflation 
activities of the US Federal 
Reserve which are unrelated to 
European conditions and mar- 
ket needs - will constrain 
investment plans. 

The nub of the conflict lies 
between the DIW’s demands 
that the Bundesbank should 
cut short-term rates and the 
majority view that far from 
leading to lower capital market 
rates, such a move would raise 
both inflationar y expectations 
- and, consequently, long 
rates. 

There is also strife, although 
less polarised, over the damp- 
ening effects of the D-Mark's 
relative strength on export 
opportunities, and the impact 
on domestic demand of con- 
tinuing pressure on disposable 
incomes. 

A recent survey by Munich's 
Ifo economics institute found 
around half German companies 
were already counting on nega- 
tive effects from the dollar's 
fell in mid-October to its low- 
est rate against the D-Mark in 
two years. On balance, how- 
ever, the national currency's 
strength is in present circum- 
stances seen as a positive fac- 
tor since it acts as a buffer 
against imported inflation. 

F alling personal incomes are 
also playing a role in curbing 
inflation, reducing manufactur- 


GERMANY 


If your corporation is 
looking fora foothold in Ger- 
many or intends to broaden 
its existing base by an acquisi- 
tion, we can assist in search, 
approach and negotiation. 

As our domestic clients 
are usually entrepreneurs, 
proprietors or shareholders 
of privately-owned German 
companies, we are well ac- 
quainted with their mentali- 
ty. We are sensitive to this 
when making approaches 
and during negotiation and 
valuation. 

If local competence is 
needed to realize your acqui- 
sition goals in Germany suc- 
cessfully, please contact us 
for further information. 


Fuchs Consult 


Kreuzberger Ring 64 -65205 Wiesbaden 
Telephone (x 49 611) 70 00 40 - Fax (x 49 61 1) 71 04 04 


ers' and retailers' room for 
manoeuvre on prices. But 
there is growing evidence that 
it may soon he time to reassess 
the broader effects of shrunken 
pay cheques. 

On recent experience, many 
economists predict the German 
public will continue to draw on 
their substantial savings to 
prevent any real erosion of 
their living standards. A study 
from the BVB banking indus- 
try association noted that “the 
stability of private demand is 
remarkable in tile light of the 
fact that real incomes have 
been felling since the middle of 
1993.” 

Consumer demand was still 
at the level it reached in the 
preceding phase of economic 
growth, the association said, 
adding that savings had acted 
as an economic stabiliser dur- 
ing the recession, and implying 
they would continue to func- 
tion in similar fash inn during 
the recovery phase. 

Latest estimates suggest real 
private consumption has 
grown around 0.5 per cent this 
year - confounding general 
forecasts of contraction - with 
a similar rise forecast for 1995. 
However, the introduction in 
January of an in come tax sur- 
charge to fund unifi cation 
transfers, higher insurance 
taxes and the launch of a con- 
tributions scheme for care far 
the elderly are expected to 
slice another DM40bn a year 
off disposable incomes. 

If consumers respond by dig- 
ging deeper into their reserves 
or reducing the amount of cash 
they salt away each month, it 
will not be long before the 
Bundesbank pays attention 
and will not hesitate to raise 
interest rates, regardless of the 
effect on growth. 


Profile: HILMAR KOPPER 


Tough guy at the 



Ton, thick-set and radiating 
energy, Mr Hilmar Kopper, 59, 
seems to be thriving after five 
years at the head of Deutsche 
Batik. He talks of rising prof- 
its, greater efforts to fight off 
domestic competition and 
improve efficiency, and a new 
push abroad in investment 
banking, writes ANDREW 
FISHER. 

His period as speaker of the 
management board at Ger- 
many’s largest commercial 
bank has, he says, “been a 
very lively period of tremen- 
dous growth gud great chal- 
lenge”. 

But the latest of his years in 
one of Germany’s most 
demanding corporate jobs has 
undoubtedly been one of the 
toughest 

As the country climbs out of 
recession, criticism of banks' 
lending policies and some- 
times hi gh- handed a tti tudes to 
customers have grown. Adding 
to Deutsche's tribulations was 
the near-collapse of MetaD- 
gesellschaft, the ind ustrial and 
trading co m pany with which it 
was involved as shareholder 
and creditor. 

A further blow came with 
the failure of the Schneider 
p roperty group, to winch, the 
bank was a major lender; it 
while on that 

crisis that Mr Eopper made his 
fateful remark about outstand- 
ing payments to contractors 
being “peanuts” - the German 
press picked this up with glee 
as evidence of the bank's arro- 
gance. 

But these upsets were noth- 
ing compared to the dream- 
stances in which Mr Kopper 
came to his presort post He 
was appointed after Mr Alfred 
Herrhausen was murdered by 
terrorists in November, 1989, 


fvV, 



Hflmar Kopper of Deutsche Bank 

just three weeks after Ger- 
many had experienced the 
euphoria of the fell of the Ber- 
lin WalL 

Mr Hopper's pragmatic 
down-to-earth style is very dif- 
ferent from that of Mr Her- 
rhansen who had a high public 
profile through expounding on 
a variety of political and. eco- 
nomic topics beyond the world 
of banking. Mr Herrhausen 
spoke in favour of reonifica- 
tion before many in west Ger- 
many bad accepted its inevita- 
bility. But It was Mr Kopper 
and his colleagues who bad to 
move the bank eastwards. 

“We had to some of 
the fastest and most far-reach- 
ing decisions made since 
World War Two,” he says. 
“Looking back on it (the 
investment in the east I, there 
is very Uttie we would change. 
We are very pleased with how 
we were able to grow in that 
period.” Now, it has a larger 
market share in east Germany 
(nearly 9 per cent) than in the 


west. Surprisingly to many 
people, Geu i iaiiy's big banks' 
have - a smaller sfa areof tfaefr 
own' market than their coun- 
terparfs in other countries. 

With total assets of 
DM 57 Qbn, Deu tsche B ank is. 

sion; ft has bought retafl'heuk- 
tng networks in Spain 'and? 
Italy and is locating. ite'vforiil- 
wide investment hankttig 
activities in Londevu'-^bere 
Morgan Grenfell (Itemercfaant 
bank subsidiary) fe based. 

Bnt there is obe ftreawbere • 
. Deutsche Bank -does not plan 
to expand: its ittdnstiial shaie- 
holdings, with a market yah® 
of some DM25bn. White these 

provide useful earning* 

cushion, theyalso attractenvy 
and critical comment about 
the Machfc der Bankeu (power 
of the banks). 

Compared with the market 
capitalisatioi of listed compa- 
nies, German banks’ HnhBnp 
are tiny. But to same politi- 
cians, they are a provocation. 
Calls to reduce , them ' are 
voiced often, usually linked 
with the demand that the . 
prominent presence of hankers 
on company’s" nan-executive 
snpervisoryboardsbe reduced. 

Mr Kopper rejects the 'view ; 
that banks make poor, share- ' 
tedders. "What makesa bmv 
a worse shareholder thanany- 
body rise?” He says Deutsche 
does not interidto Increase its 
portfolio, though it would like 
to diversify it Oh *M* and 
other issues whenr thebank 
has come under fire, he has a 
simple answer “We are a 
member of society and thereis 
nothing wrung in people dis- 
cussing what we do.” Even so; 
he must hope the next few 
years bring fewer barbs and 
co ntro versy than 1994. 


G ermany's two-tier board 
system has been a 
much admired feature 
of its industrial and finanrial 
strength in the post-war 
decades, but recent events 
have led to some red faces 
among bankers and business- 
men. 

For the more complex and 
International businesses 
become, the harder it is for 
non-executive supervisory 
board members - meeting only 
four times a year - to have a 
firm grasp of what is really 
going on. Hie case of MetaH- 
gesellschaft has reopened the 
debate about the effectiveness 
of these boards. The main 
questions asked are whether 
they serve any real purpose 
and what sort of reforms, if 
any. should be introduced. 

As usual in such cases, it is 
the banks which feel the 
impact most severely. It is they 
who provide many of the non- 
executive board members, and 
especially chairmen. 

Mr Ronaldo Schmitz, a man- 
aging board member of Deut- 
sche Bank, took over the 
supervisory board chairman- 
ship of MetallgeseELschaft in 
March of last year. It was at 
the end of 1993 that the Indus- 
trial and trading company 
revealed spectacular losses on 
US oil futures trading. Mr 
Schmitz's response was to sack 
key members of the company's 
board, headed by Mr Heinz 
Schimmelbusch, and try end 
unwind the financial costs of 
the complex oil contracts. 

The argument about whether 
this was done in the right way 
- or whether it made paper 
losses into real ones - is con- 
tinuing, with executives of the 
bank and the company ranged 
against academics and former 
MetaUgesellschaft employees. 
But the wider and more signifi- 
cant debate, over the real pur- 
pose and relevance of German 
supervisory boards, is only just 
beginning. 

Nor is it a new one. Previous 
industrial upsets have also led 
people to question not only 
whether the system of two-tier 
boards was appropriate in the 
first place but also whether the 
right people were being 
appointed to them. Today, 
however, the debate in Ger- 
many also has to be seen, in the 
context of a wider interna- 
tional discussion over corpo- 
rate governance - the relation- 
ship between management, 
shareholders and others 
closely involved in a corpora- 
tion, such as employees. 

The mam criticisms of the 

German supervisory board 

(AufsichtsnU) system concern 
the frequency of meetings, the 
number of mandates individu- 
als should bold and the Patent 
to which their work is sup- 
ported by committees on such 
functions as auditing and per- 
sonnel. None of this would 
guarantee that debacles like 
that of Metailgesellschaft - 
where Mr Schmitz says Mr 
Sc him melbusch did not keep 
him properly informed - could 
never happen. But such 
im prove ments would provide 
an extra level of protection. 

The main Job of the supervi- 
sory board is to choose the 
management board (Vorstcmd). 
it also advises on major invest- 
ment and other decisions. 
Since 1976, under the MUbes- 
timmung (co-determination) 


■ CORPORATE GOVERNANCE 

Perturbation in 
the boardrooms 


law, large companies must 
have an equal number of 
shareholder members on their 
supervisory boards. However, 

the chairman has a Casting 
vote and one labour member 
has to come from the white-col- 
lar s taff and is thus likely to 
side more with management 

The workload for supervi- 
sory board members can be 
immense, especially for the 
chairmen. Because of their 
links with corporations and 
their status in the financial 
community, bankers are often 
chosen as beads or members of 
these boards. Top managers of 
Deutsche Bank (from board 
members downwards) sit on 
around 400 supervisory boards; 
Mr Hthnar Kopper, the bank's 
chairman, heads the supervi- 
sory board of Daimler-Benz, 
the country’s biggest industrial 
group, and sits on those of 
Volkswagen, Lufthansa and 
Bayer, among others. 

One of his Deutsche Bank 
colleagues, Mr Rolf Breuer, 
believes it is up to the banks to 
make the main proposals fin 1 a 
reform of Germany's non-exec- 
utive board system. One sug- 
gestion, also put forward by 
some politicians, is for a reduc- 
tion in the number of such 
board positions one person can 
hold; currently, it is 20. “It 
would certainly be desirable if 
people had more time for a dif- 
ficult mandate," he told Firum- 
zen magazine. 


He also said supervisory 
boards would benefit from hav- 
ing mure experienced business- 
men at or near retiring age. 
“They would be 65 or younger 
and have a great deal of experi- 
ence or contacts.” Store com- 
mittees would help, too. But he 
thought the Aufsichtsrat sys- 
tem as a whole was healthy . 

In a comprehensive descrip- 
tion of rhangwB needed to the 
system, Mr dorian Schilling, 
partner in a Frankfurt-based 
management consultancy firm 
(Amrop Mfllder & Partner), 
agreed with some of these 
points. He said a study by the 
firm had shown that many 
supervisory board members 
themselves agreed with criti- 
cisms now being aired. 

O f course, if shareholders 
took greater account of 
their own Interests in 
the first place, many of the 
problems would never occur. 
This would need a basic 
change in shareholder con- 
sciousness, he said in an 
article in Frankfurter All- 
gemeine Zeitung . the daily 
newspaper. But since this was 
not likely in the short term, 
improvements in the workings 
of supervisory boards were 
necessary. 

The lack of a strong equity 
culture in Germany is often 
bemoaned by those wanting to 
speed up development of the 
country’s financial markets. 


Cad FQrstenberg, a legendary 
German banker who died in 
1931, once said shareholders 
were stupid and cheeky - stu- 
pid for buying shares and 
cheeky for expecting divi- 
dends. However, Mr Schilling 
noted there were few Goman 
shareholders and they were 
seldom “cheeky” enough to 
call management and rianexec- 
utives severely to account 

Among the main proposals 
arising from the Amrop Mttlder 
study were:' a more open 
method of choosing supervi- 
- sory board members; -mare use 
of specialised committees; 
smaller boards of no more than 
12 people instead of the 20 or 
so at some companies; fewer 
bankers, a point with which 
many bankers themselves 
agreed (Mr Schilling reckoned 
this reflected the harsh criti- 
cism many have come under 
because of their supervisory 
hoard roles); the voluntary 
acceptance of fewer mandates; 
and more frequent meetings. 

Few critics of the system 
actually want to do away with 
it altogether; it has played too 
valuable a role in promoting 
industrial harmony and solid- 
ity. Nor is the current discus- 
sion anything new. Reforms 
were also mooted after crises 
such as those at AEG, the elec- 
trical company now owned by 
Daimler-Benz, IBH, the now 
defunct construction equip- 
ment maker, and the KlOckner- 
Humboldt-Deutz engineering 
concern. 

Changes do not happen fast 
in Germany, so any revamping 
of the supervisory board sys- 
tem will take time. But if noth- 
ing is done, the next crisis will 
raise further doubts about Us - 
viability. 

Andrew Fisher + 


0 


Degussa on Degussa 



Aiming high ensures 
down-to-earth 
solutions. 


For centuries, mankind has 
looked to science and technology 
to create heaven on earth. 

But our efforts have not always 
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progress In one area ran often 
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Degussa understands the 
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researchers In chemistry, precious 
metals and pharmaceuticals 
work closely together to appre- 
ciate each other's viewpoint lb 
help each other weigh the oppor- 
tunities, for mankind against the 
risks to our environment 


Only mutually beneficial 
ideas are good enough for our 
tomorrows. Which is why our 
work in all areas involves serious 
consideration for environmental 
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For Degussa. it all began 
with goto and silver. Today. -we- 
shine in many more fields. 


AO 


SOLU77 0% 




Degussa <#> 




^Control 

Purificatii 

Conserve! 





finance TlMKs 


MONDAY NOVEMBER 21 1994 


★ 


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.‘.‘I ..t.l .. 



^HQ s_ ar e timid investors, says Andrew Fisher 


Afraid of a flutter 


^^^~vesav C n 
stocks and sh^E,^ downs 0 

LonB-tprnT SI \ area - even thouc! 

«SrS: ,te ““ 

S&S33S 

from equities t,al B 11 ™ 

ra”h° e rZ' ihe real story i, 
«n™« r n ? Qre C 0 ®pJex. First 

pressurT?,?’ unavoidable 

i«avf ure oa individuals tc 

£wt far° r »L pr ? Vision them 

Sf ftfi£. needs lviH acc entu- 
ate tlw change. And third, the 

reroUecUan of world wars and 

and the resulting dis- 

^mi^T Ubereplac ^fr 

™S L by ,he “PfortSS 

opening up Jn the rapidly 
22 international capital 

. 'f? e P resen t statistics look 
fairiy dismal for proponents of 
the equity culture. Only 5 per 
cent of German households’ 

assets °* 
UM-l,000bn consist of equities. 
Of the money going into 
investment funds, over two- 
thirds is directed towards 
those specialising in bonds. 

number of listed stocks is 
dwarfed by those in other 
countries; Germany’s 665 com- 
pare with 1,900 in the UK. 1,300 
in Japan and 6£00 in the US. 

On the other hand, Germans 
saved more than 13 per cent of 
their incomes last year, well 
above the level in Ranee, the 
UK and the US. Why does more 
of that money not go into 
shares? In the view of Mr Ger- 
hard Lie tier, a director of the 
Daimler-Benz vehicle and aero- 
space group, efforts to win 
over the investors of the future 
will have to be made now if 
they are to be persuaded to go 
more enthusiastically into 
equities. 

If households’ property own- 
ership is added in, their total 
assets amount to around 
DMIO.OOObn. As much as 
DM2,000im could be passed on 
to the next generation np to 
2000, he told an investment 
conference in DQsseldorl The 
average value of an Inheri- 
tance would be about 
DM300,000. 


Mr Lioner had several 
answers to the above question. 
One was the existence of a 
financial and accounting sys- 
tem which favoured creditors 
rather than shareholders. Sav- 
ers deposit funds with banks 
which lend them to companies. 
Shareholders’ interests are 
often neglected. Nor is it easy 
to obtain a clear financial pic- 
ture from many corporate 
accounts, since high levels of 
tax-free reserves stand in the 
way of full profit disclosures. 

Daimler-Benz started chip- 
ping away at such obstacles 
when it agreed to produce a 
separate, and more open, set of 
accounts for its US share list- 
ing last year. Other companies 
are reluctant to follow, but 
may have to If they want to tap 
world markets for cheaper 
sources of finance. 

One reason for the govern- 
ment’s efforts to help develop 


Attitudes are changing, 
with the rise of postwar 
generations who do not 
remember the inflation 
crises of the past 


the financial infrastructure 
was the sheer size of future 
capital-raising needs. Not only 
is the public sector itself a 
heavy borrower, but German 
state and private companies 
are also expected to come to 
the market -in increasing vol- 
umes. 

As Mr Liener pointed out, 
the partial privatisation of 
Deutsche Telekom, the state 
telephone company, is expec- 
ted to raise some DM15bn. This 
will only be the first tranche. 
Daimler itself raised DM3bn 
this year. "The German capital 
market Is over-stretched with 
sums of this type,” he said. 
“Thus large companies will 
increasingly turn to other capi- 
tal markets, above all to the 
US, the most productive in the 
world." 

If Gorman companies are to 
take advantage of this - Deut- 
sche Telekom hopes eventually 
to obtain a US listing - they 
will have to adapt to 
Anglo-Saxon methods. US 
institutions have a huge vol- 
ume of fimds for investment; 
by next year, they will have 
JlOObn invested abroad. To be 


tempted more heavily into Ger- 
man stocks, they will need 
more transparent accounts, 
evidence that companies really 
do care about the price of their 
shares, and a wider spread of 
issues. 

If this occurs In the next few 
years, the outlook for German 
investors will also improve. 
Some progress is already dis- 
cernible. Investment funds (the 
equivalent of UK unit trusts) 
attract a growing volume of 
funds. Bundesbank figures 
show that every seventh 
D-Mark invested now ends up 
in a managed fond compared 
with every 13th in the 1980s 
and only every 30th in the 
1970s. 

The central bank said unit 
purchases by private and insti- 
tutional Investors had under- 
gone "a powerful upturn" after 
being overshadowed by other 
forms of Investment before the 
mid-1980s. Foreign bankers 
also pay tribute to the efforts 
of investment funds, some 
owned by the big banks, to win 
over investors and provide a 
wide range or domestic, for- 
eign, and hedging funds. 

Although most German 
Investors still prefer bond- 
based funds, their tastes are 
changing, says Mr Christian 
Stronger, head of DWS. Deut- 
sche Bank’s fond management 
operation. "The proportion of 
money being invested in our 
equity fimds has been rising 
strongly. FOr DWS, it is now 20 
per cent. It ought to go to 35 
per cent” This could happen in 
two to four years - “hopefully 
before the end of the millen- 
nium". 

By putting a Mr Smiley face 
on some of its brochures, DWS 
has tried to catch savers’ atten- 
tion. Mixing fun and finnn«> is 
fairly un-German, but DWS 
hopes to appeal to investors of 
all temperaments. Also adopt- 
ing a novel approach. Beren- 
tzen, a drinks company, put 
details of its recent share issue 
on the backs of schnapps bot- 
tles. 

Another innovation is the 
DM5 nominal share, now 
allowed by law and aimed at 
making shares more affordable 
by dividing them into smaller 
units. The first such issue, by 
the Fielmann optical company 
in September, was an immedi- 
ate success. 


GERMANY S 



Frankfurt akport* a new twmfciafc stow to catch on but quick to catch up 


Andrew Fisher studies Germany’s bid to be a world financial centre 

Frankfurt flaps its wings 


S low to catch on but 
quick to catch up" Is the 
verdict of a foreign 
banker In Frankfurt on how 
Germany’s financial markets, 
and those responsible for their 
development, have responded 
to pressures for change. 

The Bonn government has 
pushed through laws to make 
Finanzplatz Deutschland (Ger- 
many as a financial centre) 
more attractive and efficient; 
the equities ‘and futures mar 
kets have been streamlined; 
and the Bundesbank has taken 
a more relaxed stance over 
financial Innovations. More 
changes are in the pipeline. 

This activity is yielding 
results: Insider trading is being 
outlawed: a new body to regu- 
late the securities markets is 
being formed: tougher disclo- 
sure rules for share stakes are 
being introduced; and money 
market funds - common in 
countries like France and the 
US - are becoming part of the 
financial landscape. 

Thus Frankfurt has the basis 
to develop into a much more 
dynamic financial centre. But 
this does not mean it Is 
approaching the status of Lon- 
don, a global centre ranking 
with Tokyo and New York. 
That was underlined by the 
recent decision of Deutsche 
Bank to base its investment 
banking activities in London, 
where it bought Morgan Gren- 
rell, the UK merchant bank, 
five years ago. 

The fact that Germany's big- 
gest bank took that long to 
choose London as the centre of 
its investment banking activi- 
ties - its German business will 
stay in Frankfurt - shows the 
truth of the above quote. On 
the other hand, Deutsche Bank 
did not want to swamp Morgan 
Grenfell's identity and was 
keen to learn about the more 
entrepreneurial Anglo-Saxon 
ha nking culture. 

Although Deutsche Bank's 
plans shook many people in 
the German financial commu- 
nity, there was general under- 
standing for its decision. Lon- 
don Is where much of the 
expertise lies and where inter- 
national equities trading, 
mergers and acquisitions 
advice, and derivatives busi- 
ness are Ear more highly devel- 
oped. Other German banks 
may also move equities and 
derivatives trading to the UK. 

While this will hardly 
enhance Frankfurt’s reputa- 
tion. it should not dent it too 
much. Many bankers see 
Frankfurt's main role as a 
regional financial centre for 
continental Europe, handling 


important deals for both east 
and west. 

"What we do in London 
should and will have a positive 
effect on what we do in Frank- 
furt,” said Mr Hilmar Kopper, 
Deutsche Bank's chairman. 
“The success we may have as a 
London participant should 
mean additional business and 
more success for Finanzplatz 
Frankfurt" 

But that will mean more 
effort by those in Frankfiirt 
itself. As the home of the 
Bundesbank and now of the 
new European Monetary Insti- 
tute - forerunner of the 
planned European central 
bank - it is one of the world’s 
most important monetary capi- 
tals. It houses several impor- 
tant international banks, a 
thriving bond market - the 
third largest in the world and 
biggest in Europe - and a suc- 
cessful futures market, the 
Deutsche TermlnbOrse (DTB). 

It is in equities that Frank- 
fort, which dominates trading 
on Germany’s eight stock 
exchanges, has the most catch- 
ing up to do. This reflects the 
relative lack of interest among 
private investors in shares. 


though this is whang in g , and 
companies’ traditional reliance 
on bank loans rather than 
equity. Smaller German com- 
panies have also been reluc- 
tant to dilute control by rais- 
ing funds in the market. 

“Germany is not so far a 
stock-market oriented society," 
says Mr Bernhard Walther, 
head of Dresdner International 
Research Institute (Dili), part 
of Dresdner Rank, “But this is 
changing rapidly.” He believes 
the government's big privatisa- 
tion programme will provide a 
huge impetus. 

T he partial privatisation 
of Lufthansa, the Ger- 
man airline, raised some 
DM1 bn this year. But that of 
Deutsche Telekom, likely to 
raise some DMl5bn early in 
1996, will have a much greater 
Impact. Foreign banks have 
vied to play a key international 
role in the Tefekam flotation, 
next to Deutsche and Dresd- 
ner. If the issue is handled 
well, it could promote share 
ownership among private 
investors and raise Frankfurt’s 
status. 

“The repercussions of Deut- 


sche Telekom will be quite sub- 
stantial." says Mr Andreas von 
Buddenbrock, head of invest- 
ment banking at the German 
operation of Merrill Lynch, the 
US investment house. Foreign 
interest in the issue will be 
substantial, but domestic 
investors will also be wooed. 

There is plenty of scope to 
lift outside interest in German 
stocks. Of the net capital flow 
of 86Sbn by US investors into 
foreign equities last year, Ger- 
many accounted for only 
$2.7bn. "The German market 
has obviously only been of 
minor Interest to American 
investors,” Mr Buddenbrock 
wrote in BOrsen-Zeitung, the 
financial newspaper. With US 
investors becoming more glob- 
ally-minded, “German corpora- 
tions should attempt to became 
more a t trac tiv e". 

That means dearer accounts, 
greater attention to investor 
relations, and more under- 
standing of how capital mar- 
kets work. For an economy the 
size of Germany's, the stock 
market certainly needs more 
muscle. Only 6 per cent of 
households own shares, for 
below US and British levels. 


Moreover, the market capitalis- 
ation of German shares is 
equivalent to some 30 per cent 
of GNP. again Ear lower than 
elsewhere. 

But Germany has a highly 
successful economy in which 
companies tend to put manu- 
facturing and product quality 
much higher than financial 
skills. For private investors, 
the Bundesbank's solid mone- 
tary record! has meant that 
fixed-interest investments have 
produced steady gains. Two 
world wars, the hyper-inflation 
of 1923 and the trauma of cur- 
rency reform in 1948 have 
tipped the scales away from 
the uncertainty of shares to 
the safety of bonds and 
savings. 

“In Germany, equities have 
not always been better than 
bonds,” notes Din's Mr Wal- 
ther, citing the 1970s. But now 
that the international trend is 
towards more fund-raising 
through securities issues and 
less through bank loans, he 
sees a new opportunity for 
Frankfurt. Its regulatory 
framework is as good as any- 
where. “Now, we’ve got to put 
life into it” 



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ANOTHER DAY, A 


BETTER WAY 






«: 


Falling slowly 


Wiser 


The turning point in the west 
German, labour market in mid* 
summer this year coincided 
happily with the recovery of 
the riding coalition's fortunes 
in the pre-election opinion 
polls. 

However, as was to be shown 
by the election results and is 
becoming increasingly appar- 
ent in the monthly jobless 
data, neither event was as deci- 
sive as some would have the 
world believe. 

The adjusted total of unem- 
ployed in the west fell 46.000 
between June and October, and 
shows signs of continuing' to 
ease. There will no doubt be 
gung-ho headlines when the 
unadjusted figure for the for- 
mer GDR drops below lm this 
month or nest - provided win- 
ter does not set in too early 
and send the total up again. 

But even the most optimistic 
forecasts indicate that gross 
domestic product growth of 
3-or-more per cent in 1995 will 
have little apparent effect on 
the jobless rate - least of all in 
old heavy industry areas such 
as the Ruhr. 

According to the autumn 
prognosis of Germany's six 
leading economic institutes 
(table on facing page) the rate 
in the west will average &2 per 
cent after 8.3 per cent this 
year. In the east, it will stay 


around 13 peT cent. Overall. 
3.5m people will remain with- 
out work. 

Even longer-term, as recov- 
ery consolidates, economists 
expect western employment to 
expand at only half the rate of 
growth in GDP because of 
industry’s need to improve pro- 
ductivity further. 

In the east, where economic 
restructuring is still in full 
swing, the situation is compli- 
cated by productivity (as mea- 
sured in GDP per employed 
person) which is still only half 
that in the west while unit 
labour costs are 50 per cent 
higher. 

Even so, unemployment is 
easing and a delicate balance 
has emerged in which recover- 
ing industrial companies are 
managing to absorb the large 
number of people still being 
squeezed out of public sector 
and agricultural jobs. The situ- 
ation is also being eased by a 
growing core group of self-em- 
ployed people. According to 
official estimates, the number 
of self-employed in the former 
GDR has risen by well over 40 
per cent since the start of 1991 
to almost 500,000 or 7.5 per cent 
of the total in work. 

As in the west, where 10.5 
per cent of the workforce is 
self-employed, many have 
found roles for themselves in 


the service industries which 
most economists see as the 
main source of hope for a solu- 
tion to Germany's peculiar dif- 
ficulties with structural unem- 
ployment 

According to a recent study 
from the BHF bank, the prob- 
lem in the west is due partly to 
the mismatch between the vir- 
tual unavailability of unskilled 
jobs in the region and the 50 
per cent of the jobless total 
who have no vocational or pro- 
fessional training. Apart from 
ovi stingy education and t ra i n i n g 
schemes which are funded out 
of the labour office budget, the 
study suggests efforts should 
be concentrated on ways of 
developing hitherto unviable 
service “industries" in areas 
such as social work, for exam- 
ple. 

It was essential, however, 
not to follow the US pattern 
where the “employment mira- 
cle” had been achieved with a 
combination of low pay and 
minimal social welfare cover 
which generated a new layer of 
working poor, living on the 
fringes of poverty. 

One suggestion, much dis- 
cussed amo ng economists but 
yet to emerge at the political 
level, is that federal employ- 
ment office funds, currently 
used for unemployment pay, 
retr aining and work-creation 


" >* ® t <?; ’*» 


Transport workers ki Essen, North Rhine-WostphaSa, striking for higher pay Picture: AP 


projects, should be diverted 
into income supplements for 
people in work but earning less 

the legal minimum 

Mr Bernhard Jagoda, presi- 
dent of the labour office, 
recently proposed that such a 
new service sector might 
spring from the growing 
demand for home care for the 
elderly, and estimated it could 
create some 300.000 jobs. 

Mr Jagoda is also a strong 
advocate of job-sharing, claim- 
ing 25 per cent of all jobs could 
be split, and urging federal and 
local government to take the 
lead in public employment, 
wbere continuing waves of 
redundancies are threatened as 
a result of budget cuts. 

While such ideas are pro- 
cessed in the mill of public and 


political opinion, the consen- 
sus remains that most can be 
done In the short-term in 
annual pay negotiations and in 
the day-to-day contacts 
between employers and their 
workers' representatives. 

The need to bring Germany's 

cost of man ufacturing labour 
under control if not into hue 
with European competitors' is 
clearly underlined by the latest 
data which shows effective 
hourly pay in west German 
manufacturing increased by 25 
per cent between 1990 and 1993; 
productivity rose by 8 per cent 

Following modest pay 
increases and more job cuts 
there has been a sharp but 
unquantified increase in pro- 
ductivity this year, which 
seems likely to be sustained 


Germany ’ s 


leading national 


daily and business 



newspaper 


^ranffurterAllgmeine 







Frankfurter Allgemeine Zeitung GmbH 
D-60267 Frankfurt am Main ■ Fax (69) 75 91-21 83 


U.K. Advertisement Office: 

2nd Floor West ■ Bedford Chambers ■ Covent Garden Piazza ■ London WC2E 8HA 

Tel. 071-836 5540 • Fax 071-836 1308 



during 1995. Although wage 
negotiators are ' expecting 
slightly more generous settle- 
ments, and the job losses are 
slowing, improved working 
practices and flexible time- 
keeping are likely to play an 
important role in keeping pro- 
ductivity on the rise. 

There is also room for 
savings among the so-called 
“voluntary" payments and ben- 
efits often agreed at company 
or even plant level. 

As the BHF bank’s study 
pointed out, this “tax” on 
labour lies largely within the 
area of influence of wage nego- 
tiators on both sides an| i can 
therefore be adjusted by them 
should the need arise. 


Christopher Parfces 


Few Industries -in Germany 
have suffered subh a buffeting 
over the past four years as the 
350-odd makers of machine 
tools - the world’s largest 
machine tool, industry- after, 
Japan and comfortably, the big- 
gest in Europe ■ 

Recession at home, natu- 
rally, took its tdL But exports 
account for about 65 per cent 
of output, and foreign sales 
have suffered both from the 
severe downturn In western 
markets and the collapse of 
markets in eastern Europe, 
where Germany was the domi- 
nant foreign supplier. 

Reunification, far from 
bringing the benefits - how- 
ever .transient — ' enjoyed by 
other industries, failed to gen- 
erate extra business for 
maffhtna tool builders, and dec- 
imated all but the technologi- 
cally brighter stars amid the 
hugely overmanned east Ger- 
man industry. 

The strength of the D-Mark 
made it harder to make money 
in export markets. At the same 
time, the industry’s customers 
in German manufacturing 
were gppkfog to cot their own 
costs and modifying their boy- 
German stance. 

Recent statistics from the 
VDW, the German Machine 
Tool Builders' Association, 
paint a sorry picture. Employ- 
ment in the old West German 
industry was more than 100,000 
in 1990/91. but had felted to 
73,000 by the end of last year, 
excluding the remaining 9,500 
warkere in eastern Germany. 

Production fell from 
DM17.2bn in 1991 to DMlQ.7bn 
last year, and domestic con- 
sumption from DM12L3bn to 
DMSAbn over the same period. 

Things are now looking up - 
the industry’s order intake for 
the first eight months of this 
year was up 22 per cent oa-tbe 
same period of 1991 . 

But the traumas of the part 
four years have punctured the 
arrogance of the industry, pos- 
sibly permanently, and some of 
its famous names, both corpo- 
rate and individual, have been 
humbled. 

The intertwining, and even- 
tually starkly contrasting, for- 
tunes of four companies- in par- 
ticular. Gildemeister and 
Traub in turning machines and 





GMeroetatarfs AjM Kama : 


year’s sales are expected to be 
about DM55QHX, compared with 
DMl-5bn for the three compa- 
nies before the recession. 

Traub, which was a rival bid- 
der for Deckel Maho, -has also 
been through' considerable 
upheaval since 1990. Internally, 
production costs have betel sig- 
nificantly reduced,: with 
“design for mimufecturing”. 
techniques, modular' construc- 
tion and fewer parts- - 

Machines are made much 
more quiddy^ahd with fewear 
people, than ^flve 'years ago. 
This , has raised the competi- 
tiveness of Traub's products 
among UR Subcontractors," 
says .Mr Paul Maynard, manag- 
ing director of. .Traub's UK. 
sales organisation, renamed 
Traub-Heckert UK in October. 

The name change, which is 
being repeated throughout 
most of Traub’s woridwide sell- 
ing organisation, reflects test 
year's acquisition by the Re- 
chenbach-based company of 
Heckert, based at nhwnhita hi 
former East Germany. 

Once “again, this brings 
together turning. and milling - 
technology as. i»art of a 
long-term global strategy - 
Heckert makes sophisticated 
machining centres. And the 
upheaval caused by reunifica- 
tion gave Traub the opportu- 
nity to buy - only what it 
wanted from the former 
Honeckar-regAme . showpiece 
that was employing 4,000 peo- 
ple in 19804 

Traub cuirentiy employs just 
over 500 people at Heckert 
“We have bought the high- 
technology part of the com- 


German machine tool industry 1990 - 93 * (DMbrt) 


Year 

Output 

Home demand 

World ardors 

1990 

1&4 

11 A 

17.5 

1991 

17.2 

12 a 

1M 

1992 

14*2 

9l5 

11* 

1993 

10l7 

6 A 

9* 


— — — i i~ii i m ----- 


Maho and Deckel in milling 
and boring machines, bear wit- 
ness to the upheaval In the 
industry. 

All four were separate, inde- 
pendent companies in the late 
1980s, but even then faced stra- 
tegic disadvantages vls-d-vis 
their Japanese competitors. 

Now, through a succession of 
sales agreements, a failed 
merger and a corporate col- 
lapse, Gildemeister has 
emerged as the owner of 
Deckel and Maho, mmhimpg 
its own turning technology 
with their milling and boring 
technology. 

The key event was the 
appointment in April of an 
administrator at Deckel Maho, 
two companies which had been 
at each other’s throats for 20 
years. 

“Everybody expected that it 
would happen, but it was a tre- 
mendous blow for our strat- 
egy,” says Mr Axel Kemna, Gfl- 
demeister’s chairman. By that 
stage, Deckel and Maho prod- 
ucts were accounting for 55-60 
per cent of the volume in Gll- 
demeister’s newly-formed 
Deckel Maho Gildemeister 
sates joint venture 

The Deckel Maho collapse 
gave Gildemeister the opportu- 
nity to buy only what it needed 
to continue its strategy, and in 
July it paid DM90m to buy a 
package of Deckel Maho assets 
out of bankruptcy. 

Gildemeister took on about 
1.000 of the 1.700 Deckel Maho 
employees at the time of the 
administration. It left behind 
I the Deckel plant in Munich 
and Maho’s DM160m plant at 
Kempten in Bavaria, a lavish- 
ly-constructed white elephant 
that contributed to the down- 
fall oF former Maho chan- man 
Werner BabeL 

Mr Kemna believes that, 
with a stre amlin ed organisa- 
tion and shorn of the debts of 
the past, Gildemeister has a 
good chance to make some- 
thing” out of Deckel Maho 
whose cost base has been 
reduced by DMlSGm a year. 

The new. broader Gfldemeis- 
ter soup is a stronger compet- 
itor in global machine tool 
markets, he says. As a measure 
of the upheaval, however, its 
workforce stands at about 
2,200, against 5,000 for the 
three formerly independent 
companies, based on continu- 
ing operations. 

On the same basis, next 


pany, which is one of the most 
advanced machine tool fecto- 
rles in Europe." says Mr May- 
nard, one of Traub’s senior 
European executives. Traub 
did not want Heckert’s 
heavy-duty milling machine 
business, which used to ui«ke 
about 2,500 machines a year 
mainly for eastern European 
markets. It has turned what 
remains of Heckert into a cen- 
tre of excellence for computer- 
numerical controlled (CNC) 
machining centres. 

Manufacture of Fntnfc and 
Variomatic marhinog formerly 
made in western Germany at 
companies acquired by Heck- 
ert, has been transferred to 
Chemnitz, which is to make 
machine beds for the Traub 
turning machines produced at 
Reichenbach. 

Early this month , Traub 
also announced it was taking a 
majority shareholding in 
Hermle. the western German - 
milling and boring machine 
manufacturer with which it 
made a sales and distribution 
pact early last year. 

Overall, Traub's workforce 
has fallen from 2,500 before the 
recession to just over 2,000, 
even with the Heckert pur- 
chase. But the takeover is 
aimed at giving the company a 
better balance and, in the 
long-term, the Heckert range 
will contribute about 40 per 
cent of turnover, says Mr May- 
nard. In the first half of this 
year, it accounted for DM3&3m 
out of total turnover of 
DMl6Llm, w hich itself was up 
50.6 per cent from the first half 
of 1993. 

Gildemeister’s Mr Kemna 
says he believes the Industry 
took the right actions through ' 
the recession, but says tt can 
hardly be blamed for not hav- 
ing moved quickly enough. ■ 

For SOme Ge rman mari-dna . 
tool builders, especially vol- 
ume producers, the rfwKn* was 
60 per cent 

Most machine tool execu- 
tives will privately admit the 
recession has, paradngieaily , 
peen a good thing for the 
industry, it has forced it to 
Shape a corporate and . fi nanefal 
structure that matches the 
undoubted strength of its prod- 
uct ranges and research and 
devdopmeut, which has been 
maintained throughout the 
downturn. 


Andrew Baxter 





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GERMANY 7 


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^ known. Buf ihf eSMon jt 
upswing must nr 1 , h u Gnomic 
to conaai J£ , not allowed 
mediSm JSf £? that in the 
country must ternj our 
with problem? i* arn to deal 
eat arferfW J, W 1 * <Wfer- 
downs GemSn^^ Upsa nd 
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combine to el °Pments 

5 *“-» «• SiSJUS* 

aSgflKMS! 

° r 6101)31 “■* 

?“ ■*?* competitive pressures 
• ?h?? £rom south-east Asia. 
.. 7“f. Process of deepening 
«K EwopeaS 

• The emergence or wholly 
“f^potoPatitors on our thresh 

Iron lhe fiU1 ° f the 

5S!f lopmenls “nlront 

us with both opportunities and 
mks. Germany, itself rich in 
hwnan mid investment capital, 
mil be able to benefit in future 
from improved international 
distribution of labour. The 
enlargement of markets as a 
result, of the Ml of the Iron 
Curtain and the expansion of 
the European community will 
allow greater series-production 
in manufacturing which will 
generate appreciable cost- 
savings. 

Nor should we under-esti- 
mate the possibilities pres- 
ented by the variety of prod- 
ucts we have to oiler - thanks 
to the MIttelstand companies 
forming the backbone of the 
economy. Germany’s geograph- 
ical position in the centre of 
Europe should also be espe- 
cially beneficial. But the 
greater the opportunities, the 
greater the risks of reacting 
wrongly to them. 

Private business must fe»kw 
care to adapt to the new cir- 
cumstances: reorganisation, is 
already under way in many 
sectors. But doubts must be 
raised over the government’s 
will and ability to react ade- 
quately and the readiness to be' 
flexible on the part of wage 
negotiators. With these doubts 
in mind. £ see the need for 
’ thorough-going reforms in five 
areas of policy. 

• Less protectionism: Ger- 
mans have to came -to terms 
with the fact that our indus- 
tries in which we, are less pro- 


The recovery may be full of surprises, argues ALBRECHT SCHMIDT 


Forget about the old up 
and down cycles 


ductive than other countries 
will shrink. It is even more 
important that we accept con- 
traction In those sectors where, 
even though we may be more 
productive than foreigners, our 
lead is relatively narrow. 

I offer mining, the steel 
industry, agriculture and tex- 
tiles as possible examples, 
although I admit the latter 
already have a large part of the 
necessary adjustment process 
behind them. But only If we 
take Ricardo's theory of rela- 
tive cost advantage seriously 
can we realise the hoped-for 
trading profits from improved 
international distribution of 
labour. 

To date economic policy has 
tended mostly to hamper struc- 
tural change necessary in our 
labour market, and it is tin « » 
call a halt It is absurd to - +o- 
sidise jobs in mining with 
annual funding sufficient to 
send each of our 150,000 mine 
workers on a year-long holiday 
to Majorca. 

• Deregulation; The most 
important way we can arm 
ourselves for new competitive 
conditions is to reduce and 
thin out the dense mass of 
state regulation. It is aot the 
job of the state to act as aide 
and agent to private enterprise 
which, wants to protect itself 
from unwelcome competition 
by means of excessive restric- 
tions-on access to markets. 

There are more than enough 
examples of inefficient regula- 
tory measures. Is it really nec- 
essary, for example, to insist 
that an individual must have a 
master craftsman’s certificate 
as a precondition to setting up 
in a small business? Is it really 
not enough for the would-be 
proprietor to demonstrate five 


years' experience as a journey- 
man carpenter, bricklayer or 
whatever? Should a plumber 
really be forbidden from re-lay- 
ing the tiles he removed while 
fitting n new bath, or rebuild- 
ing the w»U he pulled down to 
get at the pipes behind? 

The skilled crafts associa- 
tions and guilds complain 
about the increase in illicit 
work. But isn't the prolifera- 
tion of working "on the black" 
merely a natural reaction to 
excessive regulation of the 
market? 

• Cost-benefit analysis 
instead of book-keeping: 

It is not possible to make an 
exception of the state at a time 
when individuals and all other 


institutions are having to 
adapt to new conditions. 

Progressive tax rates have 
led to an insidious increase in 
the state's share or gross 
domestic product, and at the 
same time the obligation to use 
tax revenues economically has 
been put to one side. 

Special interest groups infest 
the parliamentary environ- 
ment and have found ways, out 
of public view, of gorging 
themselves on the taxation 
honeypot The jungle of new 
legislation grows as every gen- 
eration of parliamentarians 
responds to the perceived need 
to justify its existence. Party 
political democracy is stuck 
fast in a tangled web of inter- 
ests. 

How can the excessive 


growth of state involvement be 
contained, and how can we 
ensure its internal efficiency? 
This is not a matter which can 
be resolved by better book- 
keeping: it would be far more 
effective if every large state 
spending project were sub- 
jected to a cost-benefit analy- 
sis. 

The profitability criteria of 
the market economy can in 
many instances be applied 
effectively to governmental 
regulatory measures. Consider 
environmental protection: in 
Germany we try to protect the 
environment by prescriptions 
which lay down technical stan- 
dards and procedures for busi- 
ness activities which burden 


the environment. 

These standards are ineffi- 
cient because while they pres- 
ent no problems for some com- 
panies, they impose conditions 
on others which cannot be ful- 
filled. The application of the 
so-called "bubble concept” in 
the US demonstrates that you 
can have cheaper and more 
efficient environmental protec- 
tion. The concept is based on 
limited geographical areas - 
the bubbles - within which 
tradeable pollution licences 
permit the transfer of pollutant 
discharges between the compa- 
nies operating within the bub- 
bles. 

Improving the efficiency of 
the state also involves letting 
light into the legislative jungle. 
Rather as Bavaria has done in 


drastically cutting Its bunding 
regulations, all legal systems 
need to be thinned. A second- 
ary goal here would be to 
transfer more responsibility to- 
individual citizens. 

• Responsibility’ self or 
state? Reinforcement of indi- 
vidual responsibility Is also a 
necessary part of the reforms 
to the social welfare system. 
The state cannot be responsi- 
ble for every slight wiwbap or 
loss at earnings. In order to 
avoid any misunderstandings: 
no-one wants to sacrifice social 
welfare. But it has to be 
acknowledged that the German 
system is on collision course 
with every principle of effi- 
ciency in the book, and is no 
longer affordable in its present 
form. 

The essence of the "social 
state” lies in the insurance 
cover it offers its citizens. 
Accordingly, as with every 
form of insurance, state protec- 
tion reduces the insured per- 
son’s incentive to make per- 
sonal efforts to reduce damage 
or risk. In the end the benefits 
of insurance fall not only on 
those who have stumbled into 
difficulties through no fault of 
their own, but also those who 
[ailed to bother to take any 
precautionary measures. 

The private insurance indus- 
try solves the problem gener- 
ally by offering partial-cover 
contracts under which the 
insured accepts responsibility 
for part of the risk. Transfer- 
ring this technique to the 
social welfare system will 
increase both its efficiency and 
the popular sense 'of responsi- 
bility. 

An obvious example is the 
case of the much-discussed 
Karenztage system of funding 


Germany, confronted by dramatically sharpened 
competition, faces three overlapping developments 
which combine to pose a historic challenge to its 
economic welfare 


GERMAN ECONOMIC INSTTTUTE FORECASTS 


West Germany 


East Germany 


Federal Republic 



1903 

1994' ■ 

1995 1 

1993 

1994’ 

1995' 

1993 

1994' 

1995' 

GDP® % change 

-1.7 

2.0 

2.5 

5.8 

as 

B-5 

-1.1 

2JB 

3.0 

Nos. employed fOOOs) 

28,994 

28.650 

28,725 

6,273 

6,300 

8,375 

35^367 

34,950 

35,100 

Unemployed fOOOs) 

2,270 

2,560 

2,525 

1,149 

1,160 

1.075 

3,419 

3,720 

3,600 

Un-employment rate % 

7.3 

8.3 

8.2 

14.8 

14.9 

13.9 

8.8 

9.6 

9.3 

Inflation % 

3^ 

3.0 

Z5 

8.4 

3.5 

2.5 

3£ 

3D 

ZS 

' Estkiwtea from majority of Institutes 

* in 1991 prion 





Sourcaa: Federal ntattfittcn office. Bundnbnnk estimates 


Vll 




Or A/breeftf Schmidt 


rick pay. [The principle is that 
workers staying at home 
through sickness should not be 
paid for the first day or days, 
thus ensuring that people with 
minor illnesses, or hangovers, 
think twice before taking time 
off.] 

Unemployment insurance 
can also be made more effi- 
cient in similar ways: the inter- 
est among employees and 
employers in reducing jobles- 
sness can be strengthened by 
transferring some of the finan- 
cial and management burdens 
associated with the problem to 
the so-called social partners 
which negotiate wages pacts. 
In principle there are two 
extreme ways of arranging 
unemployment insurance: a 
wholly centralised form as we 
have now with the Federal 
Labour Office in Nuremberg, 
and a fully decentralised ver- 
sion comprising a multiplicity 
of smaller insurance schemes 


organised on sectoral basis or 
according to regional pay 

scales. 

The optimal answer cer- 
tainly does not lie in the mar- 
ginal solution chosen in Ger- 
many. But we might consider, 
for example, a system in which 
only a portion of the responsi- 
bilities and contributions 
remain with the federal labour 
office. A further portion could 
be distributed to special funds 
established for individual 
industrial sectors and regions 
which would then be responsi- 
ble for managing their individ- 
ual affairs with their own bud- 
gets. 

The effective insurance cover 
against structural unemploy- 
ment would be somewhat 
reduced in this construction. 
Bat I believe the jobless total 
would fall because there would 
inevitably be more moderate 
pay settlements which In the 
end would reflect a better bal- 
ance between the interests of 
the employers, the employees 
and the unemployed. 

• Shares Instead of pay: 
Whatever else happens, moder- 
ate pay deals will be forced on 
the market in fixture. You do 
not need to be a prophet to see 
that more than ID-fold pay dif- 
ferentials such as we ham in 
the European Union are not 
sustainable. 

That means German wages 
must undergo considerable 
adjustment: at the very least 
they cannot continue to rise as 
quickly as they have until 
now. 

The development of Ger- 
many so Ear has been charac- 
terised by the shrinking labour 
force’s ability to demand 


steadily increasing scarcity 
premiums while economic 
growth allowed the accumula- 
tion of ever more capital. 
Although the availability of 
human labour hardly 
increased, the sum of earned 
incomes in general terms grew 
just as quickly as gross domes- 
tic product and investment 
earnings. 

This will change in future. 
According to everything econo- 
mists know about competitive 
processes, future growth in the 
German economy will be 
marked by a far-reaching 
uncoupling of investment and 
earned incomes. Any distribu- 
tion policy seeking to fulfil its 
aims via pay increases will pro- 
voke mass unemployment 
which would be a far greater 
threat to the social peace than 
any change in the way earn- 
ings are distributed. 

One promising solution 
might involve changing the 
disiributiaD of wealth to the 
benefit of wage earners. There 
are many possibilities for 
increasing property ownership 
among employees, and pay pol- 
icy has an especially important 
role to play. 

The motto for pay talks for 
the coming years should be 
“Savings not cash" (Sparlohn 
statt Barlohn). If pay rises are 
paid in share certificates 
rather than in cash, the advan- 
tages are not limited to 
Improved liquidity for the com- 
panies. Tbe employees benefit 
too: with the right to dividends 
and profit-sharing they gain a 
second income stream in addi- 
tion to their wage or salary. 

□ The author is chairman of 
Bayerische Vereinsbank 


Industry 19SQ-93M* 





In just five years since reunification, the former East Germany has 
become one of the most attractive locations in Europe for international 

investors. 

London One of the prime reasons is its new and advanced telecom- 

Fax ; +44 n 28? bo 99 m unicaiions ii&z&tmdHre, the most sophisticated in the 
ST+'fs’sgj'g «>■ world. And the speed with which Deutsche Telekom 

has put it all in place is in itself a feat of engineering unpar- 

ta $ I § is as ® alleled in the world of communications. 

BSsra'J 5 'SS Currently, no fewer than 100,000 new telephone lines are 
Far. +331 44 43 0° 1° cormecte( j gygjy mon th _ ove r twenty times more 

^$27750599 than in the old German Democratic Republic. 

■n^nrs The telephone infrastructure for Eastern German industry 
+® 639 is 97 ^ gjjgg^jy fijjjy established. 75 % of all local networks have 

WgiBSa been completely overhauled. 


Data lines are now available in every area. And the same applies to 
mobile networks, radio, television and, from 1995 , ISDN - the new 
nervous system of European industry. 

In high-performance fiber optics technology, Eastern Germany even 
leads the field. As the world’s first network operator, Deutsche Telekom 
is bringing fiber optics right to its customers’ doorsteps in the eastern 
part of the country. 

So a sound basis lias been created 
for a secure and successful future. 

Now it’s up to investors to make a 
shrewd decision on where to set up 
business. 

Telecommunications made in 
Germany. 



We tie markets together. 


Deutsche 

SI Te-l-e-k-om- 


21 . 



r 

{ 


>uri- 






T here is a consensus in 
Germany that the coun- 
try's energy sector needs 
sweeping reform to sweep 
away outdated practices. 

But there is no consensus 
about how the sector can be 
prised open to outside competi- 
tion in a which would lead to 
de-regulation and liberalisa- 
tion. 

It will be the task of the new 
coalitiqn government to try 
and attain that consensus. 

Across Germany's energy 
sectors - electricity, gas, and 
coal - decades-old practices 
continue to exist Tate electric- 
ity. The large utilities, ted by 
RWE, Bayemwerk and Preus- 
senElektra, function within the 
demarcation and concession 
system whereby they have 
exclusive rights to supply the 
municipalities. The gas indus- 
try enjoys a similar monopolis- 
tic position. This has the effect 
of guaranteeing security of 
energy supply, but at the same 
time, it restricts choice, includ- 
ing price, for the municipali- 
ties and the consumer. 

A challenge against this sys- 
tem has now been mounted by 
Kleve, a small town on the 
Dutch border, which wants to 
end its exclusive contract with 
RWE In a bid for cheaper, 
alternative and independent 
energy, from across the Dutch 
border if necessary. The case 
has been referred to the Euro- 
pean Commission. The out- 
come will be watched closely 
by the industry. 

But the structure and price 
of German electricity among 
the highest in Europe - are 
also influenced by the practice 
of allowing electricity compa- 
nies are permitted to collect a 
levy - the so-called Kohlepfen- 
nig - from the consumer to 
help finan ce the use of the 
high cost German coaL 
The Kohlepfennig is tied to 

the Jahrhundert Vertrag, an 
agreement between the coal 
and electricity industries in 
Germany covering the amount 
of domestic coal the utilities 
undertake to burn for the 
remainder of this century. 

German coal prices are 
higher than world coal prices - 
at current exchange rates, 
world coal prices are about 
DMSO per tonne but the Ger- 
man electricity companies pay 
DM280 per tonne for German 
coal to make up for the cost of 
imported coaL More than 40m 
tonnes of coal are subsidised 
by the Kohlepfennig. 

Phasing out of the Kohlep- 
fennig would have social politi- 
cal consequences: it would 
affect domestic coal production 




Christopher Parkes on Lufthansa’s re- 

From ugly duckling 
swan in three yeai 


i-'-s . 


Coi, work security; miners at Befpkamen fci the Ruhr district of north west Germany protest against impending dosurea Picture: AP Photo 

Fuel and power monopolies are under scrutiny, writes Judy Dempsey 


Big is no longer beautiful 


output and eventually drain 
support from the opposition 
Social Democrats, whose con- 
stituencies are rooted in the 
coal regions. Yet the SPD also 
realises that it Is facing pres- 
sure from industry- tor lower 
electricity prices, and is aware 
that the annual DMSbn 
required to subsidise coal con- 
tinues to put a strain on the 
budget deficit which Is over 
DM68bn. 

It is not only the coal indus- 
try which Is under pressure to 
become competitive. There is 
growing pressure on the elec- 
tricity and gas utilities to con- 
sider how tor they are prepared 
to introduce Third Party 
Access (TP A) which would 
allow outsiders access to their 
distribution grids. 

Mr Gflnter Rexrodt, the eco- 
nomics minister, has proposed 
a comprehensive reform of the 
energy sector envisaging some 
form of TPA. In October 1993, 
he unveiled a draft energy law 
intended to replace the 1935 
Energiewirtschaftsgesetz, or 
energy law. 

The- draft legislation pro- 
posed that operators of the 
electricity or gas grid, upon 
whom third parties are depen- 
dent for transportation, must 
not lmrpasnnahly hinder those 


seeking contracts for TPA. 
However, refusal to grant such 
TPA is not considered unrea- 
sonable in several situations: 

• if the capacity of the line 
for TPA is insufficient; 

• if no appropriate compensa- 
tion for TPA is offered: 

• if the secure supply to other 
customers of the operator of 
the line for reasonable condi- 
tions is rendered impossible 
through TPA; 

• and if, in the case of gas. a 
curtailment of supply on inter- 
national markets occurs. 


S o far, Mr Rexrodt has 
been unsuccessful in 
pushing this legislation 
through because of opposition 
from within the government 
itself, and from the- utilities 
and other related institutions. 

For example, the Federal 
Association for Gas and Water 
(BGW), supports in principle 
the idea of TPA, but only if it 
is reciprocal- “Germany cannot 
go it alone,” argues Mr Martin 
Weyand. an energy expert at 
the BGW. However, Mr Wey- 
and and the BGW believe that 
tiie consequences of TPA and 
the abolition of the principle of 
exclusive service areas would 
have the following results: 

• Inequality of opportunity. 


Foreign gas companies would 
be able to supply the German 
market while foreign markets 
- particularly France - would 
remain inaccessible to German 
gas companies; 

• threat to security of supply. 
The system of long-term sup- 
ply contracts used throughout 
Eh rope, which consists of 
long-term supply contracts 
with high take-or-pay obliga- 
tions. could no longer be 
applied. However, short-term 
contracts would not be a suit- 
able alternative and would not 
guarantee secure, area-wide 
supplies to customers; 

• small consumers and medi- 
um-sized businesses and rural 
areas would he hit; 

• the obligation to connect 
and guarantee supply could no 
longer be met; 

• expropriation of private 
investment. Those companies 
which have undertaken 
long-term investments could 
lose the right to dispose of 
their own property and it is 
unclear if there would be a 
compensating mechanism. 

The Verband der Industriel- 
len Energie-und Kraftwirt- 
schaft, the association for 
industrial energy, wants 
greater competition because it 
believes it would lead to lower 



Bayern. 

At the peak, research 
at its peak. 


In Bayern, research is paramount 
At the very peak of die Zugsprtze, 
Germany's highest mountain, 
there's an atmospheric research 
station. Thou^i a bit lower in 

altitude, the stare's other scientific 
institutes {the headquarters of the 
wortorenowiad Max-Ptanck and 
Rainhofer Institutes are in Bayern), 
universities, p olytechnics and 
technology transfer agencies afl 
conduct research at the same Mgh 
level. 


Should we have heightened your 
interest in doing business in 
Bayern, please contact the 


Bavarian Ministry for Economic 
Affairs, Transport and Technology 
Dr. Manfred Pfeiffer 
PrinzTegemanstr. 28 
80538 Mflnchen / Germany 
Tel- (89)2162-2842 
Fax: (89) 21 62 -27 60 


They also produce the high-quality 
personnel staff i ng the state's high- 
powered companies. These compe- 
nies and their high-performance 
products have scaled the heights of 
the vrorid market 


Bayern. 

The Gualty Edge 
in the New Europe 


prices. The V1K. headed by Mr 
Max Dietrich Kley, a board 
member of BASF, the giant 
chemicals group and one of the 
largest consumers of energy, 
wants third party access. 
Indeed. BASF, through Winter- 
shall, its gas subsidiary, to 
building a network of gas pipe 
lines across Germany precisely 
to break the monopoly held by 
Ruhrgas. the country’s largest 
gas supplier, and introduce 
cheaper gas prices and more 
competition. 

But the VTK does not. have 
the support of the Arbeitge- 
meinscbaft RegionaJer Ener- 
gie verso rgungs -U nternehmen 
(ARE), the organisation which 
groups together the regional 
utility companies. Sandwiched 
between the municipalities and 
the large utility companies, 
ARE can live without the strict 
concession and demarcation 
systems, since it would give 
them greater opportunities to 
compete and supply on the 
local level. Yet they do not 
want TPA because they would 
be smothered by outside com- 
petitors. 

The German government to 
under some pressure from the 
EU to deregulate. For the 
moment however, there to no 
consensus in Brussels about 
how far TPA within the EU 
should go - while the UK 
sta unchly defends wide liberal- 
isation, France favours the sin- 
gle-buyer model which would 
allow one utility to import 
sell, and distribute electricity 
in the national market ‘This 
would mean that the national 
market in France would be 
blocked by its own compa- 
nies," a BGW official said. 

Thus, without consensus 
either in Brussels or within 
Germany, it will be up to the 
incoming Bonn coalition to 
force the pace. 


The evolution of Lufthansa 
from ugly duckling to swan 
over the past three years is by 
common consent tte most suc- 
cessful German restructuring 
story yet to emerge from the 
turmoil of the recession. 

The international invest- 
ment community showed its 
approval in late September, 
subscribing with enthusiasm 
to a rights issue and an offer- 
ing from the federal govern- 
ment's shares which shrank 
Bonn’s stake from 62 per cent 
to 35 per cent 

To judge from the mood 
among investors, the govern- 
ment might have disposed of 
its entire holding in one 
swoop, but regulatory require- 
ments - not to mention the 
prospect of the g o vernment's 
getting a fetter price in ftainre 
- mean they will have to wait 

Expectations of a rising 
Lufthansa share price are 
based on confidence that the 
airline's management will 
keep the rationalisation and 
cost-catting process moving at 
pace, plus the effects an rou- 
tine operations of the interna- 
tional economic recovery. 

Chairman Mr JQzgen Weber, 
who has kept all of Us prom- 
toes so tor (in fact the turn- 
round from the brink of disas- . 
ter took only around two years 
instead of the five he expec- 
ted), is in no mood to let go of 
' the reins now. He only 
recently gave a hint of bow 
serious the company's condi- 
tion was when he took over. 
“Only a few people knew 
really how bad it was, and we 
could not say anything,” he 
said. “There were times when 
I got up in the morning and 
knew that we would lose 
another DM4m today.” 

While the government gets 
on with p rep arin g for the final 
stage of privatisation, prom- 
ised before the end of next 
year, the group’s management 
continues working towards its 
long-term objective of displac- 
ing British Airways as 
Europe’s premia' airline. 

The “passenger-friendly” 
fnm» of the German flag-carri- 
er’s latest a dvertis i n g is the 
most visible indicator of this 
ambition. But the most audi- 
ble is Mr Weber’s constant 
refrain that the cost-savings 
and quality improvements 
must continue at every level. 

Accordingly, the entire 
DML2bn raised in the Septem- 
ber rights issue will be used to 
pay off bank borrowings run 
up by the previous manage- 
ment which spent heavily 
anticipating the completion of 
the single European market- 
while simultaneously toiling, 
to anticipate recession. The 
group plans to halve its net 
debt to DM3fanby 1997, saving 


DM200ra a year In Interest 
charges, white Mr Weber has 
other cost savings of DM500® 
in Iris sights. 

Hie first stage of restructur- 
ing programme introduced by 
Mr Weber shortly, after Us 
appointment in late 1991 was 
aimed at reducing manning 
and labour costs. OM hierar- 
chies were SpHt up, pa y Wa s 
frozen -for one year, working 
hoars were increased. Pilots 

agreed to a 7 per cent increase 
in flying hours, and the end of 
easy-going times was under- 
lined when one of their num- 
ber was fired after refusing to 
tote off because his hmch was 
not on board. 

Luxuries such as the group's 

Cologne headquarters were cut 

in a sale-and-Zeaseftacfc deal. 
Fringe interests such as hotel 
management were thrown out 


ntede at tbeapex -wiridj-Wfil 



Chairman JOrgen Weber 


as stakes were reduced in tire 
Kempinski and Penta hotel 
drains. As a result, In the 24 
months to June this year, 
costs were cut 15 per cent mid 
productivity was Increased 
more than SO per cent. 

The second stage, introduced 

this year. Is intended to reduce 
costs by a farther 20 per cent 
by 1997. A large proportion of 
these economies is likely to 
come not from the direct 
efforts of Mr Weber and the 
main board, but from new, 
independent management 
teams assembled to run the 
new-look Lufthansa group, 
plans for which em erged on 
the eve of p rivati s ati on. ' 

Group cargo operations plus 
the internal service divisions, 
aircraft maintenance and 
information technology wfQ be 
hived off as separate joint 
stock companies on January L 
They will fimcfion as indepen- 
dent profit centres, alongside 
the main passenger airline 
business, and LSG Catering 
and Condor charter services 
which are already run as free- 
standing businesses. 

The result will be a whole- 
sale restructuring of the clas- 
sic German “pyramid” man- 
agement structure - where 
virtually every decision is 


Privatisation thrust is renewed, writes Michael Undemann 


Local government targeted 


Mr Peter Hlntze, the general 
secretary of the Christian Dem- 
ocratic Union (CDU). the larg- 
est of the three parties in Ger- 
many’s centre-right coalition 
government, did not take long 
to come to the point 

Minutes after emerging from 
the first session of talks 
between the CDU and its two 
coalition partners to shape a 
new coalition programme he 
was talking about the need for 
more privatisation. 

The government, Mr Hlntze 
said, would trim the federal 
bureaucracy by l per cent a 
year - about 14,000 jobs - and 
cut back the excessive 
amounts of red tape as part of 
a drive to modernise Germany. 

However, while Chancellor 
Helmut Kohl’s new govern- 
ment has vowed to maintain 
the momentum of privatisa- 
tion, most of what still needs 
to be done is in the hands of 
Germany’s 16 L&nder (or state) 
governments and reaches 
down to local councils across 
the country who are under 
growing pressure to contract 
out an array of services from 
waste disposal to parks man- 
ageraent. 

Since coming to power in 
| 1982 the CDU-led government 
has drawn in its tentacles and 
pushed many industries and 
services into the private sector, 
raising DMU.6bn in the pro- 
cess. Lufthansa, the national 
carrier, has been privatised. 
The railways have been turned 
into a joint stock company as a 
first step to privatisation and 
Deutsche Telekom will be 
listed on the stock exchange in 
1996. 

“The privatisation of conven- 
tional industry Is basically fin , 
ished," said a senior finance 
ministry official, "You need a 
ma gnitying glass to find any 
holdings we still have in larger 
companies." 

The government has said it 
will now redouble its efforts to 
get the state governments to 


sell their industrial holdings 
and examine new models, like 
private motorways, which 
would enable tfrgm to function 
more efficiently. 

Leading the way among the 
states is Bavaria, one of Ger- 
many's richest states, which 
last year announced an ambi- 
tious new initiative to sell off 
its holdings in a variety of 
companies. The state govern- 
ment has already raised over 
DM3bn and hopes to bring 
together another DM2bn, 
money which will almost all be 
invested In new technologies. 

Mr Theo Walgel, the finance 
minister who himself comes 
from Bavaria, rarely misses a 
chance to ting the praises of 
his party brethren in Munich 
who have been setting the 
example he wants other states 
to follow. 


The frontrunner is 
Bavaria which last year 
said it would seO its 
state hokfings in a 
variety of companies 


However, poorer states like 
the Saarland and the city state 
of Bremen, where unemploy- 
ment is relatively high, feel 
duty bound to prop up limping 
industries with state funds. 

Hie state of Lower Saxony is 
setting another bad example 
by holding on to its 20 per cent 
in the- car maker Volkswagen 
and much of what could not 
immediately be privatised in 
eastern Germany was taken 
over by the respective state 
governments via BetaligwiQS- 
QeseUschaften or state-owned 
companies created to manage 
Shareholdings in strategic com- 
panies such as Jenoptik, the 
wqll-knowzz Thuringian optical 
instruments manufacturer. 
“The Lender are not overly 
inclined [to privatise],” said Ms 
Barbara Eckrich, of the finance 
ministry. 


There is hope yet. As a 
senior finance ministry official 
points out, the reason most 
States and councils will make 
further efforts to privatise is 
because they are running out 
of money. The federal govern- 
ment, for instancy announcpri 
earlier this year. that it would 
only pay unemployment bene- 
fit to people' who have lost 
their jobs for a maximum of 
two years. Thereafter they win 
receive so-called so cial assis- 
tance which will be entirely 
funded by local governments. 

Hie smaller budgets, coupled 
with a realisation that many 
privatisation models developed 
outside Germany do actually 
work, means that the country's 
traditional penchant to have 
civil servants do everything is 
beginning to wane. 

The process has been helped 
considerably by the Treuhan- 
danstaU, the state-owned 
agency charged with privatis- 
ing east Germany which will 
be wound up at the end of this 
year. 

Faced with a shortage of 
funds and confronted with 
unheard of difficulties involved 
in privatising a whole country 
the Treuhandanstalt developed 
a variety of new models for 
local government, .setting an 
e xa mp le which has made pri- 
vatisation much more palat- 
able than ft would otherwise 
have been. 

Some sewage plants, for 
instance, are now operated pri- 
vately, including one in the 
east Thurlngian town of Alten- 
burg where about 50 compa- 
nies competed for the contract, 
a process which enabled the 
local council to make consider- 
able savings. 

On a national level, the gov- 
e mine nt in Bonn meanwhile 
has pushed through reforms 
which allow private employ- 
ment agencies to compete 
alongside the state-owned 

agencies in the hope that com- 
petition wffl offer better ser- 


vices to people seeking jobs. 

However, the government 
has not made all the progress 
it has wanted to. In. the past 
state and local governments 
were allowed to fulfil thair 
tasks by means of publicly- 
owned companies or authori- 
ties. Now a new law will 
require them to prove that 
their duties must be carried 
out by a state-owned entity, 
otherwise, the contract must 
go to a private operator. 

But just weeks before the 
October elections, the Bundes- 
rat, the upper chamber of par- 
liament which represents the 
26 IJdid er , threw out fits new 
law shifting the so-called bur- 
den of proof. The gover nm ent 
has vowed to push the amend- 
ment through early in the next 
session of parliament but the 
setback is an indication of how 
difficult it may be to force the 
Lander, many of which are r un 
by the left- wing Social Demo- 
cratic party (SPD), to privatise. 

Meanwhile the government 
will press on to privatise as 
much as it can of what is left 
in its care. 

Hie finance ministry is muH- 
ing over plans to sell institu- 
tions such as the famous Max 
Planck Institute and other pub- 
lic research facilities. And the 
organisation which runs Ger* 
many’s 350 motorway service 
stations is being restructured 
and renamed and will be sold 
off next year. 

Woric is also continuing on 
technology to introduce tolls 
on motorways, a first step 
towards wholesale privatisa 
«<m. Since 1990 the govern- 
ment has also sold about 9,000 
flats and houses which used to 
belong to foreign armed forces 
stationed in Germany and it is 
frying hard to make the then- 
saa k of hectares it still owns’ 
more attractive for developers, 
including discounts of up to 50 
per cent from the purchase 
Price if the land is used for 
approved council hanging . • 


A '■ -• 

' J*?’- 


M '* 

. ■ 

• . . ■ 
.. 




&"■ v.*.. 


senger ahifne, while; fostering; 

entrepreneurlaHmn .;in ' the 
other companies. . ; 

They -win be expected Jo 
seek but new business and cus- 
tomers apart from- Lufthansa 
in the world market and, as 
the airtbw’s internal newspa- 
per said, counter coat pres- 
sures with “greater flexfliflity^ 
than is available to -them 
under the existing -group . 

stnuctmre. 

As an indicator of - the possi- 
bilities open to the -offshoots,, 
the IT business, to be named 
Lufthansa Systems, is to. be 
launched In -concert with, the 
General Motors - Subsidiary, 
EDS, which will held a » per 
emit stoke and dure manage- 
ment controL This suggests 
similar arrangement* with 
glofoafiy-active partners: sire 
desirable , for the other fledg- 
fings and in the tore badness 
itself, where two candidates 
are already waiting In the 
wings - partners and code- 
sharers United. Airlines and. 
Thai Airways. . • _ 

Ami d all the brouhaha over 
the way the. board, mastered 
the recession and rebuilt the . 
airline, most excitement has 
stemmed from fee "formation 
this year of strategic, affiances 
with United and Ttad which 
gave Lufthansa the global 
reach necessary if it is to stage 
a realistic challenge to British 
Airways . 

Alt that is iflrfrtwg, analysts 
say, is for the ideals , to he 
cemented by cross-sharehold- 
ings, an issue which all three . 
sides, have said may . be 
addressed in totarb . 

When that might be appears 
to depend, on Bonn's success in 
its efforts to persuade its Euro- 
pean Union partners to amend 
union legfailatian under which 
mare than half an airline oper- 
ator's shares must be owned 
by European individuals, or 
in s titu t i ons. This was one of 
the reasons for using the book- 
building technique in the 
recent placing - to allow care- 
fbl selection of investors - and 
excluding the US from the 
offer. According to the govern^ 
mentis own timetable, change 
wDI be needed before, the end 
of next year when It has 
undertaken to dispose of all its 
remaining shares, which are 
forecast fay then to be worth 
wefi over DMSbtu 

With the first tranche of the 
privatisation of Deutsche Tele- 
kom due almost immediately 
afterwards - and expected to 
raise at least DMlObn - suc- 
cess will depend on Bonn’s 
ability to spread its offerings 
as widely as possible across 
the global capital market. 


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argeted 


PrivatUatTftn d s lareest 
’owed to c °", aeenc >'- 
operations by th?Sfi et 5 its 
Set up to jS end of 1 9 M- 

b »wtaeaMs or firS2 abse ^ 
S«t eastern £ST comniu * 
Treuhand then Srf ny ’ the 
bo ? ks 13,700 5ate^2j* n ,ts 

Ky^srarc 

ast:5P» 

aasSS^ 

gir.-jrar s 

^ rusted . with privatising the 
companies in its 
JS™L°‘ ^ of the finance 
« will be called the 
B ®teiligungs-M anagemen t-fip. 
selfeihaft Berlin. The BMBG, 
as it is known, win have an 
administrative budget of 
DM5m and will be divided into 
three sections. 

The first section will look 
after about 100 companies with 

gr80 of these enterprises have 
been placed under the so-called 
Management KGs, companies 
which are run by west German 
nuumgers who have a free 
hand to restructure them and 
Prepare them for privatisation. 

Separate from the Manage- 
ment KGs is a small group of 
partly privatised companies in 
which the Treuhand holds a 
stake, or companies about to 
be privatised. These include 
the SKET machine-buil ding 
and engineering complex in 
Magdeburg in the state of 
Sarony-Anhait; Eko Stahl, east 
Germany's largest steel mill In 
Brandenburg, of which a part 
is being sold to Cockerill- 
Sambre, the Belgian steel pro- 
ducers; and Kali und Sai* u the 
potash mines in Thuringia. 

Also under the BMBG is a 
section called the Auslaufak- 
tivitdten, which win supervise 
the completion of environmen- 
tal clean-ups and land reclama- 
tion, particularly in the H gnitn. 
or brown-coal fields. A gmaii 
section within the BMBG will 
look after the financing and 
legal issues, as well as rela- 
tions between the European 
Union and the five east Ger- 
man states. 


GERMANY 9 


Judy Dempsey records the Treuhand’s high-speed achievements 

The sale is nearly over 



The Trauhandantatt buKcSng, east Baffin: ft is almost dosing time 




Picture: Tony Andrews 



Then there is the contracts 
department, which monitors 
all current investment commit- 
ments and job guarantees. This 
department will remain under 
the privatised Bundesanstalt 
f&r vereinigupgsbedingtes Son- 
d er vermflgen (BVS), while the 
Liegenschafts gesellschaft der 
Treuhandanstalt (TLG) will 
continue to exist for some time 
until it has completed the pri- 
vatisation, or renting, of east 
Germany’s land and forests. 

All told, the snrcgssnf to the 
Treuhand will employ 45,000 
and will have a budget of 
DMSbn from 1995 until 1998. 
The total deficit over this 
period will amount to DM45bn- 
DM55hn, which is already part 
of the Treuhand’s total debt of 
DM270bn. 

The Treuhand’s rapid pace of 
privatisation is illustrated by 
the statistics. By the beginning 
of October 1994, only 354 of the 
13,781 former communist enter- 
prises remained on its books. 


The entire retailing sector, 
including the gmaii shops, cin - 
emas . bookshops pharma- 
cies, had been quickly priva- 
tised in 1991 and 1992. 

The agency says it has 
secured investment commit- 
ments exceeding DM206bn, 
guarantees of more than L4m 
jobs, and proceeds from sales 
of nearly DM65ba 

But the tax payer will have 
to carry the Treuhand’s 
DM270bn debt for many years 
to come. The debt has arisen 
because of the Treuhand's phi- 
losophy. “We actually bought 
management for these enter- 
prises, rather than sold the 
enterprises,” Ms Birgit Breuel. 
the outgoing president of the 
agency, repeatedly explained. 

Essentially this meant that 
in order to attract investors 
the Treuhand had to pick up 
old debts and loans from east 
German enterprises which by 
the end of 1994 will have 
totalled DM80bn. The agency 


had to provide an additional 
DM15hn for capital increases, a 
further DM66bn for guarantees 
which provided the enterprises 
with liquidity, and an addi- 
tional DMSbn was allocated by 
the Treuhand for enterprises 
that were unable to finance 
lump-sum severance payments 
cm their own. 

With such a large debt, the 
question remains whether the 
Treuhand will have created the 
conditions for a thriving priva- 
tised sector which will not only 
expand but will help absorb 
some of the unemployment 
which officially Is r unning at 
15 per cent. Unofficially it is 35 
per cent when short-time work, 
job creation and retraining 
schemes are taken Into 
account. 

The omens at present do not 
appear bright The investment 
commitmen ts and job guaran- 
tee contracts undertaken by 
investors have been too ambi- 
tious. “It is true that their 


. w'. .♦.It A? . V- . *•. - ;/-?*• 


While you are rushing 

ahead of your competitors ▼ ▼ ▼ 



expectations about finding 
markets were too high," said 
Mr Heinrich Homef, the Treu- 
hand’s financial officer. As a 
result, Mr Hero Brahms, a 
Treuhand board member, said 
that the agency’s contracts 
department is at any one time 
renegotiating 10 per cent of all 
contracts. “We do everything 
possible to extend the time- 
table for investment commit- 
ments. The thing we don’t 
want to do is to buy back 
enterprises,” added Mr 
Brahms. 

Nevertheless, many con- 
tracts for job guarantees 
include an obligation by the 
investor to employ short-time 
staff, even if there is no work 
available. The result is that 
this has delayed an increase in 
productivity, which is still 
extremely low in the steel, 
machine-tool, and scientific 
instruments sector. In these 
cases, productivity is still 40 
per rent of west German levels. 


thereby pushing up labour imit 
costs in the east Last year, 
GDP per employee in eaSem 
Germany was 46 per cent of 
the level in the west, but per 
capita wages and salaries rose 
to 70 per cent In short, eastern 
unit labour costs are 44 per 
cent above those in west Ger- 
many. 

Another problem for east 
Germany’s privatised sector is 
that it is not yet competitive 
enough for the export market 
The Bundesbank. Deutsche 
Bank and the Berlin-based 
DIW economics irwUmte have 
all shown that east Germany 
still contributes only two per 
cent to Germany’s total Grass 
Domestic Product "The export 
potaxtial of the east German 
economy still remains low and 
this sector has not yet come 
out of the trough." said a 
recent Deutsche Bank 
Research repost 

The share of exports in 
aggregate demand, including 
deliveries to eastern Germany, 
is one-fifth, compared with 
west Germany’s one third. And 
of tofoi iinwMtfi* spending; a 
significant part is spent on 
imports, which axe still almost 
as high as GDP. 

This imping Owl pact Ger- 
man output only covers 
slightly more than half of 
aggregrate demand. 

Finally, the privatised sector 
remains seriously undercapi- 
talised. A special fond was 
recently set up by the finance 
mi n i st r y and the «««* Ge rman 
states to extend fresh capital 
tor investments and market- 
ing. But this problem is expec- 
ted to remain for some time. 

Treuhand officials think 
there is a bright side, however: 
the east Goman economy Is 
expected to grow by about 
eight per cent next year, 

althoug h this is cran- 

ing from a very low base - the 
region’s GDP fell by 30 per cent 
between 1990 and 1992. 

But any economic upswing is 
crodal for the Treuhand whose 
official* admit that the real 
test for the agency is when the 
investment commitment and 
job guarantee contracts end. 
When they do, managers win 
be giv en a free hand to reas- 
sess their labour costs. That 
will inevitably q ffpc * their deci- 
sions about reducing or 
increasing the work force. If 
the economic upswing contin- 
ues, the Treuhand might be 
able to say it has created con- 
ditions for a vibrant privatised 
sector. But no one is placing 
bets. Just as tew believed the 
Treuhand would cease to exist 
after 1994. 


Profile: BIRGIT BREUEL 

Exit the 
liquidator 


MRS BIRGIT BREUEL Is 
particularly fond of three pub- 
lic comments which she made 
in her years as head of the 
Treuhand agency, which has 
privatised, liquidated or 
rationalised the former state 
prop erties of the German Dent- . 
oeratic Republic; 

Her first was her description 
of how she started work at the 
agency in October 1990. “We 
had very few experience peo- 
ple. We had no rules! We did 
not even have a list of compa- 
nies, let alone balance sheets,” 
she said. 

Her second bon mot con- 
cerned the Treuhand's philoso- 
phy: “Our aim was not so 
much to sell the enterprises, 
but to buy management tor 
the east German enterprises.” 

But her most famous (or 
notorious) comment was in 
reply to journalists’ questions 
about about her past, her 
future or about sensitive 
investment contracts. “No 
Comment. I do not have to 
answer that question,” she 
would say. 

Recently, however, she has 
suddenly become more forth- 
coming. This is not surprising. 
With the Treohand doe to 
wind up most of its work by 
the raid of the year, Mrs Brenel 
is preparing to try her hand at 
cnm rfhing new, as Commis- 
sioner General of the World 
Pair Expo 2000 to be held next 
year in Hanover. 

It will be a relief from the 
daffy grind of the Treuhand 
where Mrs Brenel, a former 
flwanw minister of Lower Sax- 
ony, has put in at least 12 
hours a day. "She comes Into 
tike office at about 7.15 and 
leaves between 8pm and 9pm," 
a colleague says. “And when 
she leaves, she carries a big 
bag with her - full of work.” 

Mrs Brenel, who rea d poli- 
tics at Oxford Uni ve rs i ty , does 
not drink, smokes moderately, 
and lives in a small 75 square 
meter apartment in Bfitte, the 
heart of east Berlin, with a 
view of tiie Brandenburg Gate. 
“She goes home to her fkmffy 
at the weekend, but more 
often Han nut, her husband 
*im 1 two sons visit her,” her 
colleague a ^ pJ. Her third son 
died from cancer in December 



Treuhand cNef Birgit Brette! 

1990, three mouths after she 
joined the Ttenhand board. 

Her commitment to the 
Treuhand meant foregoing 
many official functions. 
Indeed, when Queen Elizabeth 
visited Berlin in 1992, Mrs 
Brenel, who had been invited 
to one of the receptions, 
politely declined. “She stayed 
in the office because she work 
to do,” her colleague said. 

In the early days of the 
Treuhand’s existence, east 
Germans loathed the agency 
because It d06ed so many fac- 
tories and sharply reduced fac- 
tory maiming levels. Some for- 
eign investors saw the 
Treuhand as a west German 
mafia intend on keeping for- 
eign investors out of east Ger- 
many. 

Politicians blamed it for the 
ills of the east German econ- 
omy. Mrs Breuel herself 
admits it was a convenient 
scapegoat “But no politician 
could have taken our deci- 
sions,” she says. 

The end of her stint at the 
Treuhand means that Mrs 
Breuel will perhaps have more 
time to pursue ber hobbies, 
such as gardening. With a lit- 
tle luck, she might have more 
time to do this after December 
30 of this year, her last work- 
ing day at the Treuhand. 

Judy Dempsey 


A powerful team 
Right on track 
Three good quarters 



sfes :-: • 



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of your banking requirements. 

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DePla-Bank Group: 


.Jan. -Sept 1994 


Balance sheet total 

DM 11&383m 

+ 

6.4% 

Landing volume 

DM 105,826 m 

+ 

6.7% 

Outstanding securities 

Inducing bans taken up 

DM 93,404 m 

+ 

7.3% 

Operating profits 

before provisoes 

DM 340.600 m 

+ 26.3% 


To receive your copy of our detailed interim report 
simply contact DePfe-Bank, Head Office. P&finenstraBe is, 
65188 Wiesbaden, Germany. 


welcome your call. Hamburgische Landesbank. Your Individual consultant. 

. i n 1 A HAMBURGISCHE . A . 

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Margate Hall, 155 Moorgate. London EC2M 6XB - Tel.: 071 972 9292. Fax 071 972 9290 



DePfa-Bank 

Deutsche Pfandbrief- und Hypothekenbank AG 





X 


E ast Germany's chemical 
Industry has already 
found a place in the his- 
tory boohs and in novels. 

In April 1936, as part of izis 
re-armament and industrial 
programme. Hitler created a 
giant synthetic robber manu- 
facturing complex in Buna, 
now In tiie state of Saxony- 
AnhalL Production started a 
mere seven months later. By 
1944, the Buna plant was prod- 
ucing 6,000 tonnes a month and 
meeting half the Reich's total 
needs. 

After 1945, Buna was placed 
under the Soviet administra- 
tion, which soon re-started pro- 
duction. In 1953. the industry 
was placed under the east Ger- 
man communist state. By 1990. 
more than 83.600 people were 
working in the chemical sec- 
tor. 

Until German unification in 
1990, the chemical triangle, as 
it is known, encompassing the 
regions of Halle, Merseburg 
and Bitterfeld In Saxony - 
Anhalt, was considered one of 
the key sectors of the east Ger- 
man economy. But that sector 
also spewed out enormous lev- 
els of pollution, the effects of 
which are documented in a 
novel by Monika Maron called 
Ftugasche [fly-ash]. 

As a young journalist in the 
1970s, Ms Maron was sent to 
the chemical triangle to write 
an ideologically glowing report 
about the industry. What she 
found instead was illness, 
waste and inefficiency. After 
deviating from her subject - 
she chose to write the truth - 
she was duly sacked. She is 
now >a successful novelist liv- 
ing in western Germany. 

When the Treuhand privati- 
sation agency took over Buna 
and the entire chemical indus- 
try in 1991, it was faced with a 
choice: to close down or keep 
Bona open. The decision was 
fundamental. West Germany 
had built up its own chemicals 
industry after the second world 
war, begging the question on 
unification as to whether a 
chemical industry was also 
needed in eastern Germany. 

After the Treuhand opted to 
keep the region's chemical sec- 
tor alive. It embarked on a 
massive restructuring which 
will cost a total of DM14bn by 
the time it is complete. No 
sooner had the agency made 
this decision than it was faced 
with another question: could 
the sector become competitive? 

Mr Klaus Schucht, the Treu- 
hand’s board member responsi- 
ble for modernising east Ger- 
many's chemical industry, ha« 
no doubts. Tram a social and 












Worker* In ChemnKg (formerly Kart-Mart StadQ p r otesti ng In 1998 at the down by the Treuhand of ta rgeacalB places- of employment in east Qarmany Ptetmc AP Photo 


Eastern chemicals are saved from extinction, says Judy Dempsey 

Survivors from the flood 


political point of view, we need 
this industry. But 1 have no 
hesitation in saying that we 
wOl make it competitive.” he 
said recently. 

After reducing the work- 
force by 60.000, the agency 
planned the following shape 
for the chemicals sector Bitter- 
feld, Buna, and Leuna (which 
has an oil-refinery complex), 
would produce basic chemi- 
cals; Buna and Leuna would 
also produce polymers, a chem- 
ical substance; the cracking, a 
process whereby inflamma ble 
oils are obtained by dry distil- 
lation of organic substances, 
especially coal and petroleum, 
would take place at BOhlen and 
Leuna; the refining would be 
carried out at Leuna, LOtzen- 
dorf and Zeitz; and the distri- 
bution would be carried out by 
Mtnn I, the petrol distribution 
company. The aim is to secure 
12,000 jobs and invest more 
than DMl4bn in modernising 
east Germany's chemical 


industry. But it is the future of 
Buna, which will produce 
PVCs, or plastics, which will 
determine the success of the 
entire project 

The Treuhand has ear- 
marked over DM2.8bn of 
investments for modernising 
Buna and BOhlen, the location 
of file cracking facility, as part 
of its plan to create a fully 
integrated petrochemical com- 
plex. 

This year. Buna will have a 
turnover of DMSOQm on losses 
of about DMSOOm. But under 
one of the most ambitious 
schemes undertaken by the 
Treuhand, it hopes Buna will 
break even within five years, 
thanks to a partnership 
between Dow Chemical, the 
US-based chemical manufac- 
turers, and Gazprom, the state- 
owned Russian gas company 
and the Treuhand. 

Under the terms of the 
recent letters of intent, Dow 
Chemical will take a majority 


independent stake of Buna, 
and Gazprom will take a 
minority stake. (The Treuhand 
will reta in 49 per cent, with the 
option of reducing it cnee the 
investment programme has 
been complete.) 

B una will produce lm- 
L5m tonnes of polyeth- 
ylene. The crucial issue 
for waiting R ima competitive 
is the price it will pay for its 
energy. At present, electricity 
produced at the nearby power 
plant at Schkopau is too expen- 
sive. Mr Schucht believes part 
of thiB energy problem can be 
solved through Gazprom, 
which is seeking a 26 per cent 
stake in Buna, and which will 
give one of Russia 's largest and 
most lucrative state-run com- 
panies a foothold in the Ger- 
man «Hgm fails industry. 

“We said to Gazprom that we 
are offering you the possibility 
of producing plastics in east 
Germany. We want its liquid 


gas - the C2s, C3s and C4 
gases. And in any case, 
Gazprom has to do something 
with these gases at its Yamal 
fields [in Siberia],” said Mr 
Schucht. To Tttflfrp the entire 
project cost-effective, 
Gazprom's gas, which Buna 
requires, will have to be 
shipped to eastern Germany at 
competitive prices. 

The Treuhand Is considering 
two options on how to ship the 
20bn cubic metres of gas 
Ugprfgd annually for Buna. One 
way is via Tscharepoweck in 
Russia, where the C3 gases will 
be shipped up to the harbour 
at Vyborg, transported through 
Poland to the east German part 
of Rostock «nd then trans- 
ported via a pipe line to the 
cracker at BOhlen. The other 
option is through the Ukraine, 
but Russia wants to reduce its 
dependence on the Ukraine. 

The key factor is that the 
transport costs cannot be 
higher than the prices of. the 


A bitter legacy 
of Communism 


feedstock in BOhlen”, 
explained Mr Schucht To real- 
ise this project, the Russians 
would have to build a pipeline 
at Yamal Experts estimate the 
pipeline would cost between 
$30bn-$40hn. 

Yet even if the relationship 
with Gazprom works according 

to plan tha Ti-p nhawd pray atill 

have to convince the European 
Commission that the level of 
investments it is allocating to 
Buna will not amount to subsi- 
dies. “The capacity is there. 
But we are trying to build new 
capacity with a lower cost 
structure of about 30 pm - cent," 
said Mr SchuchL 

Despite the high risks, file 
Treuhand believes the east 
German chemical sector can 
become competitive and that 
its location wm prove a consid- 
erable advantage once the 
economies of eastern Europe 
pick up. That is one of the rea- 
sons Dow Chemical has chosen 
. to invest in Buna. If this ambi- 
tious, heavily-capitalised proj- 
ect is successful, east Ger- 
many’s plwnrifBi sector will no 
longer carry the stigma of feed- 
ing Hitler's war and industrial 
manhtnR, or being remembered 
by east Germans as one of the 
country's worst polluters. 


“The restructuring of land in 
eastern Germany has proved to .. 
be oneofthc most difficult pro- 
cesses the Treuhand. privatisa- 
tion agency has had to "face,” 
said Mr Otto Barren ell: 

As a senior official at the 
agriculture ministry, Mr Bam- 
mefl has sea. how property 
has pitted east German against 
west German, revived old fam- 
ily feuds, and has convinced 
many expats, that the German 
government's droisfan to allow 
restitution before compensa- 
tion in 1990 may now have 
been a mistake. "We have the 
law. We have to make the most 
of it,” said Mr BammalL 

Under the tmwi of the unifi- 
cation treaty, forma- Nazi vic- 
tims and those whoselahd was 


full right to restitution, and 
compensation. This right also 
applies to people whose land 
was confiscated by the commu- 
nists between 1949 and 1990. 

When, in late 1990, the Treu- 
hand started applying the law 
to agriculture in a bid to pri- 
vatise 1.2m hectares of east 
German land, it soon ran into 
difficulties. 

At that time, the agency had 
two aims. It wanted to restruc- 
ture the region’s agriculture, 
whlchT meant breaking up the 
Landwirtschaftliche Produk- 
tionsganossenschaften, or 
IPGS, the large cooperatives, 
and the Volkseigene Gates, or 
VEGs, the state farms; and 
then it wanted to sell the prop- 
erty. This entailed the lore of 
thousands of jobs in the agri- 
cultural sector: Indeed, the 
unemployment rate in the 
countryside Is in some cases as 
high as 70 per cent 

Soon after German unifica- 
tion, the agency began selling 
agricultural imj But many of 
the buyers were coming from 
west Germany. "The east Ger- 
mans felt aggrieved. They felt 
there were being colonised,” 

explained Mr RarnmaTl . 

“They had little chance to 
buy land Wmwa they no 
capital. Ther e was terrible ten- 
sion in the countryside. We 
decided we had to give the 
easterners a chance. So we 
introduced a new system. We 
would lease land to the east- 
erners -at p r e fo rantial . prices," 


he added. The leases were 
based on short-tsrm three-year 
contracts, or long-term 12-year 
ones. , _ 

But no sooner had the Treu- 
hand embarked on tids plan 
than its officials discovered 
♦tint many questions concern- 
ing property rights stipulated 
in the unification treaty would 
have to be tackled. 

For Instance, the Treuhand 

soon realised that when it 
wanted to lease land to east (or 
west) Gomans, it bad to make 
sure that there were no out- 
standing claims on the prop- 
erty. . 

“In tome cases, the east Ger- 
mans complained that they 
received only shortterm con- 
tracts of about three years, 


Tirana who managed, to obtain 
12-year contracts," said Mr 
BammeEL “The problem facing 
the agency yas that it was 
afraiH to pxtpnd kmg contracts 
In case former property owners 
had already put in a claim. 

JUDY DEMPSEY 
recounts the battle 

of the title deeds 


What could the Treuhand do 
with an east Geanan long-term 
leaseholder if a former owner 
wanted to come back?” 

The Treuhand was faced 
with another problem. It was 
often difficult to ascertain, who 
originally owned the land. The 
g»nwpin of the LPGs explains 
why. These state .forms were 
created from land expropriated 
by the former Soviet Union 
which bad ruled eastern Ger- 
many between 1945 and 1949, 
and from small landholders 
who In 1952 were forced to 
{dace their plots in the LPG. 

In many cases, the original 
land register was dosed and a 
new one was created which 
-stipulated that the owner of 
the LPG was the east German 
state. However, the Treuhand 
is now finding that former 
owners have been able to trace 
the original land registers. As 
a result, they are now claiming 
their land back. 

□ Continued on faring page 


What is the 
most important 
today? 











™* Nc,A *- times 


MONDAY NOVEMBER 21 1994 





RoJds and homes near Chemnitz {formally Kart-Marx Stadt): plenty to argue about Picture: Tony Anckews 

Private scramble for land 


□ Con td from opposite page 
“This has inevitably slowed 
down the whole process of leas- 
ing land,” said Mr BamtnelL “If 
land has been leased, even for 
a short time, and if the former 
owner can prove legal tide to 
it, then the Treuhand nan 
allow the lease to run its full 
term. But once the lease has 
expired, the Trenhand must 
pass on to the original owner 
the rent from the leaseholder". 

This sense of uncertainty 
about who owns land in east- 
ern Germany has been com- 
pounded by another factor, for- 
mer land owners, usually 
belonging to the Prussian aris- 
tocracy. whose land was expro- 
priated by the Soviet adminis- 
tration 

These owners have no right 
to restitution bat have a right 


to buy back their land, rent it, 
or, following a law passed last 
September, to limited compen- 
sation. 

“After unification, these for- 
mer large landowners hesi- 
tated to buy back their prop- 
erty. They were waiting to see 
what kind of compensation law 
would be agreed," said Mr 
BammelL But In the process, 
the privatisation - and invest- 
ment in east German agricul- 
ture - was delayed. 

As a means of speeding up 
the privatisation of land, the 
German government gave 
investors priority over restitu- 
tion claims. This law allows 
individuals wishing to buy 
land in eastern Germany to cir- 
cumvent outstanding property 
rights riarms if they can prove 
to the Trenhand that they wOl 


invest and create jobs. In some 
cases, this has meant that a 
former landowner can only get 
the land back if he or she can 
match that investment plan. 

“The east Germans simply 
do not have the money to com- 
pete with the west Germans,” 
said Mr Werner Loranz, an east 
German who, along with 14 
other colleagues, farms 1,300 
hectares in the state of Meck- 
lenburg-Vorpommern 

Despite the scale of these 
problems, the Treuhand has 
drawn up 9,000 contracts which 
involves leasing 90,000 hectares 
based on short-term contracts, 
and a Anther 788,000 hectares 
based on long-term contracts. 
*1 think the turmoil in east 
German agriculture is nearly 
at an end. Bat it has been a 
high price to pay.” 


XI 


GERMANY 11 


■ TELECOMMUNICATIONS U NCHAINED 

A market is 


T he dynamics of the tele- 
communications busi- 
ness have once again 
proved Irresistible, writes . 
CHRISTOPHER PARSES. 

The latest demonstration of 
the market's momentum 
occurred in Bonn in mid-Sep- 
tember when the German 
postal ministry performed an 
unexpected about-face. 

Mr Wolfgang Bfitsch, post 
minister, setting aside objec- 
tions from Deutsche Telekom 
and European Union col- 
leagues, announced he was no 
longer inclined to delay liberal- 
isation of Germany's monopoly 
on telecommunications. 
Instead, he favoured opening 
networks to competition on 
January 1, 1998, the date previ- 
ously set by the EU for liberali- 
sing markets for telecoms ser- 
vices (provided through links 
rented born the mostly state 
monopolies). 

In a clear signal to Paris that 
the unwritten go-slow alliance 
between Germany and France 
was at an end, he said Bonn 
would consider going it alone 
in the absence of consensus. 

Since the deadline - early 
1996 - for the first tranche of 
the privatisation of the exist- 
ing state monopoly had 
already been fixed, Mr Bdtsch's 
announcement completed the 
timetable for the opening of 
the free- market era in the Ger- 
man telecoms sector. 

The U-turn was all the more 
striking in the light of the Ger- 
man government's earlier foot- 
dragging. For example, Bonn 
Initially interpreted and 
applied the 1988 EU regulation 
allowing the t ransmis sion of 
speech within closed user 
groups in its most re st rict iv e 
form. 

Although the regulation was 
intended to allow companies to 
use their own networks freely 
for internal voice telephone 
services, the German interpre- 
tation said permission would 
not be granted for groups made 



Posts mMstar Wottgang Bfitich 


up of legally independent sub- 
sidiaries. 

Only under pressure from 
eminent companies such as 
BASF chemicals and Colonia 
insurance, did Bonn finally 
relent: at the end of 1993. It 
was not until mld-1992 that the 
first licence for a private 
mobile phone service was 
granted to a consortium led by 

However, Mr BOtsch’s latest 
statements prompted the lead- 
ing private contenders for a 
share of the market to spring 
promptly into action. The ener- 
gy-based conglomerates, pri- 
marily RWE. Veba and Viag. 
better known for their protec- 
tionist attitudes towards their 
electricity distribution “rights” 
than for their competitive 
instincts, strove to catch the 
investors' eye with the unveil- 
ing of grander and grander 
designs. 

Veba, for example, scored 


something of a coup what it 
announced an agreement in 
principle with the federal rail- 
ways, allowing it to lay its 
cables and optical fibres along 
the national track and signal- 
ling networks. The group, pro- 
claimed chairman, Mr Ulrich 
Hartmann, was to invest 
DMSbn, create 10.000 jobs and 
take a 10 per cent share of a 
DMlOObn-a-year market by 
2003. Days later, RWE claimed 
it was to fatten its product 
portfolio by taking over Preus- 
sag’s mobile phone business. 

Supported by the influential 
DIHT federal chamber of trade 
and industry, the newc o mers 
have since harassed Mr BOtsdx 
increasingly with demands for 
access to the market even 
before the start of 1998. 

The pressure from the pri- 
vate sector for “freedom now” 
stems partly from the desire to 
spread their networks and 
their wings in the interests of 
gaining practical experience, 
the better to c om p ete at h o 1 * 11 * 
and elsewhere with established 
private operators from the US 
and the UK. 

But the main attraction is 
the conviction that glittering 
prizes await the front runners. 
In less than 10 years, the 
prophets say, telecoms in all 
its manifestations could be 
Germany's biggest-selling 
industry, outstripping automo- 
biles and engineering. 

The scale of the prospective 
profits defies calculation, but 
even the most conservative 
estimates appear dramatic. For 
example, a basic comparison 
carried out in 1992 showed tele- 
communications sales per head 
of population in the US were 
DM960 a year compared with 




DM520 in Germany. Market 
analysts have extrapolated 
that Hite alone implies a sales 
“gap” of DMZObn a year to be 
bridged, even before additional 
services and products are 
taken Into account 

Veba, for example, forecasts 
double-digit annua! growth in 
some services in the period 
from 1993 to the end of 1997. It 
envisages a 22 per cent a year 
potential expansion in mobile 
telephones, 32 per cent in 
added value services and 15 per 
rent annually in cable televi- 
sion (excluding pay TV). By 
2003, the company sal's, Ger- 
many's main markets will be 
worth almost DMIQObn. 

But ambition is one thing 
and reality is another. Despite 
considerable heavyweight pub- 
lic/investor relations work, the 
energy distributors' projects 
have failed to ignite investors’ 
interest. One possible reason is 
that the proliferation erf con- 
tenders and consortium part- 
ners has made it difficult to 
pick winners. The relatively 
long-term nature of most of 
their projects also suggests 
there is no need to rush. 

Analysts have chosen the 
energy groups as the most 
obvious because of their exist- 
ing infrastructural advantages: 
electricity distribution net- 
works already equipped with 
copper cable or optical fibres, 
and experience operating 
extensive internal data and 
telephony services. 

Although there will certainly 
be plenty of niches for service 
providers without networks of 
their own, such a role has 
already been rejected by the 
Preussag steel and engineering 
group, which recently sold its 


SALES PROSPECTS FOR WEST EUROPEAN AND GERMAN TELECOMS MARKETS (DM bn) 


Sectors 



Western Europe 




Germany 



1893 

1998 

2003 

+% pjL 

(93-98) 

+% p-a. 
(99-03) 

1993 

1998 

2003 

+% p-Q. 
(93-98) 

+% p-a. 
(99-03) 

Cable TV 

6 

11 

15 

12-9% 

6.4% 

2 

4 

5 

14.9% 

4.6% 

Added Value Services 

7 

16 

25 

18.0% 

9.3% 

1 

4 

8 

32.0% 

8.4% 

Data Transmission 

36 

55 

76 

8.8% 

6.7% 

8 

13 

16 

102% 

42% 

Mobile Telecoms 

14 

29 

41 

15.7% 

7.2% 

3 

8 

12 

21.76% 

8.4% 

International long distance speech 

45 

59 

68 

5.6% 

22% 

10 

12 

14 

3.7% 

3.1% 

National long distance speech 

86 

104 

116 

3.9% 

2.2% 

18 

21 

24 

&1K 

2.7% 

Local speech 

50 

60 

65 

3.7% 

16% 

12 

15 

17 

4.6% 

2J5% 

TOTAL 

244 

334 

406 

&5% 

42% 

54 

77 

94 

7.4% 

4.1% 

Source: VEBA 


burgeoning mobile telephone 
business to RWE. But even 
some of those deemed most 
likely to succeed are taking a 
circumspect view. 

Viag, which is reputed to 
have the most extensive opti- 
cal fibre network - some 
4,000km courtesy of its Bayem- 
werk subsidiary - recently 
excluded telecoms from a list 
of future “core" activities. It 
was placed instead among 
“supplementary” businesses 
which might in future become 
mains tream operations. 


Heavyweight 

challengers 

■ VIAG: Has extensive cable 
and optical fibre network, but 
used almost exclusively for 
internal voice and data trans- 
mission. Has founded TB&D 
Telekommunikation subsidiary 
which has been linked up with 
the internal network of Bayer - 
ische Hypobttnk. Believed to be 
trying to extend network 
through deals with regional 
electricity distributors, but has 
no stakes in other telecoms busi- 
nesses and ml experience of 
operating in private sector. 
Aims to win a 7 per amt share 
of domestic private telecoms 
market (DMGOOm-TOOm) by 1998. 

■ RWE: Actively building 
stakes and interests in promis- 
ing consortiums and partner- 
ships, with plans to invest 
DMLSbn by the end of the 
decade and reach break-even a 
year earlier. Entire telecoms 
interests recently bundled 
together in RWE Dnitel AG. 
Analysts suggest relatively con- 
stipated progress is due to the 
conglomerate's bureaucratic, 
politicised planning mecha- 
nisms. The group is controlled 
by local governments from the 
Ruhr region, with dozens of 
important posts fitted by doil 
se rvant s ar politicians. 

■ VEBA: Would-be telecoms 
power house among the power 
compa n ies. Plans to invest 
DM6bn by 2003. looking for for- 
eign partner for its newly- 

f armed Vebacom subsidiary 
which bundles together its 
stakes in nine separate busi- 
nesses spamting the whole tele- 
coms spectrum from cable TV to 
satellite communications. 

Veba’s projects, pushed through 
against resistance from tradi- 
tionalist board by new chair- 
man, Mr Ulrich H art m ann . 
They are also being enthusiasti- 
cally promoted by one of the 
most effective investor relations 
teams in Germany. 



A country full of inventors 
exists only in fairytales. 


Or in Germany's Southwest. 


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What else docs Germany's Southwest have 
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Take the fact that there's nothing foreign to 
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For more information about Batlen-V'uri- 
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Dr. Hans-Dieter Rotb, 
WiUi-Bleicber-Strasse 19. 7017-iSluttgurt. 
Germany, Tel. (+49) (711) 22787 14. 

Fax (+49) (711)2278722. 


MINISTRY 01' 
ECONOMIC VITA I US 



Thinking global 




... acting local. 



Landesbank Hessen-Thuringen. 


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Phone: (361) 66 57-0, Telefax: (3 61 ) 56 26 284 

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telephone: (0)221/2 21-6123, fo: (0)2 21/2 21-66 86 



FINANCIAL TIMES MONDAY NOVE MBER 211^ 

GERMANY 12 

Michael Lindemann profiles Mannesmann’s Peter Mihatsch arid Tele kom s Helmut Ricke 


Ambitious rivals for the big prize 



When Mr Peter Mihatsch looks 
out of his first floor office in 
Dusseldoif he has an inspiring 
view of the river Rhine. Vast 
concrete and steel bridges 
tower over Europe’s mightiest 
river which flows north as far 
as the eye can see. 

It is an inspiring view and 
leaves one feeling spectator in 
little doubt that the world is 
there for the taking. 

.. In Bonn, Mr Helmut Ricke 
has a far less interesting view 
, - a cityscape of small office 
blocks and detached houses. 

The different views from 
their offices reflect their con- 
trasting styles. 

Mr Mihatsch heads the tele- 
communications division at 
Mannesmanm the first German 
company to take on Deutsche 
Telekom, the State-owned tele- 
coms operator run by Mr Ricke 
which is soon to be privatised. 

Both men have ambitious 
plans. Mr Mihatsch ’s operation 
is tiny compared with Tele- 
kom. but he is looking to 
expand it rapidly. Mr Ricke, on 
the other hand, has taken Tele- 
kom into joint ventures across 
Europe and the globe, but 
knows that as competition 
from companies such as Man- 
□esmann intensities, Telekom, 
which still largely enjoys a 
monopoly, will stand to lose. 

In 1990, Mr Mihatsch moved 
from Marwesmann Kienzle. a 
company which makes equip- 
ment for commercial vehicles 
and is part of Mannesman!! , 
the engineering 'and automo- 
tive technology group, one of 
Germany’s top 20 companies in 
sales terms. 

He was charged with setting 
up Germany's first private 
mobile phone network, a bold 
new venture for a company 
which had become almost syn- 
onymous with steel piping. 

It has been a startling suc- 
< cess and set an example which 
others are racing to follow. 

The division is expected to 
report sizeable earnings for 
1994. the first full year in 
profit Sales are expected to top 
DM1 .Sbn for the year, making 
it the fastest growing unit 
within the Mannesmann 
group. 

What the pipes did for the 
company’s image pales in com- 
parison with its profile among 
millions of people reached by 
its aggressive advertising cam- 
paign for its D2 mobile phone 
network. 

Mr Mihatsch's success has 
earned him a seat on the sev- 
en-strong Mannesmann man- 
agement board but be seems 
far from excited about it 

The Mr Ricke chooses his 
words more carefully. He has 
to avoid upsetting the govern- 
ment ministers who are bis 
masters or provoking the pow- 
erful trade unions. During a 


Peter Mihatsch of Man nesm an n 

discussion about the needs of 
Germany's rapidly changing 
telecommunications industry, 
he pauses to consider the exact 
title of the new law that will he 
needed. 

The contrasting style also 
reflects the fact that whereas 
Mr Mihatsch only has around 
2,500 employees, Mr Ricke has 
to lead 224,000 people, many of 
whom realise that they may 
lose their jobs as Telekom is 
privatised. 

Before moving to Telekom in 
1990. Mr Ricke spent 12 yeps 
running Loewe Opta, a leading 
manufacturer of telecoms 
equipment He had, for a while, 
been a member of the technical 
council which advised Telekom 
and was singled out by the 
then post minister to take over 
as chief executive. 

The job has often been 
described as one of the most 
difficult in Germany, requiring 
the incumbent to dodge and 
weave among political mine- 
fields and showdowns with the 
unions while all the time 
ensuring that Telekom is as 
well placed as possible to tap a 
fast-moving market in which 
the competition becomes ever 
fiercer. 

The State's responsibility to 
run the telephone network 
used to be enshrined in the 
Constitution. So even the Con- 
stitution had to be changed 
earlier this year. The mentality 
at Telekom has also had to 
change. When Mr Ricke took 
over, the supervisory board - 
which oversees the manage- 
ment board - frequently found 
itself debating whether Tele- 
kom's national and interna- 
tional plans were constitu- 
tional or not 

Such distractions are no lon- 


ger necessary and Telekom has 
been transformed beyond rec- 
ognition. It will become a joint 
stock company on January 1, 
1995 and is expected to be 
listed on the stock exchange 
early in 1996. It used to be a 
company focused entirely on 
Germany arid supplied mainly 
by German telecoms manufac- 
turers such as Siemens; now 
around 28 per cent of the sup- 
pliers come from outside Ger- 
many. 

Customer service should also 
improve now that most Tele- 
kom employees are no longer 
civil servants. 

Telekom has ambitious plans 
for international expansion: 
together with France Telecom 
it has a joint venture with 
Sprint the DS long distance 
carrier, it has taken a stake in 


Pwrtache Tnfcfcom'i Helmut Rfcfco 

MATAV. the Hungarian tele- 
coms operator; has interests in 
the Ukraine and may become 
involved in the Czech. Repub- 
lic. Turnover is forecast to 
reach DMSObnby 2000, up from 
the DM69bn planned for next 
year. 

Yet while others are looking 
forward to capturing market 
share, Telekom, the one-time 
monopolist, has to give tt up. If 
Mannesmann and other opera- 
torshave their way, Mr . Ricke 
or his successor will have to 
surrender the cable television 
network to an independent 
company which would allow 
equal access for all competi- 
tors. 


so-called corporate networks, 
alternative .nets built on the 
infrastructure which' big com- 
panies such as .ntflitfes have 
available. . - 

Following 1 the success of the 
D2 mobile phone network, Mr 
jfihatsch is weighing up what 
he might dd next , ■ 

That seems -to be. is. style: 
when he finished studying 
electronic engineering to. 
frfrrnfoh he rush into Industry 
but preferred rto do research 
work oh. plasma physics. “I 
wanted to step back a bit and 
gat abetter overall picture," he 
says.. ■ 

T.flm Mr Ricke, he is looking 
abroad - to see where he can 
use the D2~ know-how eise- 


Even if Telekom keeps the 
network, the European Com- where in Europe and where 
mission is at some point likely Mannesmaxm and its partners 
to allow c om petition from the can supply new networks. # 



An overseas telephone caB-card hafatec the choice widens Picture: Deutsche Tetetom 


Mobile phone users are increasing by 30,000 a month, reports Michael Lindemann 


How Mannesmann got in first 


West JEumpe; tetecomiminlcatlptis nukket 


By country 





Sourar URMsWRa 


rd\Nn 


lands 


Jump in a taxi in Germany and 
D2 is often written in large 
blue lettering across the car. 
Leaf through the many weekly 
news magazines and you will 
find the same logo. “It’s my 
line." is the English slogan 
that comes with It 

D2 and the catchy jingle are 
the trademark of Mannes- 
mann’s mobile phone business, 
the first private telecoms oper- 
ator in Germany which started 
operating commercially In mid- 
1992 and has signed up around 
760,000 clients since then. 

About 30,000 clients a month 
are being won over to mobile 
phones and the network 
expects to report sizeable prof- 
its for 1994 following invest- 
ments of around DM3bn. 

It has, so Ear, been an unex- 
pected success story with Man- 
nesmann pitting its skills 
against Deutsche Telekom, the 
soon-to-be privatised state- 
owned telecoms operator 
which operates DL the other 
mobile phone net 

Where Mannesmann led, oth- 
ers quickly followed. Veba, the 
energy-based industrial con- 
glomerate also based In DQssel- 
dorf, has taken a stake in the 
so-called E-plus network, 

alongside Tbyssen which still 
makes a lot of its money In 
steel 

Meanwhile RWE, the utility, 
has teamed up with Mannes- 
mann and Deutsche Rank , Ger- 
many's largest bank, to 
develop a corporate network, a 
sort of alternative telecommu- 
nications network which 
would use the existing cables 
belonging to utilities and other 
large companies. 

Viag, the Munich-based 
industrial group, is also trying 
to work out how it can get into 
the market while Veba 
recently announced that it was 
working with Deutsche Balm, 
the Federal railways, to use 
their rail infrastructure as a 
basis for a corporate network. 

In short, telecommunications 
has become flavour of the year 
in Germany, in no small way 
th anks to Mannesmann winch 
first took on the Telekom’s 


monopoly. But Mr Peter 
Mihatsch. head of Mannes- 
mann’s telecoms division, is 
not content with taking on one 
mobile phone monopoly. 

Over the summer Mannes- 
mann and Mercury, the UK- 
based telecoms operator, joined 
forces to challenge a derision 
by the German postal ministry 
which wanted to award Ger- 
many's first in-flight mobile 
phone service to DeTeMobil, 
the Deutsche Telekom subsid- 
iary which operates the Dl net- 
work. 

The court challenge is still in 
progress but Mr Mihatsch says 
it marks an important turning 
point on the German telecom- 
munications market “For the 
first time Deutsche Telekom 
didn't get a service straight 
away,” he says with an audibly 
sterner tone in his voice, 
reflecting the resentment of 
constantly having to do battle 
with Telekom's monopoly. 

Alongside Mannesm ann 
Mobilfunk (MMO), the unit 
which runs the mobile net-' 
work, Mr Mihatsch has created. 


Eurokom, a company which 
has amassed a series of hold- 
ings in telecoms ventures 
across Europe, including 
stakes in mobile phone net- 
works in Spain and Italy and 
in companies specialising in 
data transmission. 

Mannesmann is now looking 
for partners across Europe 
with whom it can offer D2 cli- 
ents services across the conti- 
nent, enabling them, for 
instance, to have their phones 
repaired or exchanged. 

Most importantly Mr 
Mihatsch intends to use the 
mobile phone net to cany a 
variety of new services. 

“You can buy more than just 
an Aspirin at the chemists," he 
says in his office in Dusseldorf. 
“In the same way there will be 
different suppliers offering dif- 
ferent services.” 

He is currently working on 
plans to couple the GSM 
(Global System for Mobile 
Communications) standard 
with satellite technology and 
provide drivers across Ger- 
many --and eventually Europe 


- with an array of services 
including navigational aides 
and technology which would 
automatically pay motorway 
tolls. 

VDO. Mannesmann’s auto- 
motive technology division, is 
working on the so-called black 
box which would give drivers 
access to this catalogue of new 
driving aides. 

How soon the technology is 
available depends in part on 
political decisions to privatise 
motorways but Mr Mihatsch is 
confident that within three 
years the services could be 
available. 

Alongside the new in-car ser- 
vices, Mannesmann is also lin- 
ing up to take advantage of the 
expected liberalisation of the 
telephone network in Ger- 
many. 

The competition from Veba 
and others who are toying with 
the idea of corporate networks 
seems unlikely to pose much of 
a threat to Corporate Network 
International (CNI), a joint 
venture that M annesmann has 
entered with RWE and Deut- 
sche Bank, both leaders in 
their respective fields. 

Tn the end it is all about 
who has the customers,” says 
Alan Coats, an analyst at Pari- 
bas Capital Markets to London, 
pinpointing CNTs outstanding 
strength. 

Mr Mihatsch expects “heated 
discussions" before Telekom 
can be made to relinquish its 
monopoly. Mannesmann may 
not want a sudden opening of 
the German networks - there 


are same suggestions that this 
should happen as soon as 1995 
- before it and its CNI partners 
are ready. 

"But you have to identity a 
milestone, and say that (liber- 
alisation) would happen within 
two years. Those of us who 
want to invest - and not just 
DM15 but hefty sums - need 
security with which we can 
plan. 

Mr Mihatsch is loath to pre- 
dict how many mobile clients 
MMO will pick up in future. So 
many previous forecasts have 
got it wrong, be says, quotinga 
1987 study which predicted 
that there would be lm mobile 
phone users in Germany by 
2000. a slight misjudgment 
given that Dl and D2 alone 
already have about l.6m cli- 
ents. 

“The people compiling these 
studies at that time could not 
possibly foresee the develop- 
ments," he says. “Mobile 
phones were thought of as VIP 
products, to be used by a few 
very rich people. Today in Swe- 
den you have more people sign- 
ing up for mobile phones than 
for fixed lines.” 

Press him a bit and Mr 
Mihatsch admits there will be 
at least 10m mobile phone cli- 
ents in Germany alone by the 

year 2000. 

By then, he says, MMO and 
Eurokom, which have so for 
consumed far more money 
than they have earned, will be 
making healthy contributions 
to Mannesmann’s turnover and 
profit 


on i.5 acres of land, beautiful, detached 
site on little village, autobahn within 1 ' 
Suitable for school, offices, manufactur 
warehouse, eldevcare home, club etc. or 
private residence. Heatabte pool on tar, 
wrth garden *ttees. Price: DM 690.<XH 
red. Swiss AG (Corp) owing tee restet 

rf requested. Address enquiries to: 

P-O- Boa 2-4, CH-8056 Zurich, Fan +4 








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Monday November 21 1®94 


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GERMANY 13 


I ^ente n« d ?Q h ° W Utt,e 

Germany |Sb J ?if rote " “» 
^en relatively^ ^ derai l 
reform the Plans to 

system. h ‘ sher duration 

f February 

ttousana of them 3 ! hundred 

cold and 5oH? *»"* the 
across the ^ streets 

France, such ’E?’ m 

sometimes turS em °i XStrations 
stodeats piSL^J^ with 

5ST; £S~ 
SPS^SihS.'S 

readii^ organised public 

£S%rs 

verv won year ?..“ as Produced 
wL weI1 ^ ua Wied students 

™fek^ Qtly **““*» 

The reforms had nronosed 

Star Sf® 11 ® ffouJd t *o P SS 

2f two semesters, instead of 
3ftw four, to ensure they were 
academic targets; they 
oad also required students who 
were studying too slowly to 
pay fines. 

was 110 sur Prise about 
the fines: German students 
needon average seven years to 
niuah their degrees, compared 
with an average 3-3 years in 

Bri tain 

The tests and fines were part 
of a package of reforms which 
had been debated ex tens ively a 
year ago. Chancellor Helmut 
Kohl had convened an educa- 
tion summit and there had 
been countless other discus- 
sions to see what could be 
done to give students more 
choice, improve competition 
among universities and cut 
costs of around DM30bn for 
universities alone. 

However, within days of the 
protests, Mr Rainer Ortieb, the 
education minister, had 
resigned. The plans were 
shelved in the run-up to the 
October elections and they do 
not seem to be a top priority 
for the new government which 
wants to avoid arguments 
among the three party coali- 
tion. 

Under the federal system, 
education is largely a responsi- 
bility of Germany’s 16 Linder. 
While they work Hand in hand 
with the federal government, 
all important decisions, includ- 
ing financial ones, are made in 
the state capitals. The feet that 
each Tjmd has a slightly differ - 
ent education policy also made 
it harder to reach consensus 
about ferr eachmg reforms. 



Cafe Ufa in the university city of Bonn: studying In Germany usually takes tongar Picture: Alan Harper 


Student militancy sinks cash reforms, writes Michael Lindemann 

Expensive learning curve 


Efforts to cut costs also 
made little headway. BAFfiG, 
the training assistance law 
which ensures that around 
770,000 students receive funds 
to finance their studies, was to 
have been frozen until 1996. In 
July. Mr Karl-HanS i-aermawn. 
the new minister, managed to 
increase it by 2 per cent, which 
was less than the rate of infla- 
tion but nonetheless a setback 
for the gove rnment 

Meanwhile, the university 
system is binsting at its seams: 
1.8m students are expected to 
make do with 850,000 places at 
universities. 

Since 1977 the number of 
new students has risen by 73 
per cent, an increase in line 
with other industrial democra- 
cies, bat while Germans are 
not loath to sign on, around 27 
per cant of tbpm drop out of 
their studies for one reason or 
another, according to figures 
from the Federation of German 
Industry (BDl); in North Bbine- 
WestpMUa, Germany’s biggest 
state, qp to 38 per cent leave 


their Studies unfinis hed. 

Parallel to the universities 
Germany has since the begin- 
ning of the century had a sys- 
tem of vocational training 
offering qualifications from 
banking to hotel management 
for those not wishing to go to 
university. 

Each year about 550,000 Ger- 
man school-leavers sign 
apprenticeship contracts with 
companies. Every German pro- 
fession has its own training 
programme, lasting two or 
three years, and all of the 
500,000 mostly medium-sized 
companies which take on 
apprentices must provide qual- 
ified instructors. 

But participants in this pro- 
gramme are also beginning to 
wonder about the costs. 
Employers spend DM40- 
DMSObn a year on training and 
there are growing concerns 
that the Systran is also becom- 
ing too inflexible. And as Ger- 
man industry ahtufa jobs in an 
effort to raise productivity 
companies often have to turn 


away the Lehrlinge or appren- 
tices who have completed their 
training only to find that the 
jobs they were promised are no 
longer available. 

Managers too are becoming 
increasingly aware that the 
German system, admired for 
decades, may be losing its 
advantage over comparable 
systems abroad which are 
more competitive and flexible. 
A survey conducted by the 
Munich-based Ifo economics 
institute earlier this year, 
showed that 38 per cent of com- 
panies fhinir the German stan- 
dards are slipping. 

I r TyU Necker, the BDI 
president who steps 
down next month , has 
been a particularly vociferous 
critic of the shortcomings of 
the further education system. 

He has argued repeatedly 
that the system must be better 
tailored to the needs of indus- 
try and society in order to 
avoid a situation where up to 
23 per cent of university gradu- 


ates work in jobs where 
degrees are not required. “If 
society has to devote a large 
part of its resources in order to 
educate people then it also has 
to have the right to ensure that 
there is some sense to it," Mr 
Necker said. 

But the momentum 
generated by the heated 
discussions last autumn has all 
but petered out. As part of 
plans to streamline the 
government, there are even 
proposals to ftise the education 
ministry with the ministry of 
research and technology, 
reflecting the low priority 
accorded to the reforms. 

Advocates of the German 
system still say it produces 
more better educated people 
per head of population than 
other systems. They may he 
right hut pressures associated 
with an ageing population and 
a lack of funds means that 
much still needs to he done if 
Germany is to preserve its 
comparative advantage in 
years to coma 


The media are in the news, says Judy Dempsey 

Viewers fear too much 
power in too few hands 


As they voted to elect a new 
Bundestag, or lower house, 
Germans were relieved that 
they had at last reached the 
end of a mammoth round of 
local, state and federal elec- 
tions. 

For over seven weeks, televi- 
sion. and radio devoted worthy 
discussions about the cam- 
paign. Some politicians said 
they feared the electorate was 
sick of the non-stop coverage. 

But behind the scenes, 
another debate was taking 
place: how to re-write Ger- 
many’s broadcasting law. The 
discussion coincides with a 
period of rapid change in the 
media where Germany’s 
m o gute and non-Germans are 
joining tanks or competing to 
increase t heir market share. 

According to Mr Dieter Wolf; 
president of the country’s fed- 
eral Cartel Office, Germany's 
television - and media owner 
ship structure - is an oligop- 
oly. 

There are two public televi- 
sion channels: ARD ar *d ZDF. 
These faced competition a 
decade ago when the German 
government allowed indepen- 
dent rfiannefc to operate. The 
three largest privately-owned 
channe ls are SAT1, RTL and 
Pro 7. The bulk of the televi- 
sion advertising, worth an 
annual DM49bn, goes to two 
media groups - Leo Kirch, 
whose high-tech studios are 
based in Munich, and Bertels- 
mann, Europe’s biggest media 
group, which has joined forces 
with CLT, the Luxembourg- 
based broadcasting company. 

Kirch has a 43 per cent stake 
in SATl, a 2S per cent stake in 
Premier TV, a pay TV movie 
ffhunngi . a 48 per »nt stake in 
Pro 7, a 25 per cent stake in 
Deutsches SportFemsehen 
(DSF), a sports channel, and 
substantial stakes in a Swiss, 
Italian and Spanish channeL 
He also holds a 35 per cent 
stake plus one vote in the 
Springer publishing house, 
which in turn holds a 20 per 
cent stake in SATL 

Alongside the Kirch group is 
Bertelsmann. It holds a 37.5 per 
rent stake in Prrani&re TV, 389 
per cent in RTL and has a 749 
per cent in the Grflner+Jahr 
giant publishing house; as well 


as stakes in Stem and Spiegel, 
the political weeklies. 

Until recently, Germany’s 
broadcasting authorities 
turned a blind eye, or at least 
kept the debate about reform- 
ing fee ownership structure of 
Germany’s Independent televi- 
sion rfoanneig on the back- 
bumer. But two recent devel- 
opments brought the issue out 
into the open. 

The first was the decision by 
Mr Rupert Murdoch, the Aus- 
tralian mogul and owner of 
Times Newspapers in the UK, 
and Bertelsmann to save VOX, 
the television channel by tak- 
ing a 49 9 per cent stake. 

The other development was a 

German and foreign 
media moguls are 

competing to increase 
their market share 

major venture by Kirch, 
Bertelsmann and Deutsche 
Telekom, the state telecommu- 
nications monopoly, to create a 
joint venture called Media Ser- 
vice which will offer to manage 
and distribute new TV chan- 
nels, as well as specialist tele 
co mmuni cations services on 
Deutsche Telekom’s cable tele 
vision network. 

This venture was referred to 
the European Commission 
which earlier this month ruled 
that the Media Service would 
hinder competition. The three 
parties are expected to return 
to the drawing board and 
revise their plans. The three 
partners meanwhile have 
insisted that “the new joint 
venture will not act as a broad- 
caster or provider of program- 
ming," and will be scrupu- 
lously neutral in its treatment 
of future clients, restricting 
itself to technical, administra- 
tive aoH distribution services. 

All sides are also adamant 
that they are not seeking to 
create a monopoly ova* distri- 
bution of future digital televi- 
sion services in Germany. But 
the Cartel Office, and Ger- 
many’s Medienanstalten, 
which consists of 15 regulators 
representing each of the 15 
states, are scepticaL “Having 
oligopolies Is one thing. But we 


have to see if there is no com- 
petition between them," said 
Mr Wolf. 

The Medienanstalten are just 
as sceptical and even more 
critical about the ownership 
structures in German broad- 
casting. The Medienanstalten 
are quangos which also repre- 
sent the regions and local com- 
munities. They are supposed to 
act as a watchdog with the aim 
of ensuring a variety of high 
quality programmes for the 
German consumer. They carry 
out this task by issuing broad- 
casting licences. A regulator, 
for example, can award satel- 
lite and cable licences, which 
would ghre a TV station access 
to about half of Germany’s 
households. In addition, any 
station must apply to fee indi- 
vidual regulators in each state 
for terrestrial frequencies. 

"We want more competition. 
But where does the border 
lie?." said Mr Hans Hege, chief 
regulator for the Berlin-Bran- 
denburg region. Mr Hege’s con- 
cern is that the Media Service 
backed by Bertelsmann and 
Kirch will effectively monopo- 
lise the market "The big issue 
is one of concentration by fee 
oligopolies. What is required 
now is a new media law which 
would monitor and control 
both market and audience 
share." 

Under current legislation, 
owners of independent, private 
television cannot own more 
than 49 per cent in any chan- 
neL But what some regulators 
want is a law which allows any 
individual broadcaster no more 
than a 35 per cent stake of the 
audience. 

That might be hard to moni- 
tor given that audiences fluctu- 
ate Moreover, that law would 
not weaken the oligopolies run 
by Bertelsmann and Kirch 
which in theory could together 
dominate wall over half the 
audience share through their 
diverse television rharnipls and 
their overlapping ownership 
interests. 

"We have to consider all 
these thing s." said Mr Wolf. 
"But we have to make sure 
that competition between the 
oligopolies continues to exist,” 
he added. Recent developments 
suggest otherwise. 


in International Markets 



Undestenk Rheinland-Pfalz 
D-550Q8 Matas. Goman? 
Grasse Bleiche 54-56 
Telephone (61 31) 13-01 


Landesbank Rheinland -Pfalz - one of Germany’s prominent 
public-sector financial institutions - has been going from strength 
to strength in international debt markets. 

Since its decision to diversify its funding sources, the Bank 
has become a familiar name as a regular and high-quality issuer in 
international capital markets. Enjoying quasi-sovereign status and 
backed by fop credit ratings, Landesbank Rheinland-Pfalz to date 
has launched International borrowing? in a number of major 
currencies and In a variety of terms. 

In line with its objective of broadening Its investor base, 
Landesbank Rheinland-Pfalz has demonstrated its readiness to be 
innovative. The Bank’s most recent borrowing In international 
markets was its first issue of a Dragon bond in August 1994. This 
was also the first issue in the Dragon bond market by a bank of 
a German federal state. 

Landesbank Rheinland-Pfalz is a universal bank with total 
assets of over DM 60 billion and core businesses in long-term 
lending and real estate financing. It also acts as banker to the 
State of Rheinland -Pfal2 and functions as central bank and 
liquidity manager for the state’s savings banks. Its shareholders 
are the Saving? Banks and Giro Association of Rheinland-Pfalz, 
Westdeutsche Landesbank Girozentrale, and SQdwestdeutsche 
Landesbank Girozentrale. 


Landesbank Rheinland-Pfalz 








FINANCIAL TIMES MONDAY NOVEMBER. 21^994 



GERMANY 14 



Linda’s industrial separation plant near Bmo, In the Czech Ftepubflc: no trace of historic antaganosm 


Manufacturers head for eastern Europe, reports Christopher Parkes 


Poles and Czechs compete 
with the German worker 


When the Polish economy 
finally finds a firm footing 
there may be room in the mar , 
ket for three industrial gas 
suppliers at most, according to 
Mr Gunnar Eggendorfer. a 
Unde group director. 

At present, while the econ- 
omy is anything but stable, the 
key metal-working industry is 
going into reverse, the zloty is 
weakening almost continu- 
ously against the D-Mark, and 
inflation runs at more than 30 
per cent, there are more than 
half a dozen, slugging it out in 
a market which generated just 
DM 136m in sales last year. 

As a rule of thumb, Mr 
Eggendorfer reckons that 
annual sales of DMIOOm are 
necessary to keep a single 
industrial gas supplier occu- 
pied and profitable. 


It is not a situation designed 
to appeal to German compa- 
nies, typically risk-averse and 
stability-obsessed, but it is one 
Linde - plus competitors Aga, 
British Oxygen, Liquid Carbon- 
ics, Messer Griesheim and a 
handful of management buy- 
outs - may usefully learn to 
live with. 

The lessons will come in use- 
ful when the time arrives to 
push further eastwards into 
the new markets and manufac- 
turing bases In the former 
Soviet Union. But it is too soon 
for Mr Eggendorfer. "Every- 
thing is still too uncertain over 
there,” he says. 

Although Mr Eggendorfer 

and his chairman Mr Hans 

Meinhardt make much of the 

hardships and uncertainties 0 f 

pioneering in the Germany’s 


eastern frontier lands, they are 
equally eager to point out that 
all Linde's gas interests in the 
region - all set up or bought in 
the last four years business - 
are profitable. 

Even in Poland, where on 
top of all the other problems 
sales per employee are only a 
third of those in the Czech 
Republic. Linde is making 
money from its core business 
of separating air into its com- 
ponent gases and packaging it 
for industrial users. 

Since 1990 the group, also 
known as a leading supplier of 
lift trucks and refrigeration 
plant, has invested DM950m in 
the former communist east, 
with a good half of the total 
spent in eastern Germany and 
DMSSOm in the Czech Republic. 

The balance hag bought T.inde 


varying volumes of market 
share in Hungary, Slovakia 
and Poland. 

Total “eastern" sales of 
DM480m last year already 
account for about 20 per cent 
of group gas turnover. 

Difficult as conditions are in 
these markets. Linde, which 
decided to develop industrial 
gases into a core business five 
years ago, bad no alternative 
to investment. While other 
companies m aking other prod- 
ucts might be content to export 
into the new markets, the costs 
of transporting heavy gas bot- 
tles mean exports are not via- 
ble beyond a range of 80 to 
100km. 

It is also characteristic of the 
gas market that the early 
entrants or indigenous produc- 
ers tend to take dominant mar- 



On the road 
to Prague 

Thera Is a school of thought m 


ket shares, effectively locking 
out outside competitors. Air 
Liquide’s 75 per cent of the 
French market, for example, is 
a good enough reason for 
Linde to limit its amb itions to 
the west of its homeland. 

Accordingly, analysts say. 
Air Liquide has kept away 
from the Czech market pre- 
cisely because of Linde's early 
coup with the purchase of a 
majority stake - plus an option 
on the balance - in the state- 
controlled Technoplyn, based 
hi Bmo, Moravia, which has a 
market share of well over 50 
per cent 

Apart from four German 
technical specialists among 740 
employees, the entire manage- 
ment and workforce Is Czech. 
Apart horn a few curio photo- 
graphs of ancient compression 


gear and air separators, most 
of the old equipment has been 
replaced with Linde plant 
imported from Ge rmany . “But 
at its heart it is a purely Czech 
company,” insists Mr Mein- 
hardt. 

In contrast to the experi- 
ences of snmp smaller, entre- 
preneurial foreign Investors, 
larger groups such as Linde 
and Asea Brown Boveri which 
controls a boiler engineering 
plant on the other side of Bmo, 
have slipped relatively easily 
into professional, cooperative 
relationships with their Czech 
colleagues. 

Although the ABB works has 
tough production and quality 
targets comparable with those 
in the Swiss-Swedish group’s 
western works, they have been 
accepted just as readily by for- 


Cra 160 | t 

mer vnmhfaat managers as the 
requirement that they should 
learn the group language, 

Rngiiah- 

As for Unde, Mr Meinhardt 
rfatms to be surprised at the 
similarity between Czech and 
German attitudes to work and 
responsibility. There is no 
resentment against foreign 
takeovers and no traces of any 
historic antagonism between 
Ogdg and Germans. 

"Linde has profited well 
from the collapse of file old 
order in the east,” he says. 
"But we knew it was important 
to come here on a business 
footing and not to try to {day 
file role of the know-it-all 

“Here, especially, we are well 
on the way to making yields an 
our investments comparable 
with those at home .” 


community which believes 
that within onty atew years ■ 
most of the adv antages of 
man ufact uring inrefiMutln 

the Czech Republic wfflhave 
withered away, writer . 

. CHRISTOPHER PARKES. 

The linde group and . 
Jungheinrich, its rrvalin the 
Oft trade bnsiness, are \ ; 
unconvinced, for a total - 
investment ofDM37mfl)Hey 

recently opened * nevt . ■ 
purpose4raflt factory on a 40 
hectsragraenfiddsitein ; 
Moravamy, south of Bmo on . 
the Prague-Viomaroad. - 
The joinfcventure Jufiplabt 
is now being equipped and 
staffed to manufacture M 
between 80,000 aad lWMXM . ; 
electric lift-truck motors a 
year - once the task of a : 
factory mHambnrg-iha 
<»k><tgir example of the export 
. of German jobs and ;; : „ 7 ■ 

manufacturing due to 
unfavourable conditioas at 
home.. 

The fact that from the 
purchase oftee site to the . ' 
start of production in June 
this year took only 16 months 
with none of the horrendous 
planning permission delays . 
encountered in Germanywas 
only one of the attractions. 

Since building electric : 
motors is a labour-intensive - 
Job, the Brnopay rates of DM3 
to DM5 an hoar are a central 
factor, as Is the 42 %-htmr 
working week and the 
standard allowance of two 
weeks* holiday. - 

But Bmo, renowned for its 
electrotechnical department 
at its technical un i vers i ty and 
the local industry, also offers a 
wide rangeof workers and 
potential suppliers. 

Together, the new site and 
workforce provide a 
“dean-sheer start for a lean 
production project intended to 
cut the cost of motors by 40 
per end, reduce the number of 
motor variants from more 
ttteih 70 to around 35, and 
homogenise design. 

At present virtually the 
entire process comprises 
assembling components 
imported from Germany, but 
the driving logic of the JuU 
process is for the parts to be 
supplied as cheaply and 
promptly as as possible. It can 
only be a matter of time before 
they, too, come from Czech 
factories. 


Reach of the four 
supra-regional daily and 
business newspapers 
in the Media Analysis ’94 
(compared to ’93). 

Commissioned by the Frankfurter AUgemeine Zeitung, 
DIE WELT, Handelsblatt, Siiddeutsche Zeitung 
and approx. 60 other daily newspapers * 

Target group: total population over the age of 14 years. 


Sfiddeutsche Zeitung 
1.090.000 i-MQ-QQQ 



c" ■* - 

• ■ J '■ ■— 1 i-J-J- 

•: - W 

... •, 7. , 1 




Frankfurter AUgemeine Zeitung 
970.000 



DIE WELT 
620.000 


590.000 


I 1 . 1 -! 1 " •- 



,r. ■ •• 


Handelsblatt 

550.000 

520.000 




MA’93 
MA ’94 

Source: 

MEDIA-ANALYSE 1993T/and 1994T 
(AG.MA). 

* ARD, ZDF, RTL, SAT 1 and other radio and 
television broadcasters. 

Institutes: Infratest, Media Marfct Analysen, 

Sample, Marplan, IFAK, GFM-GELAS, GfK. 


SliddeutscTieZeiTung 

The great German daily 


Contact: Publicity Limited 
517/523 Fulham Road, GB-London SW 6 1HD 
TeL: (0 71) 3 85 77 23 t Fax: (0 71) 3 81 88 84 




*OVk, 




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MONDAY NOVEMBER 21 1994 



XV 


GERMANY 15 


— ^?lj! grman explains the significance of Frankfurt’s European Monetary Institute 

Chrysalis of a Bank of Europe 


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^ spite of fVrm 
foie in the p[?? ilny ’ s P> v «*al 
and Chanrei|o P U [?? ean Union 
for ^ elm W Kohl’s 
integration^ ® ur °P ea n 

endowed with F?r aay P oor, y 

Monetary Instih,i» ^ European 

Frau^fuff 1,1 ,ls n*w 

»«“ tzi ni!rs ihis 

mSL ft.* 1 ? be ' n Mt “P ‘o 

S 3 ?JraS 

aawsrrt 

Sa shS monetar y union, 
wun a single currency and sin- 

gle monetary polic%- 
Meanwhile, the institute 
^ ^ strengthen the ™ 
dination of monetary policy 

^ong the Eli’s i?c5S 

hanks and promote economic 
convergence among member 
State so they can meet the 
tough criteria which the treaty 
nas prescribed for Emu mem- 
bership. 

Mr Alexandre Lamfalussy. 
Jne EM president, and about 
75 staff have installed them- 
selves in an imposing city cen- 
tre tower block that was for- 
® ert y headquarters of the 
Bank fQr Gemeinwirtschaft. 
Last week’s meeting in the 
rechnstened "Eurotower* of 



Alwcantka UnMusqr. at work In aameat attar 10 months’ preparation 


the EMI’s governing council, 
which comprises the EU cen- 
tral bank governors and Mr 
Lamfalussy, was a signal that 
the EU's newest institution 
had begun work in earnest 
after 10 months of preparation 
in borrowed office space pro- 
vided by the Bank for Interna- 
tional Settlements (BIS) in 
Basle. Switzerland. 

Mr Lamfalussy, who moved 
from being general manager of 
the BIS to take over the BM1 
presidency at the start of this 


year, has described the EMI’s 
first task as constructing a 
"turnkey” central bank for 
Europe that is capable of oper- 
ating effectively once the polit- 
ical decisions to go ahead with 
Emu have been taken. 

After much haggling. Euro- 
pean leaders bowed to German 
wishes and agreed just over a 
year ago to site the EM in 
Frankfurt 

They also endorsed the 65 
year old Belgian honker, aca- 
demic and monetary policy 


Conner Middelmann assesses demand for capital 

No end in sight for high 
public borrowings 


Next year will see a sweeping 
overhaul of German public-sec- 
tor borrowers. With familiar 

names disappearing and new 
ones appearing in their {dace. 

However, althnng h it will be 
redistributed, the financing 
burden will remain heavy and 
officials at the Finance Minis- 
try and the Bundesbank, its 
issuing agent, will have to con- 
tinue probing the frontiers of 
innovation to ensure Ger- 
many's debt finds a safe home. 

As a result of the privatisa- 
tion of public-sector companies 
and the consolidation of sev- 
eral funds created to finance 
German unification, old capital 
market favourites such as the 
Tr euhan danstalt, the post 
office and the railway authori- 
ties will no longer issue bonds 
as from 1S95. Some of these 
bodies’ debts win be assumed 
by the government while oth- 
ers will service their debts 
independently under a new 
name. 

Nevertheless, public sector 
indebtedness is high and the 
country's financing and debt 
servicing burden remains 
heavy. While Germany's total 
public-sector deficit including 
state and local governments, is 
expected to drop markedly 
from this year’s level of around 
DMl45bn as the Treuhand defi- 
cit falls away, the Federal gov- 
ernment’s deficit next year is 
likely to remain little changed 
at around DM68.7bn, compared 
with DM69.Ibn this year. 
Finance Minister Theo Waigel 
is due to present an updated 
budget forecast for 1995 on 
December 14. 

Meanwhile, the cost of servi- 
cing Germany’s debt is set to 
increase, and Mr Waigel has 
warned that as of 1995 svery 
fifth D-Mark spent by the Fed- 
eral government will go 
towards debt servicing. 

So far this year, the govern- 
ment has managed to scrape 
through its borrowing pro- 
gramme, aided by a strong 
Ssh position at the beginning 
of the year and a generous 

DMl8.25bn contribution from 
the Bundesbank in Ag A Each 
year, the central bank trai»- 
fenT the bulk of its profits to 
the government, which uf®* 
to pay *,»n er^l- 

i ™ ‘’fever. Bonn'? trading 

was dogged 


However, Bran^ ^ ^ 


which devastated global bond 
markets this year and caused 
yields worldwide to soar. Amid 
nervOUS marlrpt: Himtitimm, the 
Bundesbank’s derision in May 
to cancel a debt auction at very 
short notice sent shudders 
through a market fearing that 
the government was unable to 
raise the ftmds it needed. 

In September, with 10-year 
yields close to their 7% per 
cent high, the government 
derided to issue a 10-year float- 
ing-rate bund pegged to the 
three-month Frankfurt inter- 
bank rate. 

The issue met with disap- 
proval from the Bundesbank, 
which for years has opposed 
money-market instruments on 

the grounds that they interfere 
with its monetary policy-mak- 
ing and foster a short-termist 
mentality among market par- 
ticipants. 

This has turned the spotlight 
on an issue which has been the 
subject of heated debate for the 
last two years: will the German 
government eventually issue 
Treasury bDls with maturities 
of less than one year? 

For the last two years, a pro- 
vision to issue up to DMSObn of 
such bills (dubbed Bu-Bills) 
has been included in the Fed- 
eral budget, but as yet none 
has yet seen the light of day. 

Following this year’s 
approval of D-Mark money- 
market funds and amid pros- 
pects for rising short-term 
interest rates, investor d em a nd 
for such instruments is likely 
to increase tn 1995. However, 
while most sophisticated bond 
markets boast liquid yield 
curves ranging from one 
month to 30 years, Germany’s 
maturity spectrum starts at 
one year and is most heavily 
weighted in the four- to 10 -year 
sector, with a relatively illiq- 
uid 30-year sector. 

The very short end of the 
German yield curve has largely 
remained underdeveloped due 
to' resistance from the Bundes- 
bank. Indeed, in August it 
announced it would stop issu- 
ing short-term bills, known as 
Bulis, for fear that they would 
fuel the growth of money mar- 
ket funds. 

"We did not want to provide 
investment opportunities for 
money-market funds by issu- 
ing Bulis, thereby reinforcing 
[the trend towards] short -ter- 





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mi Km, " Bundesbank vice presi- 
dent Johann Wilhelm fiaiMnm 
said recently. Moreover, “we 
have asked the Federal and 
state governments not to issue 
shortdated debt instruments," 
he said, explaining that 
increased short-termism in 
government financing would 
fuel economic short-termism 
generally. [Short-term financ- 
ing] may create new business 
opportunities, but it does not 
contribute to the stability of 
the financial system,'’ he said, 
warning of fiw increased inter- 
est-rate volatility and eco- 
nomic destabilisation which 
could follow. 

The Bundesbank also 
appears to fear that if the gov- 
ernment funds itself regularly 
at the short end of the yield 
curve, it will start exerting 
pressure on the central bank to 
keep short-term interest rates 
low. 

However, despite the Bund- 
esbank’s opposition, many ana- 
lysts say it may eventually 
have to bow to pressure from 
the Finance Ministry and the 
markets to issue Bu-Bills. 
Although the central bank 
advises the government on its 
funding, it is the Finance Min- 
istry which makes the final 
derision on how to raise the 
money. 

“The steeper the yield curve 
gets, the more favourable it 
will be for the government to 
issue short-dated debt," says 
Mr Holger Fahrinkrug. econo- 
mist at UBS in Frankfurt. 
Indeed, locking in high debt 
servicing costs by issuing long- 
dated bonds would further 
increase the budget deficit. The 
10-year benchmark bund cur- 
rently yields around 7*/* per 
cent, compared with 5ft per 
cent for three-month money. 

Some warn that, by issuing 
money market bills the govern- 
ment could incur a refinancing 
risk by having to roll over its 
bills every few months at pos- 
sibly rising interest rates. How- 
ever, over the long term, it is 
usually cheaper to raise 
short-term rather than 
long-term funds because yields 
curves tend to be upward slop- 
ing more often than being 
inverted, says Mr Rainer Back, 
head of fixed income research 
at Dresdner International 
Research Institute. “The mar- 
ket would like the government 
to offer a balanced mix of debt, 
ranging from three months to 
SO years," he says. 

Moreover, “it is in the inter- 
est of Frankfurt as a financial 
centre that we should be able 
to offer short-term bills to 
international investors," says 
Mr Her m a n n Remsperger, chief 
economist at BHF Bank, More- 
over, he says that “if the 
amount of Bu-Bills in circula- 
tion were restricted to, say. 

DM20bn this could hardly be 

i n ter p re te d as veering towards 

short-termism." 

Money market funds are 
another compelling reason for 
allowing money-market debt 
issuance. “Now that they exist, 
you can't un-invent them,” 
says Bis Alison Cottrell, econo- 
mist at Odder Peabody in Lon- 
don. 

“Given people want to invest 
in money market instruments, 
surely it’s preferable to keep 
their savings in Germany and 
help them fund the deficit 
rather than pushing them into 
other countries which offer 
T-bills," she says. 


expert as its head. At that 
time, there were many who 
wondered whether Mr Lamfal- 
ussy and the institute were 
being launched on a futile 
endeavour. 

The EU was still suffering 
the aftershocks of 26 mo nt h s of 
monetary turbulence. These 
had seen the departure of the 
British pound «nri the 
lira from the exchange rate 
mechanism of the European 
Monetary System, numerous 
parity changes among surviv- 
ing ERM currencies and a spec- 
ulative run on the French 
franc in July and August 1993 
that had culminated in the 
widening of the ERMs fluctua- 
tion margins to 15 per cent 
either side of its members’ cen- 
tral rates. 

Since then, calm has 
returned to the ERM. The 
exchange rates of the surviving 
member currencies have stabi- 
lised at levels close to those 
that existed before August 
1993. 

Interest rates in continental 
Europe have fallen and the 
region appears to be enjoying a 
broad based, non-inflationary 
economic recovery. According 
to Mr Lamfaluss y. "things are 
not as negative as they looked 
a year ago". The way is dear 
for intensive work towards 
Emu, if not yet for the political 
decisions to take monetary 
union further. 

The institutional framework 
and operating principles of the 
planned European central 
bank system have been defined 
in the Maastricht Treaty. It has 
been left to the EM to design 
its organisation in detail and 
specify the relations between 
the future European Central 
Bank (ECB) and the national 
central banks that will also be 
members of the ESCB. 

The EMI has to work out 


how the EU's future single 
monetary policy should be 
managed. 

It must also tackle such 
issues as the preparation of 
banknotes to be used alter the 
introduction of the Em as a 
single European currency and 
how national payments 
systems should be linked. 

These may sound like dry 
technical matters. But as Mr 
La m falu ss y has observed: “The 
veil of technicalities obscures 
important matters of Interest 
to individual countries and 
market participants alike." 

The nature of futur e mone- 
tary policy throws up several 
big issues involving differences 
of central bank practice that 
could result in tensions 
between such heavy-weight 
institutions as the Bundesbank 
and the Bank of En gland. 

The EM will have to con- 
sider whether Europe’s mone- 
tary policy should be guided by 
a money supply measure as in 
Germany or an inflation target 
as in Britain. If a monetary 
aggregate is chosen, which one 
should it be? Should commer- 
cial banks, as port of the man- 
agement of policy, be obliged 
to deposit compulsory mini- 
mum reserves with the ESCB? 
If so, should these be interest 
bearing or not? 

Fostering central bank 
cooperation is the other part 
of the EM’s mandate. This 
task, which Mr Lamfalussy 
considers as important as pre- 
paring the central bank, will 
involve building up the EMI’s 
economic research capacity. 

EU economics and finan ce 
ministers were given a fore- 
taste of the EMTs ambitions in 
this area at an informal meet- 
ing of the EU’s “Ecofin coun- 
cil" at Lindau on la ke Const- 
ance in September. Mr 
Lamfalussy presented the find- 



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ings of a penetrating KM anal- 
ysis that demonstrated how 
different levels of budget defi- 
cit. variations in currency vola- 
tility, and member states’ 
widely varying inflation 
records explained why they 
had been impacted to varying 
degrees by this year’s bond 
market turbulence. 

His presentation also served 
as a reminder to the ministers 
that Mr Lamfalussy is a 
believer in monetary union. He 
says its implementation is 
essential to protect what has 
been achieved in creating the 
European single market How- 
ever. he doubts whether Emu 
can be achieved by 1997 - the 
earliest date in the Maastricht 
Treaty. Emu and establish- 
ment of the ECB could take 
“five, six or 10 years”. 

If so, the EMI, which is due 
to be dosed down as soon as 
the ESCB starts operating, will 
turn out to be a more durable 
part of the Frankfurt financial 


scene than its designers envis- 
aged. With a staff drawn from 
all EU countries (including 
Austria, one of the applicant 
countries), it should help bol- 
ster Frankfurt’s credentials as 
an international financial cen- 
tre and offset some of the 
shock generated by Deutsche 
Bank’s recent decision to 
strengthen its investment 
banking presence in London. 

But the EMTs role will be 
judged ultimately by the 
performance of the central 
banking system that is due to 
supplant the institute, if and 
when Emu occurs. 

There Is much to do before 
the EU achieves Emu along the 
lines envisaged in the 
Maastricht Treaty. 

The excessively high budget 
deficits and indebtedness of 
mostEU member state must be 
reduced to credible and 
manageable proportions. 
Europe's politicians must 
generate the political will to 


move to stage three. 

Then there is the vexed 
question of achieving greater 
political union in the EU, 
which many economists, 
politicians and officials 
(notably in Germany) consider 
essential if Emu is to prove a 
lasting success. 

Speaking in Paris recently, 
Mr Lamfalussy acknowledged 
that much was beyond his 
capacity to deliver. “Even if 
done well”, he said, the EMTs 
preparations for Emu would 
"not necessarily tip the scale of 
the political rinwginn in favour 
of moving rapidly towards 
monetary union." 

But he made clear that he 
and the EM mean business. “I 
shall do everything in my 
power to give no excuses to 
those who. an the pretext that 
preparation for the 
organisation of the European 
Central Bank is inadequate, 
wish to postpone the date of 
the pnT|fir«i derision,” he aairL 


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XV] 


Heavy burdens of history 


When the last Russian troops 
marched past the giant Soviet 
war memorial in East Berlin 
last August, followed a week 
later by the beating of the 
retreat for the western allies, it 
marked more than the end of 
an era. It symbolised the recov- 
ery of sovereignty lor a united 
Germany. 

The two events to celebrate 
the final departure of the erst- 
while troops of occupation - 
still too sensitive to be com- 
bined in a single ceremony, in 
spite of the end of the Cold 
War - drew a clear line under 
the post-war period They also 
highlighted the fact that four 
years alter unification, the 
debate on Germany's national 
identity, its national interests, 
and Its proper international 
role, is still unresolved 

The calls for such a rethink 
are coming from all sides. At 
home, they have been made 
from left and right, from such 
distinguished figures of the 
past as former Chancellor Hel- 
mut Schmidt, as well as from 
the present generation of poli- 
ticians, like Mr Wolfgang 
Schduble, the parliamentary 
leader of the riding Christian 
Democrats (CDU). 

The international commu- 
nity. from US President Bill 
Clinton to Mr Boutros Boutros 
Ghali. the secretary-general of 


the United Nations, is also 
urging Europe's most powerful 
State to assume its full interna- 
tional responsibilities. 

Given the importance of the 
issue, it is perhaps surprising 
that it did not play a larger 
role in this year’s marathon 
election campaign. The whole 
theme of unification, its costs 
and domestic consequences, 
was paramount. Yet the for- 
eign policy consequences failed 
to emerge as a cause of dis- 
pute. 

One reason Is no doubt 
because foreign policy has tra- 
ditionally been an area of 
cross-party consensus, with the 
pursuit of unifi cation its prime 
focus. The main parties of the 
political establishment - the 
Christian Democrats, Social 
Democrats and Free Democrats 
- have always agreed on the 
need for ever closer integration 
into the European union. It 
was seen as the other side of 
the coin to German unification, 
the essential reassurance for 
the rest of Europe that a uni- 
fied Germany would be no 
threat And it worked 

A second reason for the lack 
of real popular debate is the 
instinctive desire, which runs 
deep through the German pop- 
ulation, for foreign policy ini- 
tiatives to be cautious and re- 
active, not adventurous and 


pro-active. The devastating 
experience of Nazi rule and 
wartime defeat has left a deep 
suspicion of anything which 
might smack of German high- 
handedness. in spite of the ste- 
reotypes still peddled in parts 
of the foreign press. Hence the 
resistance to any serious dis- 
cussion of the "national inter- 
est” in foreign policy. 

In spite of aU that, the dis- 
cussion is well under way in 
the smoke-filled rooms of 
Bonn. 

Inevitably, Europe is the 
dominant focus - but now with 
the opening of western Europe 
to the east quite as important 
an issue for German policy- 
makers is the continuing inte- 
gration of the European Union 
in the west Germany is the 
one member of the EU which is 
equally committed to widening 
and deepening simultaneously, 
unlike the French, who are pri- 
marily interested in deepening, 
or the British, who really just 
want the widening. 

In a key-note paper, Reflec- 
tions an European Policy, pub- 
lished by the CDU group in the 
Bundestag in September, the 
rationale was clearly spelt out: 
“The only solution which will 
prevent a return to the unsta- 
ble pre-war system, with Ger- 
many once again caught 
between East and West, is to 


integrate Germany’s central 
and eastern European neigh- 
bours into the [west] European 
post-war system, and to estab- 
lish a wide-ranging partnership 
between this system and Rus- 
sia," it said. "Never again must 
there be a destabilising vac- 
uum of power in central 
Europe." 

It adds: “Germany has a fun- 
damental interest both in wid- 
ening the EU to the East, and 
in strengthening it through 
deepening. Indeed, deepening 
is a precondition for widening. 
Without such further internal 
strengthening, the Union 
would be unable to meet the 
enormous challenge of east- 
ward expansion. It might fall 
apart, and once again become 
no more than a loose grouping 
of States unable to guarantee 
stability." 

The latter is Germany's hor- 
ror scenario - a weakening of 
the western institutions which 
have underpinned security and 
stability since 1945. just as 
eastern Europe is itself under 
enormous str ain. For Chancel- 
lor Helmut Kohl, his absolute 
commitment to the cause of 
European integration has been 
a key factor in persuading him 
to stay in office at least until 
1998. He intends to be a driving 
force for another big step 
towards European integration 









Russian soMfers in their last parade jhBerfin on August 31, 1994: and of an wa,bntwfiat comes next?- - PfctunK Router _ 


at the 1996 EU intergovernmen- 
tal conference. 

However, German policy- 
makers are keen not to 
frighten their partners - not 
least the British - from the 
conference table. "Let us look 
for practical policies to resolve 
practical problems," says a 
senior German diplomat The 
practical problems are jobs and 
competitiveness; peace and sta- 
bility in Europe; and overcom- 
ing the divide between rich 
and poor, which threatens to 
engulf western Europe in a 
new wave of migration from 
both south and east Then he 


argues that none of those prob- 
lems can be resolved by the 
traditional nation-state: they 
require trans national solu- 
tions. 

Yet even if the European 
integration process is common 
ground, there are clear divi- 
sions in Germany about how it 
should proceed. There are also 
differences over how the open- 
ing to the east can be accom- 
plished. And there is still dis- 
agreement over just what role 
Germany siwniri be playing in 
the wider peace-keeping pro- 
cess on the world stage. 

The Christian Democrat 


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paper an Europe argued that a 
"hard core” of European into- 
gratianisfs, encompassing Ger- 
many, France and the Benelux 
countries, was inevitable, 
because only they would be 
able to join economic and mon- 
etary imim (Emu) in 1399. Mr 
Klaus JvinkeL. foreign minister, 
immediately rejected the idea 
as by implication, if not inten- 
tion, too “exclusive". -. . 

Mr KtnkPi. a Free Democrat, 
is also at loggerheads with Mr 
Voiko- Rfihe, the minister of 
defence, who is urging rapid 
membership of Nato.for Poland 
and the other central European 
states, but the dear. exclusion 
of Russia. The foreign minister 
is for more concerned not to 
offend Moscow, nor to leave 
the defenceless Baltic republics 
isolated, by creating a new 
European divide an the Polish 
border. 

As for the. whole process of 
peace-keeping, Mr Rfihe and 
the Christian Democrats are 


most concerned- to give tiie 
Bundeswehr, - the German 
armed forces, a new rate by 
widespread participation in UN - 
exercises, wlffle both .Idr.Khjb- 

kel’s FDP and the opposition 
Social Democrats . (SPD)are 
more cautious; Each occasion 
will require;. the; specific 
approval of the German Bund- 
estag, and each, time there wifi . 
undoubtedly, be a huge debate 
These are the issues which ! 
will continue to. divide : the 
political establishment as; it 
seeks to define Gennany’s new 
rote ... 

But in outline, perhaps, that 

lOle is dwar fl armany ' 

will be the swing power in 
Europe, involved in an eternal 
balancing act between east and 
west, Kgftlrinjf tn Wnwnrito and- 
integrate. — 

R wfll.do so with ope band 
stiB tied behind its baefc For it 
wOT still be. loath to lead, and 
merely seek to react to the fari- 
tiatives of others. 


GERMANS ABROAD 


Foreign travel is 


a national 
obsession 


Not even recession can 
staunch German Wanderlust - 
and its concomitant drain on 
the balance of ‘ payments. 
Indeed, as recent experience 
has shown, the depression of 
holiday prices by international 
economic decline, coupled with 
the apparently unwavering 
strength of the D-Mark, 
actively encourages efforts to 
escape to the sun, writes 
CHRISTOPHER PARSES. 

Banks regularly issue 
exchange rate guides specifi- 
cally aimed at trippers seeking 
the best value for their hard 
currency on quick getaway 
breaks. Popular newspapers 
printed excited reports during 
the summer when the Italian 
currency lost further ground 
and DM1 would buy 10,000 for 
the first time. 

Despite the domestic slump 
which has brought real income 
cuts, rising taxes and unem- 
ployment, German spending on 
foreign travel is forecast to 
increase around 3 per cent this 
year to same DM64tm ($4ibn). 
Although thi« implies stagna- 
tion in reel terms after a real 3 
per cent increase in 1993, when 
set against foiling expenditure 
on all other personal and 
household goods and services, 
it se rves to underscore the 
strength of the naHnnai drive 
to get away. 

According to a new study by 
the Cologne-based IWD eco- 
nomics institute, the average 
west German fondly sets aside 
more than DM200 a month - 
almost a third of its leisure 
budget - for holidays. Accord- 
ing to Dresdner Bank, a con- 
sumer poll in which people 
were asked which areas of 
spending they would find hard- 
est to reduce found holidays 
ranked second only to the 
basics: food, rent and clothing. 

The vacation may be sacro- 
sanct, but it is becoming a con- . 
siderable burden on the bal- 
ance of payments. While the 
national travel account has 
been in deficit for almost 40 
years, the gap between Ger- 
man spending abroad and for- 
eign travellers' spending in 
Germany has increased 50 per 
cent since unification. While 
travel expenditure has risen 
from DM475ba to DM64bn, rev- 
enue income has barely 
budged, increasing a mere 
DMlbn since 1390 to an esti- 
mated DMlSbn this year. As a 
result, last year’s travel bal- 
ance was a record DM46bn in 
the red. 

The domestic industry has 
suffered from the effects of 
recession in neighbouring 
European countries as well as 
the daunting strength of the 
currency. Following a io per 
to 1993, the num- 
her of foreign guests staying in 
German hotels fen a permit 
in the first half of this year 
But the domestic industry's 
most enduring disadvantage 
according to officials at the 
government-funded DZT tour- 


ism promotion authority, is 
lack ; of marketing effort. 
France, which arguably has 
more natural holiday appeal 
than Germany, spends four 
times as much on generic pro- 
motion than the DZTs DM52m 
budget allows. Austria spends 
DM20m a year. 

Earlier this year DOT’S new 
management set about trying 
to correct “false ideas” about 
Germany as a holiday destina- 
tion, targeting young foreign 
travellers likely to be drawn by 
musical and other popular cul- 
tural attractions^ - As its 
researches had shown, the 
average age of vacationing visi- 
tors was “well over 50," accord- 
ing to marketing chief Ms Eva- 
Marie SternageL 
Surprisingly, however, 
Dresdber Bank data show that 
although revenue from foreign 
tourists in 1992 accounted for 
only 0.7 per cent of GDP. the 
absolute total of DMTLSbn was 
only a little behind that of Aus- 
tria, and compared favourably 
with the UK's DMSlhnu 
Meanwhile, the industry's 
potential in the former GDR is 
only just being tested. Despite 
the natural attractions of the 
Baltic coast, the relatively low 
population density and newly- 
accessible cultural centres 
such as Leipzig and Dresden, 
the region has attracted hardly 
any visitors from neighbouring 
eastern European countries. 
They prefer to spend their hard 
currency in locations more 
exotic than - a former commu- 
nist state. Westerners, too, 
have been deterred by the lack 
of relatively good quality 
accommodation and com- 
plaints of over-high prices are 
common. 

Although some 340,000 east- 
ern jobs already depend 
directly or indirectly on tour- 
ism, the government estimates 
the industry needs a further 
DMGbn in private investment 
to raise hotel and guest-house 
bed density from its present 
level of around half that in the 
west. . The heavy costs of 
rebuilding the basic infrastruc- 
ture in the region, such as 
roads and railways, drains, 
water, power and telephone 
connections, has limit*/* the 
volume of funds available for 
popular attractions such as 
sports and cultural facilities. 

Meanwhile, the local inhabit- 
fPjJ? ere quickly developing 
roar western cousins' taste for 
travel, but lower ea rning 
power tends to limit their 
range. Favoured destinations 
include western Germany. 
Austria, Spain and Switzer- 
land. As in the west, the aver 
age-income, four^nember fem- 
uy reserves 14 per cent of its 
rospoeable income for leisure 

mS? 4 * ” m average of 
DM554 a month. Little more 
roan DMioo of this is set aside 
for holidays - just enough to 
cover the average German 
travel agent’s price of a two- 
' vee * i foreign holiday for oik. 





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FINANCIAL TIMES SURVEY 


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WORLD NUCLEAR INDUSTRY 


-J^V-Vg ^s after the first controlled nuclear chain 
the industry is still growing, but at a much 
:tgwgrpace than i t would like. Michael Smith reports 

Concern over lull in 
plant construction 


Monday November 21 1994 


2n C |K ^ dus £T enthusiasts 
jail it a breathing space. But 

th a t y ih^ eCUtlVes *** concerned 
JJat the present luJI in plant 
construction wiU be rather 
J^pnanent and that the 
frenetic building activity of the 

to a 165^,. 

the 1980s, will not be seen 
again in their lifetimes. 

There is little chance of a 
revival this century and even 
nuclear power’s more robust 
supporters would be hard 
pressed to predict with confi- 
dence a resurgence in the early 
decades of the nest century. 

Fifty years after the first 
controlled nuclear chain, reac- 
tion. which made power gener- 
ation possible, the industry is 
still growing, but at a much 
slower pace than it would like. 

Latest estimates from the 
International Atomic Energy 
Agency are that the 2.100 Ter- 
rawatt hours of electricity pro- 
duced from nuclear power 
worldwide will expand by 
between U and 13 per cent by 
the end of the century. 

But that is against a back- 
ground of a much faster expan- 
sion in demand for electricity 
which could see output grow- 
ing by more than 20 per emit 
over the same period. 

The 17.5 per cent market 
share enjoyed by nuclear last 
year is expected by the IAEA 
to be 13 per cent at worst by 
2015 and 15 per cent at best 
What has gone wrong for an 
industry that once promised to 
provide the lion's share of the 
world’s electricity? 

The Three Mile fafawrf and 
Chernobyl accidents have had 
a decisive effect on the public’s 
thinking. Nor have recent 
nuclear proliferaiion scare sto- 
ries, however unjustified they 
may have been, helped nuclear 
power’s cause. But a large part 
of the problem is commercial 
and stems from the transfor- 
mation of the electricity supply 
industries in countries 
throughout the world. 

Monopolies are being dis- 
mantled, competition is being 
increased and, in s ome cases, 
ownership is being transferred 
from the public to the private 
sectors. The more cammertialr 
ly-mincted, and to some cases 
smaller, nKiittes are adopting a 
more risk-averse approach. 

They want technologies that 
have low capital costs and 
short lead times, and power 
stations that can be built with 
easy planning consent proce- 
dures. They also want plant 
that can be used flexibly. 

None of this is conducive to 
nuclear power construction. 
Atomic power plan t s cannot be 
switched on mid off with the 
ease of a gas or coal plant. 
They take longer to construct 
than gas, coal or Oil-fired sta- 
tions and are more expensive 
to build. 

The problems are demon- 
strated by recent constructions 
to the UK. SizeweU B. the 
1-200MW station about to be 
fully operational cm the east 
coast of England, cost about 
£2bn to build and is coming on 
stream 13 years after a pubbe 
inquiry was started into 
whether it should be built- 
By contrast, 

year opened a 900 MW gas-fired 
oower plant at Killingbolme, 
SSe. Ies3 than four 

vears after deciding to go 
ahead with it The UK, with its 
ZZL to North Sea gas, is a 
SSSl case, but there are few 
Sries where a new nuclear 


plant rather thrm a or gas 
plant would be built if the deci- 
sion were based on short-term 
financial criteria. 

The nuclear industry argues 
that taking what it sees as a 
purely market approach is dan- 
gerous. “It may be easy to 
leave nuclear energy aside in 
short-term policy but In doing 
so we endanger our planet's 
atmosphere, notably because of 
carbon dioxide and the green- 
house effect," says Mr Remy 
Carle, deputy general manager 
of Electrjcite de France and 
chairman of the World Associa- 
tion of Nuclear Operators. 
Nuclear power stations emit 
virtually no carbon dioxide or 
sulphur. 

The industry says the 
short-term approach also jeop- 
ardises the energy balance of 
the next century- “Today’s 
energy resources will have to 
meet a massive increase in 
demand: a twofold increase at 
some stage next century." says 
Mr Carle. “This is not possible 
without a significant contribu- 
tion from nuclear energy.” 

Such arguments have most 
potency in south-east Asia 
either in countries where 
access to alternative sources of 
power are restricted, as in the 
case of Japan, or where the 
demand for electricity is likely 
to be high as economies bur- 
geon, as in the case of China, 
South Korea and Taiwan. All 
of these countries are either 
building or hope to build 
nuclear power plants, and last 
year Asia had 14 reactors 
under construction, according 
to the IAEA. 

Activity is also intense in 
eastern Europe, where last 
year there were six reactors 
under construction in the 
Ukraine, four in the Slovak 
Republic, four in Russia and 
five in Romania. In Latin 
America there were five reac- 
tors under construction last 
year, including one in Argen- 
tina and one in Brazil. India is 
building five reactors and 
Pakistan one. 

The dearth areas for nuclear 
power construction include: 
the US, where no power station 
has been ordered since 1979 
and plentiful supplies of gas 
mean none are likely in the 
near future; Australia, where 
no nuclear stations have been 
built and none are likely; | 
Africa, where there are only 
two reactors on the whole con- 
tinent, both in South Africa, 
and no more are planned; and 
western Europe where, with 
the UK’s SizeweQ B complete, 
only France is building sta- 
tions and even it is close to the 
end of its programme, with 
four under construction. 

An of this could change, in 
the medium term future at 
least , if prices of fossil fuels 
rise and environmental pres- 
sures increase the need to cut 
carbon and sulphur e m is si o n s. 

But to stand a real chance of 
taking off again, the nuclear 
industry must make si gnifi c an t 
progress in three main areas: 
riorig nin g reactors which pro- 
duce cheaper electricity, deal- 
ing with waste, and renovating 
dilapidated reactors. 

Research Into producing 
cheaper nuclear power will 
inevitably be held back while 
there are only limited pros- 
pects that the vast sums of 
money needed to fund it will 
be repaid through new orders. 
While there are still hopes of 
developing fast breeder reac- 


Nuclear share 


'mnutsiJal 
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... Wangary I 
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0**H&.7% 

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0*02&3% 
0*212* 
0172% 

nits* ■ 


_ 87.2% 

7.7% 

*0*m**stLo% • - - 

•■MW - 

MEM *3-3* ' 

MBV4&3H 

mkk 42 ’ 0 * 

*0402% ■ 

Ml 3 7V% 

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132496 counVyWOMP con atmcUor r 

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J®- 7 * No rth America (9 2 1 2 ! 

ST 1 Lain America 3 4 4 

EaUan Europe PQ) 9 5. 10 

AMcaffig I ® 1 


Number of countries with 
nuclear reactors 


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r* ■ 

m ■ 

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SEAS* and 
tteftrffc fiSf 


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434 ;' 


Per East ff»J 4 » 4 

TOTAL (end tB33) 30 18 33 

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M MentwefeouariNOM Aon neon 
. eiop&a tfcnormabrcnafluctfcrr 


tors - once thought of as the 
salvatiou of the Indus- 
try - there seems little likeli- 
hood that fast breeders will 
enter commercial operation 
before 2020. 

Nevertheless, practically all 
countries with nuclear power 
programmes are developing 
versions of existing plants 
which are aimed at cutting 
costs and improving safety. 

Nuclear waste represents a 
thorny problem because the 
industry is often so dependent 
on governments lor resolu- 
tions. This has been high- 
lighted this year in the US 
where a coalition of state utili- 
ties and regulators have filed a 


suit accusing the Department 
of Energy of defaulting on its 
promise to take spent fuel The 
search for a permanent nuclear 
waste dump has dragged on for 
years with little discernible 
progress and the utilities say 
the government is backing 
away from its requirement to 
take waste by 1093. 

But the most pressing prob- 
lem for the world naclear 
industry is to help renovate 
the creaking reactors of east- 
ern Europe. Considerable prog- 
ress is being made with the 
help of aid and technological 
know-how but efforts are ham- 
pered by lack of resources. 
With most east European utili- 
ties still in the state sector and 
charging prices well below 
costs, there is little incentive 
for investors to provide tends. 

Western scientists believe 
the most obvious root causes of 
the Chernobyl accident have 
been remedied in plants 
throughout eastern Europe. 
Nonetheless, they would prefer 
to see some operating reactors, 
including two at Chernobyl 
itself, closed down. Another 
significant accident may be 
unlikely but, if one did occur, a 
resurgence of the industry 
would be delayed for decades 
and possibly for ever. 



■ ... ' : ;y< .. 


.iw-' ’ 



■m 


Sizewefl B*s distinctive dome-shaped reactor containment buflcSoQ. The 1.20OMW station, about to become fufiy operational, cost £2bn to tauM 


We’re happy to be giving 
the British economy a hand. 


Store J97J, we have generated 
for our single shareholder , 
the British Government, 
an average annual return of 
over 10% after adjusting 
for inflation. 


£1 out of every £ 750 of 
British exports is earned by 
mis. Our exports are set to 
double, placing us m the top 
30 British exporters. 

The wealth created by our 
Company represents £1 in 
every £155 generated by 
the whole of the UK's 
manufacturing industry. 

Our work supports / m 
every 375 British jobs. 
We employ 14,000 people 
and have, over a number of 
years, indirectly sustained 
jobs for 50.000 more. 

We have 0 strong position rit 
a growing global market, 
which will be worth over 
$35 billion by the 
year 2010. 

With 50 years experience 
and a long term sustained 
RE5D programme, we 
arc world leaders in nuclear 
fuel cycle services. Ours is 
an industry where Britain 
leads the world. 


©BNFL 



These little objects are fuel pellets of the type 
used in modern nuclear power stations all over 
the world. 

They’re manufactured from Uranium, 
processed and refined by us, BNFL. 

Since our inception in 1971, when BNFL was 
set up as a limited company with the British 
Government as its sole shareholder, we’ve 
pioneered the science of manufacturing and 
recycling nuclear fuels. 

Operating as a commercial enterprise in the 
same way as any other private sector company, 
BNFL has consistently produced a profit and 
paid regular substantia] dividends. 

These dividends and the growth in share- 
holder’s funds mean that the Government’s 
original investment in the Company has 
provided an average annual return of over lO^o, 
after adjusting for inflation. 

Originally set up to help meet Britain’s 
domestic needs, we soon found our expertise in 
demand overseas. Today we serve customers all 
over the world. 

Our experience, aided by a far-sighted and 

tong term research and development pro- 


areas of the nuclear fuel cycle. Ours is one of the 
few remaining technology based industries 
where Britain still leads the world. 

Cautious estimates suggest that the global 
market in nuclear services will be worth over 
$20 billion by the year 20 00 and more than $35 
billion by 2010. 

We are well-placed to capture a sizeable share 
of this market, with all that means for Britain. 

Already our work supports 1 in every 375 
British jobs. We produce £1 of every £155 
generated by the whole of the UK’s manufac- 
turing industry. £1 in every £750 earned 
abroad by British companies is earned by us. 

Now that the new Thermal Oxide 
Reprocessing Plant (THORP) has been given 
the go-ahead, our exports are set to double, 
placing us among the top 30 British exporters. 


[ 1 

Pluse lend itte s free cop; of jour Annual Report and Accomra. 


L trtn.uxnA.vrt: auou-Kiwwta. uslev K*ux*jTD-.,OEanu vuw I 
- ' 



FINANCIAL TIMES MONDAY NOVEMBER 21 1?W 



Ciive Cookson on technology 

Moving forward at a 
snail’s pace 


For several years unclear 
technology has been moving 
forward at a snail’s pace. 
Progress is painfully slow for 
those who remember how 
quickly new reactors were 
designed during the growth 
years in the 1950s, 1960s and 
early 1970s. It is also glacial 
when compared with other 
industries, not only fast-mov- 
ing Helds such as biotechnol- 
ogy and electronics but also 
competing energy technolo- 
gies such as efficient gas-fired 
power plants. 

Some of the reasons for the 
slow progress are obvious. 
After 15 years with few 
orders for new nuclear plants 
the industry has neither the 
funds to undertake research 
ami development on a large 
scale nor the incentive to 
design new reactors. 

So the main activity is 
gradual, incremental 
improvement of the long-es- 
tablished reactor designs 
-which is not something to 
quicken the heart of an 
enthusiastic young engineer. 
There is a morale problem in 
some nuclear research estab- 
lishments, with an ageing 
workforce soldiering on to 
retirement 

The pressurised water reac- 
tor, designed originally in the 
US, dominates the interna- 
tional nuclear industry. 
PWRs represent 55 per cent 
of the world's operating 
nuclear reactors and generate 
63 per cent of nuclear elec- 
tricity. And the PWR features 
just as prominently In the 
industry’s future plans. 
According to the Nuclear 
Industry Handbook 1994, 
published by Nndear Engi- 
neering International. PWRs 
account for 74 of the 143 
units planned or under con- 
struction (equivalent to 67 
per cent of generating capac- 
ity). 

The PWR pumps water 
under high pressure - to pre- 
vent boiling- to the genera- 
tor, where steam is raised in 
a separate circuit 

The nest most popular type 
is the PWR’s closest cousin. 


the boiling water reactor. The 
BWR raises steam directly 
from tiie cooling water and 
therefore does not need a sep- 
arate heat exchanger. 
Although the simpler cir- 
cuitry reduces construction 
costs, this advantage is offset 
by the requirement for addi- 
tional studding since the cir- 
cuit is susceptible to radioac- 
tive contamination. 

Development of advanced 
BWSs for tiie late 1990s is 
continuing, particularly in 
Japan where five BWR units 
are under construction and 
four are planned. 

Europe’s standardised 
advanced design is 

the 1,450MW European 
PWR (EPR) from 
Nuclear Power 
International 

Bat development work in 
Europe and US is concen- 
trated on advanced PWRs. 
These designs incorporate a 
range of “passive" or “inher- 
ent" safety features which 
are intended to reduce the 
risk of a catastrophic acci- 
dent by an order of magni- 
tude or more compared to 
existing reactors. 

For example the power den- 
sity of the core is reduced and 
the reactor is larger than ear- 
tier PWRs with the same out- 
put And tiie new designs are 
simpler, more ragged and 
more forgiving of operator 
error and mechanical failure. 

Europe's standardised 
advanced design is the 
1.450MW European PWR 
(EPR) from Nuclear Power 
International, a partnership 
of France’s Framatome and 
Germany’s Siemens. The proj- 
ect timetable calls for sites 
for the first EPR units to be 
selected in 1997 and construc- 
tion to begin in 1999, with 
commercial operation from 
2005. 

The US is developing two 
advanced PWRs with joint 
funding from the government 
and industry: the 1.350MW 


System 30+ from ABB Com- 
bustion Engineering and the 
600MW AP600 from Westing- 
house. With little immediate 
prospect of new orders from 
the US electricity supply 
industry, their commercial 
prospects probably depend on 
wi nning export business in 
Asia. Westinghouse, for 
example, set up an AP600 
engineering centre in Indon- 
esia this year to prepare for 
the design's Introduction 
there. 

The emphasis of advanced 
reactor research is more on 
winning public acceptability 
thr ough inherent safety than 
reducing costs, because the 
industry remains convinced 
that in the long term it can 
win the economic competition 
with fossil fuels. 

Development of gas-cooled 
reactors - the technology on 
which the British nuclear 
industry relied until a PWR 
was ordered for Sizewell B 
- has virtually stopped in the 
UK- But gas-cooled reactor 
research is continuing in the 
US and Russia. 

The latest government- 
funded US project is the Gas 
Tnrbine-Modular Helium 
Reactor (GT-MHR) in which 
high-temperature helium 
coolant from the reactor 
drives a gas turbine directly, 
without the need for a steam 
generating circuit. It is 
claimed to be safe, simple and 
cheap to b uild and operate. 

The GT-MHR is a candidate 
for burning surplus pluto- 
nium extracted from former 
Soviet nuclear warheads in a 
US-Rosslan joint venture. The 
reactor would generate elec- 
tricity and produce energy 
for district heating. 

Meanwhile R&D into fast 
breeder reactors - once seen 
as the inevitable next step for 
the nuclear industry - is run- 
ning down worldwide. Sub- 
stantial programmes still 
continue in France, Russia 
and Japan, but there seems to 
be little prospect that fast 
reactors will enter commer- 
cial operation within 20 
years. 


David Buchan reports on developments in France 


Some challenges to be 



France's formidable nuclear 
industry seems so far to be 
weathering a number of chal- 
lenges: the public debate over 
nudear waste, the conundrum 
of the future of the Superphe- 
nix breeder reactor, and pres- 
sure from Brussels for liberal- 
isation of the European energy 
market 

What bad been billed as the 
big media event of the year 
turned out a relative flop. This 
was the march in April and 
May against the Balladur gov- 
ernment's decision to restart 
Superphenix as a research 
reactor. The march began on 
April 8 south of Lyon at Creys- 
Malville. the site of Superphe- 
nix. then wound east to take in 
part of Switzerland and Ger- 
many, then - a month lat- 
er - ended in Paris with no 
more than 1,500 demonstrators. 

it was a far cry from tens of 
thousands, some of frhpm from 
Switzerland and Germany, who 
mobilised at Creys-Maiville in 
the late 1970s against the build- 
ing of Superphenix. and a dis- 
appointment to the Greens 
whose chief goal in the nuclear 
field had been to extend indefi- 
nitely the shut-down of Super- 
phenix ordered in mid-1990. 

Superphenix. built as the 
world’s largest breeder reactor 
to produce electricity, has this 
autumn started a new life as a 
centre of research into tbe 
burning of plutonium and 
other waste. The plant, which 
cost about FFr27bn to build, 
must be the world's most 
expensive research reactor, but 
mothballing it was not cheap 
either. R unnin g the plant as a 
research reactor will cost 
FFrlOOm a year, to be borne by 
the French Atomic Energy 
Commission (CEA) and Electri- 
city de France (EdF). the state- 
owned utility which owns 51 
per cent of the reactor, 
although they may reap some 
marginal benefit from sales of 
what electricity generates as a 
by-product 

Cogema, France’s nuclear 
fuels agency, says that Super- 
phenix’s net consumption - or 
elimination - of 100kg of pluto- 
nium a year will be useful, but 
rather puny in relation to the 
10 tonnes of plutonium that 
France's 56 reactors generate 
each year, along with nearly 80 
per cent of the country's elec- 
tricity supply. 


Worldwide 
Nuclear Capability 



GEC ALSTHOM has supplied more than 20% of the 
total generating capacity in the world's nuclear power industry. 

Power Generation, Reactor and Auxiliary Equipment • Remote Handling 
Waste Management • Storage • Refurbishment * Servicing • Decommissioning 

Project Management. 

GEC ALSTHOM one of the world's leading power generation 

companies. 


GEC ALSTHOM 


Cogema opened a new repro- 
cessing plant in La Hague in 
August specifically to treat as 
much as 800 tonnes of EdFs 
nuclear waste each year. 

This unit, named UP2, is 
akin to UP3 which started in 
1990 and which is designed to 
serve Cogema's 27 foreign cli- 
ents. 

Mr Jean-Louis Ricaud, Coge- 
ma's head of reprocessing, 
c laims that both French and 
foreigners have gained, 
because after having each paid 
out FFr 20b □ for their own 
reprocessing unit, they have 
been able to split the FFr 20bn 
extra cost of installations com- 
mon to the two reprocessing 
units. 

For Cogema. as well as for 
British Nuclear Fuels, German 
utilities are an important cus- 
tomer. accounting for 15 per 
cent of the French agency’s 
total business. However, as a 
result of a compromise earlier 
this year between the govern- 
ment and tbe opposition Social 
Democrats, German utilities 
are no longer required to repro- 


cess their spent fuel, and now 
have the option of stocking it 
German Titriities are financ- 
ing the preparation of a dis- 
posal site in the Gorteben salt 
mines in Lower Saxony, but 
political objections have put 

f his wen h fthTTtri flriwriiite This 
seems to he why Mr Ricaud 
says he is “extremely confident 
that La Hague even in 15 years 
time will have a full load''. 

r Ricaud, naturally, 
favours reprocessing 
rather than stocking 
spent fuel “Stocking would be 
tike leaving old cars lying by 
the roadside; reprocessing is 
like the sensible business of 
compressing all this spent steel 
into something useful". But 
even Cogema recognises that 
there is some waste -about 200 
cubic metres erf long-lived and 
highly radioactive material, 
enough to fill the average 
swimming pool - which cannot 
be re-used and which is just 
pQing up in a temporary sflo at 
La Hague. 

The general idea is to bury 


this waste. The government 
has now chosen four possible 
underground sites, whose geol- 


exports- 12 per cent of its 
ftenchsenarated power to the’ 
DEL. Switzerland, Italy, Ger- 

r ■ ** « • -*■ A-a 


ogy it is studying. In-another - jmmy. Spain andltortugaL And 
year or so, tt wifi, select two of .it is -also investing abroad, in 


fhecp. sites in which to sink 
underground research , labora- 
tories costing costing 1 some 
FFrL5bn each. 


■Ar gatthBi Slovakia and most 
recently in Sweden 
r -At the sane tube, ihtmever, 
it has every intention: ft. pro? 


Eventually; around ihe year; . fectmg its. home patch,' men 
2006, it may decide on an even- aced by Brussds,' The . Euro- 



tual nuclear waste storage site. 

EdF, as the world's largest 
nuclear power generator, is 
closely identified with the 
nuclear cause, but this does 
not tarnish its image, at least 
not at home. Accenting to a 
Loins Harris pbR last year, SO 
per cent of French had. ", A good 
opinion" of EdF; not as high as 
Fiance Telecom (84 per cent) 
but higher than Gaz de France 
(77 per cart) or Sf-Aquttaine 
(58 per cent). 

The opening of electricity 
markets in Europe and around 
the world, particularly in fasf- 
growing Asia, presents EdF 
with an enormous opportunity 
which it appears to be seizi n g 
with both hands. It now 


peon/ - Commission, has 
threatened court action to get 
France and some others to. 
drop their monopolies on tiie 
export, and' impart ofenergy. 

EdF is not worried about 
imports, given the ‘competitive- 
ness of its xoiclear-genorated 
electricity. It does not even 
Vnfad too much about tbe intro- 
duction of some competitive 
bkkfing by supphfiraButEdF 
draws the line at “third party 
access” which would see an 
end to EdF’s J distribution 
monopoly- • '■ 

It is this monopoly, says 
EdF.that gives it the ability to 
plan tiie heavy long-term 
investments so characteristic 
of the nudear industry. 


Frank Gray takes a look at Asia 


Suppliers are flooding in 


Western nuclear equipment suppliers, 
after years of non-growth in their own 
markets, are now flooding into Asia m 
search of fresh business that might arise 
from the region's rapidly expanding elec- 
tricity supply industry. 

The big news coming out of the region 
centres on Taiwan and the People's 
Republic of China - each of which is dose 
to finning up big orders for large nudear 
power complexes as part of their drive to 
diversify their electricity policies away 
from near-exclusive dependence on fossil 
fuels. 

Mainland China is heading for a poten- 
tial bonanza and has outlined plans to 
add 15 new nuclear plants between now 
and the first decade of tiie next century. 
They would have a combined capacity of 
at least 12.000MW, and most of the key 
components, such as reactors and tur- 
bines, would be imported. 

In tbe past two years, China has com- 
missioned its first three reactors, which 
have 2.100MW of c ap acity. They are the 
1.800MW. two-unit complex at Daya Bay, 
north of Hong Song, built by Framatome 
of France and tbe Anglo-French GEC-AIs- 
tbom. A third 300MW unit built mainly 
with Chinese technology, is operating at 
Qinshan. south of Shanghai at a site being 
developed for a full family of reactors. 

In recent weeks. Atomic Energy of Can- 
ada Ltd (AECL) signed an agreement to 
enter into detailed negotiations far tiie 
supply of a two-unit. 1.400MW complex at 
Qinshan. The proposal, if finned up, is 
worth C$2.6bn. It follows a recent 
announcement fay Framatome that it had 
won a FFrL4bn contract to supply equip- 
ment for a second 300MW unit at Qin- 
shan. 

These units would be in addition to Chi- 
na’s outline plan to add a series of huge 
reactors in south-eastern China, not far 
from the Daya Bay complex. The units 
would provide long-term base-load capac- 
ity in one of the country's most rapidly 
industrialising regions. 

The potential of the China market is 
tempered by concerns about its ability to 
fund such schemes, but no such worries 
surround the race to win at least S2bn in 


contracts to supiply Taiwan with 2300MW 
of nneiaar capacity, to be installed at a 
new complex inside a national park on 
the northern tip of tire island. 

Mr Adrian M. T. Wang, vice-chairman of 
Taiwan's Atomic Energy Council, recently 
said that the contract to build the two- 
unit complex would be made before the 
end of January. Conspicuous bidders were 
Framatome and Siemens and a TISAJK 
consortium of Westinghouse and Nudear 
Electric. Mr Wang said that Taiwan had 
to accelerate its nudear programme 
because of its huge, 93 par emit; depen- 
dence on imported energy. 

Development of the site had been 
suspended several times since the mid- 
1980s because of environmental protest 


T! 


he units would add to Taiwan's 
existing unclear capacity of 
5.144MW; some 28 per cent of all 
installed power. 

The nuclear issue has brought the two 
Chinas together on the issue of uranium 
supplies and storage. Taiwan recently 
agreed in principle to buy uranium con- 
centrate from China in exchange for per- 
mission to store the island's nuclear 
waste at a remote site on the mainland. 

Japan and Sooth Korea, the number one 
and two countries in Asia, in terms of 
nudear capacity, both {dan rapid expan- 
sion, and Indonesia is planning to begin 
its own nudear power programme. 

Mr. Djali Ahimsa, director-general of 
Indonesia’s National Atomic Energy 
Agency, said recently that first tenders 
would be called next year for the supply 
of Indonesia’s find nnrip ar units, which 
would be built at Mount Maria hi north- 
central Java. The target date for comple- 
tion was 2004, with more pairs of units 
being added regularly thereafter. 

Indonesia's total capacity now was 
10.000MW, but projections called for tills 
to rise to 31.800MW by 2011. Nuclear 
plants would ease pressure arising from 
Indonesia’s dinmdshing oil reserves and 
would free gas and coal for export 

After Japan. South Korea has tiie the 
world's most ambitions nuclear plant 
expansion programme. At present, Korea 


Electric Power operates nine reactors 
with a capacity of 7.616MW, about 36 per 
cent of total capacity. By 2006, it plans to 
have added another 14 units, with a 
capa c i t y of 12JHMMW, boosting nuclear’s 
share of all el e ct r ici ty to 87.7 per cent of 
total capacity of 45,533MW. By 2031, 
plans call for a further 18.900MW of 
nuclear capacity to be added, .by which 
time a total of 7.617MW win have been 
decommissioned. 

Most reactors have been supplied by 
Westinghouse, Atomic Energy of Canada 
and Framatome, with Korea Heavy Indus- 
tries increasingly developing its own reac- 
tor know-how. 

Kepco officials are excited by the diplo- 
matic breakthrough with tiie North, 
which will mean the Installation of 
2,OOGMW of mudear capacity under west- 
ern supervision in exchange for Pyong- 
yang's decision to scrap its obsolescent 
-but potentially lethal- graphite-mOder- 
ated. reactors. 

In Japan, there is more than 3fl,OOOMW 
of nndear capacity In operation, but the 
country’s private sector power utilities 
are failing well behind the government's 
proposed schedule to add a further 
40.000MW by 2010, 

The Ministry of I nter na tional Trade and 
Industry (Miti) says the time needed to 
negotiate site acquisition, obtain govern- 
ment and local approval, and construct a 
nndear plant is now beyond an acceptable 
level. It hopes Japan's trine power utilities 
will build and start opera ti ng at least 15 
new reactors by 2010, but it foresees this 
target as difficult to achieve under pres- 
ent sociopolitical conditions. 

The leading u tilities, led by Tokyo Elec- 
tric Power Co. (Tepco) are sourcing the 
most important nudear components 
domestically, under licence from Gfi and 
Westinghouse. GE is also a leading con- 
structor in its own right, and is in joint 
venture with Toshiba and Hitachi to 
install 2.60GMW of capacity at Tepco’s 
Kashi wazaki-Kariwa nuclear power sta- 
tions, which win open in two phases in 
1996-97. 

Frank Gray edits Power in Asia, a Finan- 
cial Times newsletter 


Michael Smith examines the UK industry 

Review will reveal all 


It is just conceivable that the UK nuclear 
power industry could be on the brink of a 
glorious era in which tbe industry will be 
transferred into the private sector and 
than expanded significantly. But few peo- 
ple are betting on it 

All will become clear when the govern- 
ment announces the conclusions of its 
long-awaited review into the industry in 
the next few months- The review could 
provide tbe framework for the industry for 
years, possibly decades, to come. 

The two main generators, Nuclear Elec- 
tric and Scottish Nuclear, are pushing 
hard both for privatisation and for the 
ability to build new power stations. But 
they are struggling to get their arguments 
accepted. 

It is, after all, just five years since the 
government was persuaded that investors 
would not buy nuclear power stations 
from the state. Ministers promptly pulled 
the sale of the nuclear stations from the 
privatisation of the rest of the power 
industry, imposed a moratorium on the 
building of new stations and promised the 
review which is now under way. 

The nuclear industry has used the time 
well, achieving significant increases in 
efficiency. 

Since 1989. Nuclear Electric has man- 
aged to raise its share of the electricity 
market In England and Wales from 1.6 per 
cent to almost 25 per cent This sharp 
improvement has been largely due to its 
success in overcoming technical difficul- 
ties with its five advanced gas-cooled reac- 
tor stations that were built in the 1970s. 
From having been among worst per- 
forming nuclear stations in the world, the 
AGRs are now among the best 

Scottish Nuclear has also made Impres- 
sive strides, achieving a 40 per cent 
increase in output since 1989 and 50 per 
cent improvement in productivity. 

In spite of the improved efficiency, the 
industry is struggling to shake off its crit- 
ics’ claims that it is uncompetitive. The 
main problem is the existence of nuclear 
levy, through which £lbn a year Is raised 
from domestic power consumers in 
England and Wales every year for the 


nuclear power industry. Nuclear Electric 
argues that the levy is to pay from liabili- 
ties it inherited from the Central Electric- 
ity Generating Board, its fore-runner, but 
the government is less precise about its 
purpose. 

The nuclear industry’s opponents say it 
is a subsidy. They feel they are on even 
firmer ground over the costs of building 
Sizewell C, the 2.S00MW power station 
planned for the Suffolk, En gland coast 
This is planned by the nuclear industry as 
what it hopes will be the first in a series of 
new plants. 

N. M. Rothschild, the merchant hank 
advising Nuclear Electric, is working on 
the possibility that it may be possible to 
build a nuclear power station entirely with 
private sector finance. 

Rothschild has yet to make its findings 
public but the City of London wffi take 
some convincing. Investors were sceptical 
enough about Nuclear Electric’s claim in 
June that it could produce electricity from 
the 2#»MW Sizewell C at 3-7p a unit 

T his was based on the assumptions 
that the station could be built for 
£3-5bn, its operating efficiency would 
be 85 per cent and that the private sector 
would demand an 11 per cent return on 
capital Invested. Critics say all of these 
claims are highly optimistic. But aBgnwm» > 
3.7p is achievable, it is still considerably 
higher than the average price of 2.4p this 
year in the electricity wholesale trading 
pool to which tiie new station would have 
to sell its power. 

The pool price will rise fay the early 
years erf the next century but not necessar- 
ily to 3.7p. The gap could be bridged if the 
government was prepared to provide a 
subsidy, perhaps as much as film. But for 
Sizewell C to go ahead, the government 
would also have to provide guarantees 
against future regulatory change or 
decommissioning problems. 

It felt unable to give such undertakings 
in 1989, but since then the environmental 
arguments to favour of nuclear power 
have increased. 

There is more international pressure to 


cut sulphur and carbon dioxide emi 

But nuclear power’s opponents i 
gas and coal industries could argu 
providing state aid for nuclear i 
whether through direct subsidy or 
writing the industry for regii 
change, would be a dear distortion 
energy market which ministers warn 
foBy competitive. This will prove a i 
point in the review. 

Even more persuasive is the gi 
menf s lack of funds and t he argi 
that the UK does not need any more 
stations in an over-supplied market. 

ine Treasury backs nuclear paw 
vatisation both for financial and id< 
cal reasons. 

The two nuclear companies 
suggested an industry structure i 
roidd make privatisation possible, 
tins the older Magnox stations. ' 
have large liabilities, would remain 
pubhc sector, leaving the advance! 
co oled reactors and Nuclear El« 
P£«SEa1aed water reactor Sizewell B, 

Prof Stephen Littlechild. elect 
regulator, wants ’more n 

^S^ U Ei^h? 21d kf 8 - 5U S8BSted 
Elec * nc “d Scottish Ni 
swap some of their assets. This i 
to the generators, althougi 
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Monday November 2* iw 



WORLD NUCLEAR INDUSTRY III 


in 



pettons elccrric icy needs for 12 months. 
J^f ^^oudear ftiei is an amazingly economical 

^tta^.eicctncicy. The fuel we use is uramuai, 

jj • • • • .' . • 1 • ".*' ■ ’ . ' * 

Virt&afcB .which »: not only pJendfid' bur logical 


2. Wyl fa 3.Heyshani 4. HattlqyKrf *. 7. Dungen6ffl"a^yml(3ey 

Point 8. Oldbury-on -Severn. Ifypu wwldUketoj^sic oneof our nuckar pdw«*tj^& : 
ot receive mow derailed information ; please QS^f^fgjki 


T Uc re ^rSu PrCad pub ‘ 

much of Si 0 * . across 
used world that f u ,nduB tria- 
industry “ ^ ‘ hc 

may havi h - Some ot 
nally from th ' ^ er >vetl origi- 

face fo r th^h^lh ^ war ' s 

industry’s v!,.^ t mh „ Dut the 
decades t 0 di^ 1 efforbi Wer 
^es of nScfc; ciate ci ^l 

military onZ in fr0in 

mind was eradi^S J * pubIlc 

another ted ! n 1388 by 
^nus to its \L etlUa ^y disaa- 
Sion a! the c^ Be: K t} ? e e ^ 10 - 
in Ukraine Ch byl reactar 

-^d ‘"o^u^^iionally 

S ce ch; m S es *SS35J5 

emt T?n b 5 ^ a one-off 

occurred on a reactor of 


Bronwen Maddox takes a look at the industry’s safety record 

Valiant efforts eradicated 


unique Soviet design and with 
operating practices that would 
not have been tolerated In the 
west". 

Industry executives add that 
the Windscale accident In the 
UK in the ISSOs and the Three 
Mile island incident in the US 
in 1979 did not cause deaths 
through radiation emissions. 

They have devoted pages of 
reports and millions of pounds 
to arguing, in the words of the 
Nuclear Energy Agency, that 
“it is possible with a suffi- 
ciently high standard of safety 
to contain a potentially very 
dangerous process". 

In studying how to contain 
that process, the nuclear indus- 
try in western countries and 


CIVIL AND MILITARY LINKS 

Serious threat of 
bomb-making 


North Korea's controversial 
nuclear programme is the 
most recent demonstration 
tnat civil nuclear power is not 
as ftr divorced from military 
applications as its supporters 
use to pretend. And the fact 
that the US and Sooth Korea 
are prepared to supply North 
Korea with water-cooled reac- 
tor technology worth $2bn to 
stop its existing graphite reac- 
tor programme shows lust how 
seriously the threat of the 
transfer between civil and mil- 
itary nuclear reactors is being 
taken. 

The reason why is simple 
enough. For a would-be 
nuclear weapons state, the 
hardest part of making an 
atomic bomb is getting enough 
of the right sort of plutonium 
or uranium. The easiest place 
to get hold of the right sort ot 
plutonium is from the right 
sort of nuclear reactor. 

For a relatively unsophisti- 
cated country the right kind of 
reactor uses natural uranium, 
which is reasonably easily 
available, surrounded by 
graphite. If the reactor is oper- 
ated for several months, two 
important nuclear processes 
occur. The first is the splitting 
- of uranium, whichTeteases the 
energy to prodnee power, and 

the second is 

the conversion 
of the natural 
fora of ura- 
nium which Is 
not explosive 
into a form of 
plutonium * 
which is. North 


similar incidents, the opera- 
tion of civil nuclear reactors 
around the world does pose a 
military problem. Large 
amounts of plutonium are pro- 
duced, even in water-cooled 
reactors. While much of this 
would be difficult to detonate, 
it is not impossible, and as it 
Is highly toxic ft also presents 
a significant chemical threat 
in the hands of terrorists or 
renegade states. 

That genie is already partly 
out of the bottle because hun- 
dreds of tonnes of plutonium 
have already been separated 
or “reprocessed” from used 
reactor fuel. Some of It is 
explicitly for weapons and 
other lower-grade stocks for 
possible use in fast breeder 
reactors: a technology which 
has now been shelved. 

Protecting that plutonium in 
stove is a hard enough task in 
the west, where standar ds of 
accounting for nuclear stocks 
have In the past been lax. 
Even last year, Mrs Hazel 
O’Leary, the US energy secre- 
tary, had to correct a figure 
for US plutonium stocks by IK 
tonnes - enough for ISO 
nuclear weapons - because of 
accounting errors. 

‘ -A full register of fissile 
materials does not exist and 
not even indi- 


Korea's 
nuclear reactors are of this 
graphite type and bear a 
strong similarity to those 
which were originally used in 
the US for plutonium produc- 
tion. Once the uranium in the 
reactor has been used for sev- 
eral months it is taken out and 
the bomb-making plutonium 
can be chemically separated. 
Whether the reactor is being 
used to make electricity or 
plutonium is partly a semantic 
distinction because the reactor 
is doing both. 

However, if the uranium is 
left in the reactor for more 
than a few months the explo- 
sive type of uranium is itself 
converted by the intense radia- 
tion into a much less explosive 
form. For efficient bomb mate- 
rial the optimum period in a 
reactor is about sir months. 

More advanced western reac- 
tors use water instead of gas 
to cool them. Unfortruuwely, 
the wafer coolant slows down 
the reaction and *? £**“■?* 
uranium, which contehis only 
1 per cent of the type 
will split to release energy, 
has to be beefed 
per cent of the raac £?? 

This “enrichment is dim 
cult and expensive, and is oue 

S^",ssr*23 t. 

££?£«Pl>«* reactors 
“^Se^e enriched tael 

SSSSss 

SAT.wS-S 8 


ars»2-s'!ss 

a*?--* 

ble, to detonate 


sSSSSS 

restart. inspectors, 

monitor by a^^Pthe US 

— .* r JSLi wtag 

neg0t ^ t «i Kforth E° reanS 

to wean to® olutoni- 

th« r h ? 1 t^ n SSphite cores 

toWar t S reactors. One 
pressured ^“^Knegotiators 

problem for ^ pe seen 

as girth® th e school of 
tod^d, that 

though* J^^reans never 

the North nuclear 

intended ® n tedfo s< l u ® e * e 

rirtl power s&uu 

***** te the re are no farther 
Bren if®®* 


, , vidual coun- 

Pravenhng tire spread of t r | es know 

potential bomb materials is exactly how 
difficult - and is being much pinto- 

m ade more so SSL thS 

have or where 
it all is. The problem is even 
worse in Russia where there 
are concerns that fissile mate- 
rials stores are not secure. 

Against that background, 
preventing the spread of 
potential bomb materials is 
difficult - and is being made 
more so by the r e processing of 
further fuel from civil reac- 
tors, and the dismantling of 
nuclear weapons. The pluto- 
nium is not needed for dvfl 
purposes and even the pro- 
posed mixed-oxide fuels to 
burn the plutonium are only a 
temporary palliative which 
will generate more plutonium. 

In the view of some in the 
nuclear industry, developed 
countries most produce better 
and more open noclear 
accountancy methods . This 
would reassure non-nuclear 
weapons states that stockpiles 
were under control, and the 
system could be passed on to 
developing countries to help 
them account for their civil 
nuclear programmes. 

The further reprocessing of 
fuel also looks questionable 
under these conditions, 
because it separates more plu- 
tonium which needs safe stor- 
age. “What could be better 
than storing this plutonium in 
its original fuel rods, still 
mixed with the highly radioac- 
tive fission products which 
would HU anyone who tried to 
steal it?” said one former 
nuclear executive. 

Another engineer still in the 
nuclear industry said: “I p re- 
fer to keep the waste as solids 
in the fuel pins, rather than 
separated out with some as 
highly radioactive liquids 
which are difficult to contain. 

Such views about the control 
of fissile materials to keep toe 
barriers between civil and 1 mil- 
itary power are particularly 
Important in the run-up to the 
conference on extending the 
nuclear non-proliferation 

treaty next year. So far, the 
objections of non-weapons 
states are that the weapons 
states have not done enough to 
disarm or control their fissile 

stockpiles- , . „ 

Their main anger has, how- 
em.%endirectedatthef^- 

^ agree a tes* 
so that weapons states can 
Mmtinue to develop more and 
2? ^ophistteated bombs. 
Cner or later W the 
rtr?ii switch to the 1 


Bernard Gray 


Japan has spent much time on 
improving the reliability of the 
pressure vessels and pipework 
of the main circuits of a reac- 
tor, particularly that for con- 
taining the reactor coolant. 

In pressurised water reac- 
tors, much work has also been 
devoted to strengthening the 
tubes of steam generators. The 
NBA reports that "since the 
early 1970s, operators of many 
PWRs around tbc world have 
found it necessary to under- 
take much more plugging of 
steam generator tubes than 
expected" because of corrosion 
and cracking. 

Regulators’ reports also 
repeatedly refer to the impor- 
tance of training, citing human 
error as the greatest risk in a 
modem reactor. 

But how Car should this pro- 
cess of refinement be pursued? 
What counts as safe? Difficult 
political and economic deci- 
sions, such os the lifespan of 
Britain's ageing Magnox reac- 
tors, depend on the answer. 
The answer to whether that is 
"safe enough" lies not in sci- 
ence or engineering but in poli- 
tics: on the degree of risk 
which the public will tolerate. 

That brings the issue back to 
the question of the public 
image of the industry. The UK 
government's Health and 
Safety Executive suggests that 


safety standards Ln future 
nuclear plants should be set so 
that the risk to a member of 
the public is at least 10 times 
less than that of a traffic acci- 
dent. As the HSE points out, 
though, however much time 
the nuclear industry devotes to 
educating the public that the 
risk Is low compared to that 
from some other indus- 
tries - and compared to that 
from activities such as riding a 
motorcycle - it faces deep, 
probably immutable, preju- 
dices. 

. cople will tolerate much 
'more risk from some- 
thing they choose to do. 
such as horse-riding, than they 
will from events beyond their 
control, the HSE comments. 
Moreover, repeated surveys 
show that many people would 
rather die of almost anything 
than of radiation from a 
nuclear accident. 

In those efforts to persuade 
the public and politicians of its 
virtues, the nuclear industry 
industry feces two other prob- 
lems on which It also has little 
influence. The first is that 
much civil nuclear power 
around the world is closely 
associated with military uses 
-sometimes it occupies the 
same site. Despite the indus- 
try’s emphatic arguments that 


each reactor docs not represent 
a bomb, it has few tools to 
counter public suspicion, given 
the secrecy that surrounds mil- 
itary programmes in even the 
most open societies. 

The second hazard the indus- 
try faces is that of an accident 
at one of the 58 crumbling east- 
ern European and former 
Soviet reactors. If there is 
going to be another Chernobyl, 
the odds are greatest that ti 
will be here. 

That gives nuclear compa- 
nies operating to high stan- 
dards a tough problem, fa the 
west, they are facing a battle 
to justify their existence, both 
with government treasuries 
and with environmentalists. 
They have to reassure those 
audiences that nuclear power 
can be safe and cheap. At the 
same time they must stir up 
enough concern - among the 
same people - about the peril- 
ous state of eastern reactors to 
persuade them to spend more 
money quickly on repairs. 

Even industries which have 
proved skilful at handling their 
public image would find that 
juggling match difficult. 
Nuclear operators, which fre- 
quently have an unwieldy and 
suspicious culture deriving 
from state ownership, may find 
that the task of reassuring the 
outside world (s never-ending. 


Cbemofayfc the Industry kttsmatfcmfy argues vigorously' that 0» accident was s one-off event 








IV 


FINANCIAL TIMES MONDAY NQVEMB^. 2T,1S 


WORLD NUCLEAR INDUSTRY IV 




G EC Alsthom's engineering 
systems group at Whetstone 
near Leicester has a long associ- 
ation with the nuclear industry, as the 
former home of some of the manufac- 
turers of the UK’s old Magnox power 
stations. 

In the modem era. with nuclear 
power station building in decline or 
non-existent in the UK and many other 
countries, the focus of the 
Anglo-French engineering group's 
nuclear activities is changing. But it is 
still achieving considerable success, 
albeit in ways that might not have been 
envisaged 20 or 30 years ago. 

Over the past few years, the bulk of 
6EC Alsthom's nuclear activities have 
been brought together within the engi- 
neering systems group, whose manag- 
ing director is Mr Martin Melling. 

The main exception is the production 
of large steam turbines that form the 
conventional "turbine island" of 
nuclear stations. These are made by 
GEC Alsthom's electromechanical divi- 
sion. GEC itself still retains NNC 
(National Nuclear Corporation), which 
is known mainly for designing and 
building nuclear power stations but is 
moving increasingly into the servicing 
and maintenance side of the business. 

It is a world leader in the design 
and supply of plant, systems 
and equipment for the industry 

Mr Melling’s group employs some 
2,300 people of which 1.450 work in the 
UK. He estimates that just over half the 
group workforce is engaged in nuclear 
activities - at Whetstone, at a similar 
but smaller facility in Grenoble, and at 
the recently acquired Schilling Develop- 
ment, a California-based specialist pro- 
ducer of robotics handling equipment 
With the exception of the reactor 
pressure vessels themselves, which 
GEC Alsthom does not make, its 
nuclear presence is one of the indus- 
try’s most wide-ranging. 

It is a world leader in the design and 
supply of plant systems and equipment 
for the nuclear Industry, and under- 
takes a complete range of contracts 
from preliminary design studies to 
turnkey projects. Worldwide, it has 
more than 25 years of experience on 
PWR installations in Europe and the 
Far East 

As for growth prospects. Mr Melling 
divides his group's nuclear activities 
into four. The PWR activity is declin- 
ing. and as supplier of equipment into 
the reactor island, rather than the main 
elements of the reactor, GEC Alsthom 
faces intense competition in markets 
such as Asia, where local content is 
often obligatory. 

There is a stable business in refur- 
bishment and modernisation, however, 
and in the area of servicing and mainte- 
nance. A good future is seen in outage 
management, where contractors have 
to perform maintenance or refurbish- 
ment during a fixed “outage" of the 
plant or part of it, although this is also 



Recently acquired: Schilling Development advanced teJeraboSc control, the Titan Manipulator 


Profile: GEC Alsthom 


Long association 
with the industry 


highly competitive. Inevitably, the lead- 
ing players in the nuclear industry 
have all moved into this arena as mar- 
kets for new plants have dried up. 

Then come two growth areas where 
Mr Melling believes GEC Alsthom has 
something unique to offer. The first is 
in dry storage of used fuel, as a way to 
postpone reprocessing or as an alterna- 
tive to it. Over the past 15 years GEC 
Alsthom has developed technology that 
can handle used fuel from both PWR 
and AWR reactors. 

As the UK’s policy was for reprocess- 
ing, the company identified the US in 
the late 1980s as good potential market 


for its modular vault dry store (MVDS). 
winning an order in 1989 to build an 
MVDS at Fort St. Vrain. Colorado, 
where the nuclear station was being 
decommissioned. 

“This was a breakthrough in selling 
to the US and in validating the MVDS 
concept internationally.” says Mr Melt- 
ing. Another important deal was signed 
in 1992. to provide a spent nuclear fuel 
store for the Paks nuclear station in 
Hungary. Paks supplies 40 per cent of 
the country's electricity and was 
looking for ways to store its spent fuel, 
most of which had formerly gone to the 
old Soviet Union. 


GEC Alsthom is marketing the sys- 
tem worldwide, exploring opportunities 
from eastern Europe to South Africa. In 
the UK. GEC Alsthom has since 1990 
been discussing with Scottish Nuclear 
an application of the system for AGR 
fuel. A Government decision is awaited 
which would allow the scheme to go 
ahead, involving dry stores at Torness 
and at Hunters ton. 

The second growth opportunity seen 
by Mr Melling is the related one of 
general waste management. “There is a 
big market for technology that can sup- 
ply solutions to the problem of the safe 
handling of nuclear waste." he says. 

The company aims both to sell 
systems and individual products in this 
sector, where the expertise of Schilling 
is especially relevant. Again, the US is 
marked out as a growth area. 

The other side of GEC Alsthom’s 
nuclear-related business is the “conven- 
tional” end. The company, or its ante- 
cedents GEC and Alsthom, have sup- 
plied 20 per cent of the steam turbines 
and generators used in the world's 
nuclear stations. 

Formerly. GEC depended heavily on 
the UK market, and GEC Alsthom had 
to make big cuts in its manufacturing 
base in the early 1990s after the UK 

The key to success In China 
will be the development of 
partnerships 

nuclear station programme was 
shelved - a victim of the “dash for gas" 
that spawned a big development of com- 
bined cycle stations. 

Alsthom, meanwhile, was a big sup- 
plier to Electricite de France, and GEC 
Alsthom is supplying two 1.500MW 
steam turbine generators to both the 
Chooz and Civaux nuclear stations in 
France. The company still has about 
1.000 people engaged in nuclear-related 
turbine and generator work, at Rugby 
in the UK and Belfort in France. 

With the slowdown in the French 
nuclear programme, GEC Alsthom is 
looking to export markets, where both 
its parents had made considerable 
inroads. The two 1.000MW steam tur- 
bines supplied by GEC to the Days Bay 
nuclear station in China have put GEC 
Alsthom in a good position to win fur- 
ther business there, says Mr Michael 
Barrett, managing director of the elec- 
tromechanical division’s steam turbine 
business. 

The key to success in China, and to 
varying extents in other Asian markets 
for nuclear power, will be the develop- 
ment of partnerships to meet local con- 
tent requirements. GEC Alsthom is one 
of the few companies in the world with 
the capability to build the large steam 
turbines used in nuclear stations, and 
will hope to use its expertise to help the 
Chinese build them, says Mr Barrett. It 
already has a collaboration agreement 
in China, and is hoping to develop thi* 
further. 

Andrew Baxter 




Bronwen Maddox looks at waste disposal 

Shortage of options 


Where to store nuclear waste: 
that is perhaps the most diffi- 
cult question the nuclear 
industry must answer in 
making a case for itself. Envi- 
ronmentalists focus mi it, see- 
ing it as the weak link in any 
argument for nuclear power, 
they argue that it is immoral 
to leave a form of pollution 
winch will persist for tens of 
thousands of years for future 
generations to solve. 

The nuclear industry has 
traditionally countered this 
stance by pointing out that 
nuclear waste can be neatly 
contained in barrels, unlike 
atmospheric pollution from 
burning fossil fuels, a rival 
source of energy. But where 
should the barrels be stored? 
That question has not yet 


extracts reusable uranium 
and plutonium from fuel 
rods, leaving a modi, smaller . 
volume of waste. ITm UK and 
France, with large civil pro- 
grammes, began years ago to 
invest heavily in reprocessing 
capacity. However, since then 
the price of uranium has. 
fallen sharply. Concern bias 
also grown internationally’ 
that the greater the amount 
of plutonium created, the 
more likely that some is - 
diverted to bomb-making. 

Other storage options are 
cheaper, many have argued, 
but bring their own political 
and technical problems. The 
UK and Germany have inves- 
tigated permanent deep stop 
age - depositing the waste s 
hundreds of metres nnder- 


be closely monitored,. amt 
keeps permanent disposal 
options open- ^*1 
Others, such as Scottteh 
Nuclear, one of the two CCS 
nuclear -generators, fonmr^a 
hybrid of the two tedmique® 
for accommodating „• highly 
radioactive waste. .Scottish. 
Nuclear .has vigorously 
hacked- “dry storage?-; for 
spent fuel: keeping used ftud 
rods . on the t surface: 'mus 

. rounded, T>y inert gas for SO 
years until the radioactive 
content and heat .fall ta a. 
point where the. nods. can.be 
'•stored undJugroumL--- V ■ 

- Those debates, in which' 
political, economic anrf scien- 
tifjc considerations, are 
enmeshed together;, are .for 
from resolved. Indeed, in sev- 

— oral , western. 

countries 


been answered 

“rSeS^’is The big new factor is the Asian embrace of SSSSte has 

some urgency civil nuclear power i; - 

in finding ■ Tn e_ on ly 

solutions. . route f^wahls 


Even though civil nuclear 
programmes are on hold in 
many western countries 
which were previously enthu- 
siastic - notably in Germany, 
the US and Britain - the oper- 
ation of existing reactors con- 
tinues to generate waste 
which needs disposal. More- 
over, the eventual dismantl- 
ing of the reactors will pro- 
duce large volumes of waste, 
from lightly-contaminated 
concrete hulks to intensely- 
radioactive reactor rods. 
Some countries, such as 
Britain, also have nuclear 
submarines which need to be 
scrapped. 

Btrt pressure from public 
mtd enviro nmentalist s is nar- 
rowing the range of disposal 
routes. Under amendments in 
the past two years to interna- 
tional conventions on marine 
pollution, the option of dis- 
posing of even low-level 
radioactive waste at sea has 
been suspended fern at least a 
decade. That leaves a variety 
of land-based techniques, but 
despite their investigation by 
many different countries, 
there is no agreement about 
the best option. 

A decade ago, it seemed 
that reprocessing used or 
“spent" nnclear fuel would be 
the ideal- Reprocessing 


ground - at Sellafield In Cum- 
bria and at the Godeben salt 
mines. This option is likely to 
be cheaper than storage on 
the surface because it needs 
little surveillance and, is 
secure from terrorist attack. 

It also has political attrac- 
tions -it appears to offer a 
permanent solution rather 
than leaving it for future gen- 
erations. But in Germany, 
controversy over the choice 
of location has widened into 
an impassioned row abotrt the 
future of the nuclear power 
industry, which has stalled 
development of the rite. 

There are also considerable 
geological problems: it is 
hard to find a site without 
fissures or water seepage 
which will contain the waste 
safely for the next 10,000 
years. Such considerations 
have already prolonged the 
investigations, of UK Ntrex, 
the company charged by the 
UK govommant with finding 
a deep disposal site for 
low-level and intermediate- 
level radioactive waste. 

Such concerns lead many 
environmentalists, such as 
the pressure group Green- 
peace, to back the option of 
storing waste on the surface. 
This route is more expen ri ve, 
but does allow the waste to 


which appears tobeaccqjt- 
abie to western publics is to 
put nuclear waste on . rites 
already occupied by nuclear 
installations:- Sellafield is a 
care to print* : 1 - - . - = 

XT countries cannot resolve 
the debate about location 
domestically, -they may inves- 
tigate whether Other coun- 
tries wifi accept their -waste, 
or at least store tt temporar- 
ily while processing it into a 
different form. . British 
Nuclear. Fuels, owner of the 
UK’S; Thorp - reprocessing 
plant in Sellafield, has made 
no secret of its opinion that 
the UK should capitalise on 
-its 'expertise in. handling 
nuclear waste. 

The new factor which could 
ease such stalemates in the 
west; however, is the Asian 
embrace of civil nuclear 
power. Aria is beginning to' 
produce large volumes of 
waste and the next two 
decades will see the different 
techniques for treatment mid 
disposal vigorously explored 
and refined. That may allow 
western governments and 
nnclear Industries, from a 
rentage print uncomplicated 
by domestic politics, to make 
a more thorough assessment 
of the answer to nuclear pow- 
er’s trickiest problem. 


SIEMENS 


Here we produce electricity 
without C0 2 


A reactor core during refueling 



Nuclear power - power generation 
with no C0 2 emissions and there- 
fore with no negative impact on our 
climate. The radioactivity burden 
from a nuclear power plant Is less 
than one percent of our natural 
radiation level. Nuclear power is 
also synonymous with assured 
supply and cost-effective electricity 
generation. 

Comprehensive services 
Siemens has a wealth of experience 
in the development and construc- 
tion of different types of nuclear 
power plant - light-water-moder- 
atsd pressurized and boiling water 
reactors, pressurized heavy water 


reactors and gas-cooled high-tem- 
perature reactor modules. Almost 
without exception, we have acted 
as general contractor in the con- 
struction of nuclear power plants. 
We are world leaders in safety en- 
gineering. Comprehensive services 
and fuel supplies are part of the 
package we offer and have contrib- 
uted to excellent long-term oper- 
ating records. 

Top rankings worldwide 
International statistics confirm the 
top rankings of Siemens- built 
plants In terms of safety, reliability 
and availability. This is indicative 
not only of the excellent qualifica- 


tion of our customers’ operating 
personnel, but also of the quality 
of our technology. 

Clean energy 

Only cost-effective, clean power 
generation will be able to meet the 
growing worldwide energy de- 
mand while conserving resources. 
We are committed to putting this 
principle into practice. In all fields 
of power plant engineering we 
design, develop and supply state- 
of-the-art systems, equipment and 
turnkey plants tailored towards 
pollution control and higher cost- 
effectiveness. 



Committed to the future. 
Siemens Power Generate 


D-9TO&8 Erlangen. Germany