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The People’s Anny 

China’s Big Red flexes 
business muscles 

Pass 13 



Euro-energy 

Creating a free market 
in power and gas 

Page 12 



People Page 


Jurgen Riittgers: man 
from the future 

Page 10 


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FINANCIAL TIMES 


■ N £ws paper 


Islamic gunmen 
kill West Bank 
rabbi in attack 

Is lamic gunmen killed a rabbi and wo unded an 
Israeli policeman near Hebron on the occupied West 
Bank. Hamas, the main opponent of the Israel-PLO 
peace deal, claimed responsibility, while settler 
leaders claimed authorities had done nothing to bol- 
ster security in the area since two Israelis were 
killed in a guerrilla attack earlier this year. Earlier, 
Israeli chief of staff, Lt-Gen Ehud Barak, warned 
the cabinet that Israel could expect an increase in 
Palestinian attacks. Page 4 

Inquiry looms for Berlusconi: Italy’s 
embattled prime minister, Silvio Berlusconi, is fac- 
ing another turbulent week, including the prospect 
of interrogation by Milan magistrates over corrup- 
tion allegations and a threatened general strike on 
Friday. Page 14 

EU to tackle enlargement: The German 
presidency of the European Union will today seek 
agreement on a blueprint for bringing central and 
eastern European countries into the EU around the 
turn of the century, at a meeting of EU foreign min- 
isters in Brussels. Page 2 

Saudis propose balanced budget: Saudi 
Arabia is aiming to balance its budget by the end of 
the decade under a plan to privatise some state 
industries, “rationalise” state subsidies and invite 
greater private investment in infrastructure. Page 4 

Ukraine takes to grassroots priv a t isa tion 

More than 150 large and 
medium scale enterprises 
in the Ukraine have been 
privatised in recent 
months, in spite of a sys- 
tem of daunting complex- 
ity and the failure of 
Ukraine's first post-Inde- 
pendence government to 
launch serious economic 
reforms. Western offi- 
cials hope that under Hip 
new leadership of Presi- 
dent Leonid Kuchma (above). Ukraine will begin a 
well-publicised privatisation programme. Page 14: 
France and UK block reform aid. Page 3 

Chechen regime repulses attack: The 

president of Chechnya, rtahnkhar Dudayev, sur- 
vived a determined attempt to overthrow him at the 
weekend as another burst of fierce fi ghting erupted 
in the Caucasian republic. Page 2 

Investors target eastern Europe: Portfolio 
investment in-eastemfuropaisiet to surge as 
emergfflgmavket funds-Taisemore than $300m to 
take advantage of mass privatisation in Russia and 
its neighbours. Page 15 

UK societies lace Job cuts: Generous 
voluntary redundancy terms are likely to be put to 
the 27.000-plus staff of Halifax and Leeds Perma- 
nent, two of the UK’s largest building societies, as 
part of plans for their merger. Page 6; Editorial 
Comment. Page 1% Competition tanrdle. Page 16 

Economic accord boosts ties: Russia and 
Japan signed agreements to improve economic ties 
and postpone Russian trade debts in a small step 
towards the normalisation of their strained rela- 
tions. Page 5 

Employers* liability shortfall: Many UK 
companies face difficulties in obtaining adequate 
insurance cover from next year for deaths and inju- 
ries at work, insurance experts warn. Page 6 

Air crash vScftms seek compensation: 

Survivors and famili es of victims of a 1992 DC10 
crash in Portugal in which 56 people died have 
demanded that the airline, Mar tinair Holland, 
pay them a total of up to 28 million guilders ($16m) 
in compensation. 

European Monetary System: In a week during 
which the Bundesbank council left German short 
term interest rates unchanged, the order of curren- 
cies in the EMS grid was unchanged. The gap 
between the strongest and weakest currency grew 
s Lightly. Currencies, Page 23 

EMS: Grid ■ November 25, 1994 

i i ) 1 


MONDAY NOVEMBER 23-1394 


DS523/C 






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2% 3% 4% 5% 6* 


The chart shows the member currencies of the 
exchange rate mechanism measured agamst the 
weakest currency in the system. Most of the amen- 


HCU 7tWe5 uyuuto* mk omki — 

l The exceptions ore the D-Mark and the 

ich move m a 2.25 per cent band. 

eadmastere march: Thousands of 
ondary school headmasters demon- 
Paris to protest against a shortage of 
a growing workload. 

5s cigarette: RJ Reynolds, US tobacco 
7L developed a new. virtually smokeless 
iSong its latest attempt to rambat the 
ng sentiment sweeping the US. Page 5 

fn- salvaged: Treasure hunters in 
they had recovered silver coins worth 
the wreck of a US “erehant^ip Jie 
F , torpedoed by a German U-boat off coast 

1*1944 

LnflJO Qatar QR1&00 

amcto hOilS SAraHa SR11 
boom MM5 ShgepareS$430 
R 425 Skrtsk RpK£L50 
grt Nans 0 s. Africa R1Z00 
mat M017.00 Sp*i Pta225 
nan ORI-fiO Sweden SMS 
lidsan Swtz SftSJO 

ifepne* ftoHJ Syria SBSOJ O 
tori 23MOO Tunisia D M 500 
>gimltntoi4 Turkey 1X000 
Es225 UAE DhIZOO 


IMF aid for Russia at risk in row over budget 


By John Lloyd in Moscow 

Resistance by Russia’s 
parliament to tough government 
budget plans was threatening the 
loss of massive foreign aid as an 
International Monetary Fund 
team arrived in Moscow at the 
weekend for crucial talks. 

In the coining weeks the gov- 
ernment will face a harsh choice 
between placating the parliamen- 
tary deputies and losing the 
chance of aid - which might total 
$l3bn for 1995 - or meeting the 
IMF’s criteria and provoking a 
confrontation with the Duma, or 


lower bouse. The IMF’s team of 
senior officials is to begin final 
talks on various forms of assis- 
tance. 

Officials say the team has 
tough questions about next 
year’s budget and is determined 
to tighten its assumptions and 
projections. The IMF does not 
believe the projections for tax 
revenues will be met. or that 
spending can be kept wi thin the 
forecasts. 

However, the government was 
warned on Friday by leading dep- 
uties, including those from par- 
ties that back economic reforms. 


that even the present budget pro- 
posal was too severe to attract 
majority support. The Dnma 
voted overwhelmingly to form a 
joint parliamentary-government 
committee to work on the budget 
and propose changes, and report 
back before December 10. 

Deputies representing special 
interests such as the agriculture 
and defence industries have been 
particularly aggressive in 
demanding much higher spend- 
ing than is foreseen. 

Mr Mikhail Zadornov, head of 
the parliamentary budget com- 
mittee, said the budget was “com- 


pletely unrealistic" in almost 
every respect: in its assumptions 
of the level of tax revenue, of the 
sale of treasury bills and on its 
central innovation to reject any 
funding from central bank cred- 
its, the main engine of inflation 
in previous years. 

President Boris Yeltsin called 
together national and regional 
leaders in the Kremlin on 
Saturday to express his appar- 
ently full support for the budget 
He claimed that the crisis in the 
economy was “close to being 
overcome” and said that there 
could be “no way back to high 


unchecked inflation”. “The 
period of retreats and inconsis- 
tent half decisions should be left 
behind with 1994, so that in 
1995 we can advance towards 
completing financial stabilisation 
and proceeding towards eco- 
nomic recovery and progress," he 
said. 

Mr Victor Chernomyrdin, the 
prime m inis ter, gave an even 
more glowing prospect - saying 
tbat the budget strategy could 
make "1995 the year of financial 
stabilisation, 1996 the year of 
overcoming economic depression 
and -1997 the year of steady eco- 


nomic growth". He added that 
the government was willing to 
work with the Duma to change 
“the structure and volume of rev- 
enues” in the budget - but 
insisted, as did Mr Yeltsin, that 
its principles, including the 
refusal to use central bank cred- 
its, were non-negotiabie. 

The only room for compromise 
could come if the Duma refrains 
from confronting the government 
and does not pass the budget In 
that case, the government would 
Tund the budget month by 
month, as allowed under the con- 
stitution. 


US Republican leader blames UK for ‘complete breakdown of Nato’ 


Dole calls on UN to quit Bosnia 


By George Graham in 
Washington, Laura SBber m 
Belgrade and Bruce Clark In 
London 

A leading US politician blamed 
Britain and France yesterday for 
a “complete breakdown" of the 
Atlantic alliance and raiM on 
the United Nations to withdraw 
from Bosnia, where up to 400 
peacekeepers were being 
detained by the Bosnian Serbs. 

Senator Robert Dole, who will 
lead the Republican majority 
when the new Congress meets in 
January, also called for the 
immediate lifting of the UN 
embargo on arms supplies to the 
Bosnian government 
‘Get the [UN] soldiers out of 
the way. Pull ’em out." Mr Dole 
said, in an outburst of frustration 
at European nations which cite 
the safety of their troops in Bos- 
nia as an argument against 
tougher military intervention. 

“I think we .have a complete 
breakdown of Nato,” he added, 
saying that he held the “British 
and French, and primarily the 
British" responsible. 

The senator’s remarks reflected 
indignation over last week’s 
refusal by European members of 
Nato to back a US plan that 
would have shored up the 
enclave of Bihac. a stronghold of 
the Bosnian government using 
Nato air power. 

In Sarajevo, the UN said Bos- 
nian authorities had accepted its 
latest proposal for a ceasefire in 
Bihac. where the Serbs have 
almost encircled government 
positions and encroached on a 
safe area” noticmally protected 
by UN resolutions. 

UN officials said fighting con- 
tinued over the weekend on the 
southern and south-western out- 
skirts of Bihac town but heavy 
armour had not been used. They 
also reported a large explosion at 
the Bosnian army's Bihac head- 
quarters, apparently triggered by 
the government forces before 
they withdrew northwards. 

The vulnerability of the UN's 
24,000-member force in Bosnia 
was underlined yesterday when 



Lull in the battle: some of the rebel Moslem soldiers led by Fikret Abdic take a break yesterday from fighting Moslem government troops near 
the western Bosnia village of Bugar, 10 km north of the beleaguered town of Bihac 


it emerged that up to 400 peace- 
keepers were being detained in 
SerhcontroOed territory. 

UN officials said last night they 
were trying to ascertain the 
whereabouts of more than 100 
Dutch and 62 British soldiers 
who appeared to have been 
stopped at Serb checkpoints. 
About 250 peacekeepers were 
detained last week after Nato 
launched air strikes on Serb posi- 
tions in Croatia and Bosnia. 

Mr William Perry, the US 
defence secretary, yesterday con- 
ceded that the Serbs had. in 
effect, won the war in Bosnia. In 
remarks which reflected Euro- 
pean concerns and differed 
sharply from Senator Dole, he 
said lifting the arms embargo 


could stoke the war, and 
expressed doubt over the feasibil- 
ity of a military solution. “The 
Serbs have occupied 70 per cent 
of the country. There’s no pros- 
pect that I see of the Moslems 
winning that back." he said. 

Amid growing signs of disarray 
over Bosnian policy in the main 
Western capitals, Mr Andrei 
Kozyrev, Russia's foreign minis- 
ter. said he had “successful and 
very useful” talks with Serbian 
President Slobodan Milosevic. 

He said Mr Milosevic was work- 
ing Eor a ceasefire in Bihac and 
throughout Bosnia. 

Reports that Mr Kozyrev was 
also meeting Serb leaders from 
Croatia and Bosnia could not be 
confirmed. The secret meetings 


were held at a remote villa in 
Kardjordjevo, north of Belgrade. 

Mr Perry said he was not pre- 
pared to recommend the deploy- 
ment of the hundreds of thou- 
sands of US troops necessary to 
reverse the tide of the war. He 
said he sent 2,000 US Marines to 


the Adriatic on Friday “for con- 
tingency purposes as a rescue 
team”. “The possibility of pilots 
needing rescue is not remote." 

Mr Perry argued that Nato had 
done whatever it had been asked 
to do. and blamed the UN for the 
absence of more vigorous action. 


Late spurt 
by Yes side 
in Norway 
yote on EU 


By Hugh Camegy In Stockholm 
and Karen Fossli in Oslo 

Final opinion polls showed the 
Yes campaign gaining ground as 
Norwegians began voting yester- 
day in a referendum on joining 
the European Union. A majority 
in favour when votes are 
counted tonight would reverse 
Norway’s rejection in 1972 of 
membership of the then Euro- 
pean Economic Community. 

The No side has led the contest 
throughout the year, but a spurt 
by supporters of Norwegian 
membership since neighbouring 
Sweden voted to join two weeks 
ago has encouraged Mrs Gro 
Harlem Brundtland, the prime 
minister, and her Labour govern- 
ment, to believe that victory is 
possible. 

In a final campaign push 
on Friday and Saturday, Mrs 
Brundtland appealed to Norweg- 
ians not to leave the country iso- 
lated now Sweden and Finland, 
its fellow Nordic nations, bad 
elected to join the EU. Calling 
the referendum the most impor- 
tant decision facing Norway 
since the Second World War, she 
said the Yes campaign was gain- 
ing momentum and called for a 
high turnout to ensure victory. 
“Get off the sofa and vote." she 
said. “We are almost there." 

The last opinion polls of the 
campaign yesterday showed a 
continued lead of about 52 per 
cent to 48 per cent for the No 
side, which argues that member- 


continued on Page 14 


UK premier is poised for 
victory in vote on EU cash 


Ely Phiip Stephens, 

Political Editor 

Mr John Major, the UK prime 
minis ter, appeared certain last 
night of victory in today's parlia- 
mentary vote on the European 
Union budget as rightwing oppo- 
nents on the Tory back benches 
in the House of Commons 
launched a last-minute drive to 
force a challenge to his leader- 
ship- 

in spite of threats by a hard 
core of Eurosceptics to risk sus- 
pension from the parliamentary 
Conservative party by abstaining 
in tonight's vote on the EU 
financ e bill, senior ministers said 
the government would secure a 
comfortable majority. 

Mr Major has warned that 
defeat would be followed by the 
government's resignation and a 
general election. Mb’ Major has a 
Commons majority of 14, but is 
assured of the votes of up to 10 
unionist MPs from Northern 


Ireland tonight. The vote, how- 
ever, will coincide with signs 
that the prune minister will seek 
to ease the tensions over Europe 
by conceding a referendum on 
any further significant moves 
towards integration. 

Mr Norman Lamont. the for- 
mer chancellor of the Exchequer, 
publicly disassociated himself 
from attempts by rightwing MPs 
to force a contest for the Tory 
leadership before the deadline for 
any such move on Wednesday. 

Leading rightwing figures 
behind the attempt to raise the 34 
signatures from Tory MPs neces- 
sary to allow a challenge admit- 
ted that they were still about 10 
short of that number. 

They were therefore seeking 
backing from dissidents on the 
left of the party. Leftwing MPs 
known to be unhappy with Mr 
Major’s leadership were being 
told that a challenge might pave 
the way for his replacement with 
Mr Michael Heseltine. the trade 


secretary, or Mr Kenneth Clarke, 
the chancellor. 

Mr Major’s opponents voiced 
confidence that if they secured 
the signatures and could demon- 
strate cross-party support for a 
contest, then Mr Lamont would 
change his mind. The former 
chancellor appeared to leave him- 
self room for manoeuvre when he 
said that he could not "envisage 
the circumstances" in which he 
would stand against the prime 
minister. 

Earlier Mr Michael Howard, 
the home secretary, had warned 
Mr Lamont that he would “cut an 
absolutely ridiculous figure" if he 
attempted to topple Mr Major. Mr 
Jonathan Aitken. a junior Trea- 
sury minister, said any contest 
would be “deeply destructive". 

Mr Lamont's comments came 
as senior ministers indicated that 
Mr Major might promise a refer- 
endum on further transfers of 

Continued on Page 14 


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ES LIMITED 1994 No 32,535 Week No 48 


LONDON * PARIS - FRANKFURT - NEW YORK - TOKYO 



Tourblllun 


735 THERE HAS 


Since 

NEVER BEEN A QUARTZ BlANCPAIN WATCH. 
AND THERE NEVER WILL BE. 


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Tel 1 1-21 80 * 1 -HI F.ix -41-21 8^41 



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FINANCIAL TIMES MONDAY NOVEMBER 2X199* 


NEWS: EUROPE 


EU to tackle I Oslo fears being Europe’s 


blueprint for 


By Hugh Camegy 
and Karen Fossil 


enlargement 


By Lionel Barber In Brussels 


The German presidency of the 
European Union will today 
seek agreement on a blueprint 
for bringing the former com- 
munist countries of central 
and eastern Europe into the 
EU around the turn of the cen- 
tury. 

The document, running to 
more than 100 pages, will be 
discussed at a meeting of EU 
foreign minis ters in Brussels. 
It lays out plans for the six 
aspirants Cram eastern Europe 
to bring their markets, trade 
regimes and laws, as well as 
foreign and judicial policies 
into line with die EU. 

But the paper stops short of 
giving a date for EU member- 
ship, and skirts the crucial 
question of how the Union 
intends to reform the Common 
Agricultural Policy - one of 
the most daunting barriers to 
eastern enlargement 

Germany, which hand;; over 
the rotating presidency of the 
EU to France on January 1. 
views the document as the cen- 
trepiece of next month's Euro- 
pean Union summit in Riwn 
and the strategy to build a 
“wider Europe”. But the sum- 
mit outlook has been clouded 
by the apparent German deci- 
sion not to invite the six cen- 
tral and east European leaders 
to Essen, and stalling among 
the Twelve over a more gener- 
ous market access package. 

France, Spain and Portugal 
were said last week to be drag- 
ging their feet over plans pro- 
gressively to reduce the use of 
anti-dumping and safeguard 
clauses as the six associate EU 
members - Poland, the Czech 
Republic. Hungary. Slovakia. 
Bulgaria, and Romania - adopt 
EU laws. 

Second, the European Com- 
mission has failed to live up to 


promises to produce a study on 
whether accumulation of EU 
rules of origin would stimulate 
trade with the central Euro- 
peans. according to a senior 
EU diplomat. Many experts 
believe that relaxing the ElTs 
rules of origin would signifi- 
cantly expand trade. 

EU diplomats are confident, 
however, that Bulgaria and 
Romania will win the same 
accelerated market access 
package agreed with the Poles. 
Czechs, Hungarians and 
Slovaks. 

This would mean free access 
for industrial products from 
January 1 1995, with steel and 
textiles following in 1996 and 
1997 respectively. 

The Czech Republic and Slo- 
vakia are also set to win an 
increase of 250,000 tonnes in 
their quotas for steel exports, 
following the collapse of the 
Commission's rescue plan for 
the steel industry. Some modi- 
fied concession on farm 
exports will also be on the 
Essen agenda. 

German Chancellor Helmut 
Kohl’s failure to Invite central 
and eastern European leaders 
to Essen is viewed in some 
quarters as an unnecessary 
snub; but German officials 
stressed that it was more 
important to reach a consensus 
on how to proceed with 
enlargement, “ binding in” 
France and the Mediterranean 
countries sensitive to the EXTs 
balance of power tilting to the 
north and east 

The leaders could expect an 
invitation to the Cannes sum- 
mit in June under the French 
presidency. 

Separately, ministers are 
expected to approve a mandate 
for Brussels to negotiate EU 
association agreements with 
the three Baltic republics of 
Latvia. Lithuania and Estonia. 


Campaigners for Norwegian 
membership of the European 
Union in today's referendum 
have hammered home the view 
that to vote against joining 
would be to cast Norway into a 
political and economic limbo 
on the remote fringes of the 
continent. 

Mrs Gro Harlem Brand - 
tland, toe veteran prime min- 
ister, said on Saturday at a 
final rally held in an attempt 
to overturn the country’s 
deep-seated reluctance to 
embrace the EU: “If you follow 
the advice of the No troops, it 
can be costly for year country, 
for you and for your children. 
If you feel the fear [of the EUL 
if yon listen to the pessi- 
mism. . . yon will place your 


country in a difficult situation 
- isolated and alone." 

The No side has responded 
with a forceful rebuttal. It 
says Norway, with its oil and 
gas, its fish and its plentiful 
hydro-power, has the funda- 
mental economic strength to 
prosper Independently - espe- 
cially as it already has the 
trade benefits of participating 
in tbe European Economic 
Area agreement with the EU. 
As a founder member of Nato, 
the country's security is 
underpinned. 

But Mrs Brandtland and ber 
government say these argu- 
ments amount to dangerous 
complacency abont Norway's 
place in a changing world. 

One of their greatest con- 
cerns lies in security. Norway 
occupies a strategic position, 
sharing a frontier with Russia 


in the far north (Nato's only 
direct frontier with Russia 
apart from that in Turkey) and 
guarding the north Atlantic 
and Barents Sea approaches to 
the northern Russian ports 
and hinterland where much of 
the post-Soviet nuclear arsenal 
is sited. 

Already, Nato has lowered 
its profile in Norway, shifting 
its northern flank headquar- 
ters from Oslo to England. US 
forces have began to run down 
some of their pre-positfoned 
stores or military equipment 
held in Norway. The govern- 
ment, still deeply concerned 
by instability in Russia, is 
afraid that Nato's commitment 
to northern Norway will be 
weakened if Norway votes to 
stay ont of the EU. 

This is because of the shift 
within Nato towards building 


a European pillar based on the 
Western European Union, set 
to become the focus of tbe 
EU*s strategic and defence pol- 
icies. Oslo, which at pretent 

only h as observer status in the 
WED, is anxious to play a faE 
part The case about strategic 
isolation has been strength- 
ened since Sweden and Fin- 
land, Norway's Nordic neigh- 
bours, voted to join the EU. 
The inevitable thrust of their 
policy is now to part ic i p ate hi 
west European strategic devel- 
opments. 

The argument abont eco- 
nomic isolation is, perhaps, 
less persuasive became of Nor- 
way's rich natural resources 
and the widespread fear of an 
erosion of Oslo's ability to con- 
trol them independently once 
inside the EU. But the govern- 
ment - and toe vast majority of 


business and industry - warm 
that with Austria, Finland and 
Sweden joining the EU, the 

future of the EEA trade accord 

is uncertain, given th at it 
would apply after a Norwegian 

No only to Norway, Iceland 
and Lichtenstein. 

More convincingly, Mrs 
Bnmdfland says that electing 
to stay outside the EU would 
risk provoking a negative 
investment flow at a time 
whim petroleum revenues are 
about to peak and Norway 
badly needs to build up its- 
weak onshore Industrial base. 
This worry is not just about 
the inflow of foreign invest- 
ment to Norway; it also con- 
cerns the flow of investments 
by Norwegian companies. 

The Yes campaign says Nor- 
wegian companies have, oyer 
toe past 10 years made Invest- 


ments overseas Which pro- 
duced dd,000 workplaces * 
-while 3,000 industrial jobs 
were lost at home. It says this 
trend will be reinforced and 
may even be accelerated by a 
shif t by companies across tite 
border into Sweden. The heads 

of Norsk Hydro, Kvaetner, the 

engineering gnrap> and the 


topri Nymmed, the. country's, 
three largest listed companies, 
and the state-owned . Statoil 
■have ail said their investment 
strategies would be influenced 
against Norway by a No vote. 

Another potent Isolation 
argument concerns' the long 
border with-Sweden, which at 
present is virtually open. 
Transformation of the Swedish 
border Into an external EU 
border could result in far 
stri c te r controls; 



Russia, US square 
off over security 


John Lloyd and Bruce Clark report on differing^ 
views about expanding the role of the CSCE 


A s Mr Andrei Kozyrev, 
Russia's foreign minis- 
ter, discussed the Bos- 
nian crisis with Serb leaders in 
Belgrade yesterday, his coun- 
try was preparing a much 
broader initiative afaral at put- 
ting Moscow's stamp on toe 
new security order in Europe. 

Russia wants a sharp 
upgrading of the prestige, bud- 
get and powers of the 53-nation 
Conference on Security and 
Cooperation in Europe, which 
groups the US. rianada, virtu- 
ally all the countries cf Europe 
and the former Soviet repub- 
lics. It wiQ press this idea hard 
at next week's CSCE summit 
in Budapest The US - whose 
views on European security 
will be set out in a speech 
today by Mr Warren Christo- 
pher. secretary of state - also 
wants the status of the CSCE 
raised. But that is where the 
resemblance between US and 

Russian thrnlcmg ptvTic 

For Russia, an upgraded 
CSCE could give Moscow a 
degree of influence over secu- 
rity in w e ster n Europe, while 
confirming Moscow's role as 
the main player in the security 
of the Commonwealth of hide- 
pendent States. 

For the US and some Euro- 
pean countries - including the 
ex-communist nations such as 
Hungary - boosting the CSCE 
would work as a sop to 
Moscow, helping to calm its 
objections to the expansion 
eastwards of Nato. 

Yet the latest pronounce- 
ments from Russia suggest 
that Moscow is not ready for 
such a tradeoff: it wants both 
to upgrade the CSCE, and to 
bead off the expansion of Nato. 

Russia’s prickly mood was 
underlined when President 
Boris Yeltsin went to the bor- 
der town of Pskov, bis most 
important public engagement 
this month. Faced with claims 
for the return of 2#)0 sq km of 
land which belonged to pre-war 
Estonia, he vowed not to give 
up a centimetre of Russian 
soiL Mr Yeltsin’s pledge won 
fulsome praise from the ultra- 


German finance minister Theo WaigeL 55, married former Olympic skier Irene Epple, 35, at the 
weekend in the southern resort town of Seeg. The ceremony was attended by Chancellor Kohl (left) 
and his wife Hannelare (right). Second from left is the bride’s sister, Ms Maria Epple ***- 


CDU women resist fixed job quotas 


By Mdiaei Linde marm in Bonn 


Chancellor Helmut Kohl's 
Christian Democratic Union 
(CDU) will today try to agree 
on quotas designed to give 
women a higher profile within 
the party despite evidence that 
many of them want nothing of 
the sort 


Several have spoken out 
ahead of the one-day national 
congress saying quotas - 
which would reserve one third 
of the party's positions for 
women - are not helpful, “it's 
a democratic crutch.” said Ms 
Rita SOs&muth, speaker of the 
Bundestag; or lower house of 
parliament. 


The quota is the only big 
issue at the congress, which 
meets in Bonn for the first 
time since the mid-October 
election victory, and will also 
re-elect its 13-strong council 
and the 26-strong national 
executive. 

However, much of the talk 
on the sidelines is expected to 


focus on who will succeed Mr 
Kohl, who said just before the 
October elections that he 
would not stand again in 1996. 

Mr Wolfgang Schauble, the 
wheelchair-bound leader of the 
parliamentary party, has long 
been regarded as Mr Kohl's 
designated successor, and the 
1,000 or so delegates will be 


.v* 4 




have a lot in common - 
both on a theme. 


\ 




paying particular attention to 
what he says. However a hand- 
ful of younger politicians - 
including Mr JOrgen RQttgers, 
the new research and technol- 
ogy minister - have been men- 
tioned in recent weeks as pos- 
sible alternatives. 

The quota is likely to be 
approved, given that Mr Kohl 
has thrown his weight behind 
the idea in the hope that it will 
improve his standing among 
women voters. 

For many other CDU mem- 
bers it is also seen as a 
last-ditch solution to a problem 
which has been often talked 
about but never solved: the 
CDU has just 13.9 per cent 
women in its ranks, less than 
the 26.3 per cent average for 
parliament as a whole. 

However, opponents of the 
quota said it would be better to 
adopt the model used by the 
CDU in the southern state of 
Baden-Wfirttemberg, where a 
fixed percentage of women are 
nominated but the election 
itself is left open. 


nationalist Liberal Democratic 
party led by Mr Vladimir 
Zhirinovsky. 

Rgtnnia, Kke virtually all the 
ex-communist states of central 
Europe, wants to be integrated 
inf/i the European Union and 
ideally Nato. But Moscow is 
anything but reconciled to the 
idea of Nato expanding. 

Opinion among Russians, 
fngiria and outride officialdom, 
is firm: “Ifs at least 99.99 per 
cent against Nato enlarge- 
ment," says Mr Sergei Karaga- 


Opinion among 
Russians, inside 
and outside 
officialdom, is 
firm: it’s at least 
99.99 per cent 
against Nato 
enlargement 


nov. a presidential foreign 
affairs . adviser.. '- “Everyone 
believes it would push Russia 
into a corner and incrpflsp ten- 
sion, not bring security.'* 

As for the upgrading of the 
CSCE, Russia’s continuing 
commitment to this was under- 
lined last week by Mr Vladimir 
Lukin, chairman of the foreign 
affairs committee of the Duma, 
parliament’s lower house. 

He spoke of the need for the 
CSCE to “obtain a mandate for 
the decision of all questions of 
security in Europe” and reaf- 
firmed Russia's support for a 
CSCE Security Council along 
the lines of the UN. 

Russian hopes of playing a 
central role In a new European 
security structure - with or 
without the CSCE - have been 
boosted by signs of disagree- 
ment between western Europe 
and toe US over Bosnia. 

According to the daily Sevod- 
nya. Mr Kozyrev was encour- 
aged by his recent trip to 
France and has begun to talk 
privately of an “historic Fran- 


co-Rusrian allianc e” as a pillar 

of a new order in Europe. He 
has also riiggested that both 
Nato and the CSCE may be 
superceded.'- “Can’t we give ah 
innovative reply to the entirely 
new European situation which 
is emerg in g today in the mid- 
1990s?" the paper quoted him 

as asking . 

Western diplomats in 
Moscow acknowledge that Rus- 
sia’s opposition to Nato 
enlargement is, for now, both 
firm amd heartfelt But they 
hope that this could change if 
toe issue is handled with care, 
. and if Moscow is drawn farther 
into the Partnership for Peace, 
a - programme for military 
coKiperaticin. 

On tiie face of things, US 
intfrnniasm for early moves 
towards the expansion of Nato 
' should .set alum bells ringing 
in Moscow. Jh today’s speech 
Mr Christopher is expected to 
state firmly that Nato must 
."begin the process" of expan- 
sion in the mmtng months. ■ 

Mr Richard Holbrooke, the 
assistant secretary of state for 
Europe, recently confirmed the 
US policy of boosting toe CSCE 
on one hand while keeping 
Nato strong, and preparing to 
expand it, on the other. 

Diplomats see only one way 
In which Washington’s stated 
enthusiasm for enlargement 
and Russia's opposition could 
be finessed. Moscow has said it 
would not object to the 
enlargement of Nato as long as 
Russia itself Is viewed as a can- 
didate - however hypothetical 
- for membership. 

While Mr Volker Ruhe, Ger- 
man defence minister, has said 
Russia can never join Nato, US 
officials avoid bring so categor- 
ical. They speak of "proce- 
dures” and "criteria” by which 
members could be admitted to 
Nato, without naming coun- 
tries. Cynics will no doubt say 
that that these word-games are 
a way to “keep toe Russians 
happy, and the East Europeans 
hoping": that is what they said 
when PFP was launched a year 
ago. 




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Turks express despair over 
entry card to the Fatherland 


, * " t « 

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By Judy De mpse y in Bonn 


M 


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-A 


I A PI Z- 










JL 

fZM 

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Im 


'SiSSBBOeOVSBBniMBtr 




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Call 0800 700 444 to apply for the American Express Card. 


B ecoming a German citi- 
zen is easier said than 
done. Not only does Ger- 
many have no immigration 
laws, but its nationality laws, 
which date back to 1913, are 
based on blood. 

Nationality is automatically 
granted - provided one of the 
parents is German. Otherwise, 
if you have no German rela- 
tions, and no German spouse, 
there is a wait of at least 10 
years before applying for citi- 
zenship. Even then, there is no 
guarantee it will be granted. 

“At first, when I started to 
address the crowd, they could 
not believe T could speak Ger- 
man. Then they were surprised 
that I did not have a Turkish 
accent. And they were even 
astonished that I was going to 
stand for parliament,” says Mr 
Cem Ozdemir. 

Bora in 1965 in tbe town of 
Bad Urach in tbe state of 
Baden- WQrttem burg, Mr Ozde- 
mir last month was elected to 
the Bundestag, the first time 
anyone from an imm igrant 
family had attained such a sta- 
tus. His election coincided with 
a spate of recent attacks on 
foreigners, particularly in Ber- 
lin. and a renewed debate 
among Germany’s political par- 
ties about whether to liberalise 
the country's strict nationality 
laws in an effort to integrate 
foreigners. “It was a long road 


to the Bundestag,” says Mr 
Ozdemir, a member of the 
Greens/Bflndnis 90 party. “But 
I hope I can have some influ- 
ence in trying to make it easier 
for the German government to 
integrate the millio ns of for- 
eigners who are living in this 
country." 

More than 6.8m foreigners 
live in Germany. For economic 
reasons, many were invited as 
Gastarbeiter (guest workers) In 
the 1960s. But those who chose 
to remain soon discovered that 
despite paying taxes, and meet- 
ing all their social commit- 
ments, they were not entitled 
to vote unless they became 
German citizens. The matter is 
forther complicated by the fact 
that in the case of the L9m 
Turks living in Germany, the 
immigrants are reluctant to 
give up their Turkish citizen- 
ship. 

The reason is that they 
become foreigners to the coun- 
try of their birth, or their par- 
ents’, and lose the right to 
inherit property. And since 
Germany does not allow dual 
citizenship, many Turks are 
reluctant to take up German 
citizenship. 

Mr Ozdemir soon discovered 
- when he applied for German 
citizenship when he was 18 
years old - that Turkey was 
reluctant to relinquish ties, s 
“Ankara wants toe sons of 
those Turks living in Germany 
for military conscription," said 


Mr Ozdemir. Mr Ozdemir 
claimed that the vast majority 
of Turks born in Germany paid 
a DM10,000 (£4,000) fine rather 
than serve in the army. 

Mrs Cornelia Schmalz-Jacob- 
sen, head of the federal office 
for foreigners’ issues, wants 
children of foreigners born in 
G erma ny to be granted dual 
citi z e n s h ip until the age of 18 , 
when they can then choose 
their nationality. 

“We have to create the 
instruments for integrating 
these children.” she said. “The 
present situation plays into the 
hands of the far-right extrem- 
ists." 

Mrs Schmalz -Jacobsen added 
that the recent proposals by 
Chancellor Helmut Kohl’s 
coalition government for 
amending the citizenship regu- 
lations verge on the absurd. 
For instance, if they become 
law, a child can have German 
natio n ality until the age of 18 1 
provided one of the parents ha s : 
been bom and ha lived In the i 
country for 10 years and the 
other parent has lived in Ger- 
many for a decade. "These pro- 
posals will be impossible to 
administer." said Mrs Sehaalz- 
Jacobsen. 

“Can you imagine the 
bureaucracy involved and the 
interpretation of the law. Peo- 
ple will ask had they in fact 
lived in Germany for io years 
if they had spent toe summer 
with their grandmother in Tur- 


key. It's a nightmare.” 

Mr Ozdemir agrees. “But the 
laws will have to change 
sooner or later which will 
make it easier to integrate,” he 
said. “The 1913 law is ah 
anachronism. It will take tima- 
But what I fear is that toe poli- 
ticians are reluctant to even 
ask when is the right time to 
change". 


2® FINANCIAL TIMES 
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NEWS: EUROPE 


UK, France block 
Ukraine reform aid 


Volkswagen to produce new Beetle 


Chechen coup 
attempt fails 


By Lionel Barber in Brussels 
and Chrysda Freeland 
in London 

The UK and France are 
blocking a joint US-German 
effort to mount an Interna- 
tional financial aid package to 
encourage economic reform in 
Ukraine. 

The stand-off is creating far* 
ther tensions in the transatlan- 
tic alliance In conjunction with 
US cr it icis m of the European 
Union’s efforts to stabilise east- 
ern Europe and former Yugo- 
slavia. Last week, President 
Leonid Kuchma was given 
red-carpet treatment In Wash- 
ington following Ukraine’s 
accession to the Nuclear Non- 
Proliferation Treaty. 

The Clinton administration 
is particularly upset by British 
resistance to supporting a 
JflOOm (£365 .8m) balance of pay- 
ments loan to Ukraine. “We 
believe that President Kuchma 
needs a strong vote of confi- 
dence from the west, and we 
are very disappointed with the 
EtTs lack of response," said a 
US official. 

Ukraine Is expected to be dis- 
cussed informally at today’s 
meeting of EU foreign minis- 
ters in Brussels, but the deci- 
sive meeting will take place 
among European finance min- 


isters a week later, just before 
the European Council summit 
in Essen on December 9 and 10. 

At stake is whether the EU 
will provide EcufiSm (fiS6.9m) 
out of the planned $600m to 
help to bridge a total $lbn gap 
in Ukraine's balance of pay- 
ments in the fourth quarter of 
1994, according to the Interna- 
tional Monetary Fund. The 
money is needed to finance 
energy imports to keep houses 
heated, to provide energy for 
industry, and reduce depen- 
dence on nuclear energy. 

The US has already agreed to 
‘‘front-load’' the package with 
$70m In. grants which, would 
rise to glOOm if the EU comes 
on board. Canada is putting up 
$2Qm and the Dutch are offer- 
ing $5m. Without the EU con- 
tribution, Japan and Russia 
will hold back, risking a reigni- 
tion of inflation and social 
upheaval, according to an 
internal IMF assessment 

Britain - backed by France, 
Italy and Belgium - argues 
that the EU cannot take part in 
balance of payments lending 
without the security of an IMF- 
stand-by loan which contains 
strict conditions tied to a 
reform programme. 

The US and Germany argue 
that conditions already exist 
following the disbursement of 


Brussels boost 
for mechanical 
engineering 


By Andrew Baxter 

The European Commission is 
proposing a series of measures 
to improve the competitiveness 
of the European Union’s 
Ecu210bn ($250bn) mechanical 
engineering industry, one of 
the sectors worst hit by the 
recent recession. 

The move reflects concern in 
the Cammission about a poten- 
tial loss of global competitive- 
ness in the. industry, which 
accounts for 8 per cent of total 
EU industrial output 

This would have serious con- 
sequences for all manufactur- 
ing in the EU, because of 
machinery makers' central role 
in supplying production equip- 
ment. the commission warns. 

A commission communica- 
tion, Strengthening the Com- 
petitiveness of the European 
Machinery Construction Indus- 
try, was presented to EU indus- 
try minis ters at their last meet- 
ing on November 8. 

It is the result of more than 
two years of talks with indus- 
try leaders, who have been 
keen to raise the awareness In 
Brussels of the strategically 
important but highly frag- 
mented mechanical engineer- 
ing sector. 

The communication discloses 


OBITUARY 

Schulmann: 
Bonn’s EMS 
planner 

Mr Horst Schulmann, a 
director of the Bundesbank 
and president of the regional 
central bank of the state of 
Hesse, who died last week 
aged 61 after a long illness, 
was one of the most interna- 
tionally experienced people on 
the German banking and 
financial scene. 

He was closely in volved In 
the creation of the European 

Monetary System. _ , 

As a senior economic adviser 
to the German government 
when Mr Helmut Schmidt was 
chancellor, he played an 
important rolew smooth^ 

the way for the start of the 

EMS in 197*- . . 

Ur Cft frplmann also helpM 
meoare the ground for west- 

S^tconomic swamil : confer- 
ences between 1 1978 and ,1982- 
Before his time with Mr 
Schmidt’s Social Democratic 

g^Snenthehadspenlfom 

Sn as a senior executive at 
theWorld Bank m Jhe< ariy 
1970 s, after which he worked 
as a senior economic official 
tor the European Community. 


that production in the EU 
mechanical engineering indus- 
try fell from Ecu225bn in 1991 
to Ecu210bn last year, apparent 
consumption from EculSObn to 
Ecul70bn, and employment 
from 2.7m to 28m. 

The commission says the 
industry has to meet chal- 
lenges on a number of fronts: it 
needs to reduce its sensitivity 
to recession, accelerate its 
restructuring, learn how to 
exploit innovation fully and 
step~ up efforts to become a 
true global force. 

Its proposals are designed to 
provide guidelines for action 
over the next few years by the 
EU, member states and the 
industry itself. 

The most important cover 
investment promotion, where 
member states will be encour- 
aged to improve tax deprecia- 
tion rules for capital goods; 
industrial co-operation espe- 
cially among small and medi- 
um-sized machine manufactur- 
ers; and fiscal incentives for 
research and development 

The proposals were wel- 
comed last week by Orgalime. 
the Brussels-based liaison 
group for the European 
mechanical, electrical, elec- 
tronic and metal working 
industries. 


Strike 
today will 
ground 
airline 


By Torn Bums 
In Madrid 

Iberia, Spain’s financially 
crippled airline, will be 
grounded today as unions 
stage a 24-strike to protest at a 
drastic restructuring plan that 
involves 5,000 redundancies, 20 
per cent of the company's 
labour force, and the break-up 
of the carrier in order to raise 
fresh capital through disposals. 

The stoppage is likely to 
cause chaos at domestic air- 
ports and severely disrupt all 
air traffic to Spain. 

Unions rejected calls over 
the weekend to return to the 
negotiating table and to recon- 
sider an earlier viability plan 
in which the management pro- 
posed to cut salaries by an 
average IS percent and to shed 
2,000 jobs over the next two 
years. 

The management said the 
only alternative to its viability 
plan was to scale down the air- 
line to a fraction of its present 
size in order to avert its 
impending bankruptcy. 


Swansea 

VftU 792)476666 

Swansea Cfcwe fixrTrade «d Industry 
Swansea SA1 3QH 


a $371m "systemic transforma- 
tion facflity” - a new financial 
instrument created to help for- 
mer communist countries taka 
the first steps to economic 
reform. 

Mr Kenneth Clarice, the UK 
Cha nc e l lor of the Exchequer, is 
taking a particularly hard line. 
“The EU is not an interna- 
tional financial institution," 
one UK official explained. 
"That’s the job of the World 
Bank and the IMF." 

France is equally unsure 
about putting forward an EU 
loan before an IMF programme 
is in place. It has argued that 
Ukraine's main energy suppli- 
ers and creditors - Russia and 
Turkmenistan - provide the 
bulk of the cash. Italy is press- 
ing for early repayment of out- 
standing debts. 

But the US, Germany and 
the IMF are pushing for an 
activist policy to help Ukraine 
whose strategic importance 
lies in its position next to Rus- 
sia, its nuclear status, and its 
faltering nuclear energy indus- 
try. 

Officials point out that, in 
fact, the EU is only being 
asked to provide Ecu20m net 
because Ukraine is supposed to 
repay Ecu 65m before the end of 
the year. Ukraine’s total for- 
eign debt is around J7bn. 



Volkswagen, the German carmaker, has 
decided to press ahead with the development of 
a modern-day Beetle with the aim of starting 
production towards the end of the decade, 
writes Kevin Done, Motor Industry Correspon- 
dent VW first showed a “back to the fixture" 
concept study for a new generation Beetle, 
"Concept 1” (pictured above), at the Detroit 
motor show last January to gauge market reac- 
tion. particularly in the US. The existing Bee- 
tle, the world’s best-selling car with output 
totalling more than 21m. is still assembled in 
Brazil and Mexico. 

The Concept 1 was designed by Volkswagen's 


Californian design studio. The body shape of 
the new car will be derived from the familiar 
rounded design of the old Beetle, but mechani- 
cally it would be a modern car. It would have a 
front-mounted engine instead of the classic 
rear-mounted, air-cooled engine of the old Bee- 
tle, and would have modem safety features 
such as airbags and anti-lode brakes. The Bee- 
tle, the "people’s car" which Volkswagen was 
founded to build, was designed by the German 
engineer Bfr Ferdinand Porsche in 1934, shortly 
after Hitler came to power. Volkswagen says 
the most likely production location for the new 
Beetle was its plant at Puebla, Mexico. 


By John ThomhH In Moscow 

President Dzhokhar Dudayev, 
the president of Chechnya, sur- 
vived a determined attempt to 
overthrow him at the weekend, 
as another burst of fierce fight- 
ing erupted in the Caucasian 
republic. 

United opposition forces 
launched an assault on Friday 
evening on Grozny, the capital, 
and at one stage even claimed 
to have seized the presidential 
palace. But Mr Dudayev's 
forces appeared successfully to 
have repulsed the attack and 
claimed they had knocked out 
20 opposition tanks. There 
were no clear reports of the 
number of casualties. "The 
Chechen nation has again 
shown it will defend its hon- 
our, freedom and indepen- 
dence." Mr Dudayev said. 

Mr Dudayev, a former Soviet 
air force general, has resisted 
several attempts by Moscow- 
backed rebels to depose him 
since the Moslem republic of 
lm people declared its indepen- 
dence from Russia three years 
ago. Yesterday, he accused 
Moscow of direct involvement 
in the latest coup attempt and 
warned that continued hostili- 
ties threatened to spread the 
war beyond the north Cauca- 
sus and "throughout R uss ia". 


Chechen security officials yes- 
terday c laim ed to have cap- 
tured SO Russian fighters and 
paraded two of them before the 
press. One of them, Mr Andrei 
Chasov, a 21-year-old serving 
soldier from Moscow, said he 
had been sent to Chechnya 
without being given a reason. 

"They said we were going on 
a trip... They showed me a 
tank. We were nervous. They 
told us we had to get in. We 
got to the edge of Grozny, then 
our commander abandoned 
us,” he said, according to a 
Reuters report 

But Russian officials vehe- 
mently denied, direct participa- 
tion in Chechnya. General 
Vladimir Potapov, chief of staff 
of the North -Caucasian mili- 
tary district, told the Interfax 
news agency on Saturday that 
reports suggesting Russian reg- 
ular servicemen had been been 
taken prisoner in Grozny were 
“malicious slander”. However, 
he did not rule out the possibil- 
ity that former Russian ser- 
vicemen could have been hired 
as mercenaries. 

Chechen opposition forces, 
which united in August to cre- 
ate a provisional council to 
depose President Dudayev, said 
yesterday they would seek 
more assistance from the Rus- 
sian government 



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NEWS: INTERNATIONAL 


Balanced budget proposed in Saudi five-year plan 


sso: 
lei 


By Mark Nicholson in Cairo 


Saudi Arabia is committing 
itself in principle to balancing 
its budget by the end of the 
decade, muter a new five-year 
plan in which the government 
says It will seek to privatise 
some state Industries, “ration- 
alise" costly state subsidies 
and invite greater private sec- 
tor investment in infrastruc- 
ture and other projects. 

The principles are contained 
in an abstract of the kingdom's 
sixth five-year plan, which will 
came into effect after approval 
by King Fatal, the Saudi ruler, 
on January L 

The abstract contains only 


declarations of principles guid- 
ing Saudi policy for the next 
five years. Details will be 
included with the plan's full 
publication next year. How- 
ever, it addresses some of the 
core reasons behind the king- 
dom's consistently High budget 
deficits over the past decade 
and hints that the government 
may be ready to make signifi- 
cant structural changes to its 
finances. 

Saudi officials recently 
suggested that the kingdom's 
next budget, also due on Janu- 
ary 1. might contain specific 
measures to raise state reve- 
nues. Last year’s budget called 
for a flat 19 per cent cut from 


all government departments 
following the kingdom's 11th 
successive budget deficit in 
im 

The fiscal gap in 1993 was 
reckoned by western econo- 
mists to be $12bn (£7-3bn), or 
10 per cent of GDP. though no 
official figure is published. A 
shortfall of around $6bn is 
expected for 1994, even after 
successful government spend- 
ing cuts. 

However, the document, 
called General Objectives and 
Strategic Bases of the Sixth 
Development Plan, says the 
government will “adopt a fiscal 
policy which allows the level of 
expenditure to commensurate 


with government revenues" 
during the plan's five-year 
period. 

This will be achieved, it says, 
by finding “optimum ways to 
increase government reve- 
nues” without causing “unde- 
sirable social and economic 
effects”. This is to include 
increasing government effi- 
ciency, enhancing private sec- 
tor investment, particularly in 
infrastructure projects, and 
“developing privatisation pro- 
grammes”. 

King Fahd has already raised 
the possibility in two recent 
speeches of eventually privatis- 
ing Saudia, the highly-subsi- 
dised state carrier, and parts of 


the kingdom's telecommunica- 
tions system. The new docu- 
ment states a general principle 
of encouraging the private sec- 
tor to own and manage “basic 
industries” through the 
"timely flotation of the shares 
of these industries”. 

On subsidies, which at pres- 
ent heavily reduce the prices of 
power, telecommunications 
and water services, the docu- 
ment says the government wfil 
“rationalise the system of 
direct and indirect subsidies". 
It says the prices of such ser- 
vices "should not be less than 
their production cost, except in 
rare cases”. While saying that 
the costs of providing public 


utilities should be reduced, the 
document holds out the pros- 
pect of price rises, adding that 
these would be implemented 
“without jeopardising the sta- 
tus of low income strata of 
society". 

The document also places a 
priority on increasing voca- 
tional training and job oppor- 
tunities for Saadis in the pri- 
vate sector. 

It says the government will 
seek to “change attitudes 
towards certain occupations 
which at present are not 
accepted by some individuals” 
- a reference to mast Saudis’ 
preference for secure and well- 
paid public sector jobs over pri- 


vate sector employment. 

It also says the government 
would “find suitable means to 
encourage the private sector to 
provide job opportunities” for 
Saudis, Muting that it may for 
the firet time introduce specific 
incentives for companies to 
hire Saudi citizens rather than 
expatriate workers. 

More than 45m expatriates 
now work in the kingdom, 

most of them in private sector 
rnannai technical or industrial 
jobs. ' ' 

Remittances . from these 
workers, mostly from the sub- 
continent and east Asia, 
ammint to $l6bn-$l8ton a year, 
according to local economists. 


Gunmen kill West Bank rabbi 


By Eric Saver hi Jerusalem 


Islamic gunmen yesterday 
killed a rabbi and wounded an 
Israeli policeman near Hebron 
on the occupied West Bank. 
Hamas , the main opponent of 
the peace deal between Israel 
and the Palestine Liberation 
Organisation, claimed respon- 
sibility in a statement issued 
in the Gaza Strip. 

The 35-year-old rabbi. Ami 
Ulaxoi, was driving north 
towards the settlement of 
Otniel, when gunmen raked 
his car with automatic fire. 


The car overturned, but it was 
not immediately dear whether 
be died from tile shooting or 
the crash. The policeman, a 
passenger in thp vehicle, suf- 
fered gunshot wounds and was 
recovering in a Jerusalem hos- 
pital last night 
Settler leaders claimed 
authorities had done nothing 
to bolster security in the area 
since two Israelis were killed 
in a guerrilla attack earlier 
this year about lkm from the 
site of yesterday’s incident 
Mr Roni Shechner, head of 
the local settlements council. 


said: “There are dangerous kill- 
ers in this area, but the army 
is thinning its forces, instead 
of reinforcing them.” 

Earlier yesterday the Chief 
of Staff. Lt-Gen Ebud Barak, 
warned the cabinet that Israel 
could expect an increase In 
Palestinian attacks. The prime 
minister, Mr Yitzhak Rabin, is 
standing by his policy of 
“fighting terror as if there 
were no peace negotiations, 
while negotiating as if there 
were no terror”. 

The attacks are, however, 
forcing him to move slowly 


and cautiously. Six months 
after Israeli troops pulled out 
of most of Gaza and Jericho, he 
bas still to set a date for evacu- 
ating the rest of the West 
Bank, or for granting the Pal- 
estinians safe passage by road 
between Gaza and Jericho. 

Mr Yasslr Arafat, the PLO 
chairman who is considering 
the possibility of setting up a 
consultative council in the 
absence of elections, is chal- 
lenging Hamas to accept a 
share of the responsibility that 
goes with influencing Palestin- 
ian autonomy. 


Jordan and Israel set up diplomatic relations 


Jordan and Israel yesterday announced 
the establishment of dl pTon-iatin tips in imp 
with last month's peace treaty leading to 
full normal relations after a 46-year state 
of belligerency, Reuter reports from 
Amman. A joint communique issued in 
Amman and Jerusalem paved the way for 
exchanging ambassadors and opening 
embassies in Amman and Tel Aviv by 
December 10, as set out in the treaty. A 
party of schoolchildren will go to Israel 


tomorrow to attend celebrations in Haifa, 
becoming the first group of Jordanians to 
enter Israel formally since November 14. 
when both countries opened the way for 
visits. 

Hundreds of Israeli tourists have Hocked 
to Jordan in the past two weeks. 

The statement added that both countries 
hoped the move would promote compre- 
hensive peace, development and co-opera- 
tion. They will now formally exchang e 


letters nominating ambassadors. King 
Hussein personally chose Mr Marwan 
Muasher, 38. Jordan's former Middle East 
peace team spokesman and a US-educated 
computer entrepreneur, as Jordan's first 
envoy to Israel. 

The cabinet appointed Mr Muasher 
ambassador at the foreign ministry on Sat- 
urday and is expected to send his papers 
to Israel soon. Israel bas yet to name an 
envoy to Jordan. 



Over the - next three 
UN peacekeeping operations 
wifi he drawing to-tt dose to 
Hozahjbjque andffonrafia - toe 
tonner a qualified success, toe 

jflHff r a n yip ypiti gated disaster. 

In Mozambique, - 7,000 ON 
troops -have overseen the 
implementation of a peace 
accord which ended a 17-year 
civil war, demobilised 75^60 
combatants, and- helped Mot. 
ambican National Resistance 
(Renamo) guerrillas -organise 
themselves into a political 


party .and contest peaceful 

elections. - *’ *;* 

In Somalia, a much larger 
and costlier UN mission has 


been unable to restore peace to 
a -nation shattered by dan war-, 
fore, the UN pullout from its; 
fo r«fiarf bunker to Mogadishu 
wifi be a dangerous and undig- 
nified affair . Attempts to make 
rival warlords talk peace have 
foiled, and the UN has hug; 
dn« dropped the pretence of 
trying to control the armed fac- 
tions battlingfor supremacy in 
toe and its hinterland. 


Leslie Crawfordt on 
the successful UN 
operation ; 
in Mozambique : 


But Mr Aldo Ajello, the 


KJHHI SKi • T& . .JBL 
A Sunni Moslem activist shouts slogans agntmrf- the SWa Moslem minority in a rally in Karachi, 
Pakistan, yesterday. The rally was railed In protest at toe kPHng of two Sunnis in a bomb attack 
on a Lahore mosque on Saturday, which has been blamed on militant Sfcias. . iwr. 


mm 


Parties close in Uruguayan poll 




By David PBHng in Montevideo 







Uruguayans yesterday voted in 
what promised to be the coon- 
fry's closest presidential elec- 
tion for decades as latest opin- 
ion polls indicated a virtual 
three-way tie between the 
mam contenders. 

Polls conducted before cam- 
paigning stopped last week put 
the governing Blanco party 
and the opposition Colorado 
party cm 29 per cent each, with 
the left-wing Encuentro Pro- 
gresista coalition just behind 
on 27 per cent Few pollsters 
were hazarding a guess on the 
likely outcome, saying the 
result could be changed by a 
swing of only 15,000 votes. 

Whoever becomes president 
will alm ost certainly lack a 


majority in Congress - whose 
members were also being 
elected yesterday - and will 
have to forge a coalition in 
order to govern for the next 
five years. 

The two presidential front- 
runners were expected to be 
Mr Julio Maria Sangirinetti, a 
former president and candidate 
for the social democratic-lean- 
ing Colorado party, and Mr 
Alberto Volonte, a maverick 
Blanco candidate campaigning 
on a “non-politician” platform. 

Close behind in the polls is 
Mr TabarS Vazquez, toe charis- 
matic mayor of Montevideo 
who leads a coalition ranging 
from social democrats to 
socialists, communists and for- 
mer guerrillas. Mr Juan And- 
rts Ramirez, Blanco’s second 


presidential candidate, is toe 
chosen successor of President 
Luis Alberto T-anaTia but has 
consistently trailed Mr Volontfe 
in the polls. 

Results of the elections, not 
expected to be officially 
announced until today, will 
determine whether Uruguay 
pushes ahead with the free- 
market reforms cautiously 
introduced by President 
Lacalle. Both Blanco candi- 
dates would try to re v i ve the 
privatisation process and to 
reform the costly social secu- 
rity system. 

Mr Sanguinetti, who has 
complained that overzealous 
liberalisation has harmed Uru- 
guayan industry, would proba- 
bly adopt less overtly free-mar- 
ket policies. Mr VSzquez, who 


enjoys fanatical support in 
Montevideo but whose party 
machinery may be insuffi- 
ciently well oiled to deliver 
him national victory, him 
sharply criticised the Blanco 
reform process. 

Uruguayans also voted yes- 
terday on constitutional 
reforms, one of which would 
make it harder to leform the 
pension system, while the 
other would guarantee that 27 
per cent of public spending 
went on education. Blanco can- 
didates say the reforms, both 
of which stand a reasonable 
chance of passing, would seri- 
ously weaken already 
stretched public finances. 

Voting is obligatory for Uru- 
guay's registered electorate of 
2.3m. 


'i y " ■ 


Mexican party turns on accuser 


By Damian Fraser in Mexico City 




"V 




Mexico's ruling Institutional 
Revolutionary party bas launched a fierce 
counter-attack against Mr Mario Ruiz 
Massieu, toe former deputy attorney gen- 
eral who last week resigned after claim- 
ing senior party figures bad blocked the 
investigation into toe assassination of his 
brother, Mr Jos6 Francisco Ruiz Massieu. 
The party formally accused him of defa- 
mation and calumny. 

Mr Ignacio Pichardo, the party presi- 
dent, brought a defamation suit against 
Mr Ruiz Massieu, saying the latter had 
offered no evidence for his allegations. Mr 
Pichardo, and Ms Maria de los Angeles 


Moreno, the number two party official, 
accused Mr Ruiz Massieu of using his 
brother's assassination to settle personal 
scores and damage the PEL 

Mr Jas6 Francisco Ruiz Massieu, the 
former secretary general of the PRI, was 
gu nned down outside a Mexico (Sty hotel 
on September 28. His brother Mario was 
until last week responsible for the inves- 
tigation, and has accused some 10 people 
of being involved in toe crime, indndlpg 
a former PRI deputy. However, the deputy 
is missing, and the investigation has stal- 
led In recent weeks. 

Mr Ruiz Massieu says be has put evi- 
dence allegedly incriminating Mr 
Pichardo, Bis Moreno and Mr Humberto 


Benitez Trevino, attorney general, in a 
sealed box to be opened on December 1, 
and says Mr Zedillo will have to deride 
what to do with toe evidence. 

Mr Zedillo 1ms hardly commented an 
the fierce battle between Mr Ruiz Massieu 
and leaders of the PEL But Mr Pichardo 
and Mr Trevino both come from a power- 
fill political grouping that has been an 
important ally of Mr ZedfDo. 

Mr Ruiz Massieu has given emotional 
interviews implicitly criticising outgoing 
President Carlos Salinas, referring to the 
PRI as the “party of parrots", attacking 
Mr Zedillo for not returning his telephone 
calls, and saying he was considering join- 
ing die opposition. 


ni 


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At first glanc e , it was bard to 
tell from the Mexican press 
that the country is to install a 
new president in a few days. 
Articles about Mr Ernesto 
Zedillo's inauguration on 
December l were swamped by 
extensive coverage of Mexico’s 
latest political scandal. This 
involves accusations - fiercely 
iipniflH — that senior officials 
and members of the ruling 
Institutional Revolutionary 
party conspired to block the 
investigation of toe September 
assassination of Mr Francisco 
Ruiz Massieu, the PRTs own 
secretary general 

However, Mr Zedillo was a 
constant figure in the marghw 
of the scandal coverage, with 
the press noting that problems 
wi thin the wiling party were 
affecting his delicate task of 
forming a cabinet and promo- 
ting political reform. 

The crisis was unleashed by 
Mr Ruiz’s younger brother 
Mario, who last week levelled 
his accusations and resigned as 
deputy attorney general, chief 
investigator into his brother's 
murder, and PRI militant 


Papers accustomed to tout- 
ing PRI orthodoxy took to 
attacking Mario for disrupting 
an already complicated transi- 
tion. The financially troubled 
Excelsior alleged that the 
“aggrieved brother’’ had been 
put up to the whole affair by 
another renegade PRI member 
and media star. Mr Manuel 
Camacho, and that the scandal 
“was a prelude to the forma- 
turn of an opposition political 
party” led by Mr Camacho and 
Mr Ruiz. Paid advertisements 
in several other papers made 
the same claims. 

El Financiers, the country's 
main business daily, took a dif- 
ferent approach, theorising 
that outgoing President Carlos 
Salinas bad orchestrated the 
entire Ruiz-PRI conflict to lay 
the groundwork for Mr Zedillo 
to “take charge” by exorcising 
the hardline “dinosaurs'’ from 
the ruling party. 

One columnist even said the 
conflict had opened the way 
for Mr Zedillo “also to resign 
from the PRI, to show he is 
serious about reform". 

Reforma, known for its inde- 
pendence and sensationalism, 
flatly declared that the accused 
PRI hierarchy had been so 
politically damaged by the 


back-biting that they were 
going to be left out of the 
Zedillo administration. 

One cartoonist at the leftist 
La Jornada took a more cyni- 
cal view, drawing a picture of 
the PRI hierarchy completely 
soaked in mud, but saying; 
“We just have to clean our- 
selves up a little bit for the 
cabinet photo.” 

The pink financial paper, El 
Eamomista, seemed not to care 
about the who, what or why Of 
the affair, saying only: “Tim 
political crisis slows the flow of 
foreign capital.” 

Over the weekend, the only 
public statement from the pres- 
ident-elect himself was his 
offer to respect the freedom of 
the press. Reporters who 
camped outside his office in 
hopes of eliciting a comment 
about the Ruiz-PRI conflict 
were snubbed, possibly in 
retaliation for all but ignoring 
Mr Zedillo’s trip to Washington 
last week to see President Bill 
Clinton. 

Instead, they were told Mr 
Zedillo was trying to fine-tune 
his inauguration speech. 

Judging by other hot stories 
filling the papers, the new 
president will have a lot of 
issues to talk about in bis 


Thmuday address. Conflict is 
beginning to simmer again in 
the southern state of Chiapas, 
scene of an armed rebellion 
this year, according to the gov- 
ernment-owned news aeencv 
Notimex. 

In addition thousands of 
opposition protesters from the 
southeastern state of Tabasco 
will soon arrive in Mexico C3ty 
to denounce alleged electoral 
fraud in a recent gubernatorial 
election, noted La Jornada and 
El Financiero. 

And many papers reported, 
based on official sources, that 
the confessed killer of the 
PRTs first presidential candi- 
date Mr Luis Donaldo Colosio 
had been secretly Interrogated 
and possibly tortured just 
hours after the assassination 
and raised the idea that the 
murder was the worts of drug 
traffickers. ^ 

With an these problems, vet- 
eran columnist Rene Delgado 
noted that Mr Salinas was the 
fifth president in a row to 
leave office amid political cri- 
sis. “ZedOlo’s challenge is enor- 
mous. In a few days he will 
have to face it,” wrote Mr Del- 
gado in Reforma. “W e hope 
this time the story will be dif- 
ferent” 


tough Italian diplomat in 
charge of the UN’s operatic® in 
Mozambique, does not believe 
in models- “What worked in 
Mozambique will not necessar- 
ily work elsewhere,” he said In 
Maputo, as he prepared to' 
leave for a well-earned rest 
“There was a real will to 
restore peace here. No-one can 
impose.peace an a people who 
wish to continue fighting." - 
ft was not as simple as that 
Mr Ajello, who arrived in 
Mozambique two years ago, 
saw immediately that the 
agreement signed between 
Renamo and theftefimo gov- 
ernment would collapse under 
the pressure of the one-year 
timetable for demobilisation. 
anti . elections. 

“We had to introduce some 
flexibility into the calendar,” 
he recalls. “The accord was too 
complex, there were not 
PTimig h people to implement it 
and the people were not gbtkt- 
enough” After ■ 17 - years . of 
fighting, most Renamo leaders 
were not well versed in imple- 
menting peace, while the Fre- 
limo government in power 
since 1975, resented the loss of 
sovereignty implicit in the 
UN’s tutelary role. 

“We had to give time for 
both parties to overcome their 
distrust of each other, and we 
had to adapt the UN mission to 
the reality on the ground,” Mr 
Ajello says. 

The former enemies, how- 
ever, dragged their feet over 
the demobilisation of their 
combatants. Mr Alfonso Dhlak- 
ama, the Renamo leader, kept 
his best men in toe bush to 
strengthen his hand in politi- 
cal negotiations. The elections, 
rescheduled for October 1994, 
looked an unlikely prospect 
Mr Ajello decided Mozambique 
could not survive another year 
of uncertainty, but he also real- 
ised that Renamo would not 
contest elections without the 
resources to fund its transfor- 
mation from a military into a 
political marfiTW* 

“People were shocked that 
the UN was prepared to fund a 
former guerrilla movement,” 
Mr Ajeflo concedes, “but toe 
only way to make this mission 
a success was to forget conven- 
tional wisdom.” The imbal- 
ances were too great To maim 
R ena mo function as an equal 
partner in the peace agree- 
ment, it needed houses in 
Maputo, telephones, faxes and 
cars; Mr Dhlakama needed to 
be given the trappings of a 
political l ea d er. 

Mr Ajello believes ' $l7m . 
(£10-3m) - the cost cf funding. 
Renamo's election campaign — 
was a small Insurance pre-. 
mdum to add to the UN’s $500m 
peacekeeping operation . in - 
Mozambique. “We gave him 
enough to ensure he had too 
much to lose if he returaed . to 
war," says Mr Ajello. 

The gamble almost faffnH On 
the eve of the poll, Mr Dhlak- 
ama suddenly announced be 
was pu ffing Renamo out of the 
contest, convinced it would- be 
fraudulent. Forty-eight hours 
“frantic negotiations finally 

taought him back into the fold. 
The election resulted in a Fre- 
Itmo victory, but with a 
smaller margin than had been - 
expected, and Mr Dhlakama 
accepted, the outcome. 

Mr Ajello is cautious about 
Jawing broader lessons tom 
tue UN’s controversial funding 
of a guerrilla movement He 
believes it worked in Mozambi- 
que because the guerrillas 
were so obviously fired of war. 
f Q Angola. Somalia and 
Rwan da, where armistice 
nxaris collapsed, Mr Ajello is 
not sure political funding ' 
would have helped torn the 
tide in favour of peace. 



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FINANCIAL TIMES MONDAY NOVEMBER 28 1994 


NEWS: INTERNATIONAL 




•' cMi c <j 


r ^ford ( . 




Russia and 
Japan agree 
to boost ties 


Japan’s rural rice lobby clings 
to power despite deregulation 

The old guard is reviving traditional tactics, writes F,mikn Terazono 


By John Uoyd bi Moscow and 
WHBam Dawkins in Tokyo 

Russia and Japan yesterday 
signed agreements to improve 
economic ties and postponing 
Russian trade debts. The eco- 
nomic accords mark another 
small step towards the nor- 
malisation of Japan's strained 
relations with Russia, seen 
until recently as a dangerous 
and unreliable neighbour. 

Mr Oleg Soskovets, Russian 
first deputy foreign minister, 
signed four economic agree- 
ments designed to increase 
trade and restructure a «man 
part of Russia’s $5bn (£3bn) 
debt. Japanese officials quoted 
Mr Soskovets as saying: “We 
must build trust on all fronts, 
through political dialogue, mil- 
itary affairs and regional con- 
tact." 

He complained, however, 
that trade with Japan had 
declined, and called for a new 
high-level bilateral trade com- 
mittee, chaired by Mr Soskov- 
ets and Mr Yohei Eono, the 
Japanese deputy premier and 
foreign minister, to speed up 
agreements on tax, investment 
protection and transport Mr 
Kono said, however, that Rus- 
sia must put its own economic 
house in order before foreign 
investment would come in sig- 
nificant quantities. 

The agreements allow Russia 
to extend repayments on $280m 
of debt to Japanese companies 
and the Japanese Export 
Import Bank over 10 years fol- 
lowing a three-year gTace 
period. There was also agree- 
ment to export 5m cu m of 
wood a year from Russia’s Far 
East to Japan; a Japanese 
promise of $50Qm in humani- 
tarian aid; support from Tokyo 
for Russian membership of the 


World Trade Organisation and 
Japanese support for the Rus- 
sian economic reforms. 

However, according to the 
Russian official news agency 
Tass, the Japanese refused a 
Russian request for an extra 
S130m of credits above the 
$400m already promised to aid 
the reconstruction of four huge 
plants - the AZLK car plant in 
Moscow, the Kamaz truck 
plant in Naberezhnye Chelny, 
the Impuls engineering plant 
in Petersburg and the Yaros- 
lavl synthetics enterprise. 

The economic agreements 
continue a process which 
began with President Boris 
Yeltsin's visit to Tokyo just 
over a year ago, in which he 
agreed to open negotiations on 
the four disputed Kurile 
islands off northern Japan, 
seized by Russia in the last 
days of the second world war. 
Tokyo agreed, in return, to 
relax its former policy of mak- 
ing any increase in Russian aid 
conditional on progress over 
the islands dispute. 

Because of Russia's owner- 
ship claim. Japan remains the 
only member of the Group of 
Seven yet to sign a second 
world war peace treaty with 
Moscow. The Kuriles are a pop- 
ular symbol of both Japanese 
and Russian national pride. 
The Kuriles issue remains - 
according to a Japanese for- 
eign ministry spokesman - 
“difficult and long-lasting”. Mr 
Kono brusquely refused a pro- 
posal from Mr Soskovets to dis- 
cuss economic co-operation on 
the Kuriles, saying this contra- 
dicted the Japanese position 
that they must be returned. 

Today, Mr Soskovets is due 
to meet prime minister Tomi- 
ichi Murayama. and other min- 
isters. 


J apanese government offl- 
cials often refer to the 
sacred importance of rice 
and the farmers' role as custo- 
dians of rural culture as the 
main reason against opening 
the country’s rice market. As 
the only food deemed to bave a 
soul, and with sacred links to 
Shintoism and Buddhism, rice 
was more than just a commod- 
ity. 

The reality is, however, that 
the spiritual importance of rice 
and the farming culture is fad- 
ing for most urban Japanese. 
Sentimental images of the 
furusato - the old home village 
- are no longer symbols to 
which they adhere. The rela- 
tionship between politicians 
and the provinces, meanwhile, 
has traditionally been more of 
a materia] kind. 

Such links will be recon- 
firmed this week when the 
country's parliament ratifies 
the government’s Uruguay 
Round farm package. Parlia- 
mentary discussions on the 
YG.OlObn f£38bn) package to 
help Japanese rice formers face 
foreign competition when 
Japan opens its doors to 
imported rice next year, 
started last week. 

The return to power of the 
Liberal Democratic party with 
the Social Democrats is behind 
the package conceived last 
month. Reformists who were in 
office at the end of last year 
forced through an agreement 
to import 4 to 8 per cent of 
domestic rice consumption 
over the next six years. 

However, the old guard, rely- 
ing on rural votes, has gone 
back to traditional politi cking , 
appealing to the electorate by 
delivering large subsidies and 
public works allotments. 

Politicians from rural areas, 
who threatened to block the 
parliamentary vote on the Uru- 
guay Round accord unless it 
stipulated financial aid, are tri- 







W.hX)* 1 - r ■ 


V- V* »■' 

&T.:, . 

v-.-l 

afP v 

mm 

i' S v • * i 

The spiritual importance of rice is fading 




S { 

rr* 


Fnddh MamfxM 


umphant. 

Meanwhile the rice lobby is 
trying to deflect criticism over 
its arm-twisting for subsidies, 
claiming the deal has yet to be 
determined. The Central Union 
of Agricultural Cooperatives 
(Zenchu) says the actual net 
increase in next year's annual 
budget is still under negotia- 
tion between the agricultural 
and finance ministries. “The 
media’s criticism is not fair 
since we don’t even know how 
big the increase really is.” says 
one Zenchu official. 

But many agricultural econo- 


mists are less concerned about 
the amount of money than how 
it will be used. Rather than 
encouraging consolidation of 
inefficient small part-time 
formers and helping expansion 
by full-time farmers, most of 
the package is linked to public 
works spending and will only 
help to sustain the current 
inefficiencies. 

Of the total, Y3,550bn is 
allotted to infrastructure 
including roads and dr aining 
paddy fields, Y77Dbn is to be 
spent on cheap state loans and 
Y890bn will be used for bund- 


ing facilities in rural areas. 

Such funds will only support 
part-time farmers which com- 
prise 80 per cent Of the fa rming 
population and have become a 
leading barrier to increasing 
farm efficiency. They are the 
main supporters of the co-ops 
at the centre of the rice lobby 
and look after every aspect of 
rural life while acting as huge 
vote-collecting machines dur- 
ing elections. 

However, it is already clear 
that neither forming subsidies 
nor the co-ops will revitalise 
Japan’s agriculture. The num- 
ber of Japanese farmworkers 
last year totalled 3.6m, or 2.9 
per cent of the country's popu- 
lation. 42.3 per cent less than 
20 years ago. The average age 
of formers is 56, much higher 
than other industries where 45 
is the average. 

There are. however signs of 
change. In January, political 
reform will usher in a new 
electoral system giving urban 
voters more political clout as a 
result of redrawing constitu- 
ency boundaries although the 
number of politicians sup- 
ported by the farming lobby 
are not expected to be cut dras- 
tically. 

It is also unclear how much 
effect the loosely worded food 
law, which governs the distri- 
bution and retailing of rice, 
will have on deregulation 
when implemented next April 
The agriculture ministry is 
said to be under pressure from 

the CO-OPS from s hifting too 
much power to rice growers 
and new distributors and 
retailers. 

Professor Yujiro Hay ami , 
who specialises in Japanese 
forming at Gakushuin Univer- 
sity. says the return of the old 
political guard will delay form 
restructuring. "Reform could 
eventually happen, but by then 
the industry could be non-exis- 
tent.” he warns. 


Hong Kong railway lets off its head of steam 

Contracts are coming fast after years of Sino-British wrangles, says Simon Holberton 


S enior managers of Hong 
Kong's Mass Transit Rail- 
way Corporation (MTRC) 
are having a busy fortnight. 
Last week they let contracts 
valued at HK$6.6bn (£544m) for 
the corporation’s HK$35bn rail- 
way connecting the colony's 
new airport to the business dis- 
trict of Hong Kong. This week 
managers hope to let a further 
four contracts for tunnelling 
and railway station develop- 
ment 

Mr Hamish Mathers, the cor- 
poration’s chairman and chief 
executive, likens the process to 
shaking a bottle of champagne 
for a long time and then 
removing the cork. "In two 
weeks we have had [a Sino- 
British] agreement on overall 
funding, land has been made 
available for the railway and 
the Legislative Council has 
approved HK$23.7bn of funds.” 

The railway, like the airport 
at Chek Lap Kok which it is 
designed to service, has been a 
hostage to more than five 


years of hone-breaking Sino- 
British talks on, first, whether 
to build the project and then, 
how to finance it In between 
talks became enmeshed in 
Britain and China’s long run- 
ning dispute about Hong 
Kong's political development 

Unlike the airport, the con- 
struction of which has pro- 
ceeded apace, physical work on 
the railway had to wait until 
China gave its approval to the 
overall financing for the proj- 
ect Although the MTRC was 
unable to begin construction 
until a formal Sino-British 
agreement It has not been idle. 

The contracts awarded last 
week, and those to be awarded 
during this and successive 
weeks, were negotiated to a 
stage where they could be for- 
mally awarded the minute a 
Sino-British deal was sealed. 
Indeed, in the whole project 
there is just one major con- 
tract - a HK$3bn-plus mandate 
for the Hong Kong island ter- 
minus to the airport railway - 


COMPANY NOTICES 

WAH KWONG SHIPPING 
HOLDINGS LIMITED 

(Incorporated in Bermuda with limited liability) 

The interim reports of the above Company will be 
posted to shareholders on 1st December, 1994. 
Copies will be available to members of the public 
upon application to the Company's UK Registrars 
at the following address:- Barclays Registrars, 
Bourne House, 34 Beckenham Road, Beckenham. 
Kent, BR3 4TU. 


that is still open for competi- 
tive bidding. 

According to Mr Russell 
Black, project director for the 
airport railway, more than a 
year ago the MTRC derided to 
embark upon a tendering pro- 
cess that concluded with the 
corporation identifying suc- 
cessful bidders and issuing 
them with “option" letters. 

“The successful bidder 
agreed to keep the price bid 
open for 12 months,” he said. 
“We identified him as the pre- 
ferred contractor and we 
assumed the risks of price 
escalation due to labour and 
materials costs, the risk on 
currency if that was relevant, 
and the risk that statutory 
enactments might affect costs. 
We accepted these risks only 
during the period of delay." 

Mr Black conceded that this 
was “a little unusual" but cited 
a parallel with London Under- 
ground's Jubilee line. 

The airport railway consti- 
tutes a major expansion for the 


MTRC. Currently the corpora- 
tion runs a rail service of 
43km; after completion of the 
airport railway the length will 
rise to 77km. The corporation 
hopes to offer a service that 
takes arrivals to Chek Lap Kok 
on an 135km an hour journey 
from the airport north of Lan- 
tau island, to the central dis- 
trict on Hong Kong island in 
just 23 minutes. 

The additional track will also 
help relieve congestion on the 
main rail service. At present 
the Nathan road section ol the 
railway on Kowloon is the 
most extensively used railway 
in the world, used by 80,000 
people per route kilometre per 
hour. The MTRC expects that 
25 per cent of users of the cur- 
rent system will switch to the 
Kowloon section of what will 
be known as the Lantau line. 

More than a railway is being 
built Above the stations the 
MTRC in partnership with 
local developers, will build 
24.000 fiats, 16 office towers, 


nine hotels (of 5.000 rooms in 
total) and five large shopping 
centres. Private property devel- 
opers pay for the costs of con- 
struction but share the profits 
with the MTRC. 

H opes, however, that 
the airport railway 
could be completed by 
mid-1997, when China resumes 
sovereignty, may not be real- 
ised. Mr Mathers says the cor- 
poration, once China approves 
borrowings of HK$11.4bn, will 
finalise an internal study on 
when the project can be com- 
pleted. In the meantime he is 
sticking to a previous forecast 
that the line from the airport 
to Kowloon will open in April 
1998, and the line to the central 
district some time after. 

Mr Roger Moss, finance 
director, is confident that the 
airport railway can be built for 
less than the HK$35bn allo- 
cated for the project. He is 
equally confident that he can 
raise the HK$u.4bn of debt for 
the project for which final 


approval is dependent an Chi- 
na's agreement to a financial 
accord between the MTRC and 
the Hong Kong government. 
The corporation has invest- 
ment grade credit ratings from 
the main rating agencies. 

This is because the MTRC is 
one of the few public rail 
systems in the world which 
actually makes money. In the 
first six months of this year it 
had a profit after depreciation 
and interest of HK$500m. It 
pays no tax due to accumu- 
lated losses currently standing 
at around HKSl^bn. 

Mr Moss is wary o f forecast- 
ing when the corporation will 
return to public debt markets 
- it has a requirement to raise 
HK*6bn a year for the next 
four years - but it is clear that 
he has been engaged in the 
financial equivalent of Mr 
Black’s pre-tendering. When 
China bestows its final bless- 
ing on the airport railway, 
expect to see equally quick 
activity in the capital markets. 






INTERNATIONAL NEWS DIGEST 

Smokers back 
‘safe’ cigarette 

BJ Reynolds, the US tobacco company, has developed a new, 
virtually smokeless cigarette, marking its latest attempt to 
combat the anti-smokiDg sentiment sweeping the US. Accord- 
ing to the New York limes, which was given access by the 
company to tests conducted throughout this year, the ciga- 
rette has won high marks from smokers who have tried it 
Reynolds' previous “safe" cigarette. Premier, flopped soon 
after it was launched in 1988. 

The new cigarette, known as Eclipse, works by passing hot 
air over tobacco without actually setting it alight. The hot air 
draws the flavour and nicotine from the tobacco but does not 
release the tars which produce noxious smnfrp and cause 
cancer. Mr Thomas Griscom, executive vice-president of Reyn- 
olds, is quoted by the limes as saying: “This is where we hope 
the future of the company is.” 

Eclipse has yet to win approval from the US Food and Drug 
Administration. Since it contains a mechanism for delivering i 
nicotine, it could be regulated as a drug under the FDA rules - 
something that normal cigarettes have so for escaped despite 
an FDA offensive thin year. "Safe" cigarettes are also under 
fire from anti-smoking groups which argue that they could 
encourage young people to take up smoking. Richard Waters, 
New York 

China to ease coal trade 

China's Ministry of Interna] Trade plans to ease controls on 
trading of coal but will retain control over some mines and 
some coal trading to back infrastructural development A 
growing part of the remaining coal supply will be freely 
traded, the newspaper China Daily reported. 

China has gradually eased government controls on a num- 
ber of key commodities as part of its market-oriented eco- 
nomic reforms. In some cases, such as cotton, controls have 
been reimposed because of hoarding and quality problems. 
Easing restrictions on coal trading and distribution is 
intended to help improve the economic efficiency or state-run 
coal mines by allowing prices to rise, the report said. 

Subsidies now used to help support indebted mines will be 
used to finance state coal purchases at higher prices. China's 
coal output between January and October rose 5.8 per cent 
over the year -earlier period to 920m tons. Demand for coal, 
however, is growing at an annual rate of 7.4 per cent The 
report said China's power plants alone would need an addi- 
tional 20m tons of coal in 1995. Although overall supply 
exceeds demand, transportation bottlenecks prevent effic ient 
distribution, it added. AP-DJ. Beijing 

Walesa vetoes tax proposals 

Polish President Lech Walesa has vetoed proposals to main- 
tain income tax rates at 21. 33 and 45 per cent for 1995. Mr 
Walesa, who is due to stand for re-election at the end of next 
year, argued that the rates were raised from 20, 30 and 40 per 
cent as a temporary measure in 1994 and should return to 
those levels in 1995. 

The move could signify that the president is preparing for 
confrontation with the government coalition headed by Mr 
Waldemar Pawlak, the Peasant party (PSL) leader, over the 
budget when it is passed by parliament early in the new year. 

A successful veto on the budget would lead to early alecHnna 
for parliament whose term expires in 1997. Hie government, 
which has won the approval of the International Monetary 
Fund for its draft budget, needs a two-thirds majority in 
parliam ent to overrule a veto. Christopher Bobinsfd, Warsaw 

Move fails against lawmakers 

Taiwan's first vote to eject lawmakers foiled yesterday due to 
low turnout. Only 18 per cent of the 2m eligible voters in 
Taipei county went to the polls in an attempt to oust four 
lawmakers from the ruling Kuomintang for their support of a 
controversial nuclear power plant which the state-owned 
Taiwan Power Company plans to build. Hie leading opposition 
Democratic Progressive party, which controls the county, also 
invited voters to cast their ballot in a referendum on whether 
the country’s fourth nuclear facility should be sited in Taipei 
county. But Taiwan's Central Election Commission, which 
supervises polls, has ruled the vote not legally binding as a 
law governing refcrendums has yet to be enacted. 

The poor turnout could reflect badly on the DPP a head of 
municipal and provincial elections to be held next Saturday, 
as opponents are likely to accuse the DPP of wasting taxpay- 
ers' money. Laura Tyson, Taipei 

Algerian oil strike called off 

The 110,000 strong Algerian oQ and gas workers union has 
called off a three-day strike scheduled to start yesterday. 
Algerian newspapers headlined a last minute accord between 
the government and the oil workers union which was pro tes t- 
ing against the restructuring of the national oil company 
Sonatrach. Hie union called of the strike after they reached 
agreement that the companies will be regrouped around Sona- 
trach. Sonatrach handles the production, transport and export 
of Algeria’s oil and gas. Reuter, Tunis 



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,1*1*:* 


FINANCIAL TIMES MONDAY NOVEMBER 3 1994 


NEWS: UK 


• • ... — ■ - yv-«. 


Pirelli seeks to restore output to level reached before plant closure and cut in workforce 


UK NEWS DIGEST 


Italian tyres group to boost output Second rise 


By John Griffiths 


Pirelli intends to restore UK 
output to its level at tbe begin- 
ning’ of 1993, but with half the 
workforce and with only one 
manufacturing plant instead of 
two. The intentions of the Ital- 
ian industrial group were dis- 
closed when Ur Marco Tron- 
chetti Prove**, group chief 
executive, visited London for 
the launch of the Pirelli calen- 
dar. 

More than 20 Pirelli plants 
have closed worldwide in a res- 
tnrcturing which has started 
returning the group to profit 
after a bout of heavy losses. 
One of the 20 was at Burton-on- 


Mobil Oil. the US refining and 
marketing arm of Mobil 
Corporation, the oil group, is 
to shift its headquarters from 
London to Milton Keynes 
about 40 miles north of the 
capital. Mobil Oil. which 


employs 470 people in London, 
cited high costs there as one of 
its reasons for moving. Milton 
Keynes was chosen from a list 
of 40 passible locations and 
the transfer will take place 
next summer. 


Trent in the Rn glfcfr Midlands, 
a town best known for its 
breweries. AD Pirelli tyre out- 
put has now been concentrated 
at the company's larger and 
more modem plant at Carlisle, 
about 150 miles to the 
north-west. 

N What has happened is noth- 
ing to do with Pirelli’s market 
or employee performance in 


the UK,” Mr Prove ra explained. 
“Carlisle has perhaps the best 
workers of any Pirelli plant 
worldwide and so did the Bur- 
ton production operations. In 
January 1993 we were produc- 
ing 5.000 car tyres a day at 
Burton with a production 
workforce of 700, and 10,000 at 
Carlisle with nearly 1.000. 

“Now. with 800 fewer people. 


Carlisle is already producing 
13.000 to 14.000 tyres a day. 
And that is with a higher level 
of quality and without major 
investments." 

A mid-term target is 15.000 
tyres a day with half the total 
UK production workforce of 
January 1993. rising to 20,000. 
The Carlisle plant is being 
pushed into the unfamiliar role 
of developing premium tyres 
for some of Europe's more up- 
market carmakers. One early 
result is a sole supplier con- 
tract with Jaguar for its new 
XJ saloon range. 

“Everyone wants tailor-made 
products now", says Mr Carlo 
Mazzantini. Pirelli's UK chair- 


man and managing director. 
That means flexibility in tyre 
development and manufactur- 
ing processes to a degree the 
tyre industry could not have 
contemplated a few years ago 
- batches of fewer than 400 of 
a type are now regarded as via- 
ble. 

Mr Mazzantini says it is not 
surprising that Pirelli wants to 
concenrrate on this market sec- 
tor. The UK tyre market now 
has 107 brands jostling for 
sales, of which 99 are in the 
“commodity" sector. That 
means they are sold almost 
entirely on price to people with 
little interest in the tyres’ per- 
formance. 


of 15% likely 
for newsprint 


♦unities commission says. It afro ws women 

SSS averaged 

Women who are low. pad to g 

any, educational nuaEMSHons, ad*. 
Si' wnSsion. They W woA 

rart-time in semiskilled or unsMtedjrts, ami 
work in small, private sector finas in ppn- 

■unionised fobs. . - 

Tbe commission has fo und a mrea consuls 
tion between education and pay fevels. 0^10 
per cent of women with degrearor teaching 

qualifications are low ® 

without anaflncanaoa. 5 . - ■ 


Insurers issue 


Power generation group blames Malysia trade ban 


liability warning 
to companies 


R-R explains loss of contract 


By Chris Tlghe In 
Newcastle upon Tyne 


By Ralph Atkins, 
Insurance Correspondent 


Many UK companies face 
difficulties in obtaining 
adequate insurance cover from 
next year for deaths and 
injuries at work, say corporate 
risk managers and insurance 
experts. 

Government officials will 
hold urgent discussions this 
week with insurance industry 
representatives about a deci- 
sion by insurance companies to 
stop selling employers liability 
policies with unlimited cover. 
Insurers plan to impose a basic 
£10m (Si 6.4m) claims limit on 
policies renewed from January. 

The move has created confu- 
sion about the extra protection 
companies will need to buy. 
“Many companies may be left 
without adequate cover against 
possibly very gi gnfffcanr losses 
- to say nothing of the fact 
that they may not be meeting 
their legal obligations," said 
Mr Alan Fleming, executive 
director of the Association of 
insurance and Risk Managers 
in Industry and Commerce 
(Ainnic). 

Atomic is alarmed that insur- 
ers have yet to draw up details 
of policies that would offer the 


extra cover companies may 
require - even though there is 
little more than a month to go 
before the new limits are 
applied. 

Insurers have imposed the 
cap because of the soaring cost 
of employers' liability ftlafms. 

The insurers' move means 
that companies are having to 
assess the extra protection 
needed to meet the cost of pos- 
sible workplace incidents, how- 
ever unlikely. 

They also have to ensure 
that they comply with a 1969 
law which says an employer 
must have at least Egm of 
cover. But the definition of 
“employer" is unclear and each 
subsidiary of a large group 
may need £2m of protection. 

Guidelines drawn up by the 
Department of Employment 
say that each “employer" most 
be covered for at least £2m “in 
all circumstances". 

A private report circulated 
by Sedgwick, the insurance i 
broker, warns clients that 
“insurers we have contacted 
have indicated that an 
employer liability policy in the 
form required by the 
Department of Employment 
will be very difficult to 
achieve". 


Malaysia's ban earlier this year 
on placing government con- 
tracts with UK companies has 
cost Parsons Power Generation 
Systems a contract worth more 
than £100m ($l64m), says 
Rolls-Royce Industrial Power 
Group, the company's parent 

The contract, for two 500MW 
steam turbine generators for 
the new Port Kteng power sta- 
tion, would have helped Par- 
sons overcome the orders gap 
it feces. 

The company’s negotiations 


with the Malaysian authorities 
were halted when the trade 
ban was imposed in February. 

The trade ban gave Parsons 1 
US rival. General Electric, the 
opportunity to pursue the Port 
Klang order and letters of 
intent were signed just days 
before the ban was lifted in 
September. The news that Gen- 
eral Electric had won the con- 
tract was announced last week. 

"We were very close to win- 
ning it." said Mr Richard 
Maudslay, managing director 
of Rolls-Royce Industrial Power 
Group. “These things happen; 
you have to get on with it. It’s 


unfortunate but we will still 
continue to be active in the 
Malaysian market." 

The loss of the Port Klang 
prospect reduces Parsons’ 
chances of clinching new 
orders soon enough to avoid 
further job cuts. 

Hopes of avoiding further 
redundancies now hinge on 
winning an order from 
Singapore for two 600MW 
steam turbine generators for 
the Tuas power station early 
next year, and quickly 
completing agreements on at 
least one of three Indian power 
station projects. 


UK prices for newsprint are likely to rise by a 
further 15 per cent next year on top of the 15 
per cent already signalled for January, says 
Mr ftamaay Ham p tnn . chief executive of Ayles- 
ford Newsprint, a joint venture between SCA, 
the Swedish forestry group and Month, the 
European paper company. 

“That additional increase would only get us 
bad; to the level of nominal selling prices 
[lowest selling prices] in 1989," says Mr Hamp- 
ton, pointing to the deep recession from which 
the paper industry is only just recovering. 

Aylesford Newsprint has invested £250m in 
bunding Europe’s largest 100 per cent recycled 
newsprint mill in Kent, to tbe south-east of 
London, The company has started running its 
combined hpa t and power plant at the site and 
win commission the water and treat- 

ment facility before the end of the year. 

The new paper machine will produce 370,000 
tonnes of newsprint a year, mainly for the UK 
market which is now 70 per cent supplied by 
imports. 


Pensioner syndicate,;, 
among millionaires. 


Demand expected for 
cut in working hours 


^ A late rash for tickets boos ted 
wS . sales fra - the. second draw of 
M the national lottery to £47.9m, 
«yKtg ($7aan) onlyzpffl'.omtdowa 
VQ ‘ on the first week's sales of 
£48Sm- Some operators of rival 
the national gamMUig jmsfessas. 

lornorr dieted a sharp mil m tottery 
ticket sales after the high terolof publfcity 
surrounding the first week's draw. But Game- 
lot, the lottery organiser, said sates had been 
particularly heavy on Saturday, with more 
than £2m-worth of tickets saM in one boor. 
The second draw, on-Saturday night, produced 
the lottery's first millionaires, with four tick- 
ets sharing the jackpot prize . of over £7m, 
y ielding prims of £Lftn each.- One of the win- 
■ning tickets was held by a syndicate of eight . 
old-age pensioners living in sheltered accom- 
modation in the country town of Newport 
Pagnell, about 40 miles north of London. . 


Societies prepare for job cuts 


By AHson Smith 


Generous voluntary redund- 
ancy terms are likely to be put 
to the 27,000-plus staff of Hali- 
fax and Leeds Permanent two 
of the UK's largest building 
societies, as part of plans for 
combining tbe or ganisatio ns 
Mr Mi ftp Blackburn, Halifax 
chief executive, will today 
meet the society’s head office 
managers to spell out the 
agreement to merge and then 
become a public limited com- 
pany, which with £90bn 
($l48bn) in assets, would be the 
.UK's thtod-largest high street 


bank. Later in the week he will 
meet managers at the Leeds, 
and meetings with trade 
unions are also planned. 

Within the next week or so 
members of the two societies 
should receive letters setting 
out the broad outline of the 
agreement, and a helpline for 
customers will be operational 
from today 

The overlap between the two 
societies' branch networks has 
already brought warnings from 
staff organisations that hun- 
dreds of jobs are at risk. While 
the societies' managements do 
not rule out compulsory redun- 


dancies. they would prefer the 
job losses to be voluntary. 

They could face opposition 
not only from employees but 
also from customers who do 
not want to see a threat to staff 
in the 1.100 branches or a cut 
in service. The 10m investors 
and borrowers who own the 
two societies must approve the 
deal in order for it to go ahead. 

Cost savings from combining 
the two networks will be an 
important part of making the 
deal a success. 


Workers may start to demand a cut in their 
working week because of the econo m i c recov- 
ery, says Incomes Data Services, the indepen- 
dent pay analyst The engineering and manu- 
facturing sectors, in which employees are 
generally on a 3S-hour week, are the most 
likely to face pressure for a reduction. The 
research group found “significant” differences 
between the working hours of mannal and 
non-manual staff in a s ur vey of 500 organisa- 
tions. 

Incomes Data found that holiday entitle- 
ments in the UK were lower than those in 
Italy, France and Germany. The most common 
level of holiday entitlement in the UK is 25 
days a year, although it is often only 21 days 
in the retail and ftnant-p industries. UK work- 
ers are usually entitled to eight public holi- 
days in a year compared with 14 in Germany 
and Spain and 11 in Fiance. 

• Pay rises in tbe engineering industry are 
running at just below 3 per cent, and fewer 
companies are imposing wage freezes, the 
Engineering Employers Federation said yester- 
day. It said a survey of 151 companies showed 
the average deal in the three months to Octo- 
ber was 2.76 per cent. 


‘Green’ groups attack 
reform of state forests 


Government plans for introducing market 
reforms Into the way Britain’s Um hectares cf 
state-owned forests are run face criticism 
today by two big environmental groups. The 
Council for the Protection of Rural E ngla n d 
and the Royal Society for the Protection of 
Birds fear that imposmg a more “busmessfikB" 
structure an Forest Enterprise, tbe commer- 
cial arm of tbe Forestry Commission, could be 
a way of preparing ft for privaiisatioaL 


Early Beatles song hits 
$18,000 auction record 


Many women are paid 
far less than men 


Editorial comment. Page 13 
Competition hurdle. Page 16 


As many as 4m women in the UK - mare than 
one third of female workers - earn less than 
two-thirds of median mate weekly Mining s 
research published today by the Equal Oppor- 


The first Beatles record played on a radio 
station has been sold by auctioneers Bonhams 
for £11,000 ($18,000) - a world record price for a 
commercially-produced disc The early press- 
ing of the 1962 hit Love Me Do was a demon- 
stration copy an the Pariaphone label signed 
by Paul McCartney. Tony Prince, the disc 
jockey who inherited it in a dearout of the 
Radio Luxembourg record library, realised its 
significance. -. 

He wrote to McCartney, who replied that, as 
far. as be knew, Luxembourg -was the first 
radio station to play a Beaties record. Love Me 
Do reached only number 17 in UteVK charts, , 
but subsequent records took the group, to ; 
unprecedented worldwide fame.. The 1962 
record was bought by Spanish music publisher 
Mr Mikel Bazsa. . . 



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FINANCIAL times MONDAY NOVEMBER 28 1994 


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Sharp knives at Tenneco 


D ana Mead, chairman of 

Ttaneco, last week stood 

before 450 top managers 
from the company's six 
divisions m Houston's convention 
centre and asked them an impor- 
tant question; after two years of 
relentless cost-cutting and restruct- 
uring how many thought the effort 
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Mead expected that as many as 
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one asked me when things will get 
back to normal, and I said, this is 
normal'." 

By way of the interactive keypads 
with which the conference tables 
were equipped, the answer HaPy*! 
on an oversized screen within sec- 
onds; only 18 per cent of the manag- 
ers in attendance felt the effort was 

flagging 

That response is certainly a trib- 
ute to Tenneco's quality pro- 
gramme, arguably one of the most 
far-reaching and successful 
mounted in the US. Designed and 
implemented with the help of 
Armand “Val” Feigenbaum, the vet- 
eran US quality c onsultan t, the pro- 
gramme is in large part responsible 
for Tenneco’s turnaround from a 
$75Qm net after-tax loss in 1991 to a 
net profit of 5412m last year. 

Feigenbaum may not be as inter- 
nationally renowned as the late W. 
Edwards Deming and Joseph Juran, 
who are usually credited with pio- 
neering modem "quality” ideas. But 
the author of Total Quality Control. 
written 43 years ago, can also claim 
to be one of the founders of the 
worldwide quality movement 
The original link with Feigen- 
baum and his brother Donald, prin- 
cipals of Pittsfield, Massachusetts- 
based General Systems Co, was 
forged by Mead's predecessor Mike 
Walsh. A public-prosecutor turned 
corporate-turnaround expert who 
died of brain cancer this year at age 
51, Walsh took over as Tenneco’s 
chief executive in 1991 as losses at 
the company mounted. 

Having already employed Feigen- 
baum ’s General Systems Co consul- 
tancy at Cummins Engine, where 
he had been charged to head off 
competition from quality-oriented 
Japanese companies, and a gain at 
Union Pacific, Walsh was convinced 
that, a quafity^ffart .would. produce 
■ dramatic results at Tenneco. 

Making the group’s six mature 
companies (all in slow-growth 
industries) competitive on the basis 
of lowest operating costs was one of 
the few options available when he 
took over. 

At that time Tenneco was drown- 
ing in S6bn of debt, which repre- 
sented about 70 per cent of its -capi- 
tal; faced a $75Cm, or $5.57 a share, 
loss far the year, and all six of its 
divisions had declining operating 
earning ” The dismal results came 
in spite of income from $7bn in 
asset sales that year. 


Laurie Morse describes how the company managed to cut away $1.5bn in 'failure 7 


Its acquisition in 1985 of JJL Case, 
a form and construction equipment 
company, had proved disastrous. 
High costs, out-of-control invento- 
ries. a cut-throat pricing policy and 
a farm recession threw Case into a 
taflspin almost the minute it was 
acquired. Subsequent efforts to save 
the subsidiary left the other divi- 
sions - an auto components manu- 
facturer , a packaging company, the 
natural gas pipeline, Newport News 
Shipbuilding and Albright and Wil- 
son chemicals - short on capital 
By 1991, Case's portion of the 
company's loss was 5820m, with an 
additional $46lm in restructuring 
charges tagged on. 

Walsh did two things almost 
immediately that have bad a lasting 
effect he brought in his old friend 
Dana Mead, an International Paper 
executive, and put him in charge of 
mending the open wound at C ase. 
He also called the Feigenbaums and 
asked them to join Tenneco's oper- 
ating co mmit tee- This group of top 
officers - including divisional chiofe 
- is responsible far running the 
company on a day-to-day basis. 

Within three months Walsh's 
team had targeted nearly 15,000 jobs 
for redundancy, sold $1.3bn in 
assets, slashed Tenneco’s bloated 
dividend by half, reduced capital 
spending by $350m and issued 
5700m in new equity. It also initi- 
ated the Total Quality Management 
initiative guided by the General 
Systems consultants. 

T he General Systems approach 
to finding so-called “quality 
costs” is more like an ongo- 
ing fitness programme than a crash 
diet, Tenneco managers say. Qual- 
ity costs are defined at Tenneco as 
the price the company pays for 
thing s done wrong, thtng n thrown 
away or returned, or for the ttmn 
that product and people sit waiting 
without generating revenue. 

"We had been doing cost-of-qual- 
ity programmes for some time, and 
thought we were competitive within 
our industry,” says Dick Snell, rihfa f 
of Tenneco Automotive. “Then Val 
[Feigenbaum] came in and broad- 
ened all the categories. By another 
definition our quality costs were a 
respectable 5% per cent of our reve- 
nues, but using Val’s system, we 
found our quality costs were 24 per 
cent” (Tenneco’s overall revenues 
last year were $13Jfan.) 

Cross-functional quality teams 
were formed, cost-cutting goals 
were set for every person in the 
organisation, and progress was 
monitored daily, weekly and 
monthly. The goals, and techniques 
used to meet thpm, were communi- 
cated to employees through “cas- 
cading” training: top executives 
attended classes knowing they 
would have to teach the material to 
their subordinates. Line employees 
became an integral part of the pro- 
cess, including union-represented 
labour. 

Constant feedback from the Gen- 
eral Systems staff kept everyone on 
track. Snell says: "Hie quality ini- 
tiative became visceral to us, people 
could understand It In the automo- 
tive business, where margins are 
narrow, success depends on being 


low-cost producers." 

Using the Feigenbaum brothers' 
processes, Snell’s division looked in 
unusual places for failure costs, and 
found millions of dollars lying on 
the shop floor. Examining the scrap 
from pieces of car exhaust systems 
punched out of sheet metal, 
employee quality tea me valued the 
useless leftover bits at $7m-f8m a 
year. ■ 

“We pat a cross-functional team 
of engineers and designers on the 
problem, and within 18 months they 
had cut the scrap by half," Snell 
says. 

Countless additional savings were 
engineered in other areas of Ten- 
neco in a process that worked from 
the bottom up. When management 
discovered that headquarters staff 
felt immune to the cost-cutting 
goals, Mead sent an ul timatum - no 
exceptions, no excuses. 

Ilene Gordon, vice-president of 
operations, says General Systems 
not only provided a high-tech data- 


base for corporate benchmarking, 
but it also created a means of com- 
municating best practices to all of 
the divisions 1 operations, something 
larking at the disjointed conglomer- 
ate. 

General Systems has Zl staff 
members assisting various Tenneco 
divisions foil time, most with, on- 
site offices. The Fteigenbaums’ ini- 
tial quality review suggested one 
out of every 54 Tenneco earned in 
sales in 1991 was wasted in useless 
costs, for a total of about $2J5bn. 

The company’s primary goal 
became taking out half of those 
costs over a three-year period. Ten- 


neco readied the goal a year ahead 
of schedule. Of the $L6bn saved. 
ffaom has gone to the bottomline in 
profits, and the remainder has bear 
reinvested in the company. Mead 
points out that the costs targets 
were hit in relatively flat markets, 
with nearly flat revenues. 

Val Feigenbaum says Tenneco 
took out costs at about twice the 
rate of any comparable American 
company - the best results of any 
group he has advised in the US, 
Europe or Japan. He 1 attributes the 
success to the unwavering dedica- 
tion of Tenneco’s executives to the 
process. 



&& *** * * - , 


< vV- .v* 




costs 

Still, he says, Tenneco is just get- 
ting started. With quality costs 
whittled to 17 per cent of revenues, 
the goal next year is to reduce such 
costs to 10 per cent, or another 
gLbn. and ultimately to reach world- 
class levels of 5 per cent 

Feigenbaum, whom Mead calls 
his “stealth guru", warned Tenneco 
employees at the Houston meeting 
that the company needs to achieve 
considerable top-line revenue 
growth merely to move out of the 
category of “average" performance. 
“You will be attempting to do some- 
thing only a handful of American 
companies have been able to pull 
off: to continue to bnfid your Ameri- 
can business While exp anding 
throughout the world," he says. 

That challenge also troubles 58- 
year-old Mead who, besides continu- 
ing the cost-cutting programme pio- 
neered by his predecessor, has 
charted a course of global expan- 
sion. His problem is that while Wall 
Street gives the company credit for 
its gynpiignt management systems, 
Tenneco's stock has dipped from 
$5282 a share at year-end to about 
541 recently. 

Operating earnings may be rising 
and successful public offerings of 
newly-profitable JX Case Corp may 
have boosted Tenneco’s cash by 
nearly 5700m, but analysts still 
assign a “conglomerate discount" to 
the group and worry about the 
cyclical nature of Its businesses. 

Mead is consequently under pres- 
sure to make a $lbn acquisition in 
one of the three areas he has identi- 
fied as Tenneco's core businesses: 
automotive parts, packaging and 
natural gas. But he has decided to 
take a conservative approach, rein- 
vesting in domestic packaging 
operations, buying a German auto 
components company (Gillet) to fill 
a gap in that part of the business, 
and acquiring a small US power- 
generating firm to enhance the 
group's natural gas division. 


O ver the long haul he sees 
Tenneco’s future in fast- 
growing emerging markets, 
and each of his company’s six divi- 
sions has foreign expansion plans 
and joint venture prospects. Mean- 
while, Mead intends to get Wall 
Street’s attention by ex tending the 
group's quality programmes, and 
boosting its sub-standard return on 
capital by employing the now popu- 
lar system of “economic value 
added” to measure profitability. His 
Mm is for 15 per cent growth in 
annual operating earnings, with 
analysts expecting Tenneco's 1995 
earnings to reach $4-25 a share. 

The next phase of Tenneco’s 
cost-push will attack an inbred part 
of the company's culture. Its six dis- 
parate divisions have long operated 
as independent companies, rarely 
sharing economies of scale. This 
year it has embarked an a project 
aimed at getting divisions to share 
purchasing, billing, finance, com- 
puter and personnel services, and to 
boost automation. 

Internal studies estimate that 
savings from consolidated adminis- 
trative functions will add about 40 
emits a share to Tenneco's bottom- 
line within two years. 




* ^4 






Out of synch with the Internet 


I attended an internal market 
research briefing the other 
day. All extremely wonderful. 
Just as it started, the FTs mar- 
keting supremo breezed in and sat 
down beside me. 

“Hi,” she said, breathlessly. Tm 
sppiTig a lot of you on the Internet.” 

*I!!! M I replied, with the elo quence 
of a Patrick White character. “????” 
She said: “It is you, surely?” 

I said: “I am not available on the 
Internet Nor will I be available on 
Odyssey, the constell at ion of 13 sat - 
urates that will operate at medium- 
earth orbit - MEO. it’s called - and 
provide simultaneous multi-regional 
communications services to users 
on a global basis by about 1999." 

“WeH" she said. “It sounds like 
you. There is without question a 
person on the Internet Passing 
themselves off as you, with bite of 
your persona. Really most convino- 

“T wandered if she was using “per- 
sona" in the Jungian 
never know with that lot) But her 
Sset me thinking. Why should 


anyone wish to impersonate me on 
the Internet? Is it a good imperson- 
ation? 

I imagine that the impersonator 
has mastered the obvious elements: 
my serenity and cool; my been- 
there-got-the-T-shirt-but-go-on- 
surprise-me act; my cosmopolitan- 
ism; and my humorousness and 
charm. 

But what about the less obvious 
aspects, the ones that must be diffi- 
cult for an impersonator on the 
Internet to grapple with, such as 
my caringness and sharingness? If 
the person impersonating me on the 
Internet would like some tips, they 
should ring me on the telephone 
and speak to the horse’s mouth. Do 
not reverse the charge. 


Belatedly, Z have been scrolling 
through the supplement produced 
by Marketing magazine that 
describes the latest winners in the 
Advertising Effectiveness Awards 
organised by Britain's Institute 


MICHAEL 

THOMPSON-NOEL 



of Practitioners in Advertising. 

These awards focus on convincing 
demonstrations of the commercial 
contribution advertising makes to 
business success, and attracted, this 
year, 74 detailed case histories from 
30 ad agencies on behalf of some of 
Britain's biggest advertisers, includ- 
ing British Airways, BT, Cadbury, 
Procter & Gamble, Unilever, Whit- 
bread and - the big winner - BMW, 
as well as many with for smaller ad 
budgets. 

The advertising business loves 
awards. Almost every night, it 
seems, there is a loud and vulgar 
dinner-do at some London hotel at 
which admen award each other a 


sackful of prizes. At one of these 
bacchanals, several years ago, I 
watched fascinated as the guest 
speaker, Sir James Goldsmith, was 
pelted with bread rolls by some of 
the rowdier revellers on the fringes 
of the ballroom for a speech deemed 
too rightwing for an audience of 
agency long- hairs. 

I thought about throwing a roll 
myself, but was distracted by a 
drunken argument at the press 
table which ended in a face-slap- 
ping. (Goldsmith stood his ground. 
His sang-froid was admirable.) 

It is because the ad business is so 
promiscuous with its prize-givings 
that the IPA’s effectiveness awards 


- based, as they are, on very solid 
case studies - stand out like a 
bishop in a nightclub. They are the 
serious side of advertising. 

Take the Health Education 
Authority’s HTV-Aids prevention 
campaign, which won a silver 
award. You may recall that in its 
early days this campaign was rub- 
bished by some critics for its “apoc- 
alyptic” tone. But the criticism was 
stupid. This campaign, via the BMP 
agency, has done the trick In beep- 
ing HIV and Aids before the public 
gaze. Additionally, condom usage 
among 16-to-34-year-old Britons has 
zipped smartly higher. 

Over the six years to 1993. the 
HEA’s campaign cost £15.4m. On 
the basis that it costs at least 
£30,000 annually to support some- 
one with Aids, it is calculated that 
the campaign has paid for itself 
if it helps to prevent, on average, 
51 cases of EQV infection a 
year. 

What is significant is that the 
prevalence of Aids in Britain had 
dropped from 93 per cent of the 


European Union average in 1984 
to 54 per cent last year. 

Funnily enough, the striking 
thing about advertising is not its 
effectiveness, but its ineffective- 
ness. It is breathtaking how much 
expenditure is wasted. 

One of the reasons is that adver- 
tisers use ma ss wwiia to communi- 
cate with quite small target audi- 
ences. This plunges some adpeople 
into gloom. They wail and slash 
their breasts - forgetting, it would 
seem, that salvation is round the 
comer: that in the information 
superfuture, the fragmentation of 
the media into thousands of gutter- 
ing shards will greatly boast the 
effectiveness of their ads. 

Perhaps you think you are imper- 
vious to advertising. Almost cer- 
tainly you aren't. But the likelihood 
is that zt will become astonishingly 
effective as techniques improve. In 
hundreds of years’ time there mil 
still be prize-giving bacchanals in 
ritzy London hotels - and long- 
hairs hurling rolls, or so 1 shouldn't 
wonder. 



PIONEERS AND . . . 
PROPHETS ... 

Tom Bums 

Few managers around the world ■ 
have beard of Tom Bums, a 
farmer professor of sociology at . 
Edinburgh University. Yet ha 
created a string of concepts - 
which have had an incre9smgSy v 
powerful international influence 
since he retired 13 years ago. 

They have improved western 

management practice 

immeas ura b ly - a nd made 
millionaires of several famous - 
American pundits who 
embroidered them. . 

Borns, now 8Z. has written a 
new preface for The 
Management qf hmwoa&m, the ; 
pathfinding 1961 book which he 
wrote with GJH. Stalker, a. v 
psychologist. & has been 
reissued by Oxford University . 
Press with a justifiably fulsome ' 
endorsement from Warren 
Bentos, one of America's ' 
best-known leadership experts. . 
He describes it as “a major ”■ 
classic” which was “way ahead . 
of its time” when published. 

Written in refreshingly plain 
English, it is a riveting read'and \ 
b rims with Insight after insight. 
Yrt ft was based heavjfr o» a 
. relatively modest study of the 
human and orioarfsational ■ 
difficulties which established . ■ 


when, they tried to develop and 
make electronic products. - 

■. The most significant ' 

breakthrough concept, ranch ' \ 
repeated shake, was that 
machine imreahcracies of the :: 
type advocated by Max Weber' ; J 
(see last week’s coftxms^are far 
less effective at dealing with . . 
change and Instability than ... 
what Burns and Stalker 
christened “organJUf forms of 
or ganisation .' " 

• CloselyaUied newcomtepts, 
allof them farsighted, were: 

• That innovatiyeaigaiti- 
. satioos.are* “n et wor k s”, in 

. which control, authority and 
communication flow hut' from 
the top, but to and from the . 
greatest loci of expertise and 
knowledge within the . 
organisation. 

• That individual behaviour in 

an organic organisation is 
influenced more by a perceived 
comreranity of interest With it ; 
than by any contractual - i : 

relationship, fa other words, tq 
use today's jargon, “stared , 
visjan and values” art Vital, j ' 

• That lateral communication ■ 
between people of different 

• rank, resembling consultation • 
mere than command, is more 
important than communication - 
up and down toe hierarchy. 

• That the most effective way. " 


is timmgh multt-ftmctional 
teeins; led hy the same manager 
from initial concept through to ■ 
production and feumeb. 

‘ • That teams of different ' 
specialists - far instance from 
design^ engineering and .- 
production - operatefar more . 
effectively if they “Jive dose 
together” - or.to use modern 
jargon, ate "co-located”. 

Asso often when : 
breaktfcrongh thinking ' 
originates fa Europe; few - , ’ 
American writers have given •' 
Barns and Stalker the enormous 
credit they deserve; Apart fncrm 
Bentos, one of the exceptions is" 
David Nadler, wtu>sei9&2 book 
Organisational Architecture has 
become one of the most ' • 

tnAmmljM flrrafy gfrfl nf aH jj liP .' 

hUerconnected comptezities of ; 
.how modem business 
Organisations operate - or 
should do so. 


on bookshelves On both sides of 
the Atlantic and farther afield. ~ ■ 

- Christopher Lorenz 










m 


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8 


MONDAY NOVEMBER 28 1994 


BUSINESS TRAVEL 


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| Literary snapshot 

A galaxy of writers, including 
seven Nobel laureates, 
ptifehed a literary snapshot of 
the work! last week with diaries 
of a day plucked at random; 
Aprt 29 1994. Tlw French 
magazine Ls Nouve! 

Observateur compiled accounts 

by 240 writers and cafed them 
A Day in the World. Colombia’s 
Gabriel Garcia Marquez says he 
was woken on Apr8 29 by a 
telephone cat) to his hotel room 
and a worrBn*s vole© saying; 
“Fefipe expects you for darner at 
eight" A frequent traveler, the 
writer checked his location by 

consulting the sign he had 

posted by his bedside toe right 
before; V am h Madrid' His 
efrmer host was Spanish prkne 
‘ minister FeGpe GoraStez. 


Tokyo’s Euro-hotel 

Business 
M fj travellers 
to i t ir ed of 
not . Japan’s <fcab 
iairt * 1970s-style 
— "" i— J i nter na tional 
hotels may And comfort ai 
the Tokyo Westin in Yetaisu 
Garden Place, the shopping, 
restaurant and office 
complex which opened in 
central Tokyo last month, 
reports EmBro Terazono* 
Done up In “neo-classical 
European style 0 , it Is one of 
the few hotels in Tokyo 
with any character. UntH 
next February, prices in the 
hotel start from Y19£Q0 
per person, hsdu&ig 
breakfast. After that; from 
¥28,000 per person. 


Jamaica safer than US 

Orne-weay Jamaca e toutfog 
the results of a raw study which 
found that visitore are at higher 
risk in various US d&es-than in 
Jamaica A study by Richard 
Bennett of America! University, 
Washington, fomd that visitors 
are three times more Bkaiy to be 
kHied in the US c apita? than, in 
Jamaica. Using 1992 statistic s , 
toe study compared 
Washington, Olando, Main 
and New York with toe ' 
Jamaica! resorts of Ocho ffes, 
Montego Bay, Nejyil and Fort 
Antonio. It was fowid that • 
Jamaca’s resorts have a 
corrtaned murder rate of 22-58 
per 100,000, compared with 
75.21 per 100,000 for 
Washington and 37.89 per 
100,000 for Miami. 


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Health in the air: tablets might control the jet-lag, but BA aims to save passengers from themselves 

^ -w-». i „ .!.».» might haw 

Rewind your 
body clock 

A s a regular traveller and It was not until last summer that I 
news junkie, I am an avid came across something which really 
Can of Cable News Network seems to attack the causes of the 
and the BBC World Ser- problem. Called melatonin, it comes 


A s a regular traveller and 
news junkie, 1 am an avid 
/an of Cable News Network 
and the BBC World Ser- 
vice. Usually, the first thing I 
do on arriving in a hotel room 
after a long flight is switch on 
the television and catch np with 
what has happened while I was air- 
borne. 

The problems begin when watch- 
ing television becomes an enforced 
alternative to sleep. Flipping 
through the channels while sitting 
bolt upright in an unfamiliar bed in 
the small hours is not my idea of a 
good time. Battling against a wall 
of fatigue the next day is even 
worse. 

Over the years, such torment has 
led me to search systematically for 
a jet-lag cure that really works. 
Apart from regimes which involve 
fasting for several days before a 
flight - a remedy as painful as the 
affliction - I think I have tried 
almost everything. 

Going easy on food and alcohol 
and drinking plenty of mineral 
water in-flight helps a bit So does 
Dioralyte, a rehydrator which 
restores body fluids removed by 
cabin pressurisation. Arnica, a hom- 
oepathic treatment for shock, can 
also make a difference. Camomile 
tea induces bed-time drowsiness 
without the morning-after effects of 
sleeping tablets. 

But all are only partial solutions. 


It was not until last summer that I 
came across something which really 
seems to attack the causes of the 
problem. Called melatonin, it comes 
in the form of tablets which you 
dissolve under the tongue at bed- 
time, starting three days before a 
flight and continuing for three days 
after. 

1 have used melatonin so far on 
two trips to the for east and one to 
the US. It has done the trick each 
time, enabling me to sleep soundly 
for several hours during the flight 
and adjust quickly to the local time- 
zone on arrival. So much so that 
after a recent 19-hour journey from 
Seoul via Hong Kong, which landed 
at Heathrow at 5.30am. I was able to 
enjoy a friend’s birthday party that 
evening and do a frill day's work 
the next day. 


W hat is melatonin’s 
secret? According to 
Clive Cookson. the 
FTs science editor, it 
is a natural substance and its 
efficacy is scientifically based. 
It works by supplementing the 
hormone which sets the human 
body clock and is normally pro- 
duced only during hours of dark- 
ness. 

Melatonin is sold by health stores 
and is not a registered pharmaceuti- 
cal. It has therefore not undergone 
extensive laboratory testing. As one 
of its first guinea pigs on the FT, 



I am being closely monitored by 
sceptical colleagues waiting for 
me to turn green or suddenly go 
bald. 

So far. I am happy to report, 
there has been no evidence of 
side-effects. It is also reassuring 
that melatonin is widely used by 
scientific researchers into jet-lag. 
Anyway, any adverse symptoms 


EROt* l £y 


would have to be pretty bad 
to equal the ordeal of severe 
jet-lag. 

• Melatonin is available from 
Revital Health Stores. 3a The Colon- 
nades. 1231 151 Buckingham Palace 
Road, London SW1 W9RZ 

Guy de Jonquieres 


B usiness travellers on stress- 
ful long-haul flights are gen- 
erally forced to work out for 
themselves how to deal with the 
crapulous exhaustion that results 
from many hours in the air with 
little diversion other than 
food, drink and a flickering TV 
screen. 

But do-it-yourself regimes can be 
useless. Avoiding excess and keep- 
ing to the path of virtue so that you 
get off your aircraft feeling half-way 
h uman is nrrf only a hit-and-miss 
affair but calls for the sort of self- 
restraint that few possess. 

Which is why British Airways 
launched its Well-Being in the Air 
scheme last year to try to save pas- 
sengers from themselves. The 
scheme was an umbrella concept 

which tnnlr in . inter ntin »hstinmw» 

from alcohol and red meat, much 
exercise, organised rest, and sprays 
and gels to stop the skin from dry- 
ing out Its aim was modest “To 
reduce the effects of flying and help 
you arrive in better shape." 

Initially the scheme was only a 
partial success. As a BA spokesman 
puts it “Some of the exercises were 
a little vigorous, and people tended 
to end up waving their arms about 
madly. Some were even unlucky 
immig h to clout their neighbours." 

As for the dietary restrictions: 
"The special well-being menu was 
based on the yin-yang principle 
which, in reality, meant it was 
heavily vegetarian - at times, posi- 
tively vegan - which didn’t suit 
everyone.” Nor was everyone 
impressed by the relaxation 
tape. 

So BA tried again th is year, with 
an improved programme that 
includes a tub of rehydration gel to 
neutralise cabin air. a rose water 
ferial spray to relieve dry skin , and 


Rub your 
nose, hook 
a finger in 
your ear... 

a soothing eye compress to fre shen 
tired and puffy eyes. 

The programme also boasts a new 
relaxation tape with a commentary 
by psychologist Dr A vie Sigman. 
And the airline suggests that occa- 
sionally you bring your knees up to 
your chest five times, hook the tips 
of your fingers in your ears and 
lean your head over, and rotate the 

'People tended to 
wave their arms 
about madly anJ 
some clouted their 
neighbours’ 


tip of your nose with the palm of 

yOUT hand 

Is anyone taking advantage of 
BA’s thoughtfulness? “Well, if «na 
passenger does it, quite a lot of 
them start to do it,” says BA. No 
figures have been collected to find 
out how popular the scheme has 
become, but there have been hun- 
dreds of requests for the Well-Being 
brochure. “We even got a call from 
the FBI, asking if they could use 
our exercise prog ramme for their 
new recruits." 

This may be an idea whose tim« 
has yet to come. A mini-poll of 


those airlines which might have 
fre ftu expected to provide s ome t hi n g 
ff fnuiar - such as Swissair, United 
Airways, Cathay Pacific and Virgin 
Atlantic (which offers aromather- 
apy on the ground) - produced 
denials or obfuscation. 

Only Japan Airlines seemed inter- 
ested in offering a comparable ser 
vice. It does not offer a complete 
programme but will give you an 
in-flight health drink containing 
royal jelly and kiwi fruit juice, a 
honeycomb face-mask which helps 
prevent dehydration in the nasal 
passages, an audio rel a xatio n tape, 
and a list of in-seat exercises (Less 
strenuous than BA’s). 

The feet is that well-being pro- 
grammes win remain a rarity so 
long as competitive advantage 
depends on being seen to offer the 
traveller more, not less. When you 
fymrf/ter the airlines' efforts to pro- 
mote in-flight consumption, it is not 
surprising that most passengers - 
no matter how experienced - will 
tend to capitulate and eat and drink 
what is bad for tham the moment it 
appears on their laps. 

On a long flight self-denial is of 
only limited help in overcoming jet- 
lag, the most serious physiological 
drawback of long-distance flying. 
No well-being programme can com- 
pensate fhr (Ids massive derange- 
ment of your internal clock- Nor. 
say some, can anything else, includ- 
ing such recently tested remedies as 
Chinese acupressure, intense-light 
regimes and th e hormone melatonin 
(see accompanying story). 

If you are going to feel fairly 
dreadful whatever you do on an air- 
craft, you might as well indulge 
yourself 

Charles Jennings 


. Relax in the world’s most 






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Salford hits superhighway. . . 

Stephanie Flanders explains how the city plans' to make the most of broadband cable networks 

Drobablv tums'te Wp at first. 


T hink of the path* 
breakers in the 
information revolu- 
tion, and your mind 
probably turns to 
business moguls like Bill Gates 
or techno-wizards at the Mas- 
sachusetts Institute of Technol- 
ogy. Few would add Salford 
City police force to the list Yet 
the partners in a new venture 
in north-west England are aim- 
ing to do just that. 

Nynex CableComms. one of 
the three largest cable opera- 
tors in the UK, is teaming up 
with Salford's city council and 
universities to make the area, 
near Manchester, a test-bed for 
exploring the interactive 
potential of broadband cable 
networks in the provision of 
local services. 

They are not there yet But 
the project is already helping 
to overturn some of the 
received wisdom about where 
the first lanes on the informa- 
tion superhighway might lead. 

The American-owned cable 
operator, the licensed cable 
provider for the region, has 
spent the past six months 
agreeing the terms of the 
experiment with local partners. 
These are: the City of Salford, 
the University of Salford and 
University College Salford 
(which will merge into a single 
university in the middle of 
1996). 

Provisionally entitled “Gemi- 
Sys MOO”, the plan is that the 
three parties will collaborate in 
setting up local experimental 
broadband services in a range 
of public-sector settings. 
“We're not talking about the 
traditional video-on-demand 
type stuff,” says John 
Edwards, Nynex’s regional 
director in Salford. “The five 
areas are crime prevention, 
community service, health, 
education and tr aining and 
local business development" 
The choice of sectors 
emerged from discussions with 
public servants from all over 
the city, held earlier this year. 
Experiments in the US with a 
Massachusetts-based interac- 
tive wiPiKning channel and var- 
ious distance-learning pro- 
grammes have already shown 
the scope for applying the new 
fiber-optic technology to health 
and education. But crime pre- 
vention? 

"The acting chief superinten- 
dent of police was at one of the . 
sessions,'' explains Jane Bent- 
ley, one of the project co-ordi- 


nators at University College 
Salford. “Nynex gave a quick 
technical demonstration, and 
that triggered a lot of ideas. 
We were worried at first, 
because the policeman was the 
only one not saying anything. 
But right at the end, he sud- 
denly ramp out with a whole 
list of ways he could use the 
network: everything from 
sending out high-quality iden- 
tikit images to transmitting 
DNA and other records to 
other stations.” 

It will be several years before 
some of the more ambitious 
ideas are t ransla ted into real- 
ity, if ever. But the partners 
are hoping to start early pilot 
projects in most, if not all. of 
the five areas by the start of 
next year 

“There’s a number of oppor- 
tunities that I think could be 
exploited pretty readily," says 
John Willis, chief executive of 
the city of Salford. "For exam- 
ple, we can’t afford to staff as 
many council information cen- 
tres as we'd like. I think we 
could move fairly quickly 
towards using the network to 
supply information about local 
services more efficiently. We're 
talking months, rather than 
years." 

For their part the two uni- 
versities are planning to use 
the project to build on their 
established interest in develop- 
ing commercial and educa- 
tional applications for the new 
information technologies. 

"The Open University, as 
currently conceived, has taken 
current technology about as 
Car as if s possible to go,” says 
John Squires, principal of Uni- 
versity College Salford. "What 
we're talking about here, 
among other things, is the pos- 
sibility for a kind of Open Uni- 
versity, Mark 2, that exploits 
the benefits of interactivity in 
an accessible and exciting 
way." 

For the cable operator, 
which expects to invest around 
£20m in the project, it is 
clearly an opportunity to foster 
goodwill among the local com- 
munity. This can be in short 
supply for a company that 
spends most of its time digging 
up streets. But the company 
also sees a long-run commer- 
cial rationale. 

John Edwards, regional man- 
ager for Nynex, admits that the 
company’s earliest . encounters 
with load councils are usually 
to discuss holes in the road 









John Edwards, regional manager for Nynex: you try to offer the carrot of the broadband network 


and burst water pipes. "You 
try to offer them the carrot of 
the broadband network that 
will follow. Initially, they’re 
not that interested: they want 
to know why the roads are in 
such a mess. But more recently 
we’ve had some very positive 
discussions.” 


C able operators else- 
where in Britain 
have similarly 
tried to foster good 
community rela- 
tions within their franchise 
areas. "The geographical 
nature of the franchise system 
means that the operators are 
very locally focused", says 
Mall Hickey, press spokesmen 
for the Cable Communications 
Association. "They want to 
establish themselves as good 
corporate citizens." 

This has led a number of 
companies to build up links 
with local schools and other 
public bodies. In Croydon, for 
example. United Artists Com- 
munications has now cabled 
up around 85 per cent of the 
local secondary schools, at 
heavily discounted prices. The 
company is now working with 
local teachers to see how 
scheduled cable programmes 
can help in teaphtep different 
parts of the curricula. 

By and large, such projects 
have tended to look at how 


. . . but drivers 
face bumpy ride 

T raffic is beginning StlldV highlights f 1 * 1 - in ?? t ! ltion 1 

to build on the . found that away 

European informs- LLTSt SlOnmSll III time could be redi 

a UK multimedia 


0 *™ 


T raffic is beginning 
to build on the 
European informa- 
tion superhighway. 
Some vehicles are 
still experimental. The Unom 
project (Users, Network Opera- 
tors and Manufacturers), for 
example, has Matra Ericsson 
Telecom as prime contractor, 
an d aims to bring ba nking 
advice and facilities to custom- 
ers through self-service kiosks. 
It is funded by the EITs 
advanced telecommunications, 
r es earch programme. 

Others are run-in and carry- 
ing passengers. ■ In Denmark, 
Home vision, now three years 
old, is distributing multimedia 
information - text together 
with video pictures - about 
residential properties for sale 
over its network. • 

In the UK, Wigwam Informa- 
tion is providing a similar ser- 
vice ami has five trial sites, 

including «n SLXS 
owned by the TSB high street 
bank. The criminal element 
has not been slow to take 
advantage of these services, 
however. In Sweden video 
footage of the interior of a 
house sent over the w*wo rk 
was used to plan a 
These examples of current 
devek^nto on the infoima- 

STsuperhighwaymju^by 

Analvsvs. a Cambridge-oasea 

telecommunications 

£ncy to underline its convto 
tionthat multimedia is hereto 
stay driven by jp 0W “J? 
demand for 

entertainment and tne 
S^t^computem and com- 
munications. .pus that 
In a new report it warn* ^ 

existing ^^colar, it 

bumpy nde. 

sees British J^Tearlier 
dons' aimomicem trialfl of 
this month of nmrise 

ping and banking first 
existing net"°"L : Multimedia 

skirmish in a UK muiuu— 

war ' -i* for the winner 
The spoils "According 
will be considerab jncum- 
to Analysys-* ^JJors, this 

bent telecoms, op^w ^ pre - 

changing envfro^n, ^ 
seats an gen- 

hsh leadershipjn “ e te[eComs 

^Sation of broadband 


Study highlights 
first skirmish in 
a UK multimedia 
war. Alan Cane 
reports 

provision in the local loop will 
be the key, the first operator to 
reach the home or smaH/medi- 
um-sized enterprise with 
affordable broadband access 
will be in an unassailable posi- 
tion for many years to come." 

Broadband refers to the net- 
work capacity needed to trans- 
mit voice, text and video inter- 
actively over 

telecommunications lines. The 
local loop is the connection 
between a telephone subscrib- 
er's home and the telephone 
exchange. In Britain, 8T is for- 
bidden from broadcasting 
entertainment over its network 
under government rules that 
will not be reviewed until 200L 
This is to give the fledgling 
cable companies the opportu- 
nity to establish themse lves in 
the market place. However, 
cable companies are allowed to 
offer voice telephone services, 
and Analysys says that in the 
short term these services offer 
lower risk than multimedia: 
“Demand is well established 
and equipment to support 
them is readily available at low 
cost" 

It goes on to warn, however 
“Cable TV operators should 
neither ignore the long-term 
potential of multimedia, nor 
delay so long that they lose 
their current advantage.” 


C hoosing the criti- 
cal point at which 
to enter the con- 
flict and what 
resources to 
employ will remain difficult 
questions for the big players. 
Despite a sharp decline in the 
cost of technology, building a 
network to support multimedia 
services still requires substan- 
tial investment. “Network 
operators w31 need to be confi- 
dent that there is scope for 
adequate returns," Analysys 
says, pointing out that in busi- 
ness’ ti may be difficult to jus- 
tify investment in multimedia 
services qualitatively. 

“A recent trial of internal 
video-conferencing for a finan- 


cial institution in London 
found that away-from-desk 
time could be reduced by 60 
per cent But real gains in pro- 
ductivity are difficult to isolate 
from other factors influencing 
performance," says Analysys. 
Residential users, on the other 
hand, may be prepared to pay 
for a broad range of services 
through basic subscriptions 
and additional premium pay- 
ments for special services. 

Analysys argues that these 
charges are unlikely to meet 
the cost of providing the ser- 
vice and that part of the 
income for the network opera- 
tor or service provider will 
have to come from savings in 
overheads. 

A retailer, for example, could 
make substantial savings by 
cutting down on retail prem- 
ises and warehousing. Elec- 
tronic payment for goods could 
eliminate much of the adminis- 
tration costs of traditional pay- 
ment systems. Advertising is 
another potential source of rev- 
enue, although it is by no 
means clear how it might oper- 
ate on the information super- 
highway. Subscribers might 
pay a premium for accepting 
material without advertising or 
receive a discount for accept- 
ing it 

Analysys says the advent of 
multimedia services will bring 
fundamental reforms in 
long-distance telecoms tariffs 
for both residential and busi- 
ness customers, pointing out 
that existing costs would put. 
for example, videoon-demknd 
well beyond the pocket of the 
average subscriber. 

It will also have profound 
consequences for the regula- 
tion of telecoms services 
throughout Europe. “There is a 
great deal of ambiguity in 
existing regulatory frame- 
works which must be resolved 
quickly if early growth is to be 
encouraged., .Europe must cre- 
ate a uniform environment 
across different member states 
if it is to realise the fun poten- 
tial of networked multimedia,” 
says Analysys. There will be 
no roam, in other words, for 
drivers on the wrong side of 
the superirighway. 

Multimedia in Telecoms by 
Simon Norris and Susan AbleU, 
Analysys Publications, Si Giles 
Court, 24 Castle Street, Cam- 
bridge, CB3 0AJ, £695. 


schools and others might take 
advantage of cable services 
that already exist. But the 
commercial - and technologi- 
cal - bottom line to all the 
civic-worthiness is the need to 
foster demand for fiber-optic 
services which have yet to be 
Invented 

The UK cable industry plans 
to invest around £ 10 bn by the 
end of the decade laying cable 
networks nationwide. At pres- 
ent. cable providers can earn a 
return on this investment 
offering enter tainment a ban- 
ned segment of the market Cor 
British Telecom, as well as 
standard telephone services. 
But the ban will be lifted 
sooner or later - sooner, if 
BTs lobbying is successful. 

By then. BT is likely to be 


able to offer popular video-on- 
demand services over its exist- 
ing telephone network. All the 
cable companies would like to 
see evidence that they will be 
able to earn a return from ser- 
vices which are only possible 
on their (higher-capacity) net- 
works. 

Nynex has now laid cable for 
about one fifth of the 2.5m 
homes, and 150,000 bumnesses, 
in its 17 franchise areas. Sal- 
ford is a little further devel- 
oped: the company hopes to 
have 40 per rant of the local 
network laid by the end of next 
year. 

It will be a while before there 
Is a comprehensive network 
nationwide, so most of the first 
practical demonstrations will 
necessarily be geographically 



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confined. But the logic of the 
Salford project is that finding 
ways to let people interact, 
locally, is not merely a stop- 
gap to them interacting with 
the world outside. 

There are two reasons for 
this. First, local public agen- 
cies could be a fertile source of 
potential fiber-optic applica- 
tions in their own right, 
responsible for a wide range of 
information and activities to 
which the new technology 
could usefully be applied. 

The second reason is that it 
is not only suppliers of new 
technology that must walk 
before they can run. The devel- 
opment of applications must, 
to some extent, be demand-led. 
And consumers businesses 
are mare likely to think of new 
products to demand if they 
have already seen the network 
fill a local niche. 

“No-one is denying that 
broadband networks can allow 
you to be talking to the world”, 
says Carl Grose, executive 
director of Nynex for the 
north-west. "But when it 
comes down to it, you're still 
talking about people. We're not 
going to make money offering 
facilities that are somehow 
‘worldwide’, but are actually 
anonymous at a local level" 

Critics bemoan the lack of a 
"big picture” in the govern- 
ment’s piecemeal approach to 
recabling the UK for the inter- 
active era, since it could mean 
that some parts of the country 
get left behind. 

Yet the Salford project indi- 
cates that, for all the worries 
about universal coverage, some 
individual communities could 
benefit from the rather limited 
horizons of the companies lay- 
ing cable in their area. Indeed, 
Salford’s first trip down the 
information superhighway 
may be just round the corner. 


Magazines 
score big 
with factor X 


By Victoria Griffith 

A new breed of magwginpg is 
making a splash in the US. 
So-called Generation X 
publications with 

self-consciously 
Tmraiwpntinnal covers and 
enigmatic names like Who 
Cares. Bikini, Wired and Monk, 
are the latest trend In 
magazine publishing. They are 
aimed at - and usually 
published by - the 
15-toSO-yearolds who comprise 
Generation X, and their 
numbers are pj q wivHtip fast. 
Among this year’s entrants: 
Swing, Access and Might. 

The alatit of the 
offers a new way to court a 
demographic segment that 
the entertainment and 
advertising industries have 
found elusive and difficult to 


“They allow advertisers to 
appeal to young trend-setters,” 
says Harvey Goldhersz, 
assistant media director and 
Generation X guru at the Grey 
Advertizing agency in New 
York. 

Early Generation X 
magazines were launched with 
low budgets and low 
circulations, but the latest 
versions have more financial 
beef behind them. The 
ma gazines will not reveal the 
giw> of their funding, but 
sawier ones like Swing. Wired 
and Axeess are sleek and laden 
with advertising. Swing, which 
bowed in last month, 
reportedly sold a respectable 
200,000-plus copies of its first 
issue. 

Magazines like this can be a 
god-sand, says Goldhersz. 


because they allow advertisers 
"to tap int-n the mindset of 
Generation X and keep 
up with what’s hot and what's 
not" 

The term Generation X was 
coined because of the difficulty 
of labelling today's 
1 8- to-30-y ear-olds. Unlike the 
baby boomers of the 1970s and 
the "me” generation of the 
1980s, Generation X seems to 
older observers to lack 
strong identifying 
characteristics. 

The magaz i nes ' 1 editorial 
content offers some clues to 
the vagaries of today’s youth. 
Unconventionality is a key 
feature. James Monk, editor of 
Monk magazine, for instance, 
leaves messages calling 
himself “The Mad Monk" and 
can only be reached at various 
motels across the US. 

Many of the magazines place 
as much emphasis on 
technology as on clothes. They 
interview bosses of multimedia 
and software firms, and run 
articles on microchips, the 
Internet and virtual reality. 
Most of them attract a great 
deal of technology advertising, 
along with more predictable 
ads for clo thing , music and 
enter tainment Who Cares 
shows yet another side of 
Generation X: it is 
targeted at young volunteer 
workers. 

The magazines may not 
work for edL advertisers, some 
of which may well stick to 
tried-and-tnie outlets like MTV 
and Sports Illustrated. But 
many advertisers seem happy 
to have found a new way of 

ram miming ting with SUCh 8 

huge number of consumers. 



CONTRACTS & TENDERS 


COUNCIL OF EUROPE 
SOCIAL DEVELOPMENT FUND 


NOTICE OF PRE-QUALIFICATION FOR AN EX-POST 
EVALUATION OF PROTECTS 

The Council of Europe Social Development Fund is an intezgovemmental financial 
institution with 23 member countries, working in the field of social development 
and aid to refugees. 

As part of its job of following up and evaluating the projects it finances, the Social 
Development Fund is beginning an evaluation survey of projects financed and . 
completed between 1985 and 1993. This project, to be carried out in the countries 
where the projects were financed, will mainly concern how the loans were used and 
whether the scheduled objectives were reached. 

Companies with their head offices in the Fund's member countries which are 
interested in carrying out this evaluation project are asked to send a written pre- 
qualification request, specifying: 

• their status, human resources and general skills; 

■ their international experience, preferably acquired in working with 
intergovernmental financial institutions; 

• their experience in ex-post follow-up and evaluation of projects, especially in the 
fields of intervention of the Social Development Fund (give some recent 
examples of evaluation projects); 

• their ability to work in several European languages and write reports in French 
and/or English. 

Pre-qualification requests must be received by the Social Development Fund no 
later than December 28, 1991 They should be addressed to: 

Attn: Mr. Nicola Catalano 

COUNCIL OF EUROPE SOCIAL DEVELOPMENT FUND 
55, avenue Kl£ber 
75784 PARIS Cedex 16 
France 

Tel (33.1) 47.55.55.00 
Fax: (33.1) 47S5.0Z38 

Companies interested in the project may contact Mr. Catalano for any further 
information they may require 



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10 







Germany’s man of tomorrow 
and his problems of today 

Christopher Parkes looks at the challenge facing Jurgen Riittgers, 
recently appointed as the country’s first minister for the future 



F reshly installed as Germany's 
first minis ter for the future, 
JQrgen Rdttgers faces a busy 
time dealing with some mat- 
ters from the past before he 
can hope to look very far ahead. 

One job in particular - the establish- 
ment of a national academy of sciences 
- seems tailored to provide him with 
the experience he will need when he 
gets round to dealing with the responsi- 
bilities loaded on to his 43-year-old 
shoulders by Chancellor Helmut KohL 
Ruttgers, head of a combined super- 
ministry in charge of education, sci- 
ence, technology and research policies, 
has already been warned by friendly 
observers that the federal (some might 
say tribal) make-up of the German sci- 
entific community provides it with an 
in-built resistance to centralisation snH 
political tampering. 

But Bonn has decreed that a national 
body is needed to complement and pro- 
vide a point of contact with similar 
organisations in other indust rialis ed 
countries. During ROttgers’ maiden 
ministerial speech on Friday, he won 
promises of support from the opposition 
Social Democrats, despite lingering sus- 
picions that the academy of sciences 
might torn out to be a pure propaganda 
factory. 

It is now up to Riittgers to build the 
necessary consensus, which win require 
him to test in an alien environment the 
skills of persuasion which he has hith- 
erto only applied in smoke-filled back 
rooms in the Bundestag. 

The new minister was formerly chief 
whip to Chancellor Kohl's Christian 
Democratic Union and its Bavarian sis- 
ter party, the Christian Social Union, 
and respected among conservatives and 
Social Democrat opponents alike as a 
thoughtful and persuasive politician. 

Since he first took his seat in the 
Bundestag in 1987, he appears to have 
risen through the upper parliamentary 
atmosphere without creating any of the 
enemies customarily found smouldering 
in a shooting star's wake. He endeared 
hims elf to his party leadership by tak- 
ing on complex and apparently thank- 
less assignments, such as the challenge 
of an esoteric and decade-old inquiry 
into how to monitor and assess the 
impact of new technologies on society. 

It was a process initially regarded 
with deep suspicion by the liberal Free 
Democrats, the junior coalition part- 
ners, and the opposition. But Ruttgers 
won through, and now the Bundestag 


has a modest advisory bureau: not 
because the government wanted it, but 
because Ruttgers apparently came to 
believe in the concept. 

“Those who want to take advantage 
of the liberating potential of technology 
must improve their understanding of 
the short- and long-term effects and 
side-effects of [related] political deci- 
sions." he was to comment later. 

As that quotation suggests. RQttgers, 
described as using his brain more than 
bis elbows while in the chief whip’s job. 
may not be the snappiest words mi th in 
the Bundestag. But his adherence to 
such principles is likely to make him 
more than a match for the Greens and 
other outright techno-antagonists in 
parliament. 


He returned to the theme again on 
Friday when he repeated a previous 
acknowledgement that there were lim- 
its scientific progress could not over- 
step, particularly where human dignity 
might be impeached. But the question 
of whether mankind was already capa- 
ble of doing everything it had to be able 
to do to handle hunger, unemployment, 
sickness and environmental damage 
demanded an answer, he said. 

Principles aside, the minister of the 
future also showed himself a master of 
the art of making a promise and then 
suggesting that its F ulfilm ent might not 
be terribly important 

Spending on future-oriented projects 
would be increased, he proclaimed. But 
money was not the real issue. “Innova- 


tion starts in the head," he said, and 
German minds were more in need of 
change and innovation than any depart- 
mental budget. The Jeremiahs and 
doubters had the upper hand, he added. 

He will find no shortage of such types 
in regional educational authorities, nor 
among the autonomy-minded scientific 
research institutes, where the minister 
Is charged with balancing the various 
and often conflicting requirements of 
vested interests in local, regional and 
federal government, industry and aca- 
demia. 

One of the chancellor’s favourite pro- 
jects. for example, is to reduce the time 
students spend at university before 
entering work. As the chancellor enjoys 
saying. Germany cannot afford to edu- 
cate people up to the age of 30 and then 
allow them to start drawing retirement 
pensions at 60. 

Industry, meanwhile, demands that 
university study should be funded by 
loans rather than grants, and complains 
that highly-specialised German college 
courses turn out too few of the busi- 
ness-minded. broadly-based graduates 
increasingly to be found on the payrolls 
of international competitors. 

A t the same time, the busi- 
ness world demands that 
"excessive" expenditure on 
basic research in govern- 
ment-funded institutes 
should be diverted into work more rele- 
vant to the needs of an economy which 
has a structural deficit in innovation. 
According to the electronics industry 
association. ZVEI, only 50 per cent of 
basic research projects in Germany 
have any economic relevance. 

The dislocation of the relationship 
between business and government, the 
responsibility for which many lay at ! 
the door of a neglectful Chancellor Kohl 1 
himself, has been painfully exposed by 
the wrench of recession. 

The coalition’s ideas for an academy 
of science and a research, technology 
and innovation council as a central 
clearing house for political, business 
and scientific ideas, is intended as part 
of the cure for the xneffiect 
Drafting grand ideas and even lead- ! 
ing the intended participants to the , 
meeting table is the easy part Planting , 
the idea that innovation might start in 
their heads is the real job facing the 1 
minister of the future, who will be 
assured of a substantial future of his 
own if he pulls it off 



Pierson to sit 
tight in Airbus 
cockpit 

There were rumours earlier 
this year that Jean Pierson, 
chief executive of Airbus 
Industrie, was going to eject 
from the cockpit of the world's 
second biggest aircraft maker, 
writes John Ridding. However, 
the decision to ask him to stay 
on for another three years 
suggests that Mr Airbus may 
at last be able to push through 
a long overdue shift to a less 
unwieldy corporate structure. 

By extending Pierson’s 
contract until March 1988, 
shareholders of the four-nation 
aerospace consortium have 
opted not to change both the 
chairman and chief executive 
of Airbus in the same year. 
Daimler-Benz <»Hatrtnaw Edzard 
Reuter took over as chairman 
of the Airbus supervisory 
board last March and the 
renewal of Pierson's contract 
not only reduces the risk of 
turbulence in the boardroom 
but main tains the balance 
between French and German 
interests in the consortium. 
Aerospatiale of France and 
Dasa of Germany both hold a 
37 3 per cent stake, while 
British Aerospace owns 20 per 
cent and Spam’s Casa owns 42 
percent 

The maintenance of the 

Franco-German division of the 
top two positions was not a 
foregone conclusion. Germany, 
through Dasa, has been 
seeking to extend its influence 
in the day-to-day running of 
the company and had 
considered a reshuffle of the 

managemen t 

British Aerospace, Dasa and 
Pierson have argued that a 
shift towards the status of an 
ordinary limited company Is 
increasingly necessary. It 
would increase the 
transparency of the 
organisation and promote 
greater efficiency. Airbus is 
not obliged to publish audited 
accounts and acts more as a 


marketing consortium ■ whose 
members own the group’s 


■ manufacturing contracts. Now 
that the 54-year did Pierson 
has been reconfirmed, erne of 
his first tasks may be to push 
through a reform of Airbus’s 
legal status as a Gffl.or ■ .; 

groupement d'in&r&t 
eamomiquB. 

Such a change would help 
Pierson in his principal -■ 
challenge- dosing the gap on 
Boeing. Ih tins respect'1994 has 
started rather well, with 
Airbus winning qrdeasfor69 
new aircraft, or 55 per cent qf 

the market for aircraft of more. 

than 100 seats. As the , 
consortium admits, however/ 
this is a short time by the 
standards of the airline 
industry. It is also a short time 

in terms of Pierson’s new 

tenure. 

Riverso: mutual 
benefit to 
Barings 

As if Alitalia chairman Renato 
Riverso did not have enough, 
to do piloting Italy's state 
airline through a turbulent 
restructuring, he has now 
taken on the chairmanship of 
Baring Brothers (I tafia), writes 
Andrew HflL 

There are five professionals 

in Barings' Milan. office who 
main tain close contact with 
another five-strong team in 
London. Small beer, compared 
with the sprawling Alitalia - 
empire, or Riverso’s previous 
remit as chairman and 
managing director of IBM 
Europe. Nevertheless, Riverso, 

61, sees the job taking up “10 
or 20 per cent” of his time, as 
against 50 per cent at Alitalia. 

Paradoxically, he thinks . 
s u ppo rtin g foreign 
competition could give a boost 
to the underdeveloped Italian 
investment banking sector.' 
“The Italian financial world 
needs to grow in knowledge 
and experience in the various 
segments of the business, and 
this is an area where the 
contribution of foreign banks 
is vital,” says Riverso. 

Barings, London’s oldest 
merchant bank, Is keen to 
advise on more privatisations, 

and gypand gnrpqr yjw fmnnpo . 

advice to the country’s • 
thriving small- and 
medium-sized companies.. 
Indeed, the only area in which 
the new recruit is unlikely to 
benefit Barings is in winning 
more business from Alitalia 
itself: the animeis advised by 

J.P. Mnrean. admits ffivprsn. 


.The peak of 
Groerfs 


would seem to betfe p gggY - 
spot for ptodering tW 
of .one’s career# one Kvashin ■ 


Netherlands, writes Ronald ; - 
van de KroL'Or spit was for 
Hhny Groen, the driving fotte 
; bS&dtimlnteriiationql ;■ 
Expansion of Dutch txedft . \ 

- insurer NCM, who returned 


announced he would, be 
1 resigning- in May after-more 
-than 30‘y ears at the company. 


' the three-man NCM board this 

year.IaAugust,tbedepaty . 
^hah-man Dick ftmfrrema quit 
abruptly hz drcmbstances 
wbidf have never been folly 

- explained, Br nins ma has not 
-yet been replaced- • 

Groen (below) denies that his 

- own departure is. the result of 
tension with foe company’s 
board of supervisors following 
Bruinsma’s resignation. “After 
31 years at NCM, of which 20 - 
years were in a director's role 
and seven spent as chairman, 
the time had crime to 
recansfcter my future,” he says. 

SQ11 only 50, Groen Joined 
NCM as a 20-year-old clerk and 
quickly worked Ids way up the 
corporate ladder. Under his 
stewardship, the credit insurer 
took a great leap into 
internation al expansion when 
NCM acquired Britain’s Export 
Credits Guarantee Department 
when the UK government . 
-privatised in 199L Since them 
it has found partners or opened 
offices in Israel, Sweden, 
Norway add Belgium. - 

Groen say? he has absolutely 
no idea what the future holds - 
for him now. “No idea” is also . 
his response to whether be rail 

Stay in Anarmial services OT 
even whether he will remain in 
Amsterdam. 





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Richard Eyre, director of the Royal National Theatre, makes his operatic debut at Covent Garden 


Soprano shines 
in glowing, 
timeless Traviata 


T here was no lack of 
advance publicity for the 
Royal Opera’s new pro- 
duction of La traviata, 
though in the circum- 
stances that was not surprising. 
Any opera-house appearance by Sir 
Georg Solti, now 82, is going to be 
an event, even mare so with him 
conducting La traviata for the first 
tlmp in his life. When he invited 
Richard Eyre, the artistic director 
of the National Theatre, to try his 
first venture into opera, the stage 
was set for a major operatic event 
What the hype failed to do was 
get the right person in the spotlight 
When Verdi wrote La traviata, the 
role of the conductor was only just 
being properly defined and produc- 
ers were non-existent. The opera 
stands or falls depending on its lead 
soprano. In Venice, in 1653, It was a 
fiasco (Fanny Salvini-Donatelll was 
overweight and off-farm). At Covent 
Garden, last Friday, the soprano 
shone and- /the whole evening 
glowed with her. 

Angela Gheoighhi is a rising star. 
The Royal Opera has nurtured her 
carefully over the past few years, 
ufairHng her off with Zerliha in Don 
Giovanni, then moving her on to 


been rewarded. Making her 
entrance as if she is stepping out of 
a Winterhalter canvas, she looks 
and sounds bom to play Violetta. 
One dab of iced water oat of the 
phampag ne bucket and she Is run- 
ning up and down the scales of 
“Sempre libera" as if she has been 
Rin g in g the music all her life. 

Perhaps her Romanian predeces- 
sor, Tipana Cotrubas, hit the solar 


plexus harder (her joyous laughter 
in Violetta's final moments still 
sends shivers down the spine 20 
years on), but even she had not 
mastered every detail like this. 
Gheorghiu barely sings a phrase 
that has not been refined with the 
vocal equivalent of a nail-file. Every 
dot and dash in Verdi's score, every 
tone colour, was there; and what a 
joy to hear so much quiet sin g in g 

That is where Solti has played his 
part. Decca is recording these per- 
formances live (word about 
Gheorghiu has spread quickly in 
the business), and it will get music- 
making as scrupulously prepared as 
in any studio recording. Solti was 
adamant about performing the 
opera without the usual cuts, so we 
get rarely-heard second verses, not 
just automatic repeats, but each 
Hmp given with new meaning One 
could sense the audience was really 

lis tening 

For his part Richard Eyre has 
worked with Gheorghiu to build a 
believable character. This is basi- 
cally a traditional production, 
which keeps its eye on the ball 
Sound old principles like character 
development count for more than 


modestly on the other side of the 
drawing-room, then circles his prey 
before tentatively p lanting a Mm on 
her cheek in time to the duet’s final 
chord. 

Like Gheorghiu. Frank Lopardo 
as Alfredo sings with exemplary 
attention to detail and sensitivity - 
their duets together are lovers’ 
whispers, not grand opera bawling. 


But I do wonder what they would 

make of him in Milan, where Ital- 
ianate top notes count for more 
than musicianship. Leo Nucci lacks 
the vocal elegance for Giorgio Ger- 
mont (try the old 78s recorded by 
Battistini) bnt worked hard to 
phrase broadly under Solti’s tute- 
lage. There were useful cameos 
Pram t ^ah - Manan Jones as a spiky 
Flora and Gillian Knight as Annina 

Are Bob Crowley's needlessly lav- 
ish dflgjgrve the main drawback? Not 
ao&r as design quality is g mgm yfl 
per se. Swirling staircases and 
heavily-ornamented gold ceilings 
make handsome settings for the 
public scenes, although it was illogi- 
cal to have the stage area so 
cramped for those when the private 
scenes are so spacious. Alfredo's 
country retreat is a veritable palana 
and Violetta dies in what looks like 
a white-shuttered aircraft hangar. 
The music and the drama demand 
the opposite. 

The problem is that the bulkiness 
of the sets makes the intervals as 
long as the acts in between. I sus- 
pect that audiences in the future 
may curse this production as they 
go into Act 3 at the time of night 
when they were hoping to be on the 
train home. For this run of perfor- 
mances, though, nobody is likely to 
mind. Forget the 2310 from Water- 
loo. So long as Gheorghiu and Solti 
are making music, time stands stifi. 

Richard Fairman 


Sponsored by Barings and the Jean 
S&insbury Royal Opera House 
Fund. Performances (with some 
changes of cast) until December 19 


eyecatching quirks. The first meet- 
Pnccfni’s Mftni. and its patience has — ing of Violetta and Alfredo is a typi- 
cal example; he starts by sitting 



Angela Gheorghiu and Frank Lopardo 


Warm welcome for Khovanshchina 


N o harder to prononnce 
than “Khrushchev" (and 
ranch easier than 
“Shchedrin”). Mussorg- 
sky’s ultra-Russian Khovanshchina 
earned a war m welcome to the 
English National Opera repe rtoire 
last week. Perhaps for budgetary 
reasons, the UNO seems to have 
staged fewer historical epics of late 
titan it used to, though its Cinema- 
scope stage invites them. Stifi, the 
number of epic-historical operas 
that have been composed is hugely 
disproportionate to the number of 
masterpieces; and among th ose fe w, 
Khovanshchina - a hag of “unfin- 
ished” sketches though it is - must 
stand near the top in any thought- 
ful ranking. 

In the ENO programme-book, 
Paul Griffiths argues persuasively 


that “unfinished” and fragmentary 
was just what Khovanshchina had 
to be. It is the Russian opera about 
the looming impact of Peter the 
Great; but neither Peter nor his 
close relatives could be depicted oo 
the stage. Therefore Mussorgsky 
gave his dispassionate attention to 
the lesser players and their fac- 
tions, drafting his own libretto as 
be went the worried conservative 
boyars, the Westernising sophisti- 
cates, the unregenerate Old Believ- 
ers in ancient orthodoxy. 

Since they all lost, they could not 
shape the ultimate story, which 
neither began nor ended with them. 
In Francesca Zambello's cool, skil- 


ful production, the rival groups 
strut then- forces and connive in 
turn, none favoured above the oth- 
ers. The focal point of Alison Chit- 
ty's sets is a metal-frame pillar 
which unfolds to become walls, 
bridges, bleachers; the only elabo- 
rate costumes are those needed to 
establish roles and ranks. The com- 
plicated plotting is rendered unusu- 
ally clear - and mercifully it takes 
three and a half hours instead of 
the predicted four. 

The leaders are cast from 
strength: Willard White’s imperi- 
ous, dignified Prince Kbovansky, 
Kim Begley’s dandyish Prince Gol- 
itsyn, Gwynne Howell’s lofty Dost- 


fey, the Old Believers’ leader. For 
greater depth of character, we 
should probably need to have real 
Russians. The young bass-baritone 
Paul Whelan makes a striking 
debut as the sinister boyar Shak- 
lovity, with Howard Haskin a 
clever Scribe, and as tragic Marfa 
Anne-Marie Owens is all anxious 
urgency and warmth. Cathryn Pope 
and Maria Moll make creditable 
work of their shrill, ungrateful 
roles as Emma and Susanna. 

On Thursday the conductor Sian 
Edwards found vivid touches in 
many scenes, less in the way of 
steady breadth. The sense of pan- 
oramic unfolding was unconfident: 


she tends to run at things. (Even 
the marvellous “dawn” prelude 
stammered slightly, with a singu- 
larly pallid clarinet and a misfired 
dimax.) Later performances should 
expand more grandly. The second 
act risked sagging, though at the 
start of the third the sight of Khov- 
ansky dallying with his Persian 
slave-girls in a swimming-bath 
cheered everybody op. 

The ENO has opted for Shost- 
akovich's version. Mussorgsky got 
no farther with a foil orchestral 
score than two short passages; as 
with Boris Godunov, Szmsky-Korsa- 
kov published his own version after 
the composer’s death - more 


expertly bright than the amateur 
Mussorgsky could have devised (or 
might have wanted to), much cut 
and with many fussy “corrections” 
to the stark harmonies. 

In the latter respects Shost- 
akovich is incomparably more 
faithful, but he indulges a very 
sweet tooth for chiming effects. 
(Mussorgsky had been dead ten 
years when Tchaikovsky first intro- 
duced the celesta for his Sugar- 
Plum Fairy*) They supply instant 
theatrical AffekL of course - just as 
Rimsky’s prieked-otrt orchestration 
did, and no less of a modern distor- 
tion. This fine ENO production 
should gain depth and patina with 
time, without need of those dubious 
cosmetics. 

David Murray 


MTV 
awards in 
Berlin 

I t was an awesome sight The 
curtain rose to reveal (me of 
tiie most dramatic backdrops 
in the world, the Branden- 
burg Gate; not a painted pas- 
tiche but the real thing, swathed in 
blue light After this moment of 

grandeur the first MTV European 
Music Awards found their level 
when a bearded figure with solici- 
tor’s glasses bounded on stage 
looking worryingly like Sammy 
Davis Jnr. He turned into George 
Miriiari singing, of course, “Free- 
dom”. 

Berlin was the perfect spot for 
this new pop prize, not because of 
its political significance but because 
pop music, and the clubs it spawns, 
is about the only activity Ossies 
and Westerners enjoy together. 
They certainly mobbed the venue, 
described as “the largest temporary 
structure in the world", and built 
abutting the Gate. And they did not 
seem to mind the Coca Cola logo 
crawling all over it 
This was the West in all its tacky 
brilliance. 

The new awards, called the Mat- 
thews for no obvious reason, 
seemed immediately timeless: 
media creations like supermodel 
Naomi Campbell and a girl from 
Bayrmlch handing out “globes" to 
stars who either smarmpH over, or 
clowned with, the audience, a 
reputed 240m homes world wide. 

To some amazement Take That 
was voted Best Group, which sug- 
gests we must expand their shelf 
fife from four to five years. Among 
the other newish names. Prodigy 
won. Best Dance, and Crash Test 
Dummies, Breakthrough Artist of 
1994. 

But the awards also showed up 
the terrifying conservatism of pop - 
Best Male was 35-year-old Bryan 
Adams; Best Rock band Aerosmith. 
the heavy metal outfit blasting 
through their third decade. Mariah 
Carey was the safe Best Female. 

The event was cherishable for its 
musical vignettes: the decidely 
quaint Bjork, who crawled out of a 
hole dressed like a raspberry 
mousse, skipped around the stage 
singing "Big Time Sensuality, 
rolled around on her back and dis- 
appeared again into weirdo land; 
George Michael, who Is in legal 
limbo, premiering a new song (a 
certain mnaah) called “Like Jesus to 
a Quid”, hacked by enough strings 
to parcel Christmas; Tom Jones, 
who after years as an object of 
mockery has suddenly become a 
pop icon, introducing the show with 
inadvertent Teutonic humour, and. 
most priceless of all, a cameo song 
from “the artist formerly known as 
Prince", climaxing with the sad 
mantra, “Peace to George MichaeL 
Peace to MTV. But death to 
Prince." 

That's one mixed-up mannikin 
millionaire. 

Antony Thomcroft 



PARIS 


(1) 47 23 37 
: opera by 

Valery Gergiev 

fpera by 

n; Nov 29, 30; 


! 49 


AMSTERDAM 

ESS^t****" 

conduct 


Royal Concertgebouw Orchestra, 
with soprano Karen Huffstodt, 
mezzosoprano Hanna Schwarz, and 
baritone Csaba Airizer to perform 
Schoenberg and Bartdk at 8.15 pm; 
Dec 1, 2 

• Moscow Philharmonic Orchestra: 
conducted by Vassili Stnaiski play 
Beethoven and Mussorgsky at 8.15 
pm; Dec 6 

• Nikolaus Harnoncourt: conducts 
the Royal Concertgebouw Orchestra 
to play Schumann and Bruckner at 
8.15 pm; Dec 7, 8 

Het Muzfektheater Tel: (020) 551 89 
22 

• Die Rederma us: by Strauss. 

Conductor, Raff Welkert, production 
by Johannes Schaaf at 8 pm; Dec 6, 
8 

GALLERIES 

Rtjksmuseum Tet 020 673 21 21 

• Art of Devotion 1300-1500: major 
winter exhibition focusing on the 
spiritual function of objects in the 
medieval period; to Fab 25 (Not Sun) 
OPERA/BALLET 

Het Mtr aektheater Tel: (020) 551 

8922 

• Rosa: new production of the 
opera by Andriessen. Directed by 
Peter Greenaway at 8 pm; Nov 28 


■ LONDON 

CONCBTTS 

Barbican Teh (071) 638 8891 

• Gala Concert London Symphony 
Orchestra with mezzo-soprano 
Marilyn Home and conducted by 
Marvin Hamttsh. Includes 
Hamfisch’s, The Anatomy of Peace’ 
at 7.30 pm; Dec 1 

• Grand Operatic 6/ening: National 
Symphony Orchestra with soprano 
Susan McCutioch under the 
direction of Martin Merry perform a 


variety of operatic pieces at 7.30 
pm; Dec 3 

• Sir Colin Davis: conducts the 
London Symphony Orchestra in a 
concert to mark Finnish 
Independence day. Music of 
Sibelius, Mozart and Stravinsky at 

7.30 pm; Dec 8 

Festival Hall Tel: (071) 928 8800 

• Philharmonia Orchestra: with 
conductor Charles Dutoft and pianist 
Peter Jablonski play Tchaikovsky 
(piano concerto No. 2) and 
Shostakovich (symphony No.5) at 

7.30 pm; Dec 6, 8 

• Royal Philharmonic Orchestra: 
with conductor Vladimir Ashkenazy 
and pianist Shura Cherkassy play 
Rubenstein’s piano concerto No. 4 
and Tchaikovsky’s Manfred 
Symphony at 7.30 pm; Dec 7 

• Russia Old and Now: Royal 
Philharmonic Orchestra with the 
Brighton Festival Chorus, London 
Choral Society and conductor 
Vladimir Ashkwiazy perform 
Schnittke. Prokofiev and 
Rachmaninov at 7.30 pm; 

Dec 5 

Queen Elizabeth Hal Tel: (071) 928 
8800 

• The Fall of Icarus: Multimedia 
event Inspired by Bruegel's, 
’Landscape with FaB of Icarus'. 
Belgian director Fnfed&ic Flamand 
collaborates with Italian artist 
FabrizK) Plessi and composer 
Michael Nyman at 7.45 pm; Dec 2, 3 
GALLERIES 

Barbican Tel: (071) 638 8891 

• A Bitter Truth: a multimedia 
exploration of changes in attitudes 
towards World War 1 throughout its 
duration; to Dec 11 

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 Portrait Tel; (071) 306 
0055 

• Christina Rossetti: an exploration 
of the Victorian poet on the 
centenary of her death; to 

Feb 12 

Royal Academy Te!:(D71) 439 7438 

• The Glory of Venice: a major 
survey of Venetian art in the 1 8th 
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 Kitazh 
at 7 pm; Nov 28 

English National Opera Tel: (071) 
632 8300 

• Ariadne on Naxos: by Strauss. A 
Graham Vick production at 7.30 pm; 
Dec 1,8 

• Khovanshchina: new production 
of Mussorgsky's opera. Director 
Francesca Zambelfo at 6.30 pm; 

Nov 30; Dec 3, 6 

• The Magic Flute: by Mozart 
Originally produced by Nicolas 
Hytner, John AbuJafia directs this 
revival with conductor Alex Ingram 
at 7.30 pm; Nov 29; Dec 2 
Royal Opera House Tel: 071 240 
1200 

• An Ashton Celebration: The Royal 
Ballet Company pays tribute to its 
founder choreographer with a short 
festival of his work consisting of 12 
ballets and divertissements. 
Performance includes a new 
production of Daphnls and Chios by 
Ravel at 7.30 pm; Nov 28, 30 

• La Traviata: by Verdi. A new 
production by Richard Eyre. Georg 


Solti conducts for the first five 
performances, then PhBGpe Augtrin. 
In Italian with English subtitles at 

7.30 pm; Nov 29; Dec 2, 5, 8 

• Mixed Programme: indudes 
Fearful Symmetries choreographed 
by Ashley Page, and Symphony in C 
by Bizet, choreographed by George 
Balanchine at 7.30 pm; Dec 1, 6, 7 

• The Steeping Beauty: a new 
production of Tchafaovsky’s ballet 
Produced by Anthony Dowefi, set 
designed by Maria Bjomson at 7.30 
pm; Dec 3 (2 pm) 

THEATRE 

Barbican Tel: (071) 638 8891 

• New England: World premiere of 
Richard Nelson’s new play. No 
performance 12-15th Dec., 
otherwise at 7.15 pm; from Nov 29 
to Dec 29 (Not Sim) 

Donmar Warehouse Tel: (071) 369 
1732 

• True West by Sam Shepard, 
directed by Matthew Warchus. 
Michael Rudko and Mark Rylance 
(who swap roles on alternative 
nights) play two warring brothers at 
8 pm; to Dec 3 (Not Sun) 

Gielgud Tel: (071) 494 5065 

• Hamlet by Shakespeare. 

Directed by Peter Hall, designed by 
Lucy Hall. With Stephan Dfllane, 
Michael Pennington, Donald Slnden 
and Gina Bellman at 7.15 pm; to 
Feb 4 (Not Sun) 

National, Lyttelton Tel: (071) 928 
2252 

• Out of a House Walked a Mart 
by DaniH Khaims. A Royal National 
Theatre and Theatre de Complicite 
co-production of a collection of 
musical scenes by the Russian 
absurdist writer at 7.30 pm; Dec 1 (7 
pm) , 2, 3 (2.15 pm) . 5 
National, OBvier Tal:(071)928 2252 

• The Devil's Disciple: play by 


Bernard Shaw, directed by 
Christopher Monahan. Sat and Tues 
mat at ZOO pm; to Nov 30 
(Not Sun) 


■ NEW YORK 

GALLERIES 

Museum of Modem Art 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 

Italian at 8 pm; Nov 28; Dec 2, 6 

• Lady Macbeth of Mtsensk: by 
Shostakovich at 8 pm; Nov 30; Dec 
3,7 

• Madama Butterfly: by Puccini at 

8 pm; Dec 1, 5, 8 

• Rigdetto: Kalian opera by Verdi 
at 8 pm; Nov 29; Dec 3 

Now York State Theater Tel: (212) 
870 5570 

• The Nutcracker: by Tchaikovsky, 
performed by the NY City Ballet 
Tue-Thu 6pm. Fri 8 pm. from Nov 30 
(Not Mon) 

THEATRE 

Walter Kerr Teh (212)239 6200 

• Angels in America: Tony 
Kushner's Tony-award winning play. 
Sun mat at 3pm. Wed., Thurs., Sat 
at 8 pm; to Dec 4 


■ WASHINGTON 

GALLERIES 

Phillips Collection Tef: (202) 387 
2151 

• Plctogra p hs of Adolph Gottlieb: 
exhibition of one of the founding 
members of the New York School; 
to Jan 2 


WORLD SERVICE 
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EUROPEAN CABLE 
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12 


.'A}; '7-:: 

-* i 


FINANCIAL TIMES 


Samuel Brittan 

Suddenly we have 
a world upsurge 


F ive years after launch- 
ing a campaign to lib- 
eralise Europe’s 
energy markets, the 
European Commission has 
made only limited progress in 
increasing competition among 
electricity and gas producers. 

Amid concern over the 
effects on consumers of dis- 
mantling what are in many 
cases state-owned monopolies, 
many energy companies have 
stubbornly resisted attempts to 
open up die market 
Liberalising markets will be 
high on the agenda when Euro- 
, pean Union energy ministers 
i meet in Brussels tomorrow. 

' The Commission regards the 
I creation of a free market in 
power and gas as one of the 
most important elements in 
1 creating a single market for 
1 goods and services. 

"How can you ask. say. the 
chemicals or metals industries 
to compete without access to 
energy on similar conditions?" 
asks Mr Claus-Dieter Ehler- 
mann. director-general of the 
EU competition directorate. 
"What is at stake is the credi- 
bility of the Internal market 
and the competitiveness of 
European industry." 

One reason for the slow prog- 
ress in liberalising European 
energy markets is the relative 
lack of competitive or public 
pressure. The need to deregu- 
late parts of the telecommuni- 
cations market was clear to 
most EU member states, as 
technological changes made 
existing national and European 
regulations less relevant And 
consumer pressure for cheaper 
air fares encouraged progress 
in the airlines industry. 

In the absence of such pres- 
sures, there are powerful lob- 
bies against greater competi- 
tion. National energy 
monopolies have encouraged 
their customers to believe that 
change in gas and electricity 
markets might threaten safe 
delivery of supplies and push 
up prices. To many consumers, 
the scope for competition looks 
limited because it makes no 
sense to have rival electricity 
grids and gas pipe networks. 

There is also opposition to 
change from the workforces in 
the gas and electricity compa- 
nies. which amount to im peo- 
ple in the EU. Concern about 
potential job losses is height- 
ened by the experience of the 
UK electricity market one of 
the first to be deregulated, 
where some companies have 
shed more than half their staff. 

A single energy market 
would not necessarily break up 
large integrated monopolies. 
But it would remove their 
monopoly rights to gen- 
erate power and supply 



Suddenly the 
world upturn 
has moved so 
far into its 
stride that 
boom may be a 
more appropri- 
ate word than 
mere recovery. 
Indeed commentators from the 
financial sector are already 
worrying whether the boom 
might not become too much of 
a good thing. 

These international develop- 
ments have important implica- 
tions both for tomorrow’s UK 
Budget and even more for the 
meeting between the chancel- 
lor and the governor of the 
Bank of England eight days 
later on December 7. For in the 
present world environment the 
last thing the UK economy 
needs is a domestic stimulus or 
even unnecessary red ink in 
the Budget. The improved fis- 
cal outlook should be enjoyed 
entirely in the form of a more 
rapid move towards eliminat- 
ing the budget deficit. Even the 
CBI accepts that UK base rates 
will need to rise by about \V* 
percentage points. The first 
move should be made in days. 

It is fruitless to seek the 
causes of the pronounced 
world recovery. There are 
inherent tendencies for world 
demand to rise in line with 
world productive capacity; and 
it is the slumps and booms 
that require explanation. The 
US economy was being actively 
stimulated by cheap money 
until last spring and the subse- 
quent tightening has been well 


short of draconian- hi West 
Germany there was not so 
much a recession as a move 
from the excess demand result- 
ing from unification spending. 

Unfortunately the interest 
rates required to remove this 
excess demand were too high 
for the rest of Europe where a 
genuine recession was pro- 
duced. But with German short 
interest rates now back to nor- 
mal and a very sharp recovery 
in that country’s eastern 
Lander, the special depressing 
forces have ended. Least 
noticed of all, Japan has at 
long last snapped into a recov- 
ery in spite of continued defla- 
tion in domestic producer 
prices. What seems to have 
happened is that Japanese pro- 
ducers have again adjusted to 
an excessively high exchange 
rate and an over-cautious mon- 
etary policy by levering costs 
and prices downwards. 

The US investment firm of 
JF Morgan contends that 
capacity utilisation in industry 
is already above its long-run 
average - not just hi the US, 
but in the OECD as a whole. 
One reason for this is the shal- 
lowness of the recession of the 
early 1390s. That recession was 
greeted with cries of pain 
because it struck more than 
previous downturns at the 
more articulate financial and 
white-collar sectors. The last 
business cycle was also unusu- 
ally unsynchronised; the US 
was already recovering while 
Europe was entering recession. 

Morgan economists argue 
that one or more year of 


spritely outward growth will 
result in operating rates akin 
to the late 1980s when econo- 
mies were very strained. This 
applies especially to countries 
such as the US. Canada, Aus- 
tralia and those “on the periph- 
ery of Europe" that have given 
their economies a kick-start 
from devaluation. 

The above analysis is dis- 
puted by the rival investment 
bank of Goldman Sachs, which 
argues that companies tend to 
be too gloomy about their 
capacity at this stage of the 
business cycle; that new types 
of electronic equipment can be 
run more nearly flat out; that 
some of the inflationary strains 
can be taken by importing 
more from the developing 
countries; and that employing 
more workers, for instant** in 
shift work, can make existing 
capacity go further. But the 
Goldman economists do 

not dispute either the existence 
of a pronounced world upturn 
or the need at least for the 

Rant of England and the US 
Federal Reserve to tighten pol- 
icy again (in spite of the lat- 
ter’s recent tightening). 

My own view is that macroe- 
conomists and financial ana- 
lysts do not have a special 
insight Into the technicalities 
of productive capacity. They 
would do much better to ana- 
lyse world growth in terms of 
nominal demand, measured by 
nominal gross domestic prod- 
uct or one of its derivatives, 
and whether that needs to be 
restrained, stimulated or (most 
often) left alone. 


Operating rates now 


Pronounced recovery 

above average levels 


from mRd downturn 

1976-94 averages 00 


PeaksiOO 

110 OECD 

OECD 

1900s / 

capacity 

Industrial 


utilisation rates 

production 


: a w 

Vr 

=jC~ - 


1fl76 78 80 82 84 BB 

Soudk JP Motsm. Wvld FtnancM Marines 


80 82 04 


0 2 4 6 81012 14 16 

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Timisoara 


Tirana 

2-7 :4C= 

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Warszawa 


Zagreb 


A chip or two off 
the old barriers 

Michael Smith ex p lains why progress in opening 
up Europe’s energy markets has been slow 


.. .. 


Vfcnna 
h i t— n ati onal 
Airport 


Welcome 

.■r.vH' < • w-i «, t . 
£f*jia£'\ay l, 6 ..«*■■ 

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it to the customer. 

The Commission argues that 
such competition would make 
utilities more efficient prices 
would fall and become more 
uniform across the Union. It 
has adopted a two-pronged 
approach for achieving this. 

The first prong involved Forc- 
ing countries to end statutory 
monopolies enjoyed by 
national utilities to import and 
export gas and electricity, 
which the Commission says 
are illegal under EU law. Sev- 
eral cases are progressing 
through the courts, though 
none has yet concluded. 

The second prong is legisla- 
tion to improve competition 
within member states. A pro- 
posed directive, first drafted in 
1992. would require energy 
companies to “unbundle" 
themselves, by separating the 
financial accounts of their pro- 
duction, transport and distri- 
bution arms. 

This would make it more dif- 
ficult for these companies to 
subsidise loss-making parts of 
their businesses out of the 
profits from their monopoly 
over distribution of energy. 
New companies would then 
find it easier to enter the mar- 
ket, if they could see that they 
were able to undercut the 
energy utilities in particular 
parts of the business. 

The main stumbling block to 
agreement on the directive is 
what is known as “third party 
access", obliging energy com- 
panies to allow competitors to 
use their networks for an 
“appropriate" charge. 

Thus PowerGen, the priva- 
tised UK generator, could sup- 
ply electricity to French indus- 
trial companies through the 
French national grid. Cur- 
rently, if it wants to export to 
France. PowerGen can do this 
only by selling power to Elec- 
tricity de France, the monopoly 
power company. 

Third-party access is opposed 
by most European power and 
gas companies, with the sup- 
port of many members of the 
European Par liam ent and some 
of the larger governments. 
They argue that energy needs 
special protection from compe- 
tition. because of the size of 



little immediate map TS^ceaf- . . 
ing a free energy iflail * 
The Commisshm. ; 

sitter forauilatinga. f&xgfea>;' 

tive around . the- fy ginffw ffl tt-'v-..- 
already made by oppenaffs of ; v 
more reform. Fqr isstp^ 1 . 
most countries woeM pttmMy. \ . 
agree to unbundling, tte 
accounts of elecfateityiBflBiopo- >' 
lies and introduce competitive 
tendering for new plants . *• 

In an attempt Id win agreed ' . . 
ment on tbirdpariy *5cesv$e . 
Commission has agreed, the 
idea of a “negotiated% rste:- 
than automatic, right to access*, 
to power netwotks. This would "■ 
allow host companies torefose 
access on the ground* fiiat 
security of supply could he * 
threatened, w5h.an atfritiai&ni 
system tor disputes - a com- 
promise that inost^ . 
fevour of . tiberatisatian 1 woirfd' - 






H owever, opponahts 
to .- reform think . 

even, “negotiated : 
third-party access”" 
goes too for. Scone, including ; 
the French, want to introduce -. . 
a concept -of a “s to g ie buyer" 
as an alternative to tbird-irarty; . 
access. Under ' this arrange- ' 
m prit , deals between electric- 
users and foreign, suppliers..' 
would have to he reached 
through the host comrtryi . , 
transmission system operator, 
which would be the sole pur- ' - 
chaser of electricity supplies 
within that country. ; J 

Reformers, already con- 
cerned about the concessioii obi , 
“negotiated" " third-party 
access, believe the stogte bnyer 
concept would - lead to little 
change. “A too much la .con- . 
ceded, the introduction of com- ■ 
petition could he' logjammed 
for a decade, 0 says. Mr John 
Baker, chief -executive of " . 
UK’s National. Power genera- 
tion company. “It may be pret ■' 
erable to wait three or four 
years, since a delay might 
enable them to -get the fanpor- . 
famt principles through-" • 
Free-marketeers like M f 
Baker believe tlmt liberalisa- 
tion js inevitable; increasingly, . 
countries sudh as Raly, Spain . 
and the Netherlands are 
starting to deregulate their 
energy industries. In Germany, 
once . a : strong opponent of - 
cfoange,' supporters of third- •• 
party access lnctode Bfr Gtinter 
Rexrodt, economics minister. 

In= addition, the Nordic coun- 
tries that wifi join the EU next 
year are likely to support liber- 
aHsation, since -they have 
already deregulated their- . 
energy markets. Nonetheless, 
tiie scale of opposition means 
that real p rogress on liberalisa- - 
tion could take years rather 

than months. 




investment needed in the 
industries. Long-term planning 
would be more difficult if they 
were subjected to toll competi- 
tion, endangering security of 
supply, at a cost to at least 
some customers. 

There are also fears of cher- 
ry -picking - that large energy 
users might be picked off by 
foreign energy companies, 
leaving the national company 
with the less profitable users. 
In Italy there are fears that if 
other countries were to supply 
large energy users in the 
north, the poorer south could 
be left to shoulder the costs of 
the indigenous system. 

And companies in countries 
such as Germany and nplg h'tm 
fear they could not compete 
with their counterparts in, say, 
France, because of different 
regulatory, taxation and social 


regimes. Some German compa- 
nies say they are not against 
third-party access in principle, 
and are as afnci«»nt as their 
foreign competitors. But their 
prices are higher as a result of 
an obligation to buy expensive 
German coal. 

Similarly, Mr Michel Lon- 
cour, a strategy manager at 
TractebeL the Belgian energy 
company, says that competi- 
tion will be unfair if companias 
operate under different 
national rules: “Europe needs 
harmonisation on issues like 
pm r i r mnnenfeil protection, the 
security of nuclear plants, tax- 
ation, subsidies and the cost of 
capital," he says. 

The Commission is currently 
considering a common energy 
policy for Europe, but agree- 
ment is politically difficult and 
some years away. That offers 



LETTERS TO THE EDITOR T/; 


Number One Southwark Bridge, London SE1 9HL . . 

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

Church not pervasive in Irish politics 


From Mr Oliver O'Connor. 

Sir, Your editorial “No bad 
thing for Ireland” (November 
21), said the political crisis in 
Dublin exposed some vital 
questions, first among them 
whether Ireland can claim to 
be a secular state while the 
Roman Catholic Church con- 
tinues to wield a pervasive 
influence in political li fe 

You might care to read your 
correspondent. John Murray 
Brown's, reports of the crisis. 


Brown barely, if at all. men- 
tions the Roman Catholic 
Church. The crisis was about 
politics and distrust between 
Mr Dick Spring and Mr Albert 
Reynolds, arising principally 
out of the beef tribunal report 
last August Mr Spring’s unex- 
plained reservations about the 
former attorney general, pro- 
moted and then denounced by 
Mr Reynolds, had probahly as 
much to do with the attorney’s 
role in protecting Mr Reynolds 


in the course of that inquiry as 
with the style of the attorney’s 
Catholicism. 

The delay in the processing 
of the e x tradi ti on warrant was 
the fuse, not the explosive, in 
Ireland’s political explosion. 
The politics would have been 
the same, no matter what the 
profession of the child abuser. 
Despite the spreading of mis - 
leading rumours, no evidence 
of church interference in due 
process was found. It doesn’t 


amount to pervasive influence 
in political life. Besides. Irish 
votes have long since recon- 
ciled church attendance with 
independent action as citizens. 
Few people, especially politi- 
cians, pay much attention to 
what bishops say about politi- 
cal questions, in Ireland as in 
England 

Oliver O’Connor, 

48 Slonepork Abbey, 
Rothftunham. 

Dublin H Ireland 


Flaw in schools' league 


From Mr Sean Lawless. 

Sir, I feel your A-Ievel league 
tables (“Schools’ league 
tables", November 22) have a 
flaw: the Universities and Col- 
leges Admissions Service 
points score should be calcu- 
lated on the top three A-level 
results gained by the candi- 
date, not the total for several 
e xam s, thus giving a maximum 
score of 30 points. By counting 
A -levels above the three results 
required for university 
entrance, your tables become 
overshadowed by sixth forms 
that encourage their highest 


achieving pupils to take five or 
more A-levels, for the purpose 
of Improving the school, and 
not the pupil's results. 

A pupil with three M A”s is 
clearly able to deal with 
A-Ievel exams extremely well, 
while a pupil gaining a string 
of five “C"s shows less sign of 
understanding his subjects, 
and should not be counted as 
having achieved as much. This 
is the line taken by university 
admission tutors. 

Sean Lawless, 

King’s College, 

Cambridge CBS 1ST 


Deutsche Bank does not 
need any lessons 


Synchronise Eurostar as well 


From Michael Renderson-Begg. 

Sir, I am surprised that in 
his article on European time 
(Personal View, November 24). 
Sir Alastair Morton did not 
also suggest that, if the UK’s 
clocks were synchronised with 
the Continent and if the first 
Eurostar trains of the day were 
to leave Waterloo Station 
between 0600 and 0700, instead 
of at 0823 as at present, then 


British executives would also 
be able to fulfil a full days 

engagements in either Paris or 
Brussels without the added 
expense and inconvenience of 
flying to those destinations the 
night before. 

Michael Henderson-Begg, 
Bartholomew House. 

SB Weslbury Road, 

New Malden, 

Surrey KT3 5AS 


From MrNJFB 
Samengo-Tumer. 

Sir. Your coverage of the 
news that Deutsche Bank is to 
move its non-D-Mark invest- 
ment banking operation to 
London, and further integrate 
Morgan GrenfeU, seemed to 
smack of a little football-ter- 
race xenophobia and jingoism 
(Survey of Germany, Novem- 
ber 21). As an independent 
observer unconnected with 
either house, the message I 
received from the FT was of a 
British victory of a sophisti- 
cated investment bank show- 
ing the way to a vast banking 
Euro-bureaucrat. 

When it comes down to who 
is benefiting from whose 
investment b anking expertise, 
I feel that you have got it the 
wrong way round - unless you 
believe that a small domesti- 
cally-focused mergers and 
acquisitions bank which made 
a hash of its equity securities 
operation can teach a great 
deal about hon-M&A invest- 
ment banking to a parent that 


has topped Eurobond league 
tables, has figured heavily in 
international equity issues, 
and runs a thriving range of 
capital markets operations 
(including gilts and deriva- 
tives). 

Your articles informed me on 
at least two occasions that 
investment b ankin g is an 
“Anglo-Saxon culture" busi- 
ness, whatever that ghastly 
Americanism may mean. I am 
no geographer, but I would 
imagine that such great names 
ns Warburg, Lehman, Samuel, 
Schroder, Salomon, Ro thschild. 
Goldman, Hambro and Klein- 
wort have at least part of their 
roots rather closer to Frank- 
furt than London. Put ar ya-her 
way. maybe the Saxons will tri- 
umph over the Anglos, as Ger- 
many* s pre-eminent position in 
industrial Europe is mirrored 
in the world of Investment 
banking. 

N J F B Samengo-Turner, 
Coltsfoot Cottage , 
Wickbambrook. 

Newmarket. Suffolk CB88UW 


Airport proposals lack support of UK airline industry 

I/. A rt tr I •. I. . I . . . . • 


From Mr DR Hopkins. 

Sir, The call by the free- mar- 
ket Adam Smith Institute for 
the development of Northolt 
and Redhill aerodromes to 
relieve pressure on Heathrow 
and Gatwick (“Plea for two 
more London airfields”, 
November 21) is not supported 
by the UK’s airline industry. 

The fundamental flaw in the 
Northolt and Redhill proposals 
is that they will not create new 
peak time capacity at Heath- 
row and Gatwick to accommo- 
date an extra 30m passengers 
per year, as the Adam Smith 
Institute claims. This is 


because business aircraft cur- 
rently only use those take-off 
and landing slots at Heathrow 
and Gatwick that cannot be- 
used by airlines because they 
foil at the wrong time of day 
for scheduling purposes. 

Al tho u g h Northolt is close to 
Heathrow, surface links and, in 
poor traffic conditions, the 
road connection along the A40, 
M4Q and M25 are too unrelia- 
ble. The Heathrow Express will 
not pass near Northolt. The 
attractiveness of Northolt to 
interline and feeder traffic is - 
therefore very low. Further- 
more. Northolt is used for min- 


isterial flights and will soon be 
the base for the Queen’s Fligh t. 
Commercial schedules cannot 
be interrupted by these catego- 
ries. 

The current Redhill proposal 
is too small in scale and has 
too short a runway to provide 
a genuine relief for Gatwick. 
No leading airline supported 
the proposal at the recent plan- 
ning enquiry. 

While we have no objection 
to the creation of a dedicated 
business aircraft facility at 
Northolt, airlines believe that 
new capacity must be provided 
where it will expand and com- 


plement existing facilities 
along the Heathrow-Gatwick 
axis. • • 

the secretary of 
state for transport wifi initiate 
the process Of ensurin g that 
London’s two main airports 
will avoid gridlock and that 
business and leisure passen- 
gers will retain the ability to 
gaw access to airports of their 
choice. 

D R Ho pkins , 

chairman, 

British Air Transport 
Association, 

516 Pall Mall East, 

London SW1Y5BA 


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FINANCIAL TIMES MONDAY NOVEMBER 28 1994 

financial times 

Number One Southwark Bridge, London SE1 9HL 
Tel: 071-873 3000 Telex: 922186 Fax: 071-407 5700 

Monday November 28 1994 

Halifax 
and after 


JdjjSj;- Bai ? ® approach to legacy of the past. The high 
fJwTeSf" & Gloucester Build- streets are overetocked with build- 
n® Society earlier this year was ing society branches - a conse- 
maeiy recognised as the start of Quence of non-price competition in 
sometmng big^ Yet few foresaw the days of the old bmldtog sod- 
tnat it would be the catalyst for an ety carteL These outlets driver a 
upheaval m the building society proliferation of products that look 
movement on the scalethat now Screak sfaStoTSat points 
seems possible in the light of the ultimately to decP»ing profitable 
proposed merger between the ity and the need for fewer 
111 . Leeds Permanent branches. The gyrimra of build- 

bimtflng societies. ing society mergers so tar is that 

u the plans for marriage and mutualit y does little to promote 
subsequent conversion into a pub- such T atiniwtiMtimi. Accountabil- 
Iic listed company meet with the ity to shareholders seems more 
requisite approvals, nearly a third likely to deliver on score, 
of the building society move- 
ment's £280bn assets will disap- „ 
pear overnight The psychological Competition policy 
shock to the rest of the movement That is qtw reason to fed rala- 
will be traumatic. tively unconcerned about the com- 

There is, of course, noiWng com- petition policy aq recte of the Hali- 
pletel y new in finance. The origt- fax-Leeds proposal. The two 
nal merger between the Halifax societies' j o int 20 per rmt share of 
Permanent and the Halifax Equi- outstanding mortgage advances 
table in 1928, from which the pres- may sound high. Yet no other 
ent H a li fa x was formed, will large developed country as 
remain the biggest historic build- many nationwide retail hanks 
ing society merger in relation to operating in such a competitive 
the size of the industry until the enviro nment ; and the commit- 
present (or some other compare- ment of the Halifax and Leeds to 
ble) merger is consummated. cutting branch costs hardly proofs 

The difference here lies in the to upward pressure on prices, 
change in status, since the Halifax For all that, mutuality still 
and the Leeds are proposing to imposes iK«ripKnA in the use of 
follow Abbey National's route to capital. The Halifax and l /»ed s , 
the stock market. No building admittedly, are conscious of the 
society can henceforth dodge the way money burned a bole in the 
question of whether mutual own- TSB Group's pocket after its flo- 
ership continues to serve a worth- tation and have no wish to raise 
while purpose. much new capital. Yet the recent 

The case for a wholly separate history of the clearing banks con- 
regulatory regime for a shrinking notorious instances of rights 
number of societies that are hanlra issues being squandered - a lon- 
in all but name wiD also require ger term hazard, 
radical rethinking in the Trea- The case for such discipline is 
suty. The wider issue is whether a unlikely to cany weight with 
retreat from mutuality is a matter incumbent building society man- 
for regret. agemeni. And in the absence of 

real accountability, a further can- 
_ , . . traction in the n umb er of building 

Regulatory constraints societies wffl be driven more b? 

A high level of home ownership, the survival instincts of manage- 
wirich was the chief social purpose ment than anything else, 
of the societies’ mutual owner- That implies, after Lloyds’ ini- 
ship, has already been achieved, tiative with Cheltenham & 
Meanwhile, mutuality within the Gloucester, there may well be 
framework of the 1986 Building . attempts to pre-empt unwelcome 
Society Act imposes regulatory takeover approaches by making a 
constraints an building societies’ comfortable choice of partner 
attempts to become ftilty-fledged under the accommodating regime 
financial services groups. By its of mutuality. It also suggests that 
very definition such a restricted - the - managers of larger budding 
farm of ownership implies lack of societies may seek to emulate the 
access to large-scale capital and directors of privatised utilities in 
an inability to make acquisitions acquiring lucrative share options 
for paper. via stock market listings. Either 

Nor does mutuality provide the way, the game has changed fbr- 
best means for dealing with the ever. 

Discomfort in 
Europe’s south 

In the hearts of Europe’s been only partly succc 
policymakers, hope springs eter- prices in all four coantr 
nal Faster-than-expected recovery ularly in Greece) are sti 
from recession has revived the beyond the EU’s 3 per 
idea that a group of countries cen- age. While monetary ] 
bred on Germany could attain eco- remained anti-inflation 
nomic and monetary union as performanc es ha ve 
early as 1997. Yet there is an increasingly wayward, 
unfortunate corollary to the to the Commission's 1 
improved prospects for the Euro- casts, the four southern 
pean “core”. Economic diver- the sole ED members \ 
ranees in the continent’s periph- eminent borrowing wil 
ery, particularly the EU's per cent of gross domesi 
southern members, are increasing in 1995. 
at a disconcerting pace. 

Action to cope with the south’s indebtedne 

economic challenges has been tusmg maepreune 
halfhearted or curbed by political Budgetary imbalan 
difficulties, or both. This is under- accentuated governs 
Hngri by developments as diverse build-up, especially m ( 
as the problems dogging Italy’s Italy, where indebtedne 
1995 budget plans, Spain’s rejec- than 120 per cent off gn 
Hon of advice on structural reform tic product Excessive ] 
from the International Monetary tor indebtedness Is not 
Fund, and the delay to Greece’s the souto, as showuby 
privatisation programme. pies of Belgium or Swed 

These are matters of concern for the next two years, 
the whole EU. A growing gap in according to the Con 
economic performance between forecasts, debt m apt 
Jorth and south would greatly GDP m toe four south 
strain the EtTs cohesion. It would wffl continue to grow, 

SSfaer impair the EU’s ability to wffl ^ falling slightly 
ESn^solvTthe troubles an its other ED members. Eva 
KrtSSm Binges. tacreasmg and Portugal, the total 
SrSnoesthat north African debt can approach tha^ 

Stability could spill over to' target of 60 per cent of C 
to addition, by undennm- end of the decade is in 
^Z^^essarv efforts to restruc- remote. 

™ budgetary and farm support Deteriorating fiscal p 
4018 JiSSits. a widening north- the south have disturb 
“SSTSi ^P«*the EU’s markets. Yields on 
8 i!S e fejSn i ^to eastern Europe’s band markets 
pi ^ i!rSoi)a by about 3 percentage pi 

and central urope- January, roughly twic 

for D-Mark bonds, 

Fronomic shortcomings heavily on the south’s 
I. *hift in Europe’s centre of potential. The risk is 
Th .® the fell of the Berlin budget deficits and Mg 

to expose the rates wffl be sdf-feedn 
Wall has he peu or t£on 1 ing8. ments to growth and en 
south’s *2*££?iSn5 lb the* drcumstana 
Corporations . southern ments seeking a retui 

investmCTt e than tained growth are waM 

jam rope. The south’s i 
a few years “s ■ ual average weaknesses cannot be 
before Portugal without painiful measure 

growth in cent, 03 larly in reforming labou 

an lS^ e i^ts 3 M^ ^6 ED anti welfare systems. 1 
percentage igg0 ^ 1994, mention of such correct 

average- Betwem ^ to political dlffici 

growth in t®, o.4 points ther lowering investor c 

fell® 11 l Z EZLm average. Yet without such rest 

heiow the Europe® a chronic the task of adjustn 
Greece - or the last become still more dl 

under-pen 0 ^® ^^grage growth growth migrates per 
decade. lwt 0 b !ELi £md Italy is from the south, the ED i 
in Spain, por ^*f pnt Efforts to to be robust enough 1 
much m ® r l^flbrHitials have itself to the east 
w>auce — - — 


been only partly successful, and 
prices in all four countries (partic- 
ularly in Greece) are still rising at 
beyond the EU’s 3 per cent aver- 
age. While monetary policy has 
remained anti-inflationary, fiscal 
performances have become 
increasingly wayward. According 
to the Commission's latest fore- 
casts, the four southern states are 
the sole EU members where gov- 
ernment borrowing will exceed 5 
per cent of gross domestic product 
in 1995. 

Rising indebtedness 

Budgetary imbalances have 
accentuated government debt 
build-up, especially in Greece and 
Italy, where indebtedness is more 
than 120 per cent of gross domes- 
tic product Excessive public sec- 
tor indebtedness is not limited to 
the south, as shown by the exam- 
ples of Belgium or Sweden. During 
the next two years, however, 
according to the Commission's 
forecasts, debt as a proportion of 
GDP in the four southern states 
wffl continue to grow, whereas it 
will be fairing slightly for most 
other EU members. Even for Spain 
and Portu g al , the likelihood that 
debt can approach the Maastricht 
target of 60 per cent of GDP by the 
end of the decade is increasingly 
remote. 

Dete ri orating fiscal positions in 
the south have distuifced capital 
markets. Yields on southern 
Europe’s band markets have risen 
by about 3 percentage paints since 
January, roughly twice the rise 
for D-Mark bonds, weighing 
heavily on the south’s recovery 
potential. The risk is that large 
budget deficits and high interest 
rates wffl be self-feeding impedi- 
ments to growth and employment 

hi these circumstances, govern- 
ments seeking a return to sus- 
tained growth are walking a tight- 
rope. The south’s structural 
weaknesses cannot be overcome 
without painful measures, particu- 
larly in reforming labour markets 
and welfare systems. The imple- 
mention of such corrective action 
leads to political difficulties, fur- 
ther lowering investor confidence. 
Yet without such restructuring, 
the task of adjustment will 
become still more difficult. If 
growth ’ migrates permanently 
from the south, the EU is unlikely 
to be robust enough to enlarge 
itself to the east 



Central Military Commission 


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O n the west coast of 
Hainan, the large Chi- 
nese nPT+ to to 
Vietnam, a mini-Hong 
Eoog is taking shape. 
In 30 sq km, two private companies 
are building fontampr docks, ware- 
houses, offices, flats hnipfr for a 

HKfiflhn free port development 
One of the companies, Eumagai 
Gumi, is an associate of the Japa- 
nese construction company of the 
Same namA and well known among 
international investos. The other, 
China Poly Group, is relatively 
unknown, but is on the way to 
becoming one of China's biggest 
conglomerates. 

Headq uartered in Beijing, funna 
Poly is led by a major-general of the 
People’s Liberation Army (FLA) and 
‘owned’ by the FLA General Staff. It 
is perhaps the most aggressive 
investor, at home and abroad, 
among increasingly assertive busi- 
ness groups controlled by China’s 
sprawling military-industrial com- 
plex. 

This thirfcAnjng - web of manufac- 
turers, and investment and trading 
enmpanipg, fails into two categories: 
one beaded by businesses such as 
Poly Group and under direct PLA 
control; the other involving defence 
industries turned to civilian produc- 
tion under the control of China 's 
State Council, or cabinet. 

They are prime at am pi p« of what 
Mr John Frankenstein, senior lec- 
turer at the University of Hong 
Kong's business school and an 
expert on China's military business. 
/-a Tig “Chinese bureaucratic entire- 
preneuriahsm" - the involvement 
by government officials, including 
increasingly thn militar y in free- 
wheeling b usiness ventures. 

This phenomenon hag left mem- 
bers of China's military-industrial 
complex poised to play a greater 
role not only at home, but interna- 
tionally. A role-model which Chi- 
na's military businesses may try to 
Amnlatp is that of the China Inter- 
national Trust and Investment Cor- 
poration (dtic), one of the country's 
first experiments in western-style 
corporate capitalism. Citic’s Hong 
Kong subsidiary, Citic Pacific, now 
vies with the likes of Jardine 
Matheson and the Swire group for 
the title of Hong Kong's leading 
business conglomerate. Citic Pacif- 
ic’s parent in Beijing owns interna- 
tional assets from aluminium smelt- 
ing in Australia to steel and pulp 
paper operations in north America. 

Trading houses such as Poly 
Group and the Xinxing Group, 
which is owned by the PLA’s Gen- 
eral Logistics Department, may 
come in time to rival Ing Japanese 
trading companies. Indeed, China’s 
new conglomerates already resem- 
ble Japanese trading houses in one 
important respect after the second 
world war the Japanese companies 
numbered many former military 
officers among their staff and were 


Hold the 
presses 

■ Poland’s bankers are not looking 
forward to New Year’s Day. After 
the festivities of the night before, 
they will have to be at their desks 
busily lopping noughts off bank 
balances. 

It is all part of a campaign to 
restore the value of the Polish 
currency. It was planned some time 
ago but has taken longer than 
expected to implement The NBP, 
the central h ank , says that it has 
been waiting for inflation to come 
down before giving the go-ahead. 
However, there may be other 
reasons. 

Originally the central hanlr had 
ordered its new bank notes - 
depicting Polish towns - from a 
German printer. They were ready in 
1992 but have not been issued 
because the anti-forgay devices are 
out of date. That’s the official story 
anyway and the central bank has 
been at pains to deny what some 
newspaper reports suggest is the 
real reason - not only was some of 
the paper for the print run stolen, 
but a bundle or two of notes fell off 
the back of the aircraft coming in to 
land in Poland. 

Whatever the motive the NBP 
shelved the Polish towns and went 
to Thomas De La Rue for a new set 
costing "a few hundred billion 
zlotys” according to Hanna 
Gronkiewicz Waltz, the bank’s 
head. These notes depict a trio of 


Simon Holberton and Tony Walker 

examine the increasingly powerful 
commercial role of China’s armed services 

The generals’ big 
business offensive 


r un alnn p militar y lines. 

The military's involvement in 
business is «nA of the most striking 
by-products of 15 years of economic 
reform. This transformation started 
in 1978, the year China began open- 
ing to the world. Since then sectors 
such as electronics g«ri shipbuild- 
ing have forged ahead According to 
Mr Wil Zhao, chairman of the Asso- 
ciation for the Peaceful Use id Mili- 
tary Industrial Technology, formed 
in 1987 to spur defence conversion, 
some 76 per cent of production, an 
average in defence factories is now 
for civilian use. 

The decision to beat swords into 
plou ghshar es among China’s esti- 
mated 600-700 defence factories has 
made China’s former arms indus- 
tries -dominant in some consumer 
products areas such as motor-cy- 
-des, w ashing -ma chines electric 
fans. The six uiain defence indus- 
tries - nuclear, space, aviation, 
ordinance, electronics and ship- 
building - account for 20 per cent of 
China's machine industry output, 
by value. 

At the same time, general pur- 
pose trading, manufacturing and 
investment companies have mush- 
roomed under the umbrella erf the 
Central Military Commission (CMC) 
- the apex organisation of the PLA 
and fount of political power and 
patronage. 

Experts in Hong Kang on the Chi- 
nese military have no doubt that 
the emergence oT companies such as 
Poly Group and Xinxing Corpora- 
tion is only the beginning. “I thin k 
they will develop into small king- 
doms. given their autonomy and 
independence from other PLA 
authorities,” says Mr K P Ng, a 
research director at the Hang Kang 
Chinese University. 

Military industries under the 
State Council have also made a sur- 
prisingly quick transformation from 
secretive offshoots of the old mili- 
tary-industrial complex to serious 
corporate players. Among the more 
successful are organisations such as 
China Electronics Industry Corpora- 
tion (Chinatron), (Thing Shipbuild- 
ing Trading company (CSTC), China 
North Industries Corporation 


(Norinco), China Great Wall Indus- 
try Corporation (GW1C), which is 
involved in building launch 

vehicles, and China National Aero- 
Technology Import-Export Corpora- 
tion (CATIC). 

Apart from Poly Group, the most 
active among companies under the 
direct control of the PLA are Hui- 
tong, a general purpose trading and 
investment company; Tinring , aqd 
its corporation Saqj in, or the 
999 Group, which produce pharma- 
ceuticals among many other activi- 
ties; and .ffng nn, which is owned by 
the People’s Armed Police and pro- 
duces security equipment 

Adding immeasurably to the 
weight of these corporations-in-the- 
malring is tha 1 patting rde id their 
management of the so-called 
’‘princelings’’ — «ms and daughters 
of China's -political elite.' Well-con- 
nected Chinese are deeply involved 
in same of the most prominent com- 

The military's 
involvement in 
business is one of the 
most striking 
by-products of 
economic reform 

panics which Include: 

• China Poly Garoop, founded in 
1964 to compete with Norinco in 
external arms sales, partly out of 
envy over the profits being made by 
Norinco. Hie company’s name in 
Chinese, Bools, means to “keep the 
profits". 

The president of China Poly is 
major-general He Ping, director of 
the Equipment Department of the 
PLA General Staff which is respon- 
sible for overseeing PLA businesses 
and liaison with the Commission 
for Science, Technology and Indus- 
try for National Defence (COSTTND) 
- the lynchpin body -in China’s 
efforts to modernise its military 
hardware by applying high technol- 
ogy. Perhaps more important, 
Major-Gen He is also the son-in-law 
of Deng Xiaoping, China’s senior 


Observer 


leader, and his wife, Deng Rang, is 
Deng’s “favourite” daughter and 
the author of last year’s top-selling 
biography of the Chinese leader. 

Other top figures associated with 
China Poly include Mr Wang Jun, 
son of the late Wang Zhen, a former 
Long March veteran and Deng asso- 
ciate. fo ariititirm to hlS duties as 
chairman of frhina Poly, Mr Wang 
jr is also president of Citic. 

The range of fThina Poly’s busi- 
nesses is vast. In ariititinm to the 
Hainan port development its activi- 
ties include shi pp in g , finance, prop- 
erty, electronics and telecommuni- 
cations. It also control two 
companies listed on the Hong Kong 
stock exchange Poly Investments 
and Continental Mariner, a ship- 
ping company. 

9 Norinco has achieved the high- 
est profile among new defence enti- 
tles with some 157 factories under 
its control in a network that 
extends across China but whose 
stronghold is in thp heavily-indus- 
trialised north-east Norinco grew 
out of the Fifth Ministry of 
Machine-Building industry, a secre- 
tive organisation responsible for 
China’s conventional weapons man- 
ufacture. 

Norinco is inv olved in a broad 
range iff activities, including arms 
sales, trading, construction, real 
estate, finance and car man ufuiA u r- 
ing. A sign of its clout is that it is 
one of few Chinese organisations 
authorised to raise capital abroad. 
Last month it raised $183m for its 
China North Industry Investment 
trust, listed in Dublin and Singa- 
pore. 

9 Xinxing Corporation has spread 
its tentacles across (Thing with a 
branch at virtually every leading 
logistics depot Among Ximdng's 

main businesses IS phannara n tinalR 

through Sanjiu which has plants in 
southern China. Xinxing has also 
estab l ish e d offices abroad, including 
one in Hang Kong. 

Hong Kong become increas- 
ingly important as a venue for an 
evolving relationship between rep- 
resentatives of the PLA and defence 
industry businesses and powerful 
overseas Chinese entrepreneurs. 


medieval monarchy who are 
supposed to symbolise the hope that 
this year's 28 per cent inflation will 
have fallen to 17 per cent next year 
and 9 per cent in 1997. 


Making up 


■ All rather odd. Sir Donald 
Gosling, founder and major 
shareholder of National Car Parks 
and the venture capitalists who had 
planned to buy his company, are off 
to lunch at the Savoy on Friday to 
celebrate the collapse of their £650m 
deal 

The occasion is the Saints and 
Sinner s charity lunch. Is this a sly 
dig at venture capitalist Prudential 
Venture Managers following its 
unwillingness to put up the last 
£50m? Alternatively, maybe it is a 
belated recognition by Gosling that 
NCFs second largest institutional 
shareholder is probably worth 
keeping happy. Interesting to see 
who picks up the champagne bill 



probably not have been guest of 
honour at last Saturday’s annual 
itinwar of Labour’s Fabian Society 
had he not been on a crash course 
in management at Harvard in the 
mid-1980s. 

Dyke, the man who made Roland 
Rat a household name when he was 
hrfping salvage TV -am from union 
excesses, told the Fabians that he 
had Harvard to thank for rekindling 
his interest in their cause. 

Expecting to learn about the virtues 
of American capitalism, instead he 
was bombarded with talk about the 
need for private companies and 
employers to grow more ethically 
responsible. Suitably impressed. 
Dyke switched off thoughts of Mrs 
Thatcher, and tuned in to Labour’s 


Legend has it 

■ Anyone who knows anything 
about Greek mythology will find 
Bill Rooney’s choice of come-back 
vehicle a trifle bizarre. Little more 
than a year after he was forced off 
the board of Spring Ram by 
institutional investors upset by 
three profit warnings in eight 
months Rooney has taken control 
of Atreus. a bathroom goods 
supplier. According to Greek legend 


the House of Atreus was cursed and 
the story of his family “is virtually 
unrivalled in antiquity for 
complexity and corruption’’, 
according to the Encyclopedia 
Britannia. 

At one point Atreus serves 
Thyestes, his elder broths-, the 
flesh of Thyestes’ own son, wham 
Atreus had earlier slain. Welcome 
back BilL 


Conversion 

■ The things they teach you at 
Harvard Business School Cfreg 
Dyke, the former chief executive of 
London Weekend TV, would 


If only getting the Labour party 
elected was as easy. 


On hold 

■ Thank goodness. The UK 
economy's day erf reckoning has 
now been postponed. 

Bill Martin, chief economist of 
brokers UBS, who has long been 
one of the gloomiest City 
Cassandras about the state of the 
UK economy, has had second 
thoughts. 

After wnrittw of p redicting that 
the UK economy would melt down 
next year, Martin's team has now 
officially announced it was wrong. 
“Our official forecast was 
premature,” admits Martin in a UBS 
circular. He now predicts that 1995, 


This relationship is likely to prove 
mutually beneficial to the broader 
ambitions of companies such as 
China Poly and Xinxing, no less 
than it wffl to the designs on the 
mainland of Chinese billionaires 
such as Mr Li Ka-shing. The part- 
nership is increasingly likely to 
take the form erf joint ventures in 
areas such as property and possibly 
infrastructure development in 

(Thing 

Whan Yinrmg opened its Hong 
Kong office with great fanfare in 
December 1992 on hand to greet Lt 
Gen Zhang Bin, deputy director of 
the General Logistics Department, 
were a clutch of Hong Kong 
tycoons, including Mr U, and Mr T 
T Tsui, the Hong Kong and London 
bus operator with long-standing 
PLA connections. 

While China’s military leaders 
have looked askance on the money- 
making of sections of the PLA, 
involvement in business now seems 
so deeply embedded that it would 
be impossible to imagine the mili- 
tary withdrawing from its lucrative 
sideline activities. There Is also a 
practical reason for this involve- 
ment in business. 


C hina's nominal defence 
budget for this year 
stands at Yn52bn, but 
this vastly understates 
the cost of maintaining 
the Chinese military. Western mili- 
tary experts believe the actual cost 
is two or even three times this 
amount. Additional funding from 
business has thus become critical to 
maintaining a functioning military 
at a time when defence has been the 
poor relation among China's “four 
mndarniaatinn-q " 

However, the PLA high command 
has become concerned that it may 
lose control over these business 
empires and worried about the 
widespread perception that many of 
those engaged in business have 
profited personally. 

In 1992 the CMC set up an audit 
commission in an attempt to 
restrain some of the excesses. The 
CMC has also sought to prevent the 
continued proliferation of PLA 
enterprise by consolidating its man- 
agement at group army leveL China 
has some 24 group armies, each of 
which commands about 50,000 
troops. 

Worries about the “commercialis- 
ation” of the PLA have been 
expressed by no lesser figures than 
generals Liu Huaqing and Zhang 
Than, vice ch a i r men of the CMC. 
The two Long March veterans 
warned last year that “all sorts of 
unhealthy attitudes and negative 
phenomena” were endangering the 
development of a professional mili- 
tary. Their warnings have come too 
late, however, to prevent soldiers’ 
business or bmgsfum becoming big 
business. 


like 1994, will “represent the 
economy's best inflation and 
growth performance for 30 years”. 

However, don’t get carried away 
by this upbeat assessment Martin 
has not conceded defeat yet If 
strong growth continues, the 
economy will still overheat, he 
predicts - but the shock will now 
come in 1997, instead of next year. 

If he gets that one wrong then 
Martin may have to consider 
following the example of Goldman 
Sachs' chief US economist Bob 
Giordano, and spend more thna 
with his family. 


Light at the end 

■ At last a seating plan for the 
London Underground. Rupert 
Saunders, an enterprising cove who 
runs the Clever Map Company, has 
published a £2J50 pocket guide 
which tells where to sit on the 
London underground for the 
speediest connection on leaving the 
tube. 

Passengers taking the Piccadilly 
Hna at Knig hisbridge for Kings 
Cross, for example, should board, 
the fourth carriage from the front 
Beyond mugs Cross, the tip is to sit 
in the last carriage. 

“If someone saves 10 minutes a 
day by using the Tube Hopper map, 

it is toe equivalent (dan extra 
week's holiday a year, ” enthuses 
Saunders. 

Observer would stffl prefer to 
know which carriage to sit to to 
avoid being mugged. 


«■ 



14 



brother. 

TYPEWRITERS - WORD PROCESSORS 
PRINTERS • COMPUTERS • FAX 


FINANCIAL TIMES 

Monday November 28 1994 





Ukrainians see first 

buds of privatisation 

Chrystia Freeland and Matthew Kaminski on the 
frustrated enthusiasm of some would-be capitalists 


F or two years Mr Serhii 
Oksanich was a capitalist 
in waiting. He and a group 
of friends established Klnto. a 
Kiev-based investment and secu- 
rities fund, in the spring of 1992. 
But for the first two years there 
were no securities for them to 
trade. ‘'Our main activity for the 
past two years has been waiting 
for privatisation," Mr 'Oksanich 
said. 

The failure of Ukraine's first 
post-independence government to 
launch serious economic reforms, 
including a mass privatisation 
programme, meant months of 
frustration and false starts for 
Kin to and the other 400 regis- 
tered security traders in Ukraine. 

During the past few months, 
however, thing s have began to 
change. Over the summer, 150 
large and medium-sized enter- 
prises were privatised using cer- 
tificates granted, under a system 
of daunting complexity, to each 
Ukrainian. In a series of closed 
tender bids to be completed by 
the end of this month, a further 
300 factories have gone on the 
block this autumn. 

Nonetheless, Ukraine's nascent 
privatisation is one of eastern 
Europe's best-kept secrets. In 
contrast with neighbouring Rus- 
sia or the Czech republic, where 
committed governments 
launched carefully structured, 
highly publicised mass privatisa- 
tion programmes, in Ukraine the 
sell-off of large state factories is 
happening not with a hang but 
with a whimper. 

The privatisation that has 
taken place so for in Ukraine has 
not been a product of policy at 
the highest levels - the sphere 
that western experts tend to 
focus on - but has been the quiet 
result of tenacious grassroots 
enthusiasm. 

The government of former 

Major set to 
win EU vote 

Continued from Page i 

power to Brussels. The prime 
minister was said to be acutely 
aware of the rising tide of opin- 
ion on the back benches in 
favour of a referendum before 
Britain considered joining a sin- 
gle European currency. Mr Ait- 
ken, a cabinet sceptic, reinforced 
that impression by describing 
economic and monetary union as 
“an epic constitutional decision". 

The issue is not expected to 
arise before the next general elec- 
tion, but rightwing ministers 
have joined Tory MFs in pressing 
for the referendum pledge to 
form a central plank of the par- 
ty's election manifesto. 

Senior ministers hope that 
today's Commons vote on legisla- 
tion to allow higher British con- 
tributions to the EU budget 
would allow the party to halt the 
latest bout of infighting. 


The UK and France are blocking 
a joint US-German effort to 
mount an international financial 
aid package to encourage 
economic reform in Ukraine. 

The stand-off is creating 
Anther tensions in the trans- 
atlantic alliance following US 
criticism of the European 
Union's efforts to stabilise 

president Leonid Kravchuk, 
which formulated the current pri- 
vatisation programme, was at 
best a lukewarm supporter of the 
process. As a result, the existing 
plan is deeply flawed - for exam- 
ple, Ukrainian citizens have been 
issued with theoretically non- 
tradeable privatisation bank 
accounts unlike the simple freely 
traded vouchers used in Russia. 
In addition, the state bureau- 
cracy has held the process back 
rather than pushed it forward. 

In spite of this, businessmen 
have displayed remarkable inge- 
nuity in navigating a multitude 
of official blocks. The securities 
funds, for example, have devised 
ways round the official intention 
to make the privatisation bank 
accounts issued to each Ukrai- 
nian non-tiadeable. 

T he certificates must first 
be redeemed at b anks by 
individual citizens in 
order to render them usable. But 
companies such as Klnto and 
Dikon investment ftmd . another 
avid participant in Ukraine's pri- 
vatisation, have found legal loop- 
holes that have allowed them In 
effect to buy op privatisation cer- 
tificates and use them to acquire 
large blocks of shares in factories 
when they are privatised. 

“De jure, you cannot buy and 
sell certificates and foreigners 
cannot participate in the pro- 
cess," Mr Oksanich says. "But de 


eastern Europe and former 
Yugoslavia. Ukraine is expected 
to be discussed informally at 
today's meeting of EU foreign 
ministers in Brussels, but the 
decisive meeting will take place 
among finance ministers a week 
later, Just before the European 
Council summit in Essen on 
December 9. Report, Pages 

facto it is easy to get around." He 
estimates that about 6m privati- 
sation certificates have already 
been invested in Ukraine either 
in worker buy-outs or by the 
investment funds. 

A fledgling secondary market 
in shares in some of these priva- 
tised companies already exists, 
Mr Oksanich says, and he 
expects about 30 companies to be 
freely traded by the end of the 
year on what he calls “our baby 
Nasdaq system." 

Ukraine's subterranean privati- 
sation has caught the attention 
of a few of the western invest- 
ment banks active in eastern 
Europe and Russia. Several 
senior western bankas said they 
are considering setting up 
operations in Ukraine soon. 

Western officials are optimistic 
that. iiwrW new lead ership of 
president Leonid Kuchma, who 
has brought a commitment to 
radical economic reforms to the 
very top of the Ukrainian govern- 
ment privatisation prospects will 
brighten. They hope Mr Kuchma 
will begin an open, well- 
publicised privatisation pro- 
gramme similar to that of its 
neighbours in the new year. 

But if privatisation in Ukraine 
has so for escaped the attention 
of many official western observ- 
ers, Mr Oksanich concedes that 
for most Ukrainians “privatisa- 
tion certificates remain largely a 
myth”. 


Late spurt by EU Yes side 


Continued from Page 1 

ship will erode Norway's Inde- 
pendence and its control over its 
valuable oil and fish resources. 
But all polls showed significant 
gains for the Yes camp. 

With at least 10 per cent of 
voters still undecided, the gov- 
ernment and its pro-EU backers 
in the Conservative opposition 
party and the business commu- 
nity are banking on winning 
over most of those making op 
their minds at the last minute - 
as happened in Sweden. 

The No side, however, is hop- 
ing its great strength In the 
rural and remote northern 
regions will be sufficient to 
defeat an expected majority for 
membership in the more popu- 
lous urban areas, particularly In 
the Oslo area, where about a 
third of the 3.6m voters live. 

Tensions between the two 
camps boiled over in televised 
debates on Friday night when 


Mrs Brundtland accused Ms 
Anne Enger Lahnstein, the prin- 
cipal leader of the No campaign, 
of lying when she said EU mem- 
bership might weaken trade 
ration rights. Ms Lahnstein 
demanded an apology, but Mrs 
Brandtland was unrepentant. 

Polling stations in about half 
the - country's municipalities 
opened for voting yesterday, but 
the bulk of the electorate will 
cast their ballots today. The 
polls stay open until 9pm local 
time and officials warn that if 
the outcome is very dose, the 
result may not be clear until 
early tomorrow morning. 

Even if Mrs Brundtland wins, 
the issue may not be over. The 
referendum is not binding on the 
parliament, where anti-EU oppo- 
nents led by tiie rural-based Cen- 
tre party and the Socialist Left 
party, have threatened to block 
ratification of membership if the 
margin in fovour in the plebi- 
scite is narrow. 


Berlusconi 
fights 
leaks from 
corruption 
probe 

By Robert Graham in Rome 


Mr Silvio Berlusconi, the 
embattled Italian prime minister, 
this week faces interrogation by 
Milan magistrates over corrup- 
tion allegations and a threatened 
general strike on Friday. 

Mr Berlusconi was originally 
expected to be questioned by 
Milan's anti-corruption magis- 
trates at the weekend, bat his 
lawyer was reported to be unwell 
and the appointment was post- 
poned. 

The delay has given the prime 
minister time to tighten the secu- 
rity surrounding the encounter, 
which is likely to take place at an 
undisclosed location in Milan. 

Political analysts have waned 
that, should any compromising 
information emerge, it would be 
bard for Mr Berlusconi to reject 
calls for his resignation. 

Hd was angered by the leak 
last Tuesday of the fact that he 
was being investigated for cor- 
ruption while running his Fin- 
invest business empire. He is 
anxious to protect the full 
secrecy of the Interrogation and 
prevent the Milan judiciary 
allowing testimony to leak imme- 
diately to the media. 

Mr Berlusconi last week 
insisted that he had done no 
wrong while running Fbunvest, 
Italy's second-largest private 
business group. He has accused 
the magistrates of conducting a 
political vendetta a gains t him. 

Meanwhile, the three main 
trade union confederations are 
standing by their call for an 
eight-hour stoppage on Friday to 
protest against pension cuts in 
the 1995 budget even though a 
compromise plan is to be dis- 
cussed on Wednesday. 

The compromise centres on 
removing structural ehnng Bs in 
the costly state pensions system 
from the 2995 budget and treating 
them separately. The unions 
have hinted that this would prob- 
ably be enough to avert the 
strike. The new proposals, which 
would have to include alternative 
spending cuts, also meet many of 
the objections to the pension 
reform plans made by the ruling 
rightwing coalition’s populist 
Northern League, led by Mr 
Umberto BossL The league leader 
held a long meeting at the week- 
end with President Oscar Luigi 
Scalforo. 

It was announced afterwards 
that Mr Boss! had pledged to sup- 
port bis coalition partners until 
the 1995 budget has passed 
through parliament 

The magistrates’ move against 
the prime minister foflows recent 
admissions by his younger 
brother, Mr Paolo Berlusconi, 
and by Mr Salvatore Sciascla, the 
head of Finin vest's tax depart- 
ment, that L330bn ($204m) was 
paid between 198992 in bribes to 
officials of the Goardia di Fbx- 
anza. the financial police, to 
ensure favourable inspections of 
company books. 


FT WEATHER GUIDE 


Europe today 

A powerful Atlantic front will move into 
Scandinavia bringing gusty winds, coastal rain 
and mountain snows. Inland across 
Scandinavia, the front will only produce some 
scattered rain. A weak cold front wBI move 
towards the Alps causing some ran and. above 
1200 to 1800 metres, there wiH also be some 
snow. In western Russia, It will be doudy with 
scattered patches of snow. Snow showers will 
also occur near the Biack Sea. Dull and dreary 
conditions wffl prevail in western Europe, 
however northern Germany, the Benelux and 
England will have sunny spells. In Spain and 
Portugal, it will be sunny. Along the Spanish 
coast it win be doudy and showery. Showers 
wffl also affect southern Italy, Malta and parts of 
Greece. 

Five-day forecast 

A surge of cold, arctic air wifl cover eastern 
Europe as an active low pressure system with 
snow moves from Scandinavia towards central 
Russia. Once its fronts reach the eastern 
Mediterranean late In the week, Greece and 
southern Italy will have heavy rain. A strong 
high pressure system wifl continue to dominate 
from the UK to central Europe. There will be 
patches of doud and locafly persistent fog. 

TODAY'S TEMPERATURES 


ioio r iooo^ 








<*<£> . 
* GH ^4 ! 






LOW 

u Wind tpmedtit KPU 






THE LEX COLUMN 


Milking the cash cows 


The UK corporate sector is sucking in 
cash at a rapid rate. Industrial compa- 
nies are running their largest financial 
surplus since the early 1980s. So for, 
companies have chosen to use the 
cash to improve their sheets. 

They paid off £3.1bn of borrowings in 
the first half of the year and Increased 
their cash deposits. The desire for 
financial strength Is fair wirmg h. but 
this has been at the expense of divi- 
dend payouts and capital expenditure. 

Generosity to shareholders has 
proved surprisingly limited; dividends 

foil between the second half of last 
year and the first half of the c ur rent 
year on a seasonally adjusted basis. 
However, investors have benefited 
recently from the trend towards share 
buy-backs - notably by Boots and the 
regional electricity companies - and 
foil-year dividends are likely to be up 
a handsome 10 per cent 

More worrying is the stagnant capi- 
tal expenditure in the third quarter. 
The stock market tends to be sceptical 
when companies ?tihihvm* large capi- 
tal expenditure plans, as, for example, 
when Hanson recently declared its 
intention to spend $438zn expanding 
capacity in the US. But this scepticism 
is wrong-headed, if investment sup- 
ports long-term earnings growth. The 
dearth of capital expenditure probably 
reflects the impact of high real 
long-term interest rates. But with 
infla tion low. companies should argu- 
ably adjust to less ambitious profit 
targets. 

German bunds 

There was encouraging news for the 
German bond market last week. 
Growth in October's M3 money supply 
worked out at an annualised rate of 
RS per cent, suggesting the Bundes- 
bank will come dose to meeting its 
target at 4 to 6 pm- cent MS growth far 
the year. Year-on-year inflation, was 
down to 2j6 per cent In November - 
further progress towards the Bundes- 
bank's 2 per cent objective. 

The favourable outlook Is blighted 
somewhat by continuing uncertainly 
over German ffarefl policy, which can- 
not be cleared up until after the tight 
1995 budget has been agreed later this 
month. The wage round for next year 
presents another ride. But, given the 
backdrop of improving inflation and 
money supply data. It is not absurd to 
suggest that the Bundesbank may cut 
short-term rates one last time during 
the currant economic cycle, perhaps 
early next year. To some extent it does 
not matter whether shortterm rates 




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V* ;™. : 


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Wcfc’Frpwt«6';: ;* jsj-v ' 

are cut or not; sentiment towards 
bunds will improve even If rates . are 
merely left on hold throughout mast 
of 1995. This seems more likely titan 
the monetary tightening still antici- 
pated fay the Euromarkets. 

Improving f undamentals . have 
helped bunds over recent months; 
they have regained their traditional 
premium to comparable US issues. 
The outperfarmance Is more marked 
for US investors because of tire weak- 
ness of the dollar versus the D-Mark. 
This may encourage profit-taking at 
signs of a pronounced rally, but If last 
week's transitive -world-wide shift from 
equities into bands gathers momen- 
tum, bunds will dearly frenflm; 

Syndicated loans 

Margins rm fartorantimml ' gy mtiMtw! 

loana have shrunk to wafer thin lev- 
els. The Bank for International Settle- 
ments confirmed as mnrfi in its quar- 
terly survey last week. The most 
credit- worthy companies can currently 
borrow for as Httle as 15 points above 
the London inter-bank offer rate, com- 
pared with as much as 50 points just 
two years ago. That Is lower than the 
level reached during the last cycle. 

The reason for the keener pricing is 
an imbalance in supply and demand 
Banks, awash with capital following 
improved fiTum trial results raid a 
decline in bad debts, have been anx- 
ious to build their loan portfolios. But 
the corporate sector, busy paying 
down debt, has not had much appetite 
for borrowing. Competition between 
hanks has forced margins down. For 
companies, raising money through 
syndicated loans is doubly attractive, 
given the high yields they currently 
pay for issuing bonds. However 
cut-throat competition is worrying. 
With spreads so narrow, few banks are 


pngkiTifr money. Moreover, in their 
efforts to win business, they have 

competed by loosening covenant 
terms. That could store up trouble 
(fa ring the economic downturn. 

' One might k banks would walk 
away from such unprofitable bus iness. 
The is that many see syndicated 
Ipana as loss leaders, on the back of 
which they can sell corporations more 
profitable products such as deriva- 
tives. There is therefore little chance 
of a pick-up in margins. In fact, with 
Japanese banks expected to rush to 
Ttmkw loans by the end of their finan- 
. Hal year in March, a farther squeeze 
is likely. 

Brazil 

The Brazilian stock market this year 
has been the world’s best-performing 
in dollar terms, up an astonishing 80 
per twit But last week the Bovespa 
index plummeted nearly 10 per cent 
The question is whether it was a hic- 
cup in Us progress or represented the 
start of a more fundamental derating. 

In part, the descent was due to the 
general fall In international equity 
markets. Investors have also been 
locking In profits daring reassuringly 
thin trading. But the key to longer 
term growth will be the incoming gov- 
ernment’s ability to control inflation 
which bag already fallen from a peak 
of SO per cant to 3J> per cent a month. 
Some commentators believe that if 
Inflation can be successfully con- 
trolled, the economy could expand 6 
per cent a year for the next decade. 
Private sector earnings growth could 
be spectacular in an economy expand- 
ing that fast. 

Investors must hope the record of 
past Brazilian governments represents 
no guide to the future performance of 
this administration. After all, the lat- 
est economic plan is the seventh in 
eight years. However, this time there 
is consensus that a return to hyper- 
inflation must be avoided at all costs. 
All depends on the administration's 
ability to control the budget deficit- A 
positive conclusion to the constitu- 
tional reform necessary to limit the 
spending power of regional govern- 
ment is not guaranteed, hut the 
chances are better than for many 
years. Until those reforms are agreed, 
probably not before June, (he market 
will remain highly volatile. But if 
reform is Implemented, then prospects 
are bright- with Brazil set to become 
an important constituent of interna- 
tional investment funds.' If not, all 
bets are off. 




The Busiest 
Stations 
in the City. 



Sun SFARCstations. 

The Noi platform for shunting stock. 
And shares. 


Situation of 17 GMT. Tempeniuras mtarwn foretay. forecasts by Meteo Consult of the Ngtheria r xts 


Constant improvement of our service. 
That's our commitment . 


Lufthansa 


L. Angeles 

Lw Palmas 

Una 

Lisbon 

London 

LuxJmute 

Lyon 

Madera 


21 Nassau 

22 New York 

23 Nice 
16 Nicosia 
10 Oslo 

7 Parts 

8 Perth 
21 Prague 


28 Vancouver 
14 Venice 

16 Vienna 

17 Warsaw 

B Washington 
9 WeHnqton 
23 Winnipeg 
9 Zurich 


ram s 

far 12 
drad 9 
doudy 7 
rdn io 
shower IS 
shower 4 
drzzl 7 



Maximum 

Bwjng 

fair 

9 

Caracas 

shower 

31 

Faro 

sun 

IS 

Madrid 

aw 

13 

Rangoon 

far 

33 

i ' ' : ~l 


Cefcwts 

Belfast 

tog 

9 

Cardin 

cloudy 

9 

Frankfurt 

doudy 

8 

Majorca 

shower 

18 


3 

: i : 1 

AbuDtehi 

sun 

30 

Belgrade 

ft* 

6 

Casablanca 

fair 

18 

Genera 

doudy 

a 

Malta 

Ihund 

17 

no 


31 

■ \ ■ ? 

Accra 

lair 

33 

Benin 

fair 

8 

Chicago 

snow 

1 

Gtoraftar 

sun 

17 

Manchester 

fog 

10 

Rome 


17 

) 

Algiers 

fair 

19 

Bermuda 

fax 

24 

Cologne 

fair 

9 

Glasgow 

rain 

12 

Manila 

doudy 

30 

Sl Fibco 

sun 

15 

Amsterdam 

ft* 

10 

Bogota 

doudy 

IS 

Dakar 

sun 

28 

Hamburg 

fair 

9 

Mdbouroe 

fair 

29 

Seoul 

fair 

10 

■ ;• . 

A01OT3 

3hOWW 

11 

Bombay 

sun 

33 

Danas 

sun 

17 

HeWnW 

d« 

3 

Mexico City 

lair 

77 

Singapore 


31 

1 ■ • i 

Atlanta 

raki 

19 

Brussels 

doudy 

9 

Delhi 

fair 

29 

Hong Kong 

doudy 

2 r 

Miami 

thund 

zr 

fair 

6 


a Aims 

cloudy 

31 

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FINANCIAL TIMES 



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Monday November 28 1994 




MARKETS 


THIS WEEK 


BRONWEN MADDOX: 

GLOBAL INVESTOR 
If you take the word of 40 leading 
European Industrialists, the region's 
manufacturing companies are now 
at the “point of maximum danger" 
In the economic cyda The report, 
prepared by the European Round 
- Table also argues that it is an 
illusion to believe that economic recovery signals 
an end to Europe’s competitiveness crisis. Page 18 

PETER HORMANs 

ECONOMICS NOTEBOOK 
Europaan issues continue to 
fascinate and alarm. But while 
attention in the UK has been 
focused on today's Commons 
debate over contributions to the 
European Union budget, discussion 
elsewhere In Europe has shifted 
back to economic and monetary union. Page 18 

BONDS: 

Afl eyes in the UK gifts market wifi be on Mr 
Kenneth Clarke, the chancellor, as he deflvere the 
Budget tomorrow. Most Budgets have a theme and 
this year’s effort looks likely to to be, whether or 
not it is spelt out in public, a Budget for gilts. 

Page 20 

EQUITIES: 

New York - Investors this week will continue to 
wrestle with fears that the Federal Reserve may 
induce recession through tighter and tighter 
monetary policy. London - UK equities are In 
desperate need of a ton/a This could come 
tomorrow when Mr Kenneth Clarke deflvere his 
second UK Budget Page 19 

EMERGING MARKETS: 

in the largest burst of fundraising since the fall of 
communism five years ago, fund managers fund 
managers are showing growing enthusiasm for the 
emerging markets of eastern Europe. Page 19 

CURRENCIES: 

The political problems of UK Prime Minister, Mr 
John Major, am almost certain to ensure that 
staling will be a focus of market attention this 
week. Page 19 

COMMODITIES: 

Members of the Association of Coffee Producing 
Countries are to meet in London on Friday to 
discuss changes in the market situation. 

Page 18 

UK COMPANIES: - . 

The proposed merger between the UK’s Halifax 
and Leeds buffeting societies faces several 
regidatory hurdles before members can vote on It 
next March, the most immediate of which b 
surrounds competition. Page 16 

INTERNATIONAL COMPANIES: 

Substantial bad loan write-offs reduced recurring 
profits at Japan's long-term credit banks and trust 
banks in the six months to the end of September. 
Page 17 


STATISTICS 


Base lending rates 23 

Company meetings 10 

Dividend payments 10 

FT-A World tndees 18 

FT Guide to currencies _ 19 
Foreign exchanges — 


London recent issues — 23 
London share service . 26^7 
Man. fund sendee — 24,25 

Money markets 23 

New int bond issues 20 

23 World stock mfct indices- 27 


Privatisation lures cash to Russia 


By Nicholas Denton and 
Richard Lappor 

Emerging markets funds have 
raised $800m to take advantage of 
mass privatisation in Russia and 
its neighbours, marking a surge 
tn interest by investors in the 
region. 

Platings by two new regional 
funds and one existing one have 
taken to more than $L5bn the 
pool of financial investment ear- 
marked for eastern Europe. 

Pictet, the Swiss private bank- 
ing group, has attracted $56ta for 
its First Russian Frontiers Trust, 
and gained the first London fist- 


ing for a fund of its type. 

Trading in First Russian Fron- 
tiers, sponsored by stockbrokers 
Cazenove, begins tomorrow in 

London. On Wednesday the Bar- 
ings group, which has raised 
H80m for its First NIS Regional 
Fund, expects those shares to be 
fisted in Luxembourg. 

An established fund, Invesco's 
East Europe Development Fund, 
has expanded by tapping the 
markets for an extra $75m and 
trading in t he new share issue 
began at the end of last week on 
the Irish Stock Exchange. 

The proliferation of east Euro- 
pean regional funds is the most 


visible sign that investor interest 
has withstood the rise in interna- 
tional interest rates. General 
emerging market funds, hedge 
funds and even pension funds 
have contributed to a record flow 
of financial investment into Rus- 
sia estimated at $500m a month. 

Gazprom, Russia’s matn gas 
producer, has hired Klelnwort 
Benson of the UK to sell a 9 per 
cent shareholding internation- 
ally. Such action by Russia's nat- 
ural resource giants will draw in 
even more investment. 

Many of the earlier regional 
funds have weighted their hold- 
ings towards the more mature 


east European markets of Poland, 
the Czech Republic and Hungary. 

But Russia’s mass privatisation 
programme has produced a huge 
supply of equity at valuations 
that fund managers describe pri- 
vately as “laughably low”. The 
market capitalisation of the Rus- 
sian oil sector values a barrel of 
proven reserves at 10-15 cents, 
compared with $7 in the US. 

The Pictet fund aims to invest 
35 per cent In Russia and 25 per 
cent in the relatively unexplored 

Rwl>ay i dUO of Wreyiwrria anri Bul- 
garia. The fund has scope to 
invest in more than 20 markets 
including locations such as Bos- 


nia, Serbia and Azerbaijan. 

The Barings fund also targets 
Russia and the newly indepen- 
dent states of the old Soviet 
Onion. “It is very, very risky but 
the value is unparalleled in terms 
of what you see in other emerg- 
ing markets,” said Ms Nancy 
Curtin, head of emerging Euro- 
pean markets at Baring Asset 
Management. Invesco’s East 
Europe Development Fund, 
which has the best recorded per- 
formance of any fund investor 
over one and three years, also 
plans to increase the Russian 
weighting in its portfolio. 
Emerging Markets, Page 19 


Deutsche Telekom: dSstributing the spoils 


After nearly four years of courtship, Deutsche Telekom rings Goldman Sachs’ bell 

Investment banks 
take stock after 
telecoms battle 


Deutsche Bank 

Dresdner Bank Goldman 




..'VT > 


By Andrew Fisher, Richard 
Lapper and Nicholas Denton 

For executives of the world's top 
investment banks, last weekend 
must have been one of the most 
relaxing for some time. 

Those not celebrating their suc- 
cess, after Friday's announce- 
ment from the German govern- 
ment of which banks would play 
leading roles in the Deutsche 
Telekom share issue, could at 
least enjoy an wiri to months of 
tension. 

When Goldman Sachs was 
named as the foreign bank in the 
global consortium for the equity 
sale - which at some DM35bn 
($9.Sbn) is the biggest ever in 
Germany and one of the world's 
largest - it was finally confirmed 
that the US bank’s assiduous 
courtship of the German telecom- 
munications concern and its 
chairman Helmut Ricke, had paid 
off. 

The global consortium takes 
responsibility for the coordina- 
tion of demand and placement in 
consultation with regional lead- 
managers. Along with Deutsche 
Telekom and the German govern- 
ment it will also decide on alloca- 
tion of shares between the 
domestic German market and the 
four other regions. 

The international group acts as 
intermediary between regional 
leaders and the company. 

The choice of a US bank was 
virtually certain. Deutsche Tele- 
kom's decision to seek a US list- 
ing to tap as many American 
institutional and private inves- 
tors as possible meant a CJS bank 


would inevitably have a head 
start, joining Deutsche Bank and 
Dresdner Bank at the top of the 
global consortium. 

Although the decision was 
taken last Monday at a meeting 
with Chancellor Helmut Kohl, 
who was alert to the political 
implications of the choice of lead 
banks, it was kept quiet at first 
This was to give the government 
time to work out final details arid 
avoid the news clashing with the 
presentation of the newly re- 
elected government’s legislative 
programme. 

Keeping banks and the media 
on tenterhooks was “a deliberate 
diversionary tactic”, said one 
government official Even Deut- 
sche Rank only knew of the defi- 
nite choice of Goldman Sachs on 
Thursday night. Deutsche, too, 
received a boost on Friday with 
its appointment as spokesman for 
the global consortium, also 
responsible for the overall book- 
building process in which inves- 
tor interest is assessed before the 
share price is fixed. This was 
seen as a political attempt to help 
Deutsche, Germany's biggest 
bank, after its image problems 
over the Metallgesellschaft and 
the Schneider property debacles. 

Dresdner Bank had earlier 
looked like taking the top Ger- 
man prize after its success with 
the recent Lufthansa privatisa- 
tion. In the event, it shares the 
leadership of the German sub- 
consortium - likely to account 
for more than half the share sales 
- with Deutsche, while the latter 
is a joint manager (with Merrill 
and Goldman) in the American 



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placing, and co-leader for the UK 
tranche (headed by Warburg) and 
for Asia (led by Daiwa). France's 
Paribas heads the consortium for 
the rest of Europe, with Dresdner 
as co-manager. 

The whole Issuing structure Is 
finely balanced and designed to 
put the top banks in geographical 
areas at the head of the regional 
consortia. 

From the start, Goldman, 
always looked most likely to fore 
best in this overall share-out It 
had courted the German com- 
pany for nearly four years, hav- 
ing first called on its executives 
in February 1991, well before the 
Bonn government announced 
plans to raise capital for the 
state-owned company through 
the international markets. 

Other leading investment 
banks also spent years cultiva- 
ting Deutsche Telekom. One US 
Investment banker said: “Any- 
body who hadn’t been all over 
this should be fired. If somebody 


rolled up a year ago without 
investing time I think they were 
a little op timistic ” 

But Goldman Sachs was partic- 
ularly determined. Mr Scott 
Mead, a maimginp director of the 
communications A n *i technology 
group within the investment 
hanking division, and one of a 
core team of six executives 
involved in the deal, said it was a 
“a top priority for a large number 
of our senior management” - a 
formidable claim for a bank 
known for its relentless pursuit 
of business. 

In its initial contacts, Goldman 
Sachs explained its views about 
the global telecommunications 
Industry which it believes was 
poised to expand rapidly. 

“There was nothing tangible at 
the time, but we were firmly con- 
vinced that a commercial and 
corporate structure was the best 
way forward for telecommunica- 
tions companies," explained Mr 
Robert Morris, a manag in g direc- 


tor of Goldman’s global equities 
research. “Whether it was 1991 or 
1995, our belief was that you 
would have privatisation 
throughout Europe and the rest 
of the world. In a sense we 
thought it was inevitable.” 

Early in 1992, Goldman held a 
series of meetings with the group 
in connection with roadshows 
designed to introduce German 
government bodies to the inter- 
national capital markets. “This 
was an unofficial exercise 
designed to help them know what 
they would confront when priva- 
tisation came," said Mr Mead. 
“We organised the meetings to 
help explain the equity story.” 

In spring 1998, Goldman 
worked with the international 
aim of Deutsche Telekom on its 
bid for a stake in Matav, the Hun- 
garian telecommunications con- 
cern. Deutsche Telekom eventu- 
ally bought a 30 per cent stake In 
Matav for 1875m. 

Continued on Page 17 


Singer to 
pay £45m 
for control 
of Carnegie 

By Peter John in London and 
Christopher Brown-Humes in 
Stockholm 

Singer & Frledlander, the 
merchant banking group, is to 
boy a controlling stake in Car- 
negie^ the international broking 
house, from Nordbanken of Swe- 


The group, which owns the UK 
broking house Coffins Stewart, is 
expected to announce the details 

- possibly as early as tomorrow 

- in conjunction w }th a convert- 
ible share issue to raise the nec- 
essary cash. 

It is thought to be paying 
around £45m ($73m) for a 55 per 
cent stake in the company. It 
will take the equity business 
while Nordbanken will retain 
the Swedish bond and money 
broking arm. 

The purchase and fundraising 
are likely to be carried out by 
Barclays de Zoete Wedd, Singer’s 
broker. The company was not 
prepared to comment yesterday 
but a market scarce said: “The 
financing is stDl being decided 
but the daai is imminent.” 

Singer has a diversified 
growth approach, acquiring size- 
able stakes in Associated Nurs- 
ing Services, Edgar Hamilton - 
the Lloyd’s of London broker - 
and People’s Phone, an indepen- 
dent provider of mobile phone 
services. 

It also has a large property 
portfolio which contributed 
almost 20 per cent to interim 
profits in September. 

It has a significant cash pile 
and Is one of the best capitalised 
merchant b anks tn the UK 
according to banking analysts. 
While it could afford to raise the 
extra money for the purchase 
without tapping shareholders, it 
Is believed to be keeping cash for 
other ventures. For example 
increasing its 22 per cent stake 
in People's Phone. 

Nordbanken, said yesterday: 
“We have been seeking a buyer 
for over a year. We are concen- 
trating on offering standardised 
products to private individuals 
and small and medium-sized 
companies while Carnegie speci- 
alises in medium and large com- 
panies and wealthy individuals." 

Nordbanken, the worst casu- 
alty Of Sweden's 1992 lmnlrtnp 
crisis, was bailed out by the gov- 
ernment two years ago and is 
now set for privatisation after 
reporting healthy interim profits 
in August. Earlier this year, it 
had been In talks about selling 
Carnegie to Westdeutsche Lan- 
desbank Girozentrale. 


This week: Company news 


bayer/hoechst 

Chemical giants 
bullish about 
future growth 

After BASF set the tone last week wtth 
news of a three-fold increase in 
third-quarter profits, offset by a 
warning that the squeeze an costs win 
continue, much the same is expected 
fiom Bayer and Hoecbsfs nine-month 
results, due this week. 

Bayer, expected to publish today, has 
been huffish an prospects for most of 
the year, and although improvements 
on the BASF scale are not to be 
expected, analysts potat out that ;the 
Leverkusen group avoided crashing 
quite so dramatically in the recession 

^^-SraSngsS^ third quarter 


foreign, operations, Bayer's trusty 
Kre against cyclical crunctes. 
^SraSrHoechstisexpectedto 
continued pressure cm i nargms 
fromseirere price competition. 
Ai+hniurh no details are expected, 

in traditional chemicals 

££^fiSS&-. 

JSffireoorted in the third quarter 

sgSgsaa" 

such as those of Bayer in 


P^SHoSst^ ^ Sobering's 
formed abighit 


already — 

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.1994 


Sojf«cfr<i8gN» 

HANSON 

Quantum leap well 
timed for year end 

Hanson's full year figures on Thursday 
are expected to show a modest increase 
in pre-tax profits to around £lbn 
($L64bn), before disposal gains of more 
than £30Qm. Underlying earnings per 
share are forecast to show tittle change 
at 14p. 

Strong growth at the operating level 
win have continued in the fourth 
quarter with trading profits r ising by 
almost a third in the year. But the 
impact will have been largely oteet by 
a £250m swing in the interest bEL 

This utams from the rn creagn m US 
debt following the £2.lbn acquisition of 
Quantum Chemical at the start of the 
year combined with lower Income an 
Hanson's sterling deposits. 

The figures should confirm that the 
Quantum deal was very well timed. 
Quantum made little more than £35m 
before interest and tax in the year to 
September 1993. But ethylene and 
polyethylene prices have since risen 
strongly, and analysts believB Quantum 
could have almost £28&n last 

year. After interest its contribution wIU 

have been around room. 

Profits from Hanson's other cyclical 
business, parttada; ’construction 
related, have also picked up strongly 
and US coal profits have recovered 
following the long strike at Peabody. 

Hanson has already signalled that it 
will pay a fourth quarterly dividend of 
3p, making a total far the year to ILTp, 
a rise of 2.6 per cent 


OTHER COMPANIES 

Restructuring charge 
dampens party spirit 

Another hefty restructuring charge will 
depress pre-tax profits at Grand 
Metropolitan, the drinks and foods 
group, by £28Gm to around £650m 
($1.07bn) for the year ended September. 
A similar charge a year earlier cut 
profits to £83Qm. It might have 
managed a few percentage points of 
underlying profit growth in the latest 
year, 

The City hopes GrandMet will spell 
out on Thursday what the charge, 
announced in October, will entail. The 
other key area is the performance of 
IDV, its spirits business, particularly in 
the US. 

■ Severn Trent: The UK water utility is 
expected tomorrow to report interim 
profits about 7 per cent ahead to £!57m 
(5257.5m). Investors will be looking for a 
substantial improvement at the group's 
waste services division. Blfla, along 
with information on cost control 

■ Argyll Group: The UK’s third- largest 
grocery retailer and owner of the 
Safeway chain, is expected to report 
interim pre-tax profits of £206m 

(5337 An) on Wednesday. This marks an 
increase from £199m previously, after 
restating the figures to allow for the 
group's decision a year ago to start 
depredating its store values. The group 
is thought to be improving net mar gins 
through tight cost control 

■ Seaboard: The company will kickoff 


Grand Mot .. 

Share prtee(pencfij 

■ soo 



Source: FTQrapMto 

what is expected to be a controversial 
interims gee snn for the England and 
Wales regional electricity companies 
(recs) when it reports on Thursday. 
Profit figures for the first half of the 
year are always of limited significance 
but the recs 1 dividend rises always 
provoke criticism. Seeboard is expected 
to be relatively restrained, with 
analysts foretasting rises of about 1G 
per cent However some of its peers are 
likely to go beyond 20 per cent 

■ Royal Bank of Scotland: Forecasts 
for pre-tax profits for the fall-year 
centre an £508m to £S28m ($865 An) 
(against rasftm last time) when the 
bank reports on Thursday. This takes 
account of the payment announced last 
year to Mr Peter Wood, chief executive 
and founder of Direct Line, the group's 
motor insurer, of £21 m, and the extra 
£50m from RBS’ disposal of its stake in 
3i. Forecasts for the full-year dividend 
range from l&5p to l&8p, against Up. 


Companies In this issue 


Alphameric 

American Opportunity 
Aylesfofd Newsprint 
Bank Mizrahi 
Barings 


Carnegie 
Choo Trust Bank 
Deutsche Bank 
Deutsche Telekom 
Dmsfrer Bank 
EcfipseBflnds 
Goldman Sacha 


1$ 

GiupoTomui 

17 

Mobil 

6 

16 

Haflfex BuUSngSoc 

16 

Nippon Credft Bank 

17 

6 

Hanson 

15 

Nippon Trust Bank 

mu 

17 

Hoechst 

15 

Nordbankan 

16 

16 

me 

17 

Pictet 

15 

15 

Ideal Hardware 

16 

Pirelli 

6 

17 

lm± Bank of Japan 

17 

RJ Reynolds 

5 

16 

Invesco 

15 

Rolls-Royce 

6 

17 

MO 

17 

Singer & ftfedfender 

IS 

16 

Leeds Permanent 

16 

Suivtomo Trust Bank 


16 

Long-Term Cred. Bank 

17 

Tombac 


16 

Mrnmet 

16 

Toyo TustBank 


16 

Mitsubishi Tr. Bank 

17 

Volkswagen 

3 

15 

Mitsui Trust Bank 

17 

Yasuda Trust Bank 

17 


This announcement appears as a matter of record only. 



5tnd5hypatBk 

Initial public offer 
and institutional placing of 

80.5 million series A shares 

The institutional placing price 
valued the offer at 

SEK7406 million 


Joint advisers and global co-ordinators 

Alfred Berg Fondkonunission AB Klein wort Benson Securities 

International Tranche 

Alfred Berg Fondkommission AB Kleinwort Benson Securities 

Cazenove & Co. Goldman Sachs International UBS Limited 


Nomura International 
J J 1 . Morgan Securities Ltd. 

Alfred Berg Inc. 

November 1994 



Banqoe Indosnez 
Prewdner Bank Aktfenges rilm-haft 

US Tranche 

Kleinwort Benson North America Inc. 
Salomon Brothers Inc 


f 


v- 








k»] /i I -j* : 1 1 


Halifax faces competition hurdle 


By Robert Rice, 

Legal Correspondent 


The proposed merger between the Halifax 
and Leeds building societies faces several 
regulatory hardies before members can 
vote on it next March, the most immedi- 
ate of which is over competition. 

The Office of Fair Trading has con- 
firmed that it has launched a preliminary 
investigation to see whether it should be 
blocked on competition grounds. 

Although there is some qnestion 
whether the combined society would have 
25 per cent of the UK residential mort- 
gage market, the merger qualifies for vet- 
ting as the society being taken over, the 
Leeds, has assets of £20 bn. 

The OFT will hope to complete its 
inquiry within a month, after which it 
will make a recommendation to Mr Mich- 
ael Heseltme, trade and industry secre- 
tary. 


He wifi then decide whether to allow It 
to go through, unchallenged or with con- 
ditions. or whether to refer it to the 
Monopolies and Mergers Commission. A 
full MMC inquiry would take three 
mouths. 

If the proposal clears the competition 
hurdle, the merger should be straightfor- 
ward. The procedure involves “a transfer 
of engagements” which amounts to a tra- 
nsfer from the Leeds to the Halifax of all 
the Leeds’ assets, liabilities and members. 

A transfer statement explaining the 
detailed terms of the merger will be sent 
to members of both societies next spring, 
after which they most both obtain the 
approval of their investing and borrowing 
members. 

The conversion of tbe merged society to 
a hank )$ more onerous, but the societies 
have the successful Abbey National prece- 
dent to follow. 

The first step would be to form a succes- 


sor company and get a clear indication 
from the Bank of England that it would 
be authorised as a bank under UK bank- 
ing legislation. Special provisions attach 
to the new company, its memorandum 
and articles must protect it from takeover 
for five years. 

The conversion must then be approved 
by the merged society's members and the 
Building Societies Commission. A special 
resolution requiring a 75 per cent vote in 
favour must be passed by investing mem- 
bers. In addition 20 per cent in number of 
those eligible to vote must pass the reso- 
lution. Borrowing members must approve 
by a simple majority. 

TO induce members to vote, the societ- 
ies plan to offer all members free shares 
in the new company as the Abbey did. By 
doing this rather than offering cash, they 
should avoid the problems into which the 
Cheltenham & Gloucester/Lloyds Bank 
deal ran. 


Interim 
growth 
at Ideal 
Hardware 


By Alan Cane 


Yorkshire stirs societies’ pudding 

Alison Smith reports on the sector’s reaction to the merger plans 

F or the second time this Ton -IO RuEkUnn SAAiotias those tactics are not 

year building societies TOP 10 Bul,din ® Societies turned by the Halifax nw 

are hoping to prove that om agreement does in tens i 


F or the second time this 
year building societies 
are hoping to prove that 
reports of the sector’s demise 
are premature. 

But the agreement between 

Halifax and Leeds Permanent 

building societies, two of the 
UK's biggest, to merge and 
then to become a public lim- 
ited company and a bank has 
set them a serious challenge. 

Reaction now is different 
from responses to the 
announcement in April of 
Lloyds Bank’s £l-8bn agreed 
cash bid for Cheltenham & 
Gloucester Building Society, 
the UK's sixth largest 
Then there was less to put 
societies on the defensive. The 
Lloyds offer could be seen as a 
sign of its strength in the core 
markets of home loans and 
retail savings, while increased 
interest from potential pur- 
chasers could not be a threat 
since the mutual ownership 
regime protects societies from 
ho&ile takeover. 

By contrast, last week's 
announcement by the two 
Yorkshire-based societies 
planted two doubts. 

First, if Leeds, the fifth larg- 
est society with assets of 
£20bn, did not feel large 
enough to survive alone, what 
would happen to smaller soci- 
eties? 

Second, if Halifax - almost 
twice as big as the second larg- 
est - believed it had to convert 
to plc-status in order to com- 


m * ' 


■ Total assets 
I Number of branches 


40 K?)- «0S .. “ 

■HLS i 


201 &£ .in 

JU. be 




Somes. UBS Obbri ne n amti . *908 


HatgadwMi 

(haf&xftrK* 


pete effectively in personal 
financial services, how could 
other large societies do so 
while still shackled to the reg- 
ulatory restrictions on societ- 
ies' activities and funding? 

Despite these concerns, the 
remaining large societies are 
not planning a suicide pacL 

“You can never say never, 
but there are no powers we 
want that we will not be get- 
ting anyway, and capital Is not 
a problem, so why convert?” 
says Mr Peter Robinson, man- 
aging director of Woolwich 
Building Society, the UK's 
third largest 

Indeed, societies can see 
some advantages for them- 
selves from the Halifax move - 
for example in the disappear- 
ance of the Leeds brand and 
discussions with the Treasury 
about new powers for societies. 


Mr Anthony Nelson, Trea- 
sury economic secretary, has 
said the government wants a 
separate societies' sector to 
flourish. Consequently, Mr 
Brian Davis, chief executive of 
Nationwide, the second largest 
society, believes the deal 
strengthens the case for 
greater flexibility so societies 
can compete more effectively 
in their present farm. 

The common refrain amon g 
large societies is that above a 
certain minimum, size is not 
everything. They can focus 
either on developing a particu- 
lar niche - as Bradford & Bin- 
gley is seeking to do as the 
largest independent financial 
adviser - or on a strong 
regional franchise - such as 
Northern Rock’s position in 
north-east England. 

While in the short term 


Frontrunner I. SICAV 


SodAte d'lnvestissement A Capital Variable 
a Compartments Multiples 


RC Luxembourg B 31 442 
672, rue de Neudorf 
L-2220 Luxembourg 


Notice to the shareholders 


Notice is hereby given that pursuant to the d ecisi ons adopted on November 25, 1994 by tbe extraordi- 
nary shareholders’ meeting of tbe SICAV, tbe articles of incorporation of the SICAV have been 
amended, more particularly in connection with the introduction of a posable convers i on commission. 


Pursuant to such amendment to the ankles of incorporation, the Board of Directors has deckled that a 
conversion commission of up to 1% of the Net Asset Value of die shares of the co mpa r tm ent the share- 
holders leaves, may be payable to the respective compartment the shareholder is switching from. More- 
over, shareholders may be requested to bear the difference in initial commission between the compart- 
ment they leave and the compartment of which they become shareholders, should die initial commis- 
sion of the compartment into which the shareholders are conve r ti n g their shares be higher than the com- 
mission of tbe compartment they leave. All shareholders converting their shares on one same day must 
bear tbe same conversion commission. 


Furthermore, the sh a re holders are hereby informed that die Board of Directors of the SICAV has taken 
the following decisions; 


Increase of the issue commission: an issue commission of up to 5% of the Net Asset Value per share 
may be charged to investors upon subscribing for shares in the SICAV and shall be paid tq Frontrunner 
Management Company S A or to any sales agent. 


Minimum redemption amount: any shareholder has the right to request at any rim e die redemption 
of his shares at the Net Asset Value with a minimum redemption amount of ECU 1,000 or its 
equivalent in the respective Compartment's Base Currency. 


Revised fees to be paid to Fr o n tr un ner Management Company S-A. in its capacity of Admini- 
strative Agent and Investment Manager: 


- 3/4% in total p.a. of the Net Asset Value of die Equity Compartments such as defined in die 
Prospectus, 


- 1/2% in total pa. of the Net Asset Value of (be Bond Compartments such as defined in the 
Prospectus, 


- 1/8% in total p.a. of tbe Net Asset Value of the Reserve Compartments such as defined in tbe 
Prospectus. 


Revised fees to be paid to the Custodian and Paying Agent: (he fees remain the same but are only 
due on tbe Equity and Bond Compartments such as defined in the Prospectus. 


These decisions of die Board of Directors shall become effective as of December 29, 1994, one month 
after the publication of this notice. 


However, the shareholders have the possibility to request the redemption of their shares, free of any 
commission, during die period of one month as of die date of (his publication, thus before December 
29, 1994. 


Updated Prospectuses reflecting these changes are available at the registered office of die Company. 


Luxembourg, November 25, 1994 
By order of the Board of Directors 



Citicorp Banking Corporation 
U.S. $250,000,000 

Guaranteed Floating Rate Subordinated Capital Notes 
Due July 10, 1997 

Unconditionally Guaranteed on a Subordinated Basis by 

cmcoRPO 

Notice is hereby given that the Rote of Interest has been fixed at 
5.6875% and that the interest payable on the relevant Interest 
Payment Date, December 28, 1 994 against Coupon No. 43 in 
respect of US$10,000 nominal of the Notes will be U5$47.4Q. 


November 28, 1994, London _____ 

By: Citibank, NA (Issuer Services), Agent Bank uf II BA mO 



Sovereign (Forex) lid. 
24hr Foreign Exchange 
Margin 'finding FoaBty 
Ccmpatifhe Prices 
Daily Fax Sardes 
*1:071 -931 9168. 
fan 071-93! T1U 
4b hdk^in MnlW 
IsnkaSWlWCRE 


those tactics are not under- 
mined by the Halifax move, the 
agreement does intensify tbe 
pressures for change over the 
next few years. 

In particular, the deal makes 
it much more likely that a 
large society planning to 
merge or convert will now 
decide to do both. 

The case for a pre-conversion 
merger is that the larger a soci- 
ety is when it becomes a pic. 
the better-placed it is to deter 
potential predators. If the 
Leeds had decided to float on 
its own. it could have been 
destabilised by speculation 
about a hostile bid well before 
it could have been taken over. 

The argument for adding 
conversion is that, as members 
are increasingly aware of the 
value of their membership, 
they need the promise of 
shares tomorrow to persuade 
them to back a deal which does 
not bring much, if any, imme- 
diate financial benefit. 

Mr Peter White, chief execu- 
tive of Alliance & Leicester, 
says the society will not be 
making any “panic decisions", 
since getting the right partner 
is more important than simply 
enjoying tbe idea of a match. 

Societies do not need to 
panic now. But with the rea- 
sonable assumption that there 
will be further large mergers, 
they would probably be 
well-advised to join a dating 
agency so as not to be left on 
the shelf. 


I (deal Hardware, the dist- 
ributor of computer storage 
products, is benefiting from 
the rapid growth of computer 
networks and communications 
systems. 

For the six months to Sep- 
tember 30 the company 
reported a 34 per cent increase 
in pre-tax profits from £L74m 
to SZ.&in, on turnover 55 per 
cent ahead at £45.7m (£29.4m). 

Earnings per share rose 33 
per cent to 7.5ip (5.66p) and the 
maiden interim dividend is 
3.4p. Cash was strong at £8 An. 

The company distributes 
storages systems for all levels 
of computer apart from main- 
frames. 

Mr James Wickes, managing 
director, said trading had been 
strong throughout the period. 
Tbe price of equipment was 
railing but customers needed 
more storage to support larger 
networks. 

Mr Richard Jewson, c hair - 
man, said since the company 
floated earlier this year, it had 
signed distribution agreements 
with International Business 
Machines and had been 
appointed UK distributor for 
AT&T's personal computers. 

He said growth had contin- 
ued despite capacity con- 
straints. adding that, since the 
second half of the year was tra- 
ditionally stronger than tbe 
first, he was confident of a sat- 
isfactory performance for the 
year. 


American 

Opportunity 


American Opportunity Trust 
had net assets of £16.8m at the 
end of the year to September 
30. This represented a rise of IB 
per cent on last year's gi4 .2m. 
and compared with a 4 per cent 
fall in Standard & Poor's Com- 
posite index. 

Fully diluted net assets per 
share were I39.5p (121.6p). 

Net deficit for the year wid- 
ened to £89.000 (£77.000). with 
losses per share of 1.18p (LQ2p) 
and no dividend recommended. 

The Hambro-managed trust 
changed its name from Lever- 
aged Opportunity Trust. 


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FINANCIAL TIMES MONDAY NOVEMBER 28 1994 






and lifts profit 81 % 


By Nigel Clark 


Alphameric, the information 
technology systems supplier, 
has announced a number of 
actions as part of its expansion 
plans. They include a £2.75m 
acquisition, a £i.89m placing 
and open offer, a share sub- 
scription and the conversion of 
preference shares. 

The company also announ- 
ced pre-tax profits of £323JM0 
for the six months to Septem- 
ber 30, a rise of 81 per cent on 
the comparable £178^000. 

It is acquiring the outstand- 
ing 25 per cent in AlphaServ by 
buying Ambrose Consultancy 
for £2.75m satisfied by the 
issue of shares of which 
2.67m are bring placed at 37^p 
a share. There is a 3-for-13 
clawback. 

A farther 3£6m shares are 
being placed under the same 
terms to raise £885,000 for 
working capital and to fund 
expansion. 

Sejin Electron, a South Kor- 


ean keyboard manufacturer, is 
subscribing for 3m shares at 
41 . 5 p, subject to South Korean 
government approval. 

Tbe company also plans, to 
convert the 500,000 9% per cent 
convertible preference shares 
held by 3i into -L2m ordinary: 
shares. Tbe conversion rate is 
2.41 per convertible against the 
1.38 set out in the articles of 
association. 

If the plan goes through 
Alphameric will pay the 
£137,000 arrears on. the prefer- 
ence shares. An EGM is to be 
held on December. IS. 

Tbe profit rise was achieved 
on turnover IS per cart ahead 
at £6-3m (£5.28m>. Earnings, 
per share doubted to 0.8p 
(0-4p>- 

Mr Alan Benjamin, chair- 
man, said that if the present 
level of progress was sustained 
the company could be in a 
position to restore dividends in 
1994-95. 

Tbe shares rose lp to 41p on 
Friday. 


By Geoff Dyer 


Minmet,'. the ' Ibibliii-based 
'electronic information, mining, 
and exploration group,' is kOsT 
tog I£630,00ff (£620,811) through 
a l-for-6 rights issue and the; 
placing of .np to fan new shares 
at 2^p per shara. ' • 

- The .-new . funds will, -he 
invested' in Russia. Money, an 
on-screen information ' service 
joint venture, Solent Trees, a 
mature trees business, and 
the group's Russian, gold totes- . 


Eclipse makes disposal 


Eclipse Blinds has sold the 
business and assets of the 
Apollo Blinds retail franchise 
to Hunter Douglas (UK) for 
£2.4m cash, plus an estimated 
£190,000 in respect of the value 
of certain debtors attributable 
to the Apollo business. 

Apollo wiaicfla window blinds 
for franchise retail outlets in 


the UK and Irish Republic and 
supplies about 70 outlets which 
sell window blinds under the 
Apollo brand name. 

The sale is in line with 
Eclipse’s policy to develop 
around the profitable merchan- 
dised distribution of textiles 
and the component parts of 
window blinds. 


The group is also negotiating 
with Gulf. Explorations Consul- 
tants, a US shell ccmpanyin 
which Minm et has a 23£ par 
cent stake, a posable paper bid 
for Minmet by Gulf. - t 

Mr Paul Bristol, diaimtan-of 
Minmet, said thatif a Gulf bid 
were accepted by Minmet’ s 
shareholders, the new entity 
would seek to revive its Hating 
on Nasdaq, which may be con- 
sidered a more suitable market 
than Dublin for raising funds 
for Russia Money and the 
group’s Russian gold mining 
operations. 

Mr Bristol said he hoped the 
negotiations with Gulf would 
be completed before the 
December 18 deadline for the 
rights issue. 

Shares in Minmet closed 
unchanged at 295p on 


telecoms 


CROSS BORDER M&A DEALS 


BIDDER/INVESTOR 


CBra-Geigy 

(Switzerland) 


Oman (US) 


SECTOR VALUE 


Pharmaceuticals £1.3bn 


Cfba seeking 
49.9 % 


Pflzar (US) 


Unit of SmlthKHne 
Beecham (UK/US) 


Anted health £908m SKB deafing 


RoOs-Royee (UK) 


Alfison Engine Co 
(US) 


Atesteta £328m 


RFTs biggest 
ewer buy 


Danone (Ranoe) 


Baglay (Argentina) 


Rest Argentine 
foothold 


llam ma ra on (UK) 


O PM (France) 


Property 


David S Smith (UK) 


Toscana Qndufeti 
(ftaW 


Paper & 

packaging 


Second Bench 
buy in week 

. Option taken to 
buy 


McKechnle (UK) 


Unit of Hunter 
Demotes (Australia) 


Distribution 


McKechnle con- 
tinues growth 


Amcor (AustraSa) 


rinulHr. ■ »-■ -M • 

noxoie Hottnnq 
(US) 


Paper & 
packaging 


Amcor continues 
packaging buys 


. •••• M-** 


NSK (JapanJ/tngersoS- 
Rand (US) 


Nastech Europe 
(JV> 


Motor 

components 


Pooling. Europe- 
an operations 


Northwest Water UK/ 
B e ch tel Gorp (US) 


Strategic alliance 


Waters 

waste 


Far-reaching 
global plans 



U.S. $150,000,000 

First Bank System, Inc. 


LEGAL 

NOTICES 


Floating Rate Subordinated 
Capital Notes Due 1996 






PiPfqi 


Interest Rate 


6.125% per annum 


Interest Period 


25th November 1994 
27th February 1995 


Interest Amount per 
U.S. $50,000 Note due 
27th February 1995 


U.S. $799.65 




C5 First Boston 

Agent 



CS First Boston Croup 


CS First Boston 
Finance. B.V. 

itmMi'SAIRMf.HV , 


USJ200.000.000 
Guaranteed subordinated 
floating rate notes 2003 


Notice is hereby t’iivn that for 
the interest period 28 November 
WH4 to 2ti May /.'WS the notes 
tall carry an interest rate of 
ft 1X75" -per annum Interest 
payable on 2ti May fflSS 
will amount In USS.J0. 77 
per US$1.000 note and 
I&S.T07 h6 per t.-SS 10,000 
m ‘tranJ I tSSflKV 56 per 
ttSSUXt, VtHi note 


Agent: Morgan Guaranty 
Trust Company 


JPMorgan 


m&xm. 


CREGEM Finance N.V. 


|kjn>, a, iiJJ-Mt EH 

An'tt'-lw neN.ihtdni 

VJS. $100,000,000 
Floating Rate Note* due 2003 
J n accordance with the provisions of 
ibe Notes, notice is hereby given 
that the Rate of I merest for the 
six month period ending 25th May. 
IW5 has been fixed at 6 .H 625 *, 
per annum. The interest accruing 
for such six month period will 
he U.S. S 311. 48 per U.S. SI.0KJ 
Bearer Note, and U.S. S3M.81 per 
U.S. SIU.000 Bearer Note and U.S. 
S3 .048.09 per U.S. Uffljtftl 
Bearer Note on 25«h Ma>. !*»•; 
against presentation of Coupon 
No. 4. 

Union Bank of Switzerland 
London Branch Agem Bank V§7 
23rd November. 1994 








1 

THE 

NOTICE IS 1 


dated 9tti 1 

reduction of 

tbe above na 

to £5.«XUX 


- - - 1 ■ 

-F. Y 

■■ n 

* "» 05A17,M5 and U* 

"dd bjr Ae Coon tkoviag with 

iD^hed by tkt +0* 
ncftnocd Act «crc regteatd by ifer P»«rrairr 


teloil din 7R& day of Noveubv 1994 
Natairo NoObboo 
50 Stratton Street. 

Lowfao W1X SFL 


Tet 071 403 9933 
Bet: lAXXKSMa/l 


Solkttcasfor te drove named Conan y. 


ISSUE OF UP TO US$ 600,000,000 
BANQUE FRAN$AISE DU COMMERCE EXTERIEUR 
FLOATING RATE NOTES DUE 1996 
OF WHICH US$350, 000,000 IS BEING ISSUED 
AS THE INITIAL TRANCHE 

in accordance with the prov&ons of the above mentioned Ftoatina Rain 
Notes, the rate Interest for the period November 25. i994toMav25 
has been fixed aift23% per annum. 1 ' 


The interest payable will be USt 1,566.15 per note of 50 000 and 
USS 7.830.76 per note Of US$ 250,000. 


Hscal Agent 

BANOUE INTERNATIONALE AB 
A LUXEMBOURG 




N*- #86599 ot 1994 


ragSi OFJUSncE 


rniWKi *5!™* MATTER OP 
CXJMJMl N7TY HEALTH SESYICKS UMTTHD 

-oJNJHE MATTER OK 
™ COMPANIES ACT lteS 


NOTJCTB HEREBY GIVEN tba the Older of 


Petroleum Argus Daily Oil Price Reports 

V.'tof CV •- C . .-CJO -C ter Gtctat C.'ccis 

Petroleum Argus 

" ’ - i '■ • 11 AL -l- -■ , - 


CALL w. 


FUTURES 4 OPTIONS BROKERS 



execution only 


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Tel: 071 493 WJJ 

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LEGAL 

NOTICES 


Bad debt disposals hit Japanese banks 


By Gerard Bafcqr m Tofcyo 

Substantial bad loan write-offs 
reduced recurring profits - 
before extraordinary items and 
tax - at Japan's long-term 
credit banks and trust banks in 
the sis months to the end of 
September. However, most 
banks were able to report 
higher operating profits in a 
more favourable interest rate 
environment 

The three long-term credit 
banks, which are principally 
wholesale lenders to Japanese 
companies, saw combined pre- 
tax profits fall by 20 J per cent 
The decline was largely the 
result of the disposal of bad 
debts accumulated during the 
collapse of asset prices in 
recent years. 

Write-offs reduced outstand- 
ing non-performing loans to 
Yl^OObn ($1.82bn), a fell of 19 
per cent on a year earlier. 
However, these figures do not 
include restructured loans, 
where interest rates have been 
cut to assist borrowers in 
severe trouble. 

Analysts estimate that if 
these were added to the total, 
bad loans would be approxi- 
mately double the disclosed 
levels. 

The long-term credit banks 
used gains from sales of equi- 


Long-term credit banks: Six months to September 1094 (Ytwi) 


. Operating Chang* on 
raMtuas -ym wf%l 


Op«ste>8 Chang* on 
• proffls year (%) 


Recurring Change on 
Prato* yesrW 


Nat Change on N on-per ter mtofl 
profits ' T year (94} loans 


■Hefi-yeer 
tewnge fW \ 


IBJ 

LTCB 

tBppm CtedB 


-163' .'IS A' 
-123 - 133 
-3B.0- SLE. 


Trust banks 


Mitsui . 

. 5133 . 

' .-02 . 

204 

. +473 

. 02 

.. -63 

- 5-7 . 

; -09 

5353 

. 

MfteubfsW • 

•. S4ZJ’ 

' : +a'i 

77.3 

+740 

14.0 

-15.1 

6.0 ■ 

-63 

4943 

.• to 

Sumtorno 

582.5 

+133 

B3.4 

+93.0 

105 

-38.9 

73 

-73 

5212 - . 

-33 

Yasuda 

341.7 -■ 

.. -2-6 

• 23.4 

+31J2 

73 

■R1.T 

43 * 

• +5.0 

425.7 

-S3 

Toyo . 

221.7 

-17.1 

183 

+18.1 

4.6 

..-14.7 

.33 ■ 

-5.7 

297.0 

• ' -'to 

■ ChuQ 

1 423 . 

- SM 

6.1 

*309 

33 

-12.4 

1.6 : 

-S3 

1763 

. .. -22 

bBppoo 

as js 

-108 

-63 


-OS 


-1.7 


2313 

+813 


ties to offset the write-offs, but 
these were not enough to cover 
the full charge and pre-tax 
profits declined as a result 
There were mixed fortunes 
in operating profits. The Indus- 
trial Bank of Japan, the largest 
of the three, managed to take 
advantage of lower discount 
bond rates to record a 32 per 
cent increase in operating prof* 
its, but the two smaller banks 
both saw operating profits fall 
They attributed the decline 
to lower profits cm government 
bond investment farom ** than 
last year, when they benefited 
strongly from sales of bonds as 
Interest rates fell. 

For the full year to the end 


of March the three banks 
expect combined pre-tax profits 
of Y126bn. up by 18.6 per cent 
from 1993-94. 

The trust banks, many of 
which have had severe difficul- 
ties during the period of falling 
asset prices and resulting prob- 
lem loan increases, also pur- 
sued an aggressive policy of 
writing off bad loans. 

As a result, they reported 
combined pre-tax profits lower 
by 23 per cent at Y48.7bn. But 
operating profits for most of 
the hanks were sharply higher 
- by an aggregate of 57 per 
cent 

The trust banks said the 
improved operating profits 


were the result of the fall in 
interest rates in the previous 
six months - September 1993 
to March 1994 - which, 
because of the structure of 
their assets and liabilities, was 
not reflected in margins lentil 
the first half of the current 
financial year. 

Most hanks reported declines 
in outstanding non-performing 
loans, with one exception - 
Nippon Trust. The bank was 
taken over two months ago by 
Mitsubishi Bank in an attempt 
to rescue it from its enormous 
burden of bad loans. At the 
time of the takeover, Mitsubi- 
shi warned that bad loans were 
set to rise for some time. 


The increase in Nippon 
Trust’s bad loans accounted for 
the fact that aggregate dis- 
closed son-performing assets 
rose by 1_1 per emit between 
March and September this 
year, to Y2,700bn. 

However, like the long-tern 
credit banks and the city 
banks, the trust banks said 
that they expected to clear 
their had debt problem within 
three years. 

• Sumitomo Bank: In last 
week's tabulation of the Japa- 
nese city banks’ half-year 
results, tiie figure for Sumi- 
tomo Bank's hurepasa in non- 
performing loans should have 
been 73 per cent 


Telecoms battle 


Continued from Page 15 

DT was always the favourite but Mr 
Morris claimed: “They won even 
though they were not the highest bid- 
der. So it was obviously satisfactory." 

hi 1994, Goldman worked closely with 
DT and France Telecom when the two 
European companies invested some 
$l2bn in Sprint, the US telwwnwninfca- 
tions concern. Between these deals, 
Goldman's executives worked hard to 
cultivate the relationship. 

Far at least six - and usually 10 - 
executives based in Frankfurt and Lon- 
don, the DT deal was a priority. Gold- 
man even moved Mr Morris, its preemi- 
nent telecoms analyst, from the US to 
London last year in order to help with 
the Telekom campaign. 

The bank used every opportunity to 
strengthen its ties with DT, keeping the 
company informed about the progress 
of other international privatisation 
deals in which it has been involved. 

“We filled them in on our views an 
the evolution of technology and the 
background to privatisation, said Mr 
Morris. 


Goldman was heavily involved in the 
sale of Singapore Telecom in 1993, and 
this year has been in three large deals. 
It was a book runner in the sale of Tele 
Danmark, the Tianisli company, Thai- 
land Telephone & r nmnnwilratifing and 

Inrirwa t, the Indonesian long itisfanrp 

tetenmnmimieaKnng company. 

While the fees to be earned by the 
various banks from the Deutsche Tele- 
kom deal are clearly attractive at 
DM400m or more, Goldman says the 
real value of the deal is strategic. 

‘Ibis is a deal which every institu- 
tion we talk to will be interested in. 
And for our German office and our tele- 
communications business it is of 
extraordinary importance," instated Mr 
Mead. “A relationship with Telekom 
has a pay-hack you can't measure in 
terms of fees," he added. 

Rightly or wrongly, said Mr Morris, 
there is a perception in the market- 
place that if you have passed the test in 
Germany you have passed German 
engineering standards in relation to 
telecommunications flotations. It shows 
that the doors fit singly and the wheels 
are tight.” 


Higher costs 
restrict ITC 


Launch expenses of low-cost cigarette 
I brands «wd an miraxis business decline 
restricted sales and profit growth of 
I India’s biggest tobacco company, ITC, 
l Reuter reports from Bombay. 

ITC reported an 11 per cent increase 
in gross sales to Rs22.77bn (9726m) and 
a 30 per cent rise in net profit to 
Rsl.lGbn for the half year to September 
30 tank the earnings increase was mod- 
est compared with the general trend of 
many companies posting more than 100 
per cent rises for the half year, ana- 
lysts said. 

“It is a little disappointing for a mar- 
ket which is used to better results from 
ITC,” said one. “They focused on Ugh 
volume sales of low cost brands in 
rural India. This is a good strategy In 
the long run, hut marketing expenses 
eroded margins." 

ITC, which is 3L5 per cent owned by 
BAT Industries of the UK, recorded a 
6.4 per cent increase in cigarette sales 
in value terms after several years of 
stagnant growth. Cigarettes co n tribute 
to more than 60 per cent of ITCs sales. 


Philippines 
mine lower 

By Jose Qalang bi Mania 

Benguet, the Philippines' leading 
mining company, reputed net profits 
for the nine months to end-September 
of 13 An pesos <J058m). a steep drop of . 
95.7 per cent from the previous year. 
Total operating revenues amounted to 
234bn pesos, down 63 per cent 

The results were affected by poor ore 
grade which “significantly improved" 
by the start of the fourth quarter of the 
year. The company expects frill recov- 
ery by the first half of 1995. 

Gold production, Benguef s principal 
activity, suffered a decline following an 
earthquake that damaged part of the 
Antamok mine, with the clean-up later 
delayed by heavy rains. Losses from its 
An tamok open-pit mine in the January 
to September period reached 42.1m 
pesos, down, however, from the previ- 
ous year’s 703m pesos. 

Copper production, on the other 
hand, slowed in the third quarter due to I 
breakdowns in the Dixon mine's con- 
centrator plant 


FT GUIDE TO Y-TORLD CURRENCIES 


TTw taUa below ghee the latent onflabie rates of exchange (rocaviad) against four key currencies on Friday. Nowembar 25. 1994 . m aonw cases the rale b nominal. Marta* rates are the average of buying and soling rates except 
where they ere shown to £xj otherwise. In some cases mortal rates have been a fc uMd from those of foreign currencies eo which they me bed. 


(Afotwna M30JB 

&«•(> 157.57 

(Dhan eum 

fr Franc) 8J71B 

(SphasoM 2UM» 

(Hear Km nn< W BPJ 

pCarS) <2838 

ffl ss 

< hat) 2-0671 

poring 17.1522 

ftort Escudo} 248.775 


awWsderfi IT*** 

1ST BR 

B<*Z* 

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KIO plans 
write-off 
of Grupo 
Torras debt 

By Tom Bums In Madrid 

The Kuwait Investment Office 
(KIO) plans to write-off 
Ptal84.4bn ($l-4bn) to bring 
its Spanish holding, Grupo 
Torras, ont of receivership 
under the terms of a settle- 
ment proposed to minority 
creditors. 

The development represents 
the formal acknowledgement 
by the KIO and by its parent, 
the Kuwait Investment 
Authority (E3A), of Kuwaitis 
continued interest In Grupo 
Torras despite a legal fend 
between former and present 
managers of the company that 
led to an application by Grupo 
Torras tor protection against 
its creditors in December 1992. 

The proposed write-off is the 
equivalent of 90 par cent of the 
Pta205.4bn owed by Grupo 
Torras to KIO/KIA, a debt 
total that represents 933 per 
cent of the total sum owed by 
the Spanish company to its 
creditors. The remaining 6.5 
per cent of the debt, represent- 
ing Ptal4-4bn, is highly dis- 
persed among financial and 
public institutions and among 
bond holders. 

The settlement proposes a 
sliding scale: minor creditors, 
owed less than Ptalm, would 
be repaid 97 pa* cent of their 
loan to Grupo Ton-as within 
three months; Creditors who 
lent between PtalOOm and 
Ptalbn are being asked to 
write-off 80 per cent of their 
loans and will be repaid the 
balance within six months. 

The Creditors have until Jan- 
nary 21 to approve the settle- 
ment but this approval is a 
mere formality for under 
Spanish law such an agree- 
ment requires a favourable 
vote representing 75 per cent 
of the debt owed, a proportion 
that is well below the thresh- 
old of the direct Kuwait loans 
to Grupo Torres. 

The chief beneficiaries of the 
KlO’s proposed write-off win 
be Torraspapel, a paper group 
owned by Grupo Torres, and 
Ercros, the holding's fertiliser 
division. Both companies were 
placed into receivership before 
Grupo Torres itself collapsed 
and they have since received 
considerable financial hnrfring 
from the KIO. 


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Israel sells 26% 
controlling stake 
in Bank Mizrahi 


By Eric Sdvar 
in Jerusalem 

The Israeli government has 
sold a controlling interest in 
Bank Mizrahi, the country's 
fourth-ranking bank, for 
gllOm. The buyers, the Ofer- 
Wertheim consortium, -pur- 
chased a 26 per cent stake with 
an option to acquire a further 
25 per cent within 18 months, 

Mizrahi is the first of the 
“big four" banks to be priva- 
tised. The government 
acquired major holdings in all 
of them for $7bn in 1983 after 
the collapse of an elaborate 
system run by the banks tor 
ramping up their own shares. 

Mr Gill Leidner, managing 
director of MI Holdings, the 
government agency charged 
with selling off the state’s 
stake, said yesterday. “The 
Mizrahi sale is a major step 
forward, it will definitely push 
thing s ahiwii for the sale of the 
other three big banks.” 

He described the $UQm sale 
price as “reasonable” but 
admitted he had hoped to raise 
more. Mizrahi last week 
reported a 25 per cent drop in 
net profits tor the third q darter 
of 1994. to Shkafi.lm <$8.6m) 
from Shk363m in the same 
period of 1993. Earlier this year 


the bank was valued for MI 
Holdings at $450m to $50Qm. 

The Israel-based Ofer-Wert- 
heim group is controlled by the 
brothers Mr Sami and Mr Yuli 
Qfer and two businessmen, Mr 
Muzi Wertheim and Mr Abe 
Feinberg. The Ofers control 50 
per cent of the consortium, 
with Mr Wertheim and Mr 
Feinberg holding 25 per cent 


Mr Leidner explained that 
even if they did not take up the 
option to buy another 25 per 
cant of Mizrahi, the chance 
that anyone else would be able 
to buy anything dose to it was 
theoretical 

MI Holdings sold the state's 
423 per cent stake in XDB Hold- 
ing, the industrial investment 
arm of Israel Discount Bank, 
the country's third largest 
bank, for $350m in 1992 but has 
still to sell tiie hank itself. In 
1993 the government sold the 
smaller Israel Union Bank for 
$85 3m. 

Mr Leidner is negotiating to 
sell the second biggest bank, 
Leumi, to Republic Bank of 
New York. He expects the sale 
to be completed during the 
first half of 1995. An interna- 
tional tender is to be issued for 
the leading bank, Hapoalim, 
within the next two months. 


Canadian paper group 
swings back to profit 


By Robert Gibbons 
in Montreal 

Canadian pulp and paper 
producers are expected to 
report a sharp climb in profits 
in the final quarter of this 
year, driven by rising prices 
for pulp, newsprint, fine paper 

ami parVgg ln g 

Tembec, a big eastern pro- 
ducer , provided a taste of 
things to come when It 
reported a profit of C$72.9m 
(US*53m), or C$234 a share, for 
the year to September 30, a 
swing of nearly C$122m from a 
loss oT C$48.6m, or C$133, a 
year earlier. 

The C$65m proceeds from a 
financial restructuring 


accounted for part of the 
increase and the rest came 
from higher selling prices, 
especially in the September 
quarter. Costs were stable. 

Since September 30, prices 
worldwide have risen farther 
for nearly an Tembec’s prod- 
ucts. The company exports to 
more than 50 countries. The 
latest fisrel year showed sales 
of C$575m, up 32 per cent 

Tembec’s 50 per centrowned 
French pulp mill contributed 
C$3.9m in operating Income 
and the 41 per cent-owned 
Ontario newsprint affiliate con- 
tributed C$6 3m. 

Most of Temhec’s operations 
are based in north-western 
Quebec. 


HII AiTIMES 

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adhWmnbb 


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Noratiag Sara of fca Honed Popar Cfc, Ud 


Notice is hereby given that dm Rote of Interest for the Interest Period 
November 28, 1994 to May 30, 1995 has been fixed at 6.8125% 
ond that the interest payable on the relevant Interest Payment Date 
May 30, 1995 against Coupon No. 2 wifl be US$3,436.ti2 in respect 
of US$100,000 owning of the Notes. 

November 28. 1994 , u . M . . 

By: Citibank, MA. (Issuer Services), Agent Bank CmBANCO 








Japan Airlines 

A WORLD OF COMFORT 


First Union Corporation 
U.S. $150,000,000 

Roaring Rate Notes 
due 1996 

The rate of interest per annum . 
on Finr Union Corpora don’s 
Lf.S. SI 50.000.000 Floating 
Rare Notes due 1996 for rhe 
interest period beginning 
25th November, 1994. and end- 
ing 27th February. 1995. the 
next interest payment date, "ill 
be 6.125%. The amount of 
interest payable fur such inter- 
est period on each U.S. $10,000 
principal amount of the Notes 
will be U.S. $159.93. 

■BUiinlu lalhat 

LI Comp im.Uato AtniBok 


This notice is issued in compliance with the requirements of The International 
Stock Exchange of die United Kingdom and the Republic of Irekmd Limited 
(the “London Slock Exchange"). Application has been made to the London 
Stock Exchange for admission to the Official List of the undermentioned 
securities: 

THE NEWS CORPORATION LIMITED 
(Incorporated is South Australia) 

ACN 907 910 330 

$465355,31030 preferred Umlted voting ordinary shares {'‘Preferred Shares") 
divided into 930,710.621 Preferred Shares of 50 cento (Australian) 

Copies of the document relating to the issue may be dbtsaned during normal 
business bears from the Com pani es A n n ou nce m ent Offioe, foe London Stock 
Exchange. London Stock Exchange Tower, Cape( Court Entrance, off 
Bartholomew Lure, London EC2N 1HP for collection only, from 28th 
November, 1994 op to and including 30th November, 1994 and from 28th 
November, 1994 np lo and indnding 12th December, 1994 from the offices of 
Allen Sl Ovrry. 9 Qieapside, Lonritm EC2V 6AD 

Dated 2Sih November, 1994 

The Listing Agent to the listing is Allen & Overy of 9 Cheapgide, London 
ECZV6AD 




ZZj^Vm'*'***** * 


18 


FINANCIAL TIMES MONDAY NOVEMBER 2$ 1994 


Gelisen Pazarbrda 

J 

En hi Banka 


FINANCIAL TIMES 


Best Emerging 
Markets Bank 



MARKETS 



THIS WEEK 



Sr , 


Global Investor / Bronwen Maddox 



If you take tbe 
word of 40 lead- 
ing European 
industrialists , 
the region's 
manufacturing 
companies are 
now at the 
“point of maxi* 
mum danger" in the economic 
cycle. The report, prepared by 
the European Round Table 
ahead of next month's Euro* 
pean summit in Essen, also 
argues that it is an illusion to 
believe that economic recovery 
signals an end to Europe's 
competitiveness crisis. 

The authors are right to 
draw that conclusion. Nine- 
month trading figures from 
Bayer and Hoechst, the Ger- 
man chemical and drug giants, 
which are expected today and 
Wednesday respectively, are 
likely to confirm many of the 
points raised. 

Pre-tax profits are expected 
to have rebounded from last 
year’s depressed levels, but 
margins in some product areas 
are expected to show the 
effects of growing competition. 
In chemicals anH petrochemi- 
cals in particular, the breath- 
ing space which margins have 
enjoyed recently may be short- 
lived. Competitors' new capac- 
ity which comes onstream 
shortly in Asia and America is 
expected to increase competi- 


The point of maximum danger 


tion both in those countries 
and within Europe. 

The authors are right to 
point out, too, that one of the 
threats to profits is that wage 
settlements wfU edge upwards. 
They argue that at this stage 
in the economic cycle manufac- 
turers often “let loose” on 
costs, especially wages. Given 
the current backdrop of conti- 
nent-wide industrial unrest, 
investors would be wrong to 
dismiss that threat. The 
authors may, though, make 
rather too much of this factor; 
it is too early to conclude from 
the current disputes that 
Europe's historically rigid 
wage structures have persisted 
through recession intact 

The report's gloominess 
about Europe's high costs of 
energy, telecommunications 
and transport may also be war- 
ranted. 

When such markets are 
deregulated, the reduction in 
costs can be rapid: the liberal- 
isation of European voice tele- 
phony. combined with privati- 
sation of many of the 
telecommunications operators, 
is a case in point 


German drag and chemical companies 


Share price and Index rebasad 
130 — 


120 - 


110 — 


100 



90' 


1999 
Source: FT Graptfle 


94 


Siemens, the German indus- 
trial group, says that European 
prices for switching and trans- 
mission equipment have fallen 
in real terms by about 7 per 
cent in each of the last three 
years, and by even more in 
Germany. The cause Is partly 
recession and partly the 
increasingly open procurement 
policies adopted by Us custom- 
ers, inp.i tiding Deutsche Tele- 
kom, Germany's state-owned 


Light clouds over coffee talks 


Members of the Association of 
Coffee Producing Countries are 
to meet in London on Friday to 
discuss changes in the market 
situation. They could have 
more to discuss than seemed 
likely when the meeting was 
scheduled. 

Tbe association was formed 
to organise a retention scheme 
aimed at reviving coffee prices, 
which came into effect just 
over a year ago. Its initial suc- 
cess in lifting prices to 2 '4-year 
highs resulted in the suspen- 
sion of retention, even before 
the market surged on news of 


dam aging Brazilian frosts in 
June and July. 

With concern over a subse- 
quent drought in Brazil driving 
prices to 8'4-year highs - more 
than three times the levels pre- 
vailing at the inception of the 
scheme - Friday's meeting 
might have been expected to be 
largely self-congratulatory. But 
recent events have introduced 
an element of doubt Into mar- 
ket prospects. 

Since the Brazilian govern- 
ment gave its official assess- 
ment of tbe size of its damaged 
1395-96 crop - which was 


broadly in line with market 
estimates - prices have tum- 
bled. A higher than expected 
figure for Brazilian coffee 
stocks released last week accel- 
erated the slide and nearby 
robusta futures prices in Lon- 
don dipped below $3,000 a 
tonne, more than $ 1,000 less 
than the September peak. 

The market remains well 
above the level that the reten- 
tion scheme was designed to 
support, but with chart ana- 
lysts suggesting that further 
fells could be on the cards, del- 
egates at Friday's meeting may 


Every business 
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considered. 


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FINANCIAL TIMES , 

BUSINESS RESEARCH 
CENTRE 

Number One. Sowirwric Bridge. London SE I 9HL J 

TM.No.0171S734102FaxNo.UI7tsn3.WJ. I 


Total return in local currency to 24/1 1/94 

■ % change ovor period 



_ U3. 

JteMn 

daqnativ 

France 

. prtr 

UK 

Cash 

Week 

0.11 

0.04 

009 

0.10 

OIG 

0.09 

Month 


0.19 

041 

0.45 

0J0 

046. 

Year 

3.69 

2.06 

531 

5.82 

8.63 

5.10 . 

Bonds 3-5 year 

Week 

0.48 

0.65 

0.73 

079 

0^7 

0.61 

Month 

-0.04 

1.08 

■ 135 

1.35 

1.48 • 

2.10: 

Year 

-2.32 

-035 

098 

038 

3-44. 

069 ■ 

Bands 7-10 year 

Week 0.32 

091 

147 

1.68 

0-52 

L26 

Month 

-0.19 

1.44 

2.80 

2.40 

1^6 

032 . 

Year 

-6.31 

-1.44 

-236 

-5.02 

-£20 

-2.74 

Equities 

Week 

-za 

-za 

-2.0 

-2.5 

-1.0 

-2.8 

Month 

-1.9 

-5.6 

13 

4.6 

03 

•06 

Year 

0.7 

1.4 

-0.1 

-2.6 

21A 

3-2 


Source: Cun S Banda -Latanan Bnttwra. Bjimto-O NaNVut Secutfte. 

The FT-Actuane& Worfo Indcei mo jomuy owned by The F toanctf Thimb United. 
Goldman Sachs a Co. and NafWeat Securities Urcrted. 


telecoms monopoly, whose pri- 
vatisation is forthcoming. 

But while companies across 
Europe will eventually benefit 
from lower telephone charges, 
the liberalisation puts great 
pressure on the margins of 
suppliers, such as Siemens. 
Last year it reported a fell in 
new orders, and analysts are 
concerned that, despite spend- 
ing 15 per cent of revenues in 
its communications divisions 


on research and development, 
it Will Struggle to hold margins 
and market share within 
Europe. 

The paradox Is that Euro- 
pean companies want the bene- 
fits of liberalisation - such as 
lower utility costs which will 
enable them to compete better 
abroad - but resent such mea- 
sures when they stimulate 
competition on those compa- 
nies' home turf. 


Similarly, while the 40 com- 
panies represented in the 
Round Table have called for 
cuts in public spending, much 
of the European pharmaceuti- 
cal industry has been threaten- 
ing gove rnments that if public 
spending on drugs continues to 
be squeezed, great damage will 
be done to research and devel- 
opment, and so to the competi- 
tiveness of some of Europe's 
largest companies. 


In some sectors, the opposi- 
tion of Europe's largest compa- 
nies to such cost-reduction 
measures may stall them, com- 
pletely. Tomorrow’s meeting in 
Brussels of European Union 
energy minis ters will serve to 
highlight the obstacles to the 
Co mmissio n's drive to liberal- 
ise Europe's energy markets. 
The proposals to allow rival 
energy companies access to 
countries' power, distribution 
networks has met with fero- 
cious complaints from power 
companies. 

Given such opposition, inves- 
tors may well be sceptical that 
European institutions will In 
the end be willing to make the 
changes necessary for competi- 
tiveness. 

That should not, though, dis- 
tract investors from concern 
they should also fed about the 
prices paid for investments 
outside Europe. Not least, 
European chAiwiRai and phar- 
maceutical companies- have 
made a string of forays in the 
past year into healthcare in the 
US, Asia and Eastern Europe. 

Hoechst, for one, has spent 
heavily on moving into emerg- 


-ing east European markets; 
and is negotiating Woalifitot. 
ventures in Ghiua- Mr Jtlrgen 
. Dormann, Hoechsfs chairman, 
has said that he aims to 
double sides in Asia: to 2D. per 
.-.cent of group turnov er-; ; 

But the concern foturwsfors 
is ' whether that; teVan ade- 
quately profitable escape from 
competition at home, given the 
ferocious competition already 
present to non-European mar- 
kets. ■ 

Mr Dormann acknowledged . 
•earlier this month '.that 
Hoechst had “perhaps” paid 
■too high a premium in last . 
year’s $546m purchase of 51 per ; 
cent of Copley, the US generic 
drugs niaker. Moreover,. 

despite Hoechst's anxiety to. 
add several more mid-sized' 
pba r nt?CT 1T ^ na ' ,g companies, to 
its recently-acquired US inter- 
ests In generic drugs, it says 
that It is waiting until acquisi- 
tion multiples become more 
reasonable. 

It may have a long wait, 
however: there, is. little sign : 
that they are doing so. Mean- ^ 
white , as investors brace them-, 
selves to hear the price, paid in' 
tbe sector’s next takeover, they 
cannot afford to take too much . 
comfort from the recovery of 
core earnings." While - this 
week's results should confirm 
that picture, that i s no 
guarantee that profit margins:, 
will be. intact five yeara 
■from now. 


not have such a rosy picture to 
review as they might have 
hoped. 

• Other events this week 
include a five-day meeting, 
starting today, of the Interna- 
tional Natural Rubber Organi- 
sation. Agreement is expected 
to be reached on the extension 
of the price-stabilising 1987 
International Natural Rubber 
Agreement for another year 
after Its scheduled expiry on 
December 31. Wednesday sees 
the release of the International 
Wheat Council’s latest 
monthly crop report. 



European 
issues con- 
tinue to fasci- 
nate and 
alarm. But 
while atten- 
tion in the UK 
has been 

focused on 
today's Commons debate over 
contributions to the European 
Union budget and the British 
cabinet's "suicide pact" to 
fend off the threat of a back- 
bench Tory revolt, discussion 
elsewhere in Europe has 
shifted back to economic and 
monetary union. 

Half-forgotten pledges in the 
Maastricht Treaty have gained 
a new lease of life. The Euro- 
pean Co mmiss ion, in the per- 
son of Mr Giovanni Ravasio, 
Its director general of eco- 
nomic and financial clauses, 
set the ball rolling about ten 
days ago when he declared 
that Emu was a “feasible 
option" for 1997, the first tar- 
get date in the treaty. 

Since then, some formidable 
figures have waded into the 
debate on the side of caution. 
Mr Hans Tietmeyer, president 
of the Bundesbank, has stated 
his conviction that “monetary 
policy integration in Europe 
can only be tbe outcome of a 
lengthy process." He later crit- 
icised the Maastricht conver- 
gence criteria for low inflation 
and manageable budgetary 
positions as “unambitious". 

Interviewed by a French 
newspaper, Mr Kenneth 
Clarke, the chancellor, pro- 
nounced the Maastricht time- 
table “completely dead", while 
making clear that he was sym- 
pathetic to Emu as a general 
objective. 

Last week in Brussels, Mr 
Antonio Martino, the Italian 
foreign minister, challenged 
the whole idea of the Maas- 
tricht approach of gradual 
convergence towards Emu as 
“economically fallacious and 
politically dangerous." Con- 
vergence was “neither a nec- 
essary nor a sufficient condi- 
tion for monetary 
unification.’' Mr Martino said. 


Economics Notebook 


Debate on Emu 
timing hots up 


Economic trends and political ambitions' 


Index of EU economic health* 
80 - 


' Stogte market whfte paper 
Stogie European Act 
‘EuKHCtarosb' . 

No EMS 2nd stage 


Data* report*. 


^MU pBBpwaaqhe 

QartefcW 



1974 7B 


Source Centro, tar European 
POOcy Stucfes. 
Brussels 


88 88 90 92 0* 46 • 

•Based on GOP, praduot^MMSon, 
unemptayment IM account' 


batata and govdnirttant balance 


Complaining that the “con- 
vergence paradigm’ might 
result in the division of 
Europe into a dub of suppos- 
edly virtuous countries that 
met the criteria and others 
deemed unfit for such an 
exclusive club, Mr Martino 
called instead for a “monetary 
constitution" for Europe. 
“Those of us who believe that 
monetary unification is desir- 
able should concentrate on 
identifying the rules most 
suited to that end." 

In less than a fortnight, four 
significant personalities have 
pronounced on a subject that 
Mr John Major in September 
1993 said would have “all the 
quaintness of a rain Anna* and 
about the same potency." 
True the voices are discor- 
dant. But they show that the 
debate in Europe about Emu 
is hotting up. 

The accompanying chart 
shows why. Europe’s economy 
is recovering strongly from 
recession. A healthy EU econ- 
omy has usually stimulated 
greater economic and mone- 
tary integration. 

The latest commission fore- 
casts suggest that EU eco- 


nomic growth will accelerate 
to an average of 2.6 per cent 
this year, from 0.4 per cent in 
1993. It has projected growth 
of is per cent next year, fol- 
lowed by 3J2 per cent in 1996. 

Government deficits should 
drop: to 3^ per cent of EU 
gross domestic product by 
1998. True, this forecast is 
above the Maastricht criterion 
of 3 per cent But it is based 
on unchanged policies. Mr 
Ravasio has predicted that a 
majority or member states 
could meet the excessive defi- 
cit criterion before the end of 
1996 “if consolidation efforts 
are undertaken." 

But there is more to making 
Emu work than meeting 
Maastricht criteria. Mr Mal- 
colm Levitt, EU adviser of 
Barclays Bank, has pointed 
out that the “boring bits" of 
Emu, such as the introduction 
of Ecu notes and coinage, 
adaption of payments and 
accounting systems, conver- 
sion of electronic card facili- 
ties in shops and restaurants 
and the resolution of legal 
uncertainties, could take five 
years. 

Mr Levitt’s argument is that 


is already too late, to content: 
plate Emu starting in 1997. 
For Emu to start in 1999, the 
second date envisaged in the 
treaty, preparations would 
have to begin now. 

This- Is not yet the case in 
the private sector. Mr Levitt 
reports that companies are 
laitgdy unaware of what needs 
to be done. The few banks and 
companies that have studied 
the Issue are uncertain about 
the precise - timetable and sce- 
' nario and are therefore not 
making the Investments nec- 
essary for introduction of a 
single currency. 

■ Things are more advanced 
in the public policy area. Tie 
European -Monetary Institute 
this month secured the 
approval of central bank gov- 
ernors for a "master-plan' 
aimed, at completing the tech- 
nical' arrangements for. the 
proposed European System off 
Central Baziks hy the end of 
1996. 

Mr Alexandre Lamfalussy, 
the EMI president, has also 
produced a suggestion for 
moving to Emu by the end of 
the century. He says the EU 
should consider irrevocably 
fixing the exchange rates of 
its currencies, but delay 
before introducing the Ecu, 
the single European currency. 

Mr Lamfelussy’s idea for a 
phased introduction of stage 
three of the Maastricht Treaty 
would hand over responsibil- 
ity for monetary policy to a 
European central bank with 
the fixing of currencies. It 
would allow time for dealing 
with technical problems, such 
as common banknotes or com- 
patible payments systems. 

.The Maastricht Treaty says 
that Emu should go ahead in 
1999, even if only a minority 
of EU members meet the 
treaty criteria. The Lamfal- 
ussy suggestion could make 
this a feasible option. But for 
Britain, it raises the prospect 
of even greater political ruc- 
tions than at present 


Peter Norman 


FT-ACTUARIES WORLD INDICES 


Jotniyoompfed l, Th, Rundid Times Ll&i GoUnai, Sail, A Co. and NotWM SKtniltas lid. in can^nctlan wllh u» kttttute of Adugria and (he ftciJty of Aebarigk 
REGIONAL MARKETS 


Figures to parentheses 
•how number of Roes 
of suck 


US 


Index 


Wcf >0 

since 

31/12/93 


FRIDAY NOVEMBER 28 1994 


Powid 

Sterling 

Index 


Von 

Index 


□M 

Index 


Local Loc^ N 
Currency chg from 
Index 31/12/93 


Gross 

Ov. 

Yield 


“ TH V5? 0AY NOVEMBER 24 1994 
US Pound 
DoB* Sterling ran 
Index 


Index Index 


DM 

Index 


DOLLAR INDEX - 

Local ye 

Currency 52 week 62 week 


Austrafla(68) 

Austria (16) 

Belgium (35) 

Brad (28) 

Canada <103) 

Denmark po) 

Finland (24) 

Franca (102) 

Gwmeny (58) 

Hong Kong (56) — 

Intend (14) ........ 

My (59) 

Japan (46S) 

Malaysia (07) 

Mexico (ifl) _ 

Neawrtand (19) 

New Zasdond (14) .. 

Norway (23} 

Singapore (44) 

Sort Africa (59) _ 

Spain (38) 

Sweden (360 

Stntzartand (47) ... 

ThoBand (48) 

United Kingdom (204) 


™ 107.56 
—178.06 
— 167.09 
— 16&35 
-..127.53 
—247.20 
— 181.38 
-..187.87 
...133.0& 
...347.04 
— 199-35 

73.40 

...151.03 

...488.95 

-2029.78 

209.58 

— 72.23 
....134.81 

371.40 

-.327.07 
— 141.52 
,.,.234.58 
...16026 
-.166.43 
—19JL84 


0.4 

-3.7 

2.7 


- 8.1 

0.0 

47J2 

-4A 

-OS 

-29.1 

70 

7.0 
16.1 

-15.7 

-16.0 

6.3 

8.4 

as 

1.1 
208 

1.6 

19.5 

0.1 


15394 

16390 

158.49 

154JJ4 

120.97 

234.48 

172.05 

159.33 

13133 

329.19 

189.10 

6882 

14326 

47128 


10481 

111.16 

10421 

101.98 

70.62 

16483 

11324 

10480 

8683 

218.66 

124.46 

45.82 

94,29 

311.50 


13580 

14*31 

135.41 

132.39 

103.36 

20035 

147.00 

138.05 

113.73 

28127 

16137 

59.49 

122-40 

404.38 


14688 

14*38 

132.10 

25838 

127.03 

205.27 

183.03 
14183 
1 12.72 
344.49 
16286 
88.67 
9488 

491.36 


-108 

-13.4 

-8.9 


1925.35 126720 1646.03 7648.85 

198.80 13084 lean 167.04 


USA (513) 


185.15 


-88 

-28 


6881 

184.60 

362.30 

311.09 

134.23 

222.52 

152-02 

74888 

182.92 

175.83 


45.09 

121.48 

231.87 

204.76 

88J6 

14045 

10005 

97.66 

120.39 

11559 


58.54 

157.72 

301.01 

285.80 

114.89 

190.12 

129.88 


61.83 

180J32 

250.81 

288.78 

13954 

25957 

131.22 


-2.4 

-102 

222 

-105 

-11J0 

- 29.0 

- 1.6 

1.1 

2.7 

-19.9 

-6.7 

-5.4 

- 4.1 

- 1.8 

- 8.0 

10.7 

~7.fi 

7.0 

- 11.0 


126.78. 151.99 
15029 18202 


150JW 185.15 


-1TJ3 

-as 


sag 

1.13 

4.18 
040 
2.68 

1.45 
0.76 

104 

1.84 

3.48 

3.51 

1.78 

082 

1.71 

104 

3.46 
4.73 
1.83 
1.70 
2.15 

4.19 
104 
1.86 
209 
421 
228 


Index Hgti 


16522 

17722 

166.76 

170.6! 

12729 

246.72 

163.09 

167.14 

13929 

345.40 

199.75 

74.47 

151.44 

497X2 


15082 
16821 
15821 
16123 
120-93 
234.17 
173.78 
158.84 
13221 
327 84 
189.60 
7068 
143.74 
472.13 




10221 

110.27 

103.78 

108.18 

7927 

15321 

113.82 

104.00 

88.73 

214.9a 

12428 

4823 

9423 

300.61 


133.85 
14327 
138.11 
13821 
10320 

189.86 
14822 
135.40 
11222 
279.81 
18122 

6023 

122.68 

402.96 


14425 

14054 

131.00 

268.19 

12622 

204.73 

183.71 

14023 

11222 

34226 

182.16 

89-57 

8423 

49022 


189.15 

19829 

177.04 


14926 

107.46 

152.74 


184.14 

17129 

154.07 


14621 
275.78 
20 Ml 
18527 
150.40 
50626 
216-60 
97.78 
17010 


12024 

23027 

1182$ 

16324 

12827 

34129 

17229 

60.17 

134.54 


133.06 

23027 

11071 

163.14 

13041 

370.03 

173.40 

6048 

137.38 


198920 1888.33 123720 IwTifl 43071 

209.73 19927 ma imm “if* 168658 200826 


71.96 

194.70 

37Q28 

33129 

140.81 

23025 

<60.12 

157.10 

19225 

184.13 


68.30 

18429 

36125 

314.72 

13085 

22422 

15126 

14011 

183.14 

174.77 


Europe (70S) ..... — _ 

Nonflc (116) ..... 

Pacific Basin (793) .. 
Euro-Padflc (1501) . 

North America (816) 
&repaEx.UK(804) 

Pacific Ex. Japan (32 
World Ex. US (1709) 

World Ex UK (2018) 

World Ex. Japan (1754} 


-.172J5 
167.42 

-0.6 

164.08 

158.81 

107.98 

10452 

140.17 

135-68 

143.86 

149.70 

-9.3 

2.89 

3.13 

— 223.10 

17.7 

211^2 

13028 

10001 

21063 

40 

1.40 

...150.64 

10.1 

151.42 

99.66 

129.38 

104.10 

-1.6 

1.18 

162.81 

6 JO 

154,43 

101.84 

131.95 

122.01 

SJH 

2.03 

™1S1^8 

-2M 

17024 

11036 

147.16 

101.16 

-Z6 

2^5 

...15007 

1.7 

142.35 

93.89 

121.83 

12088 

-02 

2.50 

— 243-66 

-15.1 

23102 

152.06 

19739 

214.71 

-106 

3.04 

—164.62 

4.7 

166.15 

102.77 

133.42 

12568 

-4.6 

2.03 

...16025 

2.7 

158^9 

105.04 

138.38 

14007 

“3.1 

Z16 

-™182J52 

-23 

173.13 

11335 

147J93 

17040 

-02 

Z97 

170.42 

2.0 

161.66 

10039 

13012 

14099 

-4.0 

2J8 


13050 

44.77 

12120 

23048 

20822 

0721 

147.19 

99.63 

97.75 

12026 

11427 


169.91 

5829 

15720 

30005 

26821 

114,07 

191.63 

129.71 

12727 

156.31 

149.16 


172.10 

18725 

224.42 

169.83 

10228 

18061 

15020 

242.02 

16424 

16823 

102.04 


16325 

158.03 

21300 

151.71 
15429 
171.43 
142.57 

229.71 
156.46 
159.49 
172.79 


167.20 

6127 

18048 

25022 

301.88 

13067 

280.37 

131.11 

152.58 

18314 

184.13 


22330 

77.59 

211.74 

401.38 

342.00 

155.79 

242.8! 

17056 


187.93 
81 27 
16052 

294.88 
20543 

128.88 
175-83 
140,71 


188-07 

6306 
17072 
31032 
221 M 
132.31 
181.04 
146.71 


21456 

196.04 


1074)9 

104.25 

139.84 

99.45 
101.41 
11238 

83.46 
15059 
10257 
104.55 
113.27 


133.42 

135.73 

181.00 

129.48 

132.02 

14031 

121.68 

196.08 

13353 

136.12 

147.47 


181.11 

178.95 


196.78 

188.14 


17023 181 £7 1Q5.82 


143.13 

148.75 

211.10 

10384 

121.92 

18019 

12004 

21340 

125.62 

13070 

172.96 


178.58 
233*1 
176.66 
(75.14 
192.73 
1S6.12 

290-21 

178-65 

178.59 
189.20 


OootWii. IKo nnwidtf Tumi United, GUdman. Sadis 8 Co. and NtfWut StavltSas Urfted. tear 
5“*.“*** Dm Si. 1H6 - 100; FWan* (tee 31. 1«7 • 1184m (US S Mad. 90781 Pound Stated ***: D* «. 1»88 

Brani, Thatarxt and Americas: OS 31, 1H4 . 18044 (US 3 Index), 10*0 (psund Started and 14904 H — — “ - 

OoBtelteart dwnpn Daring toe wo* entag 29/llte* OtMons XmteCU CjflmertO and McKaaeM C**p. 


137.90 14060 180.00 


15052 

173.19 

134.79 

14388 

175^7 

138.66 

23359 

14058 

155-88 

17024 


156.32 

17072 

14080 

150-63 

184.72 

136.98- 

23730 

15Z04 

19X64 

17036 


15085 16012 


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19 


FINANCIAL TIMES MONDAY NOVEMBER 28 1994 ★ 


NEW YORK 


Lisa Bransten 


Investors fear 

Fed-induced 

recession 

Investors this week wifi continue to 
wrestle with fears that the Federal 
Reserve may induce recession through 
tighter and tighter monetary policy. 

But economists do not expect a repeat 
of last week's severe r«n« as a good deal 
of the worry about higher interest rates 
has been absorbed by the ma rket, at 
least for the moment Such 
apprehensions could resurface, 
however, if economic news this week 
con ti nues to show strong inflationary 
pressures in the economy. 

. Perhaps the most Important piece of 
data will be Friday’s employment 
figures. A consensus of economists 
expects non-fenn employment for 
November to show an increase of about 
22 Sj 000 jobs. If the figure is significantly 
greater, It could ignite fears that the 
Fed wOl move sooner rather than later 
to increase interest rates. 

Investors will also get early 
indications of the strength of the 
economy through a preliminary reading 
of the gross domestic product doe out 
on Wednesday and a report from the 
National Association of Purchasing 
Managers on Thursday. 

Market-watchers will be looking for 
hints of consumer spending habits 
during the holiday season, the strongest 
part of the year for retailers. 

Early in the week, investors will 
probably be looking for barg ains amid 
the rubble of last week’s sell-off that 
saw the Dow Jones Industrial Average 
plunge mare than 90 points last 
Tuesday, its biggest drop since last 
February. That fall only compounded 
five days of losses, which saw the Dow 
drop nearly 120 points overall even 


Dow Jones Industrial Average 


3850 r 



after a 33 point rebound on Friday.. 

The Interest rate Increases that 
battered the stock market had the 
opposite effect on bonds, which rose 
last week in mirror image to the decline 
in share prices. 

Laszlo Birinyi. president of research 
firm Birinyi Associates, expects this 
week’s market to be steady, but 
somewhat lower as investors recover 
from last week’s slide. “The history of 
these declines has been that once the 
market stabilises ami people realise 
that there was much more noise than 
significance to them, they will be back." 

Ultimately, the Dow will return to the 
broad trading range it has maintained 
for mast of the year In the 3,80&point 
range, he says. 

One indication that there could be a 
steadying of the market comes from 
Friday’s performance of cyclical stocks, 
which generally bear the brunt of fears 
about recession. Those shares bounced 
up further than the Dow on Friday, 
with Morgan Stanley's index of cyclical 
stocks up 1.13 per cent compared with a 
032 per cent increase in the Dow. 

Other analysts are not so optimistic 
about stocks. Although hope remains 
for a year-end rally, most are bearish 
about the general trend for the next few 
months. 


EQUITY MARKETS: This Week 


LONDON Steve Thompson 


International offerings 


Shares likely 
to dance to 
Wall St tune 

After the blitzing it received in the 
wake of the Thanksgiving week 
massacre on Wall Street, the UK equity 
market is in desperate need of a tonic. 
This could come tomorrow when Mr 
Kenneth Clarke delivers his second 
Budget to the House of Commons. 

Only those fortunate (or in the 
current climate, unfortunate) enough to 
sit around the Cabinet table in 10 
Downing Street, phis a handful of Mr 
Clarke’s most trusted lieutenants, know 
the dark secrets of his red box. 

However, if the FT-SE 100 is to make 
any worthwhile progress for the rest of 
the year, there needs to be some good 
news In the budget Indications to date 
offer little comfort to the market But 
the improving trend in public finances 
could enable Mr Clarke to offer some 
good news on the public sector 
borrowing requirement for 199% which 
has recently been estimated at £23bn to 
£24bn. 

One thing that would certainly upset 
the market would be any further 
reduction in the tax credit on dividends 
paid to non-taxpayers such as pension 
funds. 

As UBS, the securities house, pointed 
out recently, a shift from the current 20 
percent to IS per cent, for example, 
would lead to a fall in the FT-SE of 
around 2Vi per cent But UBS says 
changes in this area are much less 
likely than a year ago and gives fhpm 
only a 20 per cent chance of occurring. 

Given that most market strategists 
and economists are expecting a broadly 
neutral Budget, it seems likely that the 
UK equity market will again dance to 
Wall Street’s tune. 


. #T-SE-A AB-Share Index 


ifieo 



After recent experience that could 
spell danger, Goldman Sachs strategist 
Sushil Wadhwahi points out that the 
recent weakness in global equity 
markets largely derives freon fears that 
the US economy may have a “hard 
landing”. He says the Fed is “likely to 
remain aggressive" and expects a 
ftTTther tightening of at another 

100 basis points between now and 
March, warning a lso of the "potential 
threat of mutual fond outflows”. 

Mr John Reynolds, global strategist at 
NatWest Securities, warns that “should 
the [US] rate rises currently implied in 
the futures markets become reality, the 
outlook for global fiwmcfai markets 
would look decidedly uncomfortable”. 

He says the futures market is already 
discounting a further 200 basis points 
rise, but takes the view that the US 
economy “is much closer to slower 
growth than many believe”. Let ns hope 
he is right 

The week brings a batch of important 
company results. A prop to a faltering 
equity market recently has been the 
dividend flow. Dividends announced 
recently mostly continue to surprise cm 
the upside. One of the UK's biggest 
water companies, Severn Trent reports 
this week and should easily achieve a 
double-digit dividend increase. 


Israeli groups woo London 
and New York investors 


Hie efforts of Israeli companies 
to raise capital from interna- 
tional investors - highlighted 
lay this week's roadshows for 
Tadiran, the electronics con- 
cern - are poised to move into 
a higher gear. 

Tadiran, one of more than a 
dozen technology or export-ori- 
ented Israeli enterprises to 

r-nmp to tha infei-watifflffl l mar- 
kets in the last couple of years, 
hopes to raise up to $80m 
through a offer 

of shares in New York and 
London, and a listing in Tel 
Aviv. 

However, following progress 
tins year towards a peace set- 
tlement in the re gion , a wider 
range of Tsr aoH mmpaHiws are 
coming to the market seeking 
to raise capital. Mr Nlel Siebag- 
Montefiore, corporate finance 
director at BZW, said recently 
that European institutional 
investors were increasingly 
willing to buy Israeli stock. 

“Three years ago, Israel was 
still a financial pariah in 
Europe but there has been a 
huge fhwng g sin ra and inves- 
tors now accept Israel as just 
another country suitable for 
foreign investment,” he said. 

A banker with Lehman 
Brothers, which has been 
involved in 13 deals since 1991 
and now has an office in Tel 
Aviv, says international inves- 
tors have begun to regard 
Israel as an emerging market. 


At the same time, political 
progress should end Israel’s 
international Isolation, open- 
ing up new markets for its 
exporters as well as closer eco- 
nomic integration with its 
neighbours. 

"Investors believe Israel wifi 
become a regional centre,” be 
says. 

In total Israeli companies are 
expected to seek to raise up to 
$2bn next year. 

• In the biggest deal, Bezeq, 
the stateowned telecommuni- 
cations company, is expected 
to sell 25 per cent of its shares 
to raise about $700m. The offer- 
ing, which will cut the govern- 
ment’s stake to 51 per cent, 
will be made in New York, 
London, Tel Aviv and possibly 
a market in the Far East Mor- 
gan Stanley has been 
appointed to advise on the sale. 

• The government also wants 
to sell 22 per cent of Israel 
Chemicals, the country’s lead- 
ing chemical and fertiliser 
company, through a global 
offering in February 1995. The 
sale will reduce the govern- 
ment stake to 28 per cent and 
is expected be worth $190m. 
Wertheim Schroeder Is advis- 
ing on the privatisation and 
Lehman Brothers will be the 
global coordinator. 

• A third serious candidate for 
privatisation by global offering 
in 1995 is El Al, the state- 
owned airline. The government 


plane to sell 81 per cent of the 
company worth $78m-$20Qm. 
BZW is expected to advise on 
the sale. 

• Large private companies 
seeking a listing include Africa 
Israel, a leading Investment 
company with interests in 
property, insurance and tour- 
ism, which plans to raise 
$150m-$200m in New York, 
London and Frankfort Morgan 
Stanley has been appointed 
global coordinator. 

• Koor Industries, Israel's 
largest industrial group, 
expects to reduce its holding in 
Tadiran to 52 per cent In addi- 
tion, Koor expects to offer a 
large tranche of shares for sate 
on international markets by 
mid-1995. The Histadrut, 
Israel’s trades union federa- 
tion, plans to sell the 22 per 
cent stake in Koor owned by 
its Hevrat Haovidim holding 
company to repay heavy debts. 

• Zim Israel Navigation, 
which ranks among the 
world's 10 largest container 
shipping companies, also 
expects to make a global offer- 
ing in 1995. 

• The government is also con- 
sidering the possibility of sell- 
ing shares in the big two banks 
- Bank Hapoalim and Bank 
Lanai. 

Julian Ozanne and 
Richard Lapper 


OTHER MARKETS 


MILAN 

Trade in Italian equity futures 
begins today but analysts 
expect the contract to 
smoulder, rather than explode 
into life, an its debut The 
Fib-30 contract based cm 
Italy's 30 most traded stocks 
grouped in the re vamped 
Mlb-30 index, is a vital weapon 
in Milan 's battle to become a 
thoroughly modem market 
and is expected to proride a 
welcome boost to liquidity - 
eventually. 

However, the anticipated 
benefits will be slow in 
arriving, due to a mix of 
seasonal and technical factors, 
with a delay in moving stocks 
to cash settlement likely to 


restrain the system’s use. 

One analyst said the 
contracts were arriving at a 
time when volumes on the 
bourse were already very low. 

Dealers added that many 
houses will not be able to use 
the new instruments, even if 
they wanted to, with half of 
the 99 work stations requested 
expected to be out of action 
today because foil 
co mmuni cations networks are 
not yet in place. 

Stock exchang e officials have 
predicted that the contract will 
draw daily trade of around 
L400bn. but most analysts said 
that was likely to be at the top 
end of turnover in the opening 
weeks, with trade in the 
underlying shares stu mbling to 
just L353bn last Thursday. 


AMSTERDAM 

The Dutch market, which had 
a difficult time at the start of 
last week under Wall Street's 
influence, is expected to be a 
beneficiary of the Fed’s rate 
rise and the better than 
expected M3 figures. 

On the corporate front, 
Nedlloyd’s third-quarter 
figures are due Wednesday and 
Amev’s nine-month figures cm 
Thursday. 

Looking at the longer term, 

thp Amatw Ham mnr fcpt ha p 
been put an the overweight list 
by European strategists at 
Merrill Lynch, which said that 
relative to other European 
markets, p/e valuations 
appeared to be attractive. 
Company pamings were seen 


to be growing strongly in 1994, 
and there was no reason why 
this upward trend would not 
continue, especially as 
inflation was forecast to 
remain “subdued”. 

However, Merrill warned, 
while there was nothing in 
particular to concern investors 
there was also little to get 
excited about, and expectations 
of a growth in earnings had 
largely been discounted. 

OSLO 

Norway goes to the polls today 
to decide on membership of the 
European Union, but the 
market has its supporters, 
even if, as last week’s 
Increasingly close polls 
suggested, the electorate 


rejects the Idea. Goldman 
Sachs forecasts that share 
prices could rise by 15 to 20 per 
rant, in the cnmfrng year, even 
with a “no" vote. 

“If Norway were to join the 
EU, we think the market could 
offer a somewhat higher return 
of 20 to 25 per cent,” the 
investment bank said. Its 
favoured stocks include Norsks 
Skog, Norsk Hydro, Bergesen, 
Kvaerner and Orkla. 

“Given relatively strong 

f undamentals and att rac tiv e 
relative valuation, we regard 
any significant downturn in 
the near future as a good 
buying opportunity," Goldman 
said. It based its stance on 
favourable macroeconomic 
prospects and a strong 
earnings growth outlook. 


FRANKFURT 

Analysts are looking far a 
strong performance from 
equities, with support coming 
from the band market and 
further interest in cyclicals. 

UBS expects that after last 
week’s good figures from 
Tbyssen and BASF, the market 
will react positively to strong 
third-quarter figures from 
Bayer today and Hbechst on 
"Wednesday. This should raise 
interest not only in chemicals 
but also in other cyclicals, 
such as capital goods. 

October industrial 
production figures are due and 
James Capel says the strength 
of orders in September points 
to a 0.5 per cent 
monthuh-manth rise. 


HONG KONG 

The market is set for another 
week dancing to the US tune, 
where the overnight sell-offe 
on Wall Strait sent the Hang 
Seng index plunging last 
Tuesday and Wednesday and 
left the market 32 per cent 
down an the week, writes 
Louise Lucas. 

’ US data wifi be keenly 
scrutinised by Hong Kong 
investors for signals an the 
strength of the US economy, 
and any leads that this will 
provide for bond and equity 
markets. 

Domestically, there is little 
expected this week to influence 
investors and trading is hkety 
to concentrate again on blue 
chips. 


The property sector, under 
pressure since the local 
interest rate increase the week 
before last, wifi continue to be 
viewed warily. 

TOKYO 

With the results season in its 
last week, and very few 
companies reporting. Investors 
will be focused on overseas 
stock market movements and 
the currency market. A further 
fell in the yen could prompt 
further profit-taking by 
overseas investors, depressing 
the Nikkei index, while traders 
expect buying of shares to be 
limited to public postal and 
welfare funds. 

Compiled by Michael Morgan 


EMERGING MARKETS: This Week 



A 


The Emerging Investor / Nicholas Denton 

surge of funds to eastern Europe 


ad managers have in the 
it fortnight raised $30Qm for 
estment in the emerging 
ricets of eastern Europe in 
largest burst of fundraising 
ce the fell of communism 
» years ago. 

hares in the Baring group's 
0m First NTS Regional Fund 
L Pictet’s $5Gm First Russian 
utters Trust begin trading 
s week. Invesco’s East 
■ope Development Fund has 
) tapped the markets, for a 
m boost Nor are the latest 
,rts the last CS First Boston 
l Edmond de Rothschild 
unities are designing a 
ch Value Fund to invest in 
iervalned domestic Czech 
icher funds. 

kUd the regional and coun- 
funds are the most public 
3 of portfolio investment 
0 eastern Europe. General 
Brgjng markets funds man- 
id by Templeton, Genesis, 
[ others are also committing 
estment although they 
ke no disclosed allocation to 
gamer communist bloc. 
Iven some hedge funds, 
■nt by the bond markets, are 
3 turning for high returns to 
it European investmants- 
antum, the fund run by Mr 
orge Soros, the self -cau- 
sed speculator, bought a 

ireholding in Fotex, the 

nearian retail company . Mr 
«g~who has set up charrta- 
foundations in eastern 
rope, recently put aside his 


CtlRRENpFfS 


concern about conflicts of 
interest and allowed his funds 
to invest in the region. 

Altogether the inflow of port- 
folio investment probably now 
.exceeds that of foreign direct 
investment. International 
investment banks like CS First 
Boston have found to their sur- 
prise that securities trading 
that arises from financial 
investment has rapidly over- 
taken fees earned from merg- 
ers and acquisitions advice as 
a source of revenue. 

This record burst of activity 
Is all the more striking for its 
timing. Rising interest rates 
have drawn investors out of 
equity and especially out of 
marginal markets, which is 
what east European bourses 
still for the moment remain. 

The three established east 
European stock markets, War- 
saw, Prague and Budapest, are 
all down on their peaks earlier 
this year. The Prague index fell 
34 per cent between its intro- 
duction in April and October. 
Warsaw share prices, which 
rose the fastest, have halved 
since March. 

The two' largest funds 
launched during eastern 
Europe’s stock market boom, 
CSFB’s $200m Central Euro- 
pean Growth Fund and Bar- 
ing’s Emerg in g Europe 

Trust, have both suffered 
declines in net asset value. 
They fell victim, an emerging 
markets analyst says, to the 


Ten best performing Stocks 

Stack 

Country 

Friday 

Z5/11/M 

Week m mk dongs 

S % 

Huston Ttejran 

Taiwan 

08999 

0.0941 

11.67 

PhSppine National Bank 

PhBpjainas 

13.4737 

0-9690 

7.92 

Far Eastern Textile 

Taiwan 

1.5100 

0.1038 

757 

Cta De Acaros Del Padfico 

Chile 

4.6182 

02824 

651 

Vitro 

Mexico 

6.8185 

0.3590 

5.56 

Alpha Leasing 

Greece 

24.0082 

1-2524 

5.50 

Baglay 

Argentina 

33992 

02000 

526 

Koc YaMm 

Turkey 

0.8058 

00395 

5.16 

Banco Wiese 

Peru 

45507 

0.2405 

5.11 

Formosa Chemical & Fibre 

Taiwan 

1.4490 

00692 

5.01 


general tendency for managers 
to raise cash during a bull mar- 
ket and invest into the market 
as it drops back. 

Nor have funds with a longer 
track record all performed so 
much better. John Govett's 
Hungarian Investment Com- 
pany, which raised $10Qm in 
1990. now has a market capital- 
isation of $71 -5m. 

In as unpredictable a region, 
as eastern Europe there is a 
resounding Investment success 
for every failure. Invesco's 
EEDF, headed by Mr Roy 
Bracher. has shown compound 
annual growth in NAV per 
share of 41.5 per cent, a far 
better record than any western 
investment fond. 

Mr Bracher compares his 
approach with that of Warren 
Buffett, the legendary US 
long-term investor. “We invest 
in companies that we know 
and like,” he says. Mr Bracher 
prefers low-tech industries like 


Souee BtrtiQ secutuan 

chocolate and ice-cream mak- 
ing. EEDF leans towards 
unquoted investments and 
takes a relatively long time 
horizon - two to five years. 

The strategy, or at least 
EEDF’s performance, was 
enough to persuade Investors 
to commit another $75m to the 
fund. It may also show inves- 
tors in general that it is possi- 
ble to make money in eastern 
Europe. 

Equity in Poland, the Czech 
Republic and Hungary, also 
looks fundamentally more 
attractive than ft did. The price 
correction has killed the pros- 
pect of dramatic and immedi- 
ate capital gain, and has made 
fundamental value more 
attractive. But, says Ms Nancy 
Curtin, head of emerging Euro- 
pean investments at Baring 
Asset Management: “It has 
eradicated a lot of the frothi- 
ness in the markets." 

But the strangest new draw 


is V 


i JS sT • ,S 


of all is Russia. It is no acci- 
dent that two erf the three new 
funds are aimed at the former 
Soviet Union, and EEDF also 
says it sees good value in Rus- 
sian companies. 

The market has opened up 
tremendously in the past few 
months. Mass privatisation has 
put about 80 per cent of the 
corporate sector into private 
bands. Most of these compa- 
nies are an investor’s night- 
mare, but a few - like Lukoil, 
the ofl company, and Gazprom, 
the gas producer - are what 
one fond manager calls "world- 
class companies". 

Oil assets were privatised at 
about 4 US cents a barrel of 
proven reserves. That measure 
has since tripled, but still 
stands Ear short of the $7 that a 
barrel of oil in the ground 
would cost if an investor 
bought a US oil company. A 
telephone access line in Hun- 
gary, another former commu- 
nist country, commands a 
stock market valuation 10 
times that of a Russian one. 

Fund managers believe that 
is cheap, even after factoring 
in Russia's particular risks - 
the sheer opacity of the compa- 
nies and the burden upon them 
of providing social services. 
“All but nationalisation has 
been discounted in these mar- 
ket values,” says Ms Curtin. 

The fear of shares simply dis- 
appearing from registers and 
other horrors of custody and 




Sterling the focus in budget week 


Tomorrow's budget is not 
expected to have much impact 
on sterling. Mr Kenneth 
Clarke, the chancellor, is 
widely expected to announce a 
substantial cut in spending 
totals, white maintaining reve- 
nue neutrality. Mr Neil MacK- 
innon, chief economist at Citi- 
bank, said sterling appeared to 
be comfortable in the 
DM2.4G-45 bracket 

Two other political events 
which wifi occupy markets will 
be the outcome of today’s refer- 
endum in Norway on EU mem- 
bership, and the ongoing tribu- 
lations of Mr Sflvfo Berlusconi, 
the Italia n prime minister. 

Contrary to the position in 
Denmark, Sweden and Finland 


- which have all voted in 
favour of EU membership - 
opinion polls in Norway have 
always shown a majority of 
voters against the EU. 
Although the vote promises to 
be close, analysts say the out- 
come may not have much bear- 
ing, other than in the short 
term, on the krone. 

Mr MacKinnon said volume 
analysis of Citibank clients 
suggested that most of them 
anyway held long D-Mark posi- 
tions against the krone, sug- 
gesting that the downside from 
a No vote would be limited. A 
Yes vote might bring 
short-term appreciation, but 
Mr Ma cKinn on said: "As we 
saw in Sweden, a Yes vote 


doesn’t guarantee you cur- 
rency appreciation.” 

Last Friday, the lira hit a 
record low of Ll.03855 against 
the D-Mark. Continued uncer- 
tainly about the future of Mr 
Berlusconi’s government, and 
the impact this will have on 
the budget, have led some ana- 
lysts to predict that the lira 
will weaken to Ll,050 or, in 
extreme cases, to Ll,100. 

After the Thanksgiving 
break, dollar watchers will this 
week have some fresh data to 
focus on, principally in the 
form of November’s jobs 
report Sentiment towards the 
dollar has improved apprecia- 
bly recently, but it is sensitive 
to market perceptions about 


Lira 

Against the DM (Lire per DM) 
. 950 



1,000 




1,500 1 : 1 

Mar 190* 

Sowar FT Graphite' 


Nov 


settlement are enough to put 
off all but the hardiest or fool- 
hardiest of investors. One Rus- 
sian investor recently accused 
an al uminium company of 
erasing $300m worth of its 
shares. 

But Chase Manhattan and 
other international hanks are 
moving to set up custodial ser- 
vices which at least approach 
the standards required by 
western investors. Moreover, 
Mr Anatoly Chubais, the new 
deputy prime minister for the 
economy, has put securities 
reform at the top of his agenda. 

The discounts should narrow 
as custody and settlement 
improve, and Russia's equity 
market emerges from its 
infancy. Emerging markets 
funds hope they will gain as 
valuations in east and west 
converge. 

But ease of investing is a 
mixed blessing for these spe- 
cialist entities. Their own 
backers are pension funds, 
unprepared or legally prohib- 
ited from investing in markets 
without proper custody. 
Emerging markets funds are 
indispensable intermediaries. 

Already some of the largest 
Russian banks and natural 
resources extractors like 
Gazprom, the gas company, are 
planning issues of global 
depository receipts. 


News round-up 


■ Moscow 

The Moscow Commodities 
Exchange plans to start 
trading rouble-denominated 
white sugar futures today, 
Reuter reports. 

Trading will be for standard 
one-tonne contracts with 
January the first delivery 
month. -There was no starting 
price set for the contract 

■ Bahrain 

Bahrain plans to develop a 
bond market to provide 
fmwnring for the industrial 
sector. 

Two wwnpanitw have so for 
iaaiipd bonds thfa year. Th© 
bond, market would serve the 
region as part erf overall plans 
to develop the exchange. 

Other steps will indude 
urging the private sector to set 
up new companies, 
encouraging private companies 
to go public and speeding up 
the process for cross-listing of 
companies. 

The BSE wfil also encourage 
commercial banks to extend 


banking facilities to share 
investment An average of 6m 
shares worth BD&n ($5J3m) a 
week are traded. 

The volume of shares traded 
on the BSE dropped by 4.7 per 
cent in the first half of 1994 to 
155m shares worth 998JLm from 
168m shares worth 3106.1m. 

■ Pern 

The Lima stock market has 
been rated by a World Bank 
study as the second most 
profitable emerging market in 
the world between January 
and October, rising by nearly 
60 per cent in dollar terms. 

Only the Brazilian stock 
market surpassed it rising by 
77.1 per cent in dollar terms in 
the first 10 months. 

The Lima stock market grew 
by 88.7 par cent in dollar terms 
in 1993 and 1224 per cent in 
dollar terms in 1994, the World 
Bank added. 

Edited by John Pitt Further 


appears daily on the World 
Stock Markets page 


Baring Securities emerging markets indices 


Index 


World (301} — , 
Latin America 
Argentina (20) 

Brazil (21) 

Chffe (12) 

Mexico (25) 

PeruO 6} 

Latin America (94) ., 
Europe 
Greece (16) 

Portugal (IQ 

Turkey (21) 

Europe (55) — 
Asia 

Indonesia (26) 

Korea (23) 

Malaysia (23] 
Pakistan fll) 
Philippines (13 

Thailand (25) 
Taiwan (32) 

Asia (152) 


25/11/84 

Weak on weak movement Month on month movement 
Actual Percent Actual Percent 

Year to dale movement 
Acted Percent 

— 1 70.00 

-7.24 

-4.09 

-11.16 

-6.16 

+150 

+054 

93.62 

-4.32 

-4.41 

-144)6 

-1606 

-21.76 

-1858 

213.87 

-19.94 

-8.53 

+457 

+2.18 

7422 

+53.15 

215.02 

-725 

•3.26 

-13.45 

-669 

+67.46 

+45.74 

134.15 

-1.70 

-1.25 

-14.72 

-9.89 

-27.12 

-1652 

867.78 

-3520 

-690 

-41.92 

-4.61 

+291.69 

+5053 

— 15664 

-7.83 

-459 

-9.66 

-5.74 

+9.40 

+650 

81.37 

-0.44 

-0.53 

-4.48 

-5.19 

-1.73 

-2.08 

119.87 

4193 

-0.77 

-457 

-652 

+7.75 

+6JB1 

80.75 

-121 

-1.47 

+3.87 

+4.76 

-30-96 

-50.07 

98.42 

-082 

• -682 

-2.78 

-2.75 

-13.82 

-1251 

141.96 

-608 

-4.11 

-11.41 

-7.44 

-29.08 

-1750 

15S25 

-5.40 

-638 

-674 

-635 

♦4554 

+4152 

216.06 

-9.48 

-420 

-1855 

-7.83 

-36.99 

-1462 

10641 

-1.75 

-1.81 

-7.21 

-635 

-528 

-4.73 

281,53 

-1187 

-4.08 

-21.83 

-7.14 

-40.94 

-12170 

248.46 

-1691 

-7.07 

-2758 

-9.99 

-15.10 

-5.73 

106.65 

+1.91 

+1.16 

-9.63 

-5.47 

+1254 

+858 

-.211.17 

-633 

-3.70 

-1652 

-7.18 

-1025 

-453 


whether monetary policy is 
sufficiently restrictive. 


AS Mfcas h I wmx. Janmy 7tn IBOSalDO. Shuck Bntag Securitas 


Global connections: 

500 destinations in 140 countries with our airline partners 





2 i 



WORLD BOND MARKETSs This Week 


NEW YORK 


Richard Waters 


LONDON 


■ Phi!' p Cog a a 'v 


FRANKFURT 


Andrew Hsher 





Can the Treasury bond market 
hang on. to last week’s gains in 
the face of evidence that the 
US economy continues to grow 
strongly? The first test comes 
later this week, with the 
National Association of 
Furchaniig Management mda 
an Thursday and November 
employment figures on Friday. 

An unexpectedly high NAPM 
reading a month ago set the 
stage for the Federal Reserve's 
last interest rate rise. This 
month, the index is fikely to 
match or even exceed the 59.7 
it hit then. 

The real news, though, may 
not be in the headline number 
but in the prices paid 
component of the index, where 
future inflation may lurk (this 
hit 79.9 in October and is 
expected to climb farther). 

Nonform payroll growth, 
mean while , is generally 
expected to have jumped again 
after October’s brief lull, with 
job gains of 250,000 or more in 
November. 

These figures will be 
preceded on. Wednesday by the 


Benchmark yfertd curve ■ 

25 nuw— Mourn ago <=3 


6.75 I/- 


5.75 I— 


4.75 l L_ 1 1 

0 10 Jon 20 30 

*AS yfekii ore martsat corwarstkxi '■ 


Saunas: Morrft Lync/r 


third-quarter GDF report at 
anything from 3 to 3.4 per cent, 
the growth rate may have 
moderated from the second 
quarter but is still above the 
Fed's target rate. 

Of course, the bond market 
may shrug off such news, 
confirming a newly-discovered 
confidence in the Fed's 
determination to stamp on 
inflation. But that would 
represent a real change of 
heart from the rest of this 
year. 


All eyes in the gilts market 
will be on Mr Kenneth Clarke, 
the chancellor, as he delivers 
the Budget tomorrow. Most 
budgets have a theme, such as 
Mr John Major's “Budget for 
savers" in 1990. and this year’s 
effort looks likely to to be, 
whether or not it is spelt out in 
public, a budget for gilts. 

The chancellor is expected to 
take the benefit of reduced 
public spending totals, the 
result of lower inflation and 
hig he r growth, in the form of a 
smaller public sector 
borrowing requirement 

Having thus pleased the gilts 
market, he can concentrate on 
p le a sing the electorate with 
tax cuts in his 1995 and 1996 
Budgets. 

The consensus forecast is 
that he will knock £5bn off the 
1995-96 control total for public 
spending but Mr Nigel 
Richardson, head of bond 
research at Yamaichi 
International (Europe), thinks 
the cut could be £7bn. 

The market is also expecting 
to see moves to allow an open 


Benchmark yield curve (%}‘ 
35 /11/94— Month ago *= 
9.25 • 


yeans 20 25 


‘All yiekfc. ore marital convention 
Source: Merril Lynch 


repo market, which would 
improve liquidity. One step 
which might be announced is 
that income on gilts will be 
paid gross of tax in future. 

Gilts have been buoyant in 
the run-up to the Budget and 
were boosted last week as 
investors appeared to switch 
from shares to bonds in the 
face of Wall Street's weakness. 
The Bank of England will bope 
the Budget is well received; it 
is revealing details of its latest 
auction stock on Wednesday. 


The German bond market put 
on a show of strength last 
week after the more favourable 
inflation figures and lower 
than expected money supply 
growth. But some economists 
reckon this upturn was 
misplaced. 

“We can detect precious 
little in the recent data that 
could serve as a Justification of 
the band market rally these 
last days," said Mr Adolf 
Rosenstock at the Industrial 
Bank of Japan’s Frankfort 
office. 

"We interpret it instead as a 
spill-over from the rally in the 
US bond market, which we 
consider a bear market stHL" 

It came as no surprise that 
the Bundesbank left interest 
rates unchanged on Thursday. 
The bank is waiting for a more 
marked slowdown in MS 
growth and inflation and 
stronger evidence of wage 
moderation before deciding 
whether to opt for a final 
discount and Lombard rate cut 
in the present economic cycle. 

"The Bundesbank could have 


flwnil HIM -■ - >'*.•» . : we*uw«»0 W* - W *V~ “TI — 

X. v market last-week prompted 
Benctimwk^«aw(9^ • jjopes of lower short-ter m . 

'• • •.. interest rates and the 10 -year 




hcpesaftoTOTS^rttem^. ^ 

interest rates and the lWear . • „ ; 

i w»4w i>a»lr hond -fell ahnOSt 10 -«v. --a* 


S Sw,.,;.,;,,, 1 ., cent an Friday- ' ' x. fft’ • ’ fosffiP f 

— whflfl the Bank of Japan is ^SKSl 

imiffcatv to lower short-term , ; ? - j S S sflS- 

rates to support share p rices^ -. . • 

furtherweeiness in the stock x ** v- j h&fo.i'L r nj . ' 
piartat will boost confidence in. . 

" ' ' 1 ' » .. ■ ,r>: b the bond maiket. Economic. . . ' . vi*. s««i 

.0 10 yn ; ^gcatbrs this week should •, 

ala, reinforce the view that ; \ 

• • t| "“ r . -,*■ »..*«»- bond yields have discounted . .. 

toomuchofaneconomic; . _ '> 

some reason to cut rates," rebound. . --- : 

reckons Mr Noibert Braem of “Pata rdeased oyer toe 

Barclays de Zoete Wedd. Key remaining weAs of 1994wffl. iflttiv ; 

Interest rates have not reached continue to bolster market ^SSjSjtwut 

the lows seen in previous santiment, forecasts Barclays to indicate weak sup pott ^ _ 

SSwwMin-Ktoo.lt V . tteeconong^c ^ m m : . . 

“Tho Bundesbank wU He ' J^SSSSed - 

ready to support the economy secondary maiket on S?2«i!m!5rSsnKSS?'' 

to same extent,” he added. industnal&nk of Jaiwm : 

There is no reason for this debentures have already whfleretansaiMraexpec^ .- 

now, he says, but there could started declining. . . 

be in 1995 if economic recovery wbfle industrial production S? 

stalls because of increased figures for October, to be ' - 

D-Mark strength or sluggish. released on Wednesday, may ^ .. 

private consumption. show a slight montb-on-monlh expected to be weak.. 


Syndicated loans 


Borrowers cash in on tumbling prices 


lO-year bendunark bMd ^ 

p f“"' > uk i ; 

13 - ~~ C=SS3 Oa nrp en y ‘ * . V . vv-‘ t'.; ' 


UK 

Ocnoaqr 


Underwriters for the jumbo 
$5bn loan for the Kingdom of 
Sweden ghnnlri be lined up this 
week, and the deal will then go 
out to syndication. 

To judge by recent events in 
the syndicated loans market, it 
will receive an enthusiastic 
response, even at the keen 
price of 8 basis points over 
London interbank offered rate 
(Libor), and should be signed 
by Christmas. 

Sweden is the latest benefi- 
ciary of tarmbling prices in the 
tending mar ket, where marg ins 
have fallen by up to 50 per cent 
in the past year. It has moved 
early to refinance two out- 
standing loans, both maturing 
next year and costing 15 to 25 
basis points over Libor. 

Ms Christine Holm of the 
Swedish National Debt Office 
said: "Pricing in loans has 
come down and that on bonds 
has increased since the begin- 
ning of the year. For us it is an 
excellent opportunity as it 
gives us cheaper finance than 
we have outstanding.” 

International borrowers are 
not alone in exploiting current 
low pricing. East Midlands 
Electricity, the OK power util- 


ity, moved early and asked 
Chemical Bank to arrange the 
refinancing for a loan matur- 
ing next September, and 
obtained a price of 15 basis 
points over Libor for the 
£350m, five-year deal. 

Although the low price 
raised eyebrows in the syndi- 
cated loans market, in the Hid 
the deal was oversubscribed 
but not increased. 

Mrs Lesley Hamer, treasurer 
of East Midlands, said: "We 
were oversubscribed a fair 

amount and hurt to ceafe hank 

Obviously, there are banks pre- 
pared to lend at that level, and 
we are very pleased with the 
group of hanks we have got.” 
She said there are 13 banks in 
the loan, "three European, two 
US, and eight Japanese”. 

East Midlands may have set 
a benchmark with the deal, 
which replaced a loan taken 
out at 15 basis points over 
Libor in September 1990, just 
days before the Iraqi invasion 
of Kuwait sent pricing up. 

Intense competition among 
banks for assets has since 
driven pricing back down, 
which In turn has sparked a 
rush to the loans market 


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East European Insurance Report provides detailed 
information on insurance throughout Eastern Europe. 
With contacts in every East and Central European 
country, EEIR is acknowledged as essential reading by 
those who need to know about these complex and fast- 
changing markets. 


For a free sample copy, simply contact* 
FT Newsletters, 

P.O.Box 3651, 

London SW128PH 
W: 081 673 6666 
Fax: 081 673 1335 


FINANCIAL TIMES 
Newsletters 


This has been charted by toe 
Bank for International Settle- 
ments' latest quarterly report 
on ftnanriai market trends*'. 

The BIS report details the 
seemingly Inexorable rise of 
the syndicated loan. While ris- 
ing from $136.7bn in 1991 to 
$221bn in both 1992 and 1993 
and $177.6bn in the first three- 
quarters of this year, syndi- 
cated loans remain behind 
bonds but are increasing in 
popularity as bond markets 
become more turbulent. 

Globally, bond issuance 
re mains larger than loans, 
with $333bn of completed bond 
deals in 1992, $438bn in 1993 
and $309.'?bn in tire first nine 
months of this year. 

More specifically, in the US 
and the UK, syndicated loans 
re main streets ahead of bonds. 
The total of international 
bonds by UK and US issuers 
was the equivalent of 353bn in 
1992, $59bn in 1993 and $51-8bn 
for the first three-quarters of 
this year. In the US and the 
UK, loans were the equivalent 
of $117bn in 1992, $105bn in all 
of 1993 and rose to $121 ^bn in 
the first three-quarters of 1994. 

The increasing popularity of 


loans stems partly from the fall 
in the price of bonds and the 
consequent rise in the interest 
paid on them, or their yields. 
Earlier this year, Lloyds Bank 
brought a loan to the market 
for 3i, the UK investment 
group, at close to the pricing of 
3i sterling bond issues. 

As well as low pricing, bor- 
rowers are also attracted by 
the flexibility of loans. 

Much of the financing for the 
Foinaven oilfield in the Atlan- 
tic off the Shetland and Ork- 
ney islands will be arranged 
through a $250m syndicated 
loan, being arranged by Chase 
and Chemical Bank, which 
have agreed to underwrite it. 

The loan will finance the 
production of a floating pro- 
duction. storage and offloading 
(FPSO) system. Bankers met 
on Thursday to discuss the 
loan, which is expected to be 
for seven years priced at some 
190 basis points over Libor. 

Mr Kaare Gisvold. president 
of Golar-Nor, the Norwegian 
company behind the FPSO, 
said: "Apart from pricing, it is 
flexibility that makes h ank 
funding more attractive for 
this kind of thing.” 


However, when it comes to 
choice between a bond and a 
syndicated loan, pricing is 
undoubtedly behind the return 
to favour of lending. 

One driving force behind the 
fall in pricing is the presence 
in the market of Japanese 
banks, which have turned 
aggressively to overseas lend- 
ing in the face of a weak 
domestic market 

It may be no coincidence 
that eight Japanese banks are 
in the syndicate that provided 
the keenly-priced loan to East 
Midlands but to judge from the 
current crop of h ank results 
from Tokyo, Japanese banks 
seem to be enduring a grim 
period. 

Rival syndicated loans teams 
may be searching Japanese 
b anks ’ accounts for signs that 
trouble at home will lead to 
less of an appetite for foreign 
adventures. Whether company 
treasurers will take the same 
attitude is debatable. 


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Martin Brice 

* International Banking and 
Financial Market Develop- 
ments. by the Bank far Interna- 
tional Settlements, Basle. 



Government bonds 


Mobile 


Gilt dealers looking for a tight Budget 


? CONFE 




Communications 


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At a time when children are 
busy compiling their wish-lists 
for Santa Claus, gilt market 
participants have drawn up 
their own wish-list for Mr Ken- 
neth Clarke, chancellor of the 
exchequer, ahead of tomor- 
row's UK Budget 

To be sure, gilt analysts’ and 
traders' hopes for a market- 
friendly Budget, containing 
spending cuts and a reduction 
in the public-sector borrowing 
requirement (PSBR). are high. 

“True to the gilt market's 
hair-shirt mentality, the feel- 
ing is: tbe tighter the Budget, 
the better." says Mr John 
Shepperd, chief economist at 
Yamaichi IntemationaL "Most 
people are looking for fairly 
severe fiscal tightening on the 
tax and spending front." 

On the revenue side, the 
market is keen to see the tax 
Increases announced last year 
implemented In April. The 
planned measures include a 
cut in tbe tax rate for married 
couples' allowances and mort- 
gage interest relief to 15 per 
cent from 20 per cent, and an 
increase in tbe value-added tax 
on household fuel and power to 
17% per cent from 8 per coil 

Observers also hope Mr 
Clarke will rule out any tax 
cuts before spending and gov- 
ernment borrowing are 
brought further under control 

Meanwhile, the combination 
of faster economic growth and 
lower inflation are likely to 
cause a drop in spending. 

This summer, official PSBR 
forecasts for this year and next 
were cut by £2bn on account of 


the rise In tax revenue follow- 
ing the economic upswing. 

Mr Iffy Islam, an economist 
at Merrill Lynch, estimates 
that the Treasury will be able 
to cut the control total (public 
spending excluding cyclical 
social security and debt inter- 
est payments) “by at least a 
further £3 bn this year and 
around £4bn In the fln«wOTai 
year 1995-96 an the back of 
reduced assumptions on infla- 
tion”. 

In addition, there is wide- 
spread talk that a cot in the 
“contingency reserve" - a sort 
of war chest to cover unfore- 
seen expenditures - could 
sharply reduce government 
spending. The reserve has been 
set at £7bn for 199596 and at 
£10.5bn for the following year. 

Indeed, some argue that the 
reserve has outlived its useful- 
ness and should be abo lished 
altogether, sending a clear 
warning to government depart- 
ments not to overshoot their 
spending limits. 

Mr Simon Briscoe, an ana- 
lyst at S.G. Warburg, favours 
such a move: “When you look 
at the reccad of the last few 
years, the extra money has 
rarely been needed.” 

Reducing or abolishing the 
reserve could take a large 
chunk out of the PSBR, which 
would cheer the gilt market 
considerably. 

As a result of spending cuts 
and rising tax revenue, the 
current year’s PSBR forecast, 
which was cut this summer to 
£36bn from the original £38bn, 
is expected to be revised down- 


ward further, some say as low 
as £31bn. The 199596 PSBR 
forecast is expected to be low- 
ered to around £2Cftm from the 
current £28hn estimate. 

Other specifically gllt-maxket 
related goodies might include 
an announcement of a fully- 
fledged market for gilt repur- 
chase agreements, or repos, 
and a move to pay gilt coupons 
gross of withholding tax. 

The two are closely linked, 
for many say that a move to 
gross dividend payments 
would facilitate the establish- 
ment of an efficient repo mar- 
ket, which in turn would boost 
market liquidity. 

Gross coupon payments 
could also increase gilts’ 
appeal to overseas investors. 
Currently, only same gats are 
issued free of tax to residents 
abroad (Fotra); if non-residents 
buy non-Fotra gOts, they have 
to go through, a time-consum- 
ing procedure of reclaiming the 
25 per cent withholding tax. 

A move to gross coupon pay- 
ment would open up the whole 
market, rather than just a seg- 
ment of it, to overseas inves- 
tors. 

However, any promise to 
establish a repo market is 
unlikely to be translated into 
Immediate action. "It would 
take some time - possibly up 
to a year - until the market 
was operational," says Mr 
Shepperd. 

Any measures which will 
keep a lid on inflationary pres- 
sures wfll also be warmly wel- 
comed. 

“The government should not 


. shoot itself in the foot by rais- 
ing taxes to such, an extent as 
to boost inflation,” warns Mr 
Briscoe. 

Amid concerns over the 
inflationary effect of rising pet- 
rol duties, there has been mar- 
ket talk that some normal 
increases in drinks duties may 
not be implemented. 

Although a tight Budget 
would favour gilts over the Lon- 
ger term, it may not provide 
much near-term support 

In part, that's because much 
of the good news - if it materi- 
alises has already been 
priced into gfits, which have 
put on a strong performance in 
recent weeks. Indeed, some 
warn that such a Budget could 
prompt a “buy cm the rumour, 
sell on the news" response. 

Moreover, the political risks 
attached to gilts wiQ remain, 
even if - as expected - Prime 
Minister John Major wins 
today’s parliamentary vote 
over higher contributions to 
the European Union. The 
December 7 gilt auction, which 
was announced on Friday 
afternoon, is also likely to cap 

any Budget-induced rafiy. . 

The biggest risk, however, 
would be if a tight Budget this 
year were seen, as a prelude to 
a loose one next year. 

"If fiscal prudence is a tacti- 
cal ploy to set up a pre-election 
wi ndfa ll, rather than a genuine 
long-term attempt to cut bor- 
rowing, the response is at best 
going to be a half-hearted two 
cheers," cautions Mr Shepperd. 


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NEW INTERNATIONAL BOND ISSUES 




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THE WEEK AHEAD 


21 


DIVIDEND & INTEREST PAYMENTS 


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tlhMItp 

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FRN Ser.4 *728.74 
SMoblp 

TranwNjM Coal H020 
Ukl NawreraBrt 7.75p 
TaiWyde Z4p 


UK COMPANIES 


■ TODAY 

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Tvteddga WaOs, Kom, 1ZDD 

kharay Wntureo. 7, Were Me 9keat Qhagow. 

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INSEAD 


If service matters to you, so will 
The Strategic Management of Services 

5 - 17 March 1995 


What common factor distinguishes such successful organisations as 
McDonalds , British Airways , American Express, Marks and Spencer 
and McKinsey? The answer is outstanding service. 



Arnoud De Meyer 
Associate Dean 
Executive Education 

This programme ran Jot the very 
Jim lime this /ear. The kind <J 
Lrampcrwes if attracted are relevant 
to your business. They included: 
British Airways Pic 
World Bank 
Hong Kong Telecom 
ABB Krafiwerke AG 
Hewlett-Packard SA 
CNP jissurances 
ICL (UK) Ltd 

One pa md pant, the Chairman of 
Sedgwick UK Limited, commented: 

“The programme was very aaion- 
orientated. It will probably take 
about a year to know the Jull 
ben Jits - but I got lots of ideas 
which l will be Implementing, 
especially in the areas oj strategic 
marketing and human resources. * 


Good service creates a ‘virtuous cycle* of 
loyal customers leading to higher profits 
and ultimately satisfied employees who in 
turn better serve their customers. 

Lost year INSEAD created an entirely 
new two week programme entitled. The 
Strategic Management <J Services. 

The programme integrates the three 
disciplines — Marketing, Operations and 
Organisational Behaviour - which have 
to link successfully to deliver faultless 
service. It also addresses other specific 
topics such as information technology, 
strategic cost management, distribution 
and strategic alliances. 

The programme examines two 
essential factors. First, how to discover 
and understand what your customer 
expects; and second, how to organise your 
business to meet those expectations. 

Knowledge you can apply immediately. 

Participants will be given the opportunity 
o develop an Action Plan. And the desire 


for a very practical approach has led us to 
include an integration exercise based on a 
simulation which will run throughout the 
programme. As you are no doubt aware, 
at INSEAD wc have pioneered the use of 
simulations. 

Who should attend? 

Senior executives at the CEO level will find 
this programme particularly valuable, as 
will general managers and business unit 
managers. Equally those who support 
general management will benefit - especially 
if during a period of change they have to 
ensure customers receive better value. 

Any company committed to service 
will find it appropriate - including 
manufacturing firms who realise how 
important service is. 

If you would like to know more, 
please return the coupon below or call 
Chantal Pogct on 33 (l> 60 72 42 90. 
She wifi arrange for a brochure to be 
sent to you. 


Our new brochure “The Strategic Management of Services” is now available. 

REPLY IMMEDIATELY FOR YOUR COMPLIMENTARY COPY. 

Hix die completed details bck>w with your butenes* card to Chantal Pogrl on 33 (1) 60 72 42 42 or post 
them to her at INSEAD, Boulevard dc Constance, 77305 fonuinebleau Cedex, France. 


Name 


Title: Mr/Mn/Dr. /Other 


Bra Nan 


Job Title 


Company Name 


Company Addrcss_ 


Town 


PbMende/Zlpcodc_ 
j Telephone 


Counli-I 


_Fajc/Tck*_ 


. SMS9SFT 


FT CONFERENCES 

VENTURE FORUM EUROPE *94 
London 1 & 2 December 1994 

Arranged jofritfy by the Financial Timas and Ventura Economics, ftis annual 
meeting brings together recognised exports from Europe and North America to 
discuss key Issues tadng the industry; identify the investment strategies and 
assess how Institutional frrvssfora now view venture capital as an asset class. 

WORLD TELECOMMUNICATIONS 
London, 6 & 7 December 1994 

Trends changing the shape of the telecommunications Industry. Including 
intern a tional alliances, the construction of superhighways' end the regJatlon 
of competition win be addressed by Or Marlin Bangemann. European 
Commission; Dr Michael Nelson, The US Office of Science and Technology 
Policy; Mr Don Crokjkshank, Office of Telecommunications (OFTEL); Mr 
Ronald T LeMay, Sprint Long Distance Division; Sir lain Valance. BT. 

THE POLISH HIGHWAY PROGRAMME - OPPORTUNITIES FOR 
PRIVATE FINANCE AND INVESTMENT 
Warsaw, 12 & 13 December 1994 

Thte Financial Timas conference, arranged m assoctaflcm with The Institution 
of CM Engineers (ICE), wffl marie the commencemanl of the forthcoming $8bn 
Highway Construction Programme with this high-level tarum to explore the key 
challenges - finandai. technical, managerial and operational - In mounting 
major infrastructure projects In Poland. Speakers Include: Dr Bogustaw 
Lfoenatekf. Polish Minister ol Transport and Maritime Economy. Mr Ryszard 
Pazura, Polish Deputy Minister ol Finance; Mr Andrzej Pataias and Mr 
Mlrosiaw Grellk. Agency far Motorway Construction; Mr Paul Knotter. The 
World Bank Poland; Mr Maclej Olex-Szczytowekl, Schroder Polska; Dr 
Manfred Knoll, Deutsche Bank AG: Mr Lars Nordln, European Bank for 
p^cons^etton and Development; Mr Waiter Cemote, European Investment 
Bank, Mr A Kent Rlffay. Bechtel Civil Company Mr Henry Uszka. Bovte 
Po&ca; MrDariua StotwInaW. Dromex; Mr Ofiwer Bonnln. Bouygues. 

BIOTECHNOLOGY- A REVOLUTION IN THE MAKING? 

London 13 & 14 December 1994 

Tris high-tevel meeting Wl# review currant developments hi biotechnology and 
assess Mur* trends; consider regulatory issues and discuss the cftaBenges of 
refers the frianoe needed to exploB faUy the setfor’s potential Speakers*!! 
|ndud8 . cart Feidbaum, Biotechnology Industry Organization; Professor Dr 
Jurgen Drews. Hoflmann-La Roche Inc; Professor Enurt-GAnter Afting. 
lussel Udaf, Mr Sfmchan Happen CB. European Medicines Evaluation 
R ° Dr Alan G Walton. Oxford BioSctence Partners; Dr John Keller. 

Beecham Pharmaceuticals and Tech Yoog Sea. Singapore Blo- 

innovations P*® 

INTERCONNECTION - THE EVOLVING UK PROGRAMME AND 

nS INTERNATIONAL CONTEXT 

)ondon s February 1995 

o^Jed^MrDonCnilckshankteD^ 

S< ^ at the key issues of the UK® interconnection programme. This joint 
* fl,,0Ok *S also address Wercoimectlon and oompetBkin in Wenntlonal 
COnfa,fl,,C ° A -j 0ps with ptwertatow from the US Federal Communications 
tB ‘® CWWT1 ^ Commteaion's Tetecommuntaatlons Directorate 

shouW be address**! to: Financial Times Conferences, P O Bon 
A* enquiries Telephone: 081-6730000, 

38611 Fax; 081-073 133a 


CONFERENCES & EXHIBITIONS 


NOVEMBER 30 

Pakistan Today - 

Prospects for British Business 

CB! conference Includes keynote 
add re sics by Prime Minister Benazir 
Bhutto and Michael Headline, 
piese Dial ions by senior Pakistan 
Government officials aad UK hivoiois 
and exputien, together wiih sectorial 
workshops and networking meetings. 
Oman Nicola Martin, CBI Conferences 
Tel 071 379 7400 
34 hr Fax-Mhdemand 071 340 1 2« 

LONDON 

DECEMBER 1 & 2 
Venture Forum Europe 

Arranged johnly by the Fi nanci al Times 
and Venture Economics, this major 
annual event brings together recognised 
experts from Europe and North America 
to discuss key issues, identify the 
mvcsanenr snaupes aad assess hoe tire 
insritutkmzi now view venture capital as 
an asset class. 

Enquiries: Financial Times. 

Tel: 081 673 9000 Far: 081 673 1336. 

LONDON 

DECEMBER 2 

Currency Risk Management 
Workshop 

Understand and identify exposures, and 
leant ibe techniques of currency risk 
management. Spot and Forward FX. 
Standard and 1 Exotic 1 Currency Options. 
Zero Premium Strategies. Currency 
Swaps. 

£275 I DAY 

Contact: Falrplacr Banking & Financial 
Training Tel: 071 329 0595 

LONDON 

DECEMBER 6 & 7 
Lobbying the European Union 

This conference is addressed to those 
who know something of Brussels and 
need to stay up-to-date with ibe changes 
that arc currently along place. 

Further details from Internal innal 
Professional Conferences Ltd Tel: 061 
445 8623. 

LONDON 

DECEMBER 7 

The Coming Year In 

Pari lament 

An assessment ot the Queen's Speech, 
views from Ihe Government and the 
Opposition. Discussion of the role played 
by backbench MPs and Peers; The 
Budget; ihe agenda for Select 
flmmiinw. and Duplications for Europe. 
Comaci: Jackie Nixon. The House 

Magazine 

Tek 071 233 1388 

LONDON 

DECEMBER 7-8 
Succeeding with Teams; 
paaicalmicgjmkrdesigrafei 


DECEMBERS 
Dispute Resobtfionki the 
International Ol and Gas MuNries 

This conference will consider recent interest 
within the international oB and gas industries 
in dispute resolution and arbitration in 
respect holh of disputes within the industry 
and of external disputes which affect the 
industry, such as those regarding territorial 
jurisdiction. 

Contact: The Institute of Peirolenm, 
Conference Department 
Tel: 071 467 7100 

LONDON 

DECEMBER 8 
The UK Economy 

Prospects op to aod bcywtd the next General 
Election. 

This Henley Centre Conference is our 
annual look at Ihe UK Economy and its 
prospects for the medium term. 

Cose £350 + VAT 

Contact Anna Harman at 

The Henley Centre Tel: 071 353 9961 

LONDON 

DECEMBER 8 

The European Works Council 
Directive 

CBI Conference with speakers from EU 
Commission. UK Government, Business 
and Trade Union Movement examining the 
new legislation on trans-border information 
and ooiuaiftatiam of ernptoycea. 

Contact: Sandra Akhed. CBI Conferences 
Tel: in I 379 7400 

24 hr Fox -on- Demand: 07 1 340 1 248 

LONDON 

DECEMBER 13 
Flexible Labour Markets 

CBI conference consider* ‘who pays for 
training' in the new mulct conditions with 
an expert panel and care studies to identify 
the vinous issue, 

Comaci Sandra AJdred, CBI Coofexencte 

Tel: 071 379 7400 

34 hr Fax-oo-Demand: 071 240 1248 

LONDON 

DECEMBER 13 & 14 
FT-Blotechnology - A Revolution 
In the Making? 

This high level meeting wDI review currerrt 
developments in biotechnology and assess 
future trends, cotnlder regulatory issues aad 
dbcuss the challenges of ratsmg the finance 
needed to exploit the sector's potential. 
Enquiries: Financial Times 
Tel: 081 673 9000 
Fax f»l 673 1335 

LONDON 


and driving the tcnn-tetteri otgamaiim. An 
hrernationaf two-dry cuttTactix spotiGafly 
dragnet! to hdp semcr executives undasand 
the fnndsmnsal esus involved in designing 
aafarp fcPMitlug a tcata- b M cd vi igu i fcMlnn 
Qatari: Business Intelligence 
Tel: 081-543 6565 Fax: 081-544 9020 

LONDON 


DECEMBER 13 & 14 
Introduction to Foreign 
Exchange and Moray Markets 

Highly participative training course 
covering traditional FX and money markets 
featuring WINDKAL (PC Windows based 
dealing simulation). For Corporate 
treasurers, bank dealers, marketing 
executives, financial eourellers. systems 
and support peraonnd. £480 * V.A.T. 
Lya-ood David Imcmaikmal Lid. 

Tel: 0959 S65820 Fax: 0959 565821 

LONDON 


DECEMBER 15 
Business Opportunities In 
Scotland Conference 

Sponsored by Edinburgh District Council. 
TSB, Arthur Andersen £ McGrigor Donald 
aod features Lord Thoaaon. Sir Ian Wood. 
Tom Farmer, Protestor Donald Macfcay. 
Discusses prospects for economy 
investment, energy, agriculture, 
manufacturing and services. 

Details: CStyforom Lid. 

Tel: 01225 466744 Fax: 0 1225 442903 

LONDON 

DECEMBER 15 
Signed, Sealed A Delivered 

CBI conference provides line managers 
responsible for health and safety with 
comprehensive information on the 
background and ooascqneoces of the new 
provisions for pr egn ant worker* and safety 
signs in the workplace. 

Contact Nicola Martin, CBI Conferences. 
TeL 071 379 7400. 24hr Fax-oo- Demand: 
071 240 1248 

LONDON 

DECEMBER 19-20 
Compliance 

A d indcplh look at regulation for all 
involved with compliance and investment 
bus ine« activity. 

UK and European community policies aod 
regulatory framework, bank regulation, 
money laundering, capital adequacy, 
companies and director*' responsibilities, 
creative accounting, misuse and abase 
XS5U plus VAT 

Comaci: BPP Bank Training, Richard 
Capps Tet 0171 6288444 Fax: 0171 6287818 
LONDON 

JANUARY 11-12 

R&EncyneeftegfarQtwrthEfflcutive 

An interactive workshop for executives 
keen to break out of the anorexic cost 
reduction spiral and initiate genuine 
transformation. Examines bow we can use 
BPR to create the capabilities, flexibility 
and opennesa to learning that will ensure 
futuie growth and competitiveness. 
Facilitated by an international authority on 
re-engineering and transformation. 

Promt The Pane for BnaBMltantdremwinn 
Tel: +44 (0)17 1 -135 3570 (24 hours) 

Fax: +44 (0)171 794 3568 (24 horns) 

LONDON 

JANUARY 17-1B 

BuBcUng a Learning Onprtsatlon - 

Practical tools, techniques and strategies for 
cjcaiiflg and sustaining a learning 
organisation. This expert led workshop has 
hear designed to help executives 
understand the opportunities, explore (be 
methods, and foots on the challenges of 
accelerating individual aad learn learning to 
improve capability and performance at ill 
levels of the organ tali ML 
CbriaiX The Owe far BtEmeEDaridimriioe 
Tel: *44 (0)171-435 3570 f24 hours) 

Fax: +44 (0)171 794 3568 (24 bams) 

LONDON 

JANUARY 19 & 2D 

Securities Settlements 

For those wishing to gain a good 
understanding of Ihe sen lemons business. 
Detailed review of global custodian role, 
including settlement conventions 
inicmaiitmal/domeslK, bonds and equities, 
Euroclenr, Cedel, reports and controls, 
rolling Ktriemem an] electronic book curry 
systems. £595 plus VAT. 

Comaci: BPP Bank Training, Jonathan 
Rogers. Tel: 0171 628 8444 Fac 0171 628 
7818 

LONDON 


JANUARY 2G 

CompBance Uhder W» New Regime 

Insurance, Pensions and Savings: Solving 
die Major Problems. A detailed briefing for 
all compliance officers. Chairman: Ralph 
Lindeyer, Compliance Control Ltd. 
Speakers include: Alan Brener, PIA; Wyn 
Thomas, Save A Prosper Gronp Ltd; 
Rowan Boswonb-Davics, TUmuss Saincr 
Dccbeit. 

COntacc Sacha Tint, 

TEL: 071 404 3040 FAX: 071 404 2081 

LONDON 

JANUARY 20 

International Asset Allocation 
Professionals involved in International 
investment management. Investor 
objectives will be analysed and the 
principles and techniques of asael allocation 
trill he explained and evaluated. The 
importance of derivatives In the process will 
be examined plus strategic, tactical and 
synthetic asset allocation. 

£325 plus VAT. 

Cbnaa: BPP BUk Dmning. Dr Tcny Wnbam 
Tel: 0171 6088444 Fax: 0171 628 7818 

LONDON 

JANUARY 23-25 
Executive Directors’ 
Remuneration 

Explores performance criteria, long term 
farvratives, contracts, and total remuneration 
package design. Hear experts from 
corporations, political parties, invasion, 
think-tanks. You win leave the conference 
and workshop able to design your total 
remuneration strategy. 

Contact: Titus Hall, AIC Conferences. 

Tek (071)827 5988 

SELFRiocg Boia, LONDON 

JANUARY 24 

Interim Management 

The Resourcing Strategy for the 

Nineties 

A national conference in association with 
PA Consulting Croup, chaired by Tom 
Maddocks, addressing the growing strategic 
importance of ibis flexible director-level 
resourcing strategy . H will highlight Ibe 
business benefits and economic 
considerations involved for both 
organisation and individual. Public and 
private sector UK case studies. 

The Conference Pannos)npTd:(]C56 33U315 
LONDON 

JANUARY 24 & 25 
Re-engineering the I.T. 

Function: . _ 

Re-aEgnlng LT- culture. capabSties and 
skills to deliver radical bnsiuc*) 
performance improvement. 

An international two-day conference of 
leading experts and practitioners which 
explores the introduction of new strategics, 
development of new organisations and 
numa geraem structures to e n a ble LT. to piny 
a key role in tnnrfanni^ the bunne*. 

Comacc Burencsx IntelUgeace 
Tel: 0151 543 6565 Fax: 0181 544 9020 


JANUARY 25-27 
Digital Images ‘SS 

Europe’s first major conference and 
exirtbitiun on electrode photography, digital 
image capture, manipulation, storage, 
archiving, proofing and electronic delivery. 
Speakers from all over the world share their 
raperirorr. There are aho 36 special-interest 
sessions which may be booked individually. 
Details: The Hammond Organisation 
Teh +44 8! 943 9700 

LONDON 

JANUARY 26 1995 
Strategy Update 

In today's increasingly complex and hostile 
markets it is no longer sufficient to rely on 
past expericoce. Managers must think 
strategically when developing and 
implementing plans which will impact their 
company’s competitive position. Yet most 
managers devote less than 3% of their time 
to strategy development. This sem i na r aims 
to redress the balance. 

Contact: Elaine Parotid at Oanfidd School 


INTERNATIONAL 


Trading Precious Metals 
This seminar examines ihe marketplaces for 
gold, silver, platinum nnd palladium. 
Understanding the markets will develop 
through three main areas, the physical 
specifications, inte rest bearing aspects and 
market prices. Spot markets, fixings, 
arbitrage, Interest rata GOFO. hedging, 
speculation, futures. £595 plus VAT. 
Contact: BPP Bank Training. Jonathon 
Rogers TeL 0171 62S 8444 Fax; 0171 628 
7818. 

LONDON 


Tek0234 751122 Fix: 0234 750070 

CRANFTELD 

FEBRUARY 15-17 
Credit Training Workshops 

Thomson Bank Watt*. Inc. leader in global 
bank risk analysis, is running a series of 
credit training workshops. Topics being 
covered are: Emerging Markets Sovereign 
Risk Analysis, Latin American Banks, 
loUndnction to Banking Systems and Banks 
of Emerging Markets of Asia. 

Far full details please cooiaci 
Tcny Bnmne 07 1-353 5548 or 
Fax:071-8150408 

LONDON 

FEBRUARY 20 & 21 
Business Process 
Re-engineering (BPR) 

leading seminar series on Business Process 
Re-en ginee ring. Enhanced 1995 programme 
includes new sections on self-managed 
teams and radical BPR. Coaching style of 
presentation. Based on 150 successful BPR 
projects m 60 organisations in Ihe private & 
public sectors attended in 1994. Repeated 
March 20-21. 

Contact: Richard Parris, Vertical Systems 
Intercede Ltd. Tel: +44-15 5-250266 
Far +44-4 55-250266 

LONDON 

FEBRUARY 22-23 

Pay Appraisal and Career 

Development 

A practical guide to the brent trcfcmtjwr, for 
achieving excellent employee p er for mance in 
tire delayered organisation. This important 
twe+day conference Uptons how to radically 
improve your business performance by 
linking Individual targets to corporate 
objectives through effective reward, appraisal 
and motivation systems. 

Pnnmrr- Business Intel! ineace 

Tel: 0181 543 6565 Far 0181 544 9020 

LONDON 

APRIL 26-27 

Derivatives Risk Management 
Executives in Ihe fiwncii] mdresoy involved 
in planning, organising and directing 
financial instruments la banHng and 
treasury departments. Developing new 
Giumdiil products; Tkading in denvntivet; 
Camrolling exposure and risk; Developing 
(be technology ro support derivatives. 

£790 plus VAT 

Director - Prof Oimistris Ornate 
Cranact: BPP Bank Ttekmig. Hilary Jackson 
Tel; 0171 628 8444 Fate 0171 628 7818 

LONDON 


DECEMBER 12 & 13 
FT- The Polish Highway 
Progr am me Opportunities tor 
Private Finance and Investment 

Tbia Financial Tunes con fere nce, anxqgcd 
in aseodadou with The inuiiutiun of Civil 
Engineers (ICE), will mark the 
commencement of the forthcoming S8bn 
Highway Construction Programme with 
this high-level forma m explore Ore key 
cfaal len^pa - fina ncial, technical, managerial 
and operational- In mounting major 
infrastructure projects in Poland. 

Enquires: Financial Times. 

Td: 08j 673 9000 Fax: OBI 673 1335 

WARSAW 

JANUARY 25 4 26 
Beyond Reengineering 

This conference will explore how 
organisations can increase global 
competitiveness by improving or 
innovating bttsinest processes to be more 
customer focused; maximising workforce 
potential aad incorporating change 
management principles. Keynote 
presentation by Martin Bangemann. EC 
COmmissioBer on Competitiveness, 
Contact Kathleen Smart-King, 

+ (32) 2675 54 05 (Telephone) 

+ (32)2675 03 95 (Fax) 

BRUSSELS 

JANUARY 30 ft 31 
Windows In Finance - Spate 

Latest IT developments and innovations m 
Spanish retail banking. Keynote 
presentations from CECA (Spanish 
Confederation of Savings Banks) and 
Telefonica. Windows user case studies 
foam Argentina, Bancqja. Banco Herrero, 
El Momc, Barclays Bank Espana and Ca)a 
General de Ahotros de Granada. 

Coo act AIC Conferences. 

T± (0171) M2 1548 ftr(OI71)242 LS08. 

MADRID 

MARCH 20-22 

Credit Training Workshops 

Thomson Bankwatcb. Inc. leader in global 
bank risk analysis, Is running a series of 
credit training workshops in Frankfurt. 
Topics being covered are; Fundamentals of 
Sovereign Risk Analysis, Techniques of 
Bank Credit Analysis, and a Survey of 
OECD Banks and Systems. 

For full detail* please contract Terry 
Bnmne 071-353 5548 or Ftac 071 -815 MOB 
FRANKFURT 

MARCH 27-29 

“Sub-Saharan Oil & Minerals’ 
Speakers include Cabinet Ministers from 
Over 30 African countries. Co- hosted by 
the SA Chamber Of Mines; Gabonese 
Ministry of Mines A Energy; Nigerian 
National Petroleum Corporation: 
Sonangoi: SA Ministry of Mineral & 
Energy Affairs nnd Europe Energy 
Environment. Please comaci Europe 
Energy Environment, 3 Hayne Street, 
London EC1A 9HH, tek 44-71-60(1 666ft 
tax: 44-71-6004044. 

JOHANNESBURG 


EXHIBITION 


DECEMBER 1-4 
EXPO-PaktetercTVadeFatr 

A unique opportunity for business contacts 
and to sec the extensive any of fclmtan's 
products: textiles, jewellery, ceramics, 
sanitaryware, onyx, g III ware, carpets, 
sp«t* goods, h*od<«fted fiiMiture etc, 
Chrtsct Mr M Aihar Tahe, 

Paktean High Coromtteon 

Fax: 071 235 8731 IOjOD A.M. to 6.00 

P.M, daily Admission free, 

BARBICAN. LONDON 


TO ADVERTISE IN THIS SECTION PLEASE CALL NADINE HOWARTH ON 071-873 3503 


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i 29 

— 



E 


m 


v-r 


ft * 



WB 


m 



INDICES 


Goto* (WI377) 1704125 1719754 1708154 2547040 18/2 


M (Mmriattft/SOI 
Al MHngft/IAIQ 

MAMteoanami 

liaMkda&m 


19100 1885.7 1857.1 234U0 312 

8594 9414 9297 1136.10 30 

387.18 8B4J5 38457 48080 20 

102379 10M£8 102202 122225 172 

139697 1382.96 1384JB 134ZB5 90 

439875 457348 439300 G51UUH 13/9 

370496 374411 3716.41 427HJH 20710 

409930 406580 401808 460090 23/3 

2001.48 160690 197651 2KBJ6 172 

56508 58323 58014 9S440 21/11 

34440 34355 34156 41639 2/2 

18812 18822 18403 197200 4/2 

128858 128108 125044 158520 32 

194559 103488 189300 235893 2/2 


FM»ffleK31/1 2/581 77113 771.38 76646 BU7 IB/6 

CBBWBaaaiii n /iasai 220000 219500 210000 mbuo 21 s 

□AX PQ/I2/B7H 205192 205597 203131 22n.11 IB/5 


6020(1/1/911 

Brad 

Bowspa (29/12/83) 

Mi 

UAto Hri^ivq 

Can4Rde+(l07g 

PW**l§5(4rt«3) 

CMa 

VBACnpl/iaoq 

Dawk 

ttpe*ag»SBa/l«» 

fund 

HEX BmKripa/lZH) 
tan 

SBF 250 (31/1290) 

CAC 40(31/12/87) 


1867.10 23/11 
90490 SB 


37694 25/10 
101198 Bfi 


mmn 20/4 
896998 2M 
188048 26A 


337.19 8/11 

1601.10 3/1 

122798 25/10 
182442 25/10 

74294 5/10 
211630 5/10 
196058 7/10 


PG Otar 197® 

C8S TOHtoCnd 83) 
CBS 7W Shr 03xl 83) 
Dm 2aM 
C*. 40 (1/7*6) 

Honov 

Oslo SE(bKQCan78S9 

i^miu 

IMa COnp (2/1/85) 

Fungri 

BTA fT977> 


M »3896 241687 2881.17 86 


4319 43ZO 
2709 2719 


4Z79 48490 31/1 
2KL4 29490 31/1 


5£SAUS>n(&4/79 
San Africa 
JSE a*! E8/9/7T) 
jsEinmt 


2046.7V 20679 

69292V 89499 


KaUJapEjfVITMr 107455 1085.10 109597 113835 a/11 
Sp*k« 

WaWdSEpOnaaq 30292 30193 296.72 35831 31/1 

BUM 

AtamnHBaT (1/337) 149590 148990 147540 180190 31/1 


ABtertt &831ft2fl() 

hdrb Km 

Hug SmQ(31/7AM) 

Ml 

BSE SenMUPB) 

Mw tt 

Jute* DamKiwaflg 

SSo»8|VU89 


(100.7!) 808,11 808.44 119498 18/1 

865893 884796 857893 1220199 4/1 
413238-407598 402297 482857 12» 

487.5 7 48890 48291 61299 61 

160928 160790 179243 2082.18 201 


Bnca Gam IM (1872) 623.17 62695 62394 017.17 10* 
MB Genoa (4/1/94) 10099 10169 10109 13I&S0 1W5 


MM 2Z5 (18W40) 
MM 300 (1/1082) 
Tt* {4/1*8} 

2M 3B*M <4/1*# 


1866898 1870194 
27273 27297 
146492 1484.16 
205434 206032 


H 2166281 13® 
t) 311JI 13* 
H T712J3 136 
M 254298 6/7 


44072 12/7 

189414 1/7 

60895 10ft 
94490 10ft 

1738874 4ft 
20822 4ft 
144187 4ft 
187133 4/1 


SMnBkM <31/1339 120690 121041 120108 142334 31ft 
SBC 6mml (1AV87) 91228 91088 90197 1D3129 31ft 

IHn 

WfctaaYflMWr 642192 634102 6371.46 >191.13 SOS 

Mb) 

8aflqMcSET GW4/15) 134939 135730 133295 t1SU3 4ft 

ta 

iSsrtrt CbjlUsb 1906) 

2700997 288969 26820.1 2888390 13ft 

1KHJD 

MS CBpM ht {1/1/7QS 6069* 6069 0077 E4EL00 2/11 


taka* 100(26ft0Sa) 132877 132995 131393 1640.10 31ft 
Bra Taj-100 (ffiftOQ 117298 117290 115099 131191 2/2 
JCmettgrepi 712/SQ 04 31194 30593 395.19 5ft 

BartaffS BnoftP/Wa 17090 16097 10093 13179 28/9 

■ CAC-40 STOCK 1MPBX HJTUM8 (MATT) 

Open SettMoa Change Ugh Low 
Nov 1B35.D 1934.0 - 19509 1926.0 

Dee 1945.0 19439 - 19599 19359 

Jan 19529 19505 - 19529 19469 

Open Monet Bgana tor prartov* day. 




40630 21® 
287 JO 21® 


199222 1386.17 196233 243964 3/2 

1048JB 105070 103735 1211.10 202 

272136 Z73Q.47 272575 330&37 4ft 

29502 29449 2942.7 322060 10/2 

54185 54293 54237 S41J1 4ft 


20486 2934J0 7» 
68859 838110 22/11 


174500 14/2 
544500 191 


m 



LxlJlpZ 


r~, 


1 


T 


US INDICES 


Mar Nor 

25 23 


Mabtafc 370627 387463 367799 39T&36 359395 397536 4122 

(31ft) (AM) (31/1/94) (2/7/32) 

tag Bond) 9177 9178 8178 10S61 6375 10577 5460 

(21/1) (21/11) {10/1QS3I (1/1081) 

Transport 1*29.18 1422.19 144062 186129 1422.19 168229 1222 

(2 m (2311) 02m (8/7/33 

UMn 17921 177790 17194 22766 17194 25545 1150 

01) (22/11) 01/8/93) <8/4/33 

Du M Day’s high M (3704J1 j Low (u) pe; 2.05 ) (iMntcd4| 

Day'S high 371299 (368699 ) Low 3072.01 P83897 ) (Actuah)) 

Standard and Poor 

CompojS* t 45229 44193 45099 49290 43562 48290 4.40 

02) m (2 nm (1/0/32) 

MusttfcV 53772 534.31 53725 86110 51105 56110 392 

(28/10) (21/40 (28/10/94) plffiSq 

Rnandal 4194 40.76 3997 4594 3197 4890 694 

(MM (22/11) (28STO (TftOffg 

NYSE Conn. 247 60 24118 24892 20771 24114 207.71 4.46 

(2/2) m 0m (25/4/G) 

Ann MM W 43469 43240 43114 48799 42297 48799 2991 

(2/2) CBS) (2/2/54) (&/1 2/72) 

KftSOU) Cb%) mss 73170 74191 80193 69179 a«U3 5497 

(16/3) (24/6) (ia/3/B4) piftD/73 


1138.72 27/10 
mat 27/to 


ttSBUO 24/3 

59190 4/4 

126598 5/10 
113595 5/10 
29038 21/3 
14195 21/4 

Est voL Open InL 
10,472 15,344 

2,999 26287 

303 372 


Dow Jones bid Dtv. Yield 

5 & P Ind Dlv. yWd 
S & P Ind PTE raifa 


Nov 4 Yeer agi 
178 2.71 

Nov 2 Year agt 
2.39 2.38 

2095 28JB0 


■ STAftPAflP AITO POORS BOO mx* FVTUBSS 5500 limes hdflx 

Open Sett price Change High Low EslvoL Openlnt 
Dec 45095 453.65 +3.10 453.70 46095 104.483 206.781 

Mar 454.00 45 Gl 65 +3.10 456.60 453J5 9,830 46,052 

Jun 46050 46090 +3.00 46090 458.00 450 4916 

Open kmnHt figra are lor proutaua day. 


■ MW TOHK ACTTW STOCKS 

Friday Stocks Ckw Changi 


doss Ctaige 

price on (toy 


fn. 

TeMona 
AT B T 

Gen UMn 

Odcorp 

W*Maft 


ns camM4/4/BQ 101192 100794 100190 ismjs s/i azaaa 4/4 

- Sf* No* 18: Titan WMeAM Price 644896: Korea Con* Ex 111795. Baas rakes of ri tadees era 100 ampt Autferia Al Odnery 
and Mtotog - 600: Auraia Ttadefl, HH.gft HEX Otn, MB Gen. S8F2S0, CAC40, Bn Top-1 00. ISBO Own* Tocrtt Comp/lMata i& 
Mhein art DAX - jB 1900: JSE Gold - 255.7: J8E 20 Indusolato - 2049; NYSE Al Corarxn - 80 and Sanded and Po«/a - 11 35 
Uv*ad ♦ Taonto. « Ooeed. (u) UnanddlB. J IBM/DAX edter+ioum hdeac Mem 26 - 206027 -292 


1572900 34H 

1.496.400 51ft 

1.302900 ISM 
1933900 38 

1901200 42 

1,147900 23M 
1983900 56M 
1937.200 70ft 
1927900 4844 

1918.400 36ft 


• VUune (nClan/ 

Nor 25 Nor 23 Nov 22 
New YM SE 111921 430.735 383.349 
Ama 7.715 21108 11428 


NYSE 

teniat Toned 

(IMS 

Fife 

Ubdmgad 
Haw Highs 
New Lows 


2933 2,033 

1.144 475 

1236 1985 

S53 563 

3 8 

344 325 


t Conadkn * Ca ta Arted at 1590 GMT. • Exdudng bonds, t hnkcdddL pkn UoMm. Ftaenctd aid Thnsporiadon 
+ Thn DJ Ind hdax ttnoradcd day’s Hgto sd kma am the amayes of riM hlghat end tans! prices reached during Dm day by each 
stack sdieiBaB Itta adtad dq/b hlgha and Idm hieaded by Tdekn) seprasant Bm Nghest and toaeat «eim dtt Oh Mbs haa reached 
skiing Dm day. (Dm llgian ki badcata era pravtoui day’s). V Sub(ea to oHdd racakaMKin. 


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FINANCIAL TIMES MONDAY NOVEMBER 28 1994 


23 




CURRENCIES AND MONEY 


•-it 






>n 


3 ny place 

iare... 


■ T- ~ C* -S? * ; 
‘ - s nC".- 



- _POO ND;SPOT;FOfiVVARD AGAINST rRE POUND 


Noy25 Ckwng Change BWtofTor Day's MW 

h*HxHni on Day spread high tow 

Europe 


DOLLAR SPOT FORWARD AGAINST TBEfDOLLAR 


One morth Three mutts Qajm Hank ot 
Hale XPA Rate *PA Rato %p A Enp. in d» 


Novas 


Ctowng Cftnge BU/offer 
mm-pater on day 


Ds/a mid 

high kar 


Ons month Tims months One year J-P Kogan 
Hate «PA Bate %PA Hare %PA tatter 


MONEY RATES 




Austna 

(Sch) 

17.1522 

+0.0188 

455 • 588 

17.1597 17.1161 



Belgium 

Denmark 

(BFr) 

50.1114 

+ 0.0211 

721 - 507 

5D.1EG0 50.0310 

- ' T . ’ 

*•" 

IDKx) 

9.5431 

-0.0738 

4 00 - 487 

B.S494 

»I83 



Finland 

(FM) 

7J156 

+0.0473 

071 - 240 

7.5270 

7.4620 



Franco 

(FFi) 

8.3716 

♦0O1Q7 

688 - 743 

8.3802 

83488 

- w< ' 

< j " 

Germany 

Greece 

PM) 

2.4366 

+0.0027 

358 - 373 

2.4382 

2.4298 



(Dr) 

375.656 

+0.592 

557 - 755 

375.930 372.694 



Ireland 

flti 

10143 

+0.0032 

136 ■ 149 

1.0157 

14XB9 

_ ■*- 

"4 ’.*■■. - 

Italy 

(L) 

252824 

+12J32 

705 - 942 

2S29.6Q 2 S 12 JM 



Luxembourg 

(LFq 

50.1114 

+ 0.0211 

721 - 607 

50.1660 5Q.0310 


> 

Hettwrianda 

P) 

2.7295 

+ 0.001 

286 - 303 

2.7314 

2.7236 



Norway 

INK t) 

106819 

♦0.0203 

788-852 

10.7868 10.6410 

** 


Portugal 

IES) 

248 775 

+(X253 

873 - 877 

248 976 248.155 


. * _ ' 

Spain 

Piaj 

203.439 

*0.38 

367 - 510 

203.515 202.832 


ii;' 

‘.I, 

Sweden 

(SKr) 

11.6741 

+0.0588 

644 -838 

11.7044 

1 1.6024 

r., ■ 

Switzerland 

UK 

eft) 

ffi 

2.0843 

♦ 0.0012 

634 . GS1 

2.0669 

20557 



Ecu 

- 

1 -2801 

+00017 

795 - 806 

1.2807 

12771 

* 

. , 

SORT 

Americas 

- 

0.831 788 

■ 

- 





Argentine 

(Peso) 

15633 

+0.0015 

830 - 835 

1.5650 

1J5810 

• V 

.2, -i- - 

Brazil 

W) 

1.3427 

+0.0067 

409 - 444 

1.3446 

10315 


I • 1 ?M 

Canaria 

ICS) 

2.1510 

+0.0035 

503 - 517 

2.1517 

2.145B 


* -tu 

Mexico (New Peso) 

5J871 

+0.0051 

838 - 903 

5.3910 

50760 

s . 

! ' - 1 . 

USA 

S) 

15831 

+ 0.001 

628 - 633 

1.5664 

10610 

i * -J 

j"' 

Paefflc'MWdto EMt/AJrica 



' -r ' 

Australia 

(AS) 

2.0571 

+0.0008 

560 - 581 

2.0610 

2.0507 


•. i-‘ 

Hong Kong 

(HKS) 

124)850 

+0.0077 

823 - 877 

12.1032 

12.0687 


f. 

India 

(Ral 

49.0407 

+0.0381 

289 - 524 

49.1030 48.9800 

r ■ - , 


Japan 

(Y) 

153.781 

- 

G97 - 824 

154.310 163JS60 



Mateysia 

IMS) 

3.8967 

+00011 

963 - 981 

4.0034 

3.8832 



New Zealand 

9*2$) 

25201 

+0.0028 

186 - 215 

2.5221 

2.51 G 8 



PNHppmes 

Paso) 

37.1225 

+0.0238 

258 - 192 

37.5600 38.7200 



Saudi Arabia 

(SR) 

55828 

+0.004 

614 - 641 

5.8710 

5A552 


‘ 't . 

Singapore 

(SS) 

25905 

+ 0 L 0 OS 

893 - 916 

22927 

20873 


<1 

S Africa (Com. 

(R) 

55282 

+ 0.002 

261-302 

5^368 

5.5228 

- 


S Africa (Fin.) 

«) 

65367 

+0.0307 

200 - 534 

6JSS4 

6.5042 



South Korea 

y*or>) 

124259 

+a&4 

211 - 287 

1244.18 124084 



Taiwan 

(TS) 

40.9910 

+05192 

026 - 194 

41.0422 40.9203 


-4 

Tbatend 

(Bt) 

39.0895 

- 

809 - 961 

39.1740 39.0730 


17.1478 

(L3 

17.136 

04 

. 

. 

115.4 

EUUVE 

Austria 

(Sch) 

108735 

+0005 

710-760 

10.9900 10.9380 

10.988 

04 

10.9485 

05 

10452 

1.1 

1044 

50.0864 

0.8 

504014 

09 

494214 

1.2 

117.1 

Beigten 

eft) 

324600 

-0407 

400 - 800 

32.0950 314950 

32.04 

0.7 

31^ 

09 

31.75 

14 

1060 

9-5413 

ft* 

ft 548 

+02 

94340 

0.1 

TT7.0 

Oanrriork 

(DKi) 

6.1064 

+00041 

044 - 064 

6.1045 6.0880 

61047 

ai 

61079 

-02 

61119 

_ai 

105.1 

• 

- 

- 

- 

- 

- 

68.1 

Finland 

(FM) 

44083 

+0.0272 

036 - 129 

441 76 4.7644 

44055 

a7 

4.7998 

07 

4.7928 

03 

m o 

80706 

ai 

«i*w 

0.4 

8-3011 

as 

110.0 

Franca 

ffTi) 

54559 

+0.0034 

5SO - 568 

64590 5.3380 

6455 

02 

53505 

04 

5.3219 

04 

1X4 

2A35S 

04 

2.4317 

0.6 

2 .4002 

14 

1204 

Germany 

(P) 

14580 

+00007 

586 - S91 

14598 1.6540 

14581 

04 

1.5557 

08 

14389 

14 

107.1 

- 

- 

■ 

- 

. 

- 

_ 

Greece 

(Dr) 

240435 

+0225 

310 - 360 

240.360 238450 

243.035 

-134 

248385 

-13.4 

260085 

-124 

684 

1.0141 

02 

1.0137 

0.2 

14156 

-01 

104.9 

* -4 

■VanO 

m 

14412 

-00039 

404 - 419 

14487 1.5391 

14415 

-02 

1.542 

-02 

1.5375 

04 

- 

2S34.B4 

-3.0 

254064 

-2.8 

250619 

-2.7 

734 

Italy 

04 

161740 

+845 

700 - 800 

1618.05 1606.45 

1621.48 

-23 

16284 

-2.7 

1664 

-23 

74.0 

50.0804 

0.6 

60.0014 

0.9 

49.5214 

1.2 

117.1 

Luxembourg 

(LFr) 

32.0600 

-0007 

400 - 800 

32 0950 31.9950 

32-04 

07 

31.X 

09 

31.75 

14 

1X.0 

2.7283 

04 

2.7245 

0.7 

2.8829 

1.3 

1209 

NBUieriands 

im 

1,7463 

-00004 

460 ■ 465 

1.7475 1.7418 

1.7465 

04 

1.743 

07 

1.7265 

1.1 

1067 

lassie 

00 

104849 

+OT 

J 0.634 

0.0 

8S.fi 

Norway 

mt 

5.3340 

+0.0086 

330 - 350 

68480 68050 

6.8412 

-14 

0853 

-1.1 

6861 

-OA 

95.8 

250^05 

-84 

263.685 

-74 

- 

- 

- 

Portugal 

(Ea) 

159.160 

+006 

120 - 200 

159270 156780 

158.735 

-43 

1X48 

-4.3 

164.41 

-34 

95.4 

203.809 

-22 

204.464 

-2.0 

207.348 

-14 

85.6 

Spate 

(PtaJ 

130.155 

+018 

130-180 

IX IX 128.730 

13048 

-2.1 

1X4 

-2.0 

132.905 

-01 

X.6 

114926 

-14 

11.7306 

-1.9 

114928 

-1.9 

75.7 

Sweden 

(SKr) 

7A888 

+00338 

638 - 738 

7.4870 7.4184 

748 

-1.B 

74043 

-15 

74228 

-01 

81.6 

2461 

1.9 

2.0538 

2.0 

2.0117 

24 

1208 

Swtberfand 

(SR) 

13207 

-0.0001 

203 - 210 

14230 1.3157 

14185 

24 

1.314 

2.0 

1.2899 

2.3 

1064 

- 

- 


. 

. 

- 

794 

UK 

m 

1.5631 

♦a ooi 

628 - 633 

14854 14610 

1.6631 

04 

14628 

OlI 

14567 

04 

663 

1^8 

ao 

14805 

-0.1 

12735 

05 

- 

Ecu 


12211 

-00009 

206 - 214 

72246 72205 

1J2211 

0.0 

14214 

-O.l 

1.2249 

-03 

- 


SDftt 
Americas 
Argamtno 
B nd 


- 1.46738 


<P8OT} 

CFBJ 


1.000? 

1X8580 


+0.0003 001 - 00? 
+0.005 sao - 000 


1.0002 1.0000 

03800 0 8560 


2.1512 

-0.1 

2.1 Ml 

0.2 

2.1499 

ai 

66.1 

Canotfo 

(CS5 

14762 

+00014 

758 • 764 

1.3784 

14735 

13759 

02 

14765 

02 

14797 

-0.3 

82.7 

- 

- 

- 

- 

- 

- 

- 

Mexico (Now Peso) 

64485 

+0.001 

4S0 ■ 460 

3.4550 

3.4390 

3.44 75 

-03 

3.4433 

-04 

3j4567 

-0.3 

- 

14831 

. oo 

1.5628 

0.1 

1.5587 

03 

624 

USA (S) 

PaettoMddb Baetf Africa 


_ 

_ 


_ 

“ 

“ 

" 

“ 

“ 

96.1 

24582 

-14 

2462 

-0.9 

247S8 

-09 

_ 

Australia 

(AS) 

14161 

-00003 

1S6 - 165 

1.31 99 

1.3123 

14189 

-0.7 

1.3187 

-08 

14314 

-14 

89.1 

12.07B 

09 

1Z0717 

0.4 

,2.0266 

04 

- 

Hong Kong 

(HKS) 

7.7317 

- 

312 - 322 

7.7322 

7.7310 

7.7297 

04 

7.7285 

02 

7.7382 

-0.1 

- 

- 

- 

- 

- 

- 

- 

- 

tndta 

(Ra) 

31-3750 

+0405 

725 - 776 

3,4775 314700 

31.44S 

-2.7 

31-59 

-2.7 

w 

- 

- 

163431 

3.4 

152441 

37 

147-221 

44 

1904 

Japan 

00 

98.7060 

+043 

400 - 900 

88.7900 984300 

96-485 

3 A 

97.865 

34 

94.8 

4.0 

151.1 

- 

- 

- 

- 

. 

- 

- 

Mateyste 

(M^ 

2. SOTO 

-0 0009 

565 - 575 

24S35 

24565 

2.554 

1.4 

24495 

14 

2-6775 

-as 

- 

24248 

-24 

2434 

-2.2 

2.5538 

-14 

- 

NewZadand 

(wza 

1.6123 

+0.0008 

116 - 129 

1.6129 

1.6100 

1-0133 

-07 

1.6157 

-08 

1.6247 

-04 

- 


Mavtatnbcr 25 

Over 

One 

Thiee 

Gut 

One 

Lamb. 

Ota. 

Rapo 


night 


mtfn 

rathe 

year 

inter. 

rate 

rote 

Belgkan 

4% 

4 3 

5ft 

5ft 

8 

7.40 

4.50 

- 

weak ago 

45b 

4fi 

S3 

5ft 

eft 

7.40 

4.50 

- 

ftera* 

5i 

S3 

Si 

54i 

6ft 

5.00 

- 

8.75 

week ago 

fit 

5ft 

S’* 

5ft 

6ft 

5.00 

- 

6.75 

Oamany 

445 

4.86 

5.15 

545 

5.55 

6.00 

440 

486 

weak ago 

4.93 

4.05 

5l15 

545 

5.60 

600 

440 

*85 

»• a - - 4 

64 

5)& 

6% 

6ft 

7ft 

- 

- 

645 

meek ago 

Si 

5K 

5% 

Si 

7i 

- 

- 

325 

My 

8ft 

8* 

fi% 

9ft 

10ft 

- 

740 

840 

week ago 

8ft 

8M 

84* 

®ft 

9ft 

- 

740 

840 

Hetherlanda 

444 

6.04 

5.19 

644 

5.72 

- 

545 

- 

week age 

444 

5.04 

544 

547 

6.76 

- 

545 

- 

Swftzortand 

31k 

3% 

33 

4ft 

4ft 

5625 

340 

- 

week ago 

3 

34k 

3ft 

41 

4ft 

8.625 

340 

- 

US 

Si 

5ft 

619 

6ft 

6ft 

- 

4.75 

- 

weak a©o 

SVi 

Si 

5ft 

6ft 

6ft 

- 

4.75 

- 

Japan 

ZVi 


Zi 

2H 

28 

- 

1.75 

- 

week ago 

Zft 

zta 

2& 

3ft 

23 

- 

1.75 

- 

m ( LBOR FT London 








uun LMn* rinitg 

- 

5H 

58 

6ft 

S3 

- 

- 

- 

weak ago 

- 


S3 

8ft 

6fi 

- 

- 

- 

US Dollar CDs 

_ 

S.47 

5.70 

6.05 

647 

- 

- 

- 

week ago 

_ 

5.47 

5.75 

6.09 

6.72 

- 

- 

— 

SOR Linked Oa 

_ 

3<W 

3i 

3ta 

4 

- 

- 

- 

week ago 

- 

3te 

3£ 

3« 

4 

- 

- 

- 


^ rea<M " Sp« tuns Jto. only me last three rieamto L 

g»*B *» W ata utatetl by era Best, at BitfSrJ. Bass areraoo IMS - i 
Ml no lha Dc+n tastes dertoed tram THE WM/REUTERS CUOSWa SPOT RATES. Soma vt+uaa me raundsd by 


m not drort* quoted u tno 
Otar rad Md-mra n both 
FT. 


Phllpplnea (Peso) 23.7500 
Saud Arabia (SB) 3.7508 
Slngapon (S$) 13854 

S Atrtca (ComJ (R) 33368 

S Africa (f*v) (FQ 4.1820 
South Korea (Won) 794.550 
Taiwan (IS) 28 2250 

Thatand (BT) 280360 

IfiDR me tor Not 23. Btamftar 
but are tqH by ouram HMSII 


- 000 - 000 24.0000 235000 

+03002 508 - 511 17511 17506 17545 

-0.0006 6+9 - 659 1.4680 1.4645 1.4639 

-0.001 360 - 375 3.537S 3.5360 33523 

+0.017 720 - 920 4.1920 4.1600 4.21 

-0.1 800 - 900 793000 794 600 797.85 

-0.0045 110 - 390 285390 28.1900 23245 

+0.0105 250 - 450 25.0450 25.0250 210645 

Vi ttw Dtaoi spot table show on* the lest M 
UK. Irehmd » ECU era quoted tn US currency. 


- 1.1 

13 

-13 


17614 

1.4804 

15844 


-83 43645 

80135 


-43 

-19 26.285 
-M 25.1556 
ptaeos. Forward ret 
JJ>. Moroni 


-1.1 3.7759 -0.7 

1.4 1.4439 15 

-54 17493 -6.0 

-8.9 4.498 -7.4 

-3.3 819.85 -IT 

-03 - 

-1.9 25.56 -2.1 

b are net dreed? quoted to the nurtm 
re 83. Bern avenge 1090-100 


ECU Untied Cm add mra: 1 into: Ste 3 me 55; 6 mhx 55: i nan 6W. S ueoR fevedank rang 
ratra we ottered im tar Siam quoted to the mantel by tout reference bonks at Item each *crttrg 
day. The banks are: Bataan Trust. Bank at Tokyo, Beictsys end Natlaret Wear* raw . 

MU rates are damn lor the domestic Moray Rates. US S COs ana SDR Linked Depute (D* 


EURO CURRENCY INTEREST RATES 

Nov 2S Shan 7 days One Three Six One 

tann notice month months months year 


( cross RATES AND DERIVATIVES 











1 

I FT GOLD MINES INDEX : 1 

EXCHANGE CROSS RATES 

Nov 26 BFr OKr FFr OM 

C 

L 

FI 

NKr 

Ea 

Pta SKr 8Fr 

* 

cs 

s 

r 

ecu 

% dig % of 

Bo* atecc tor Mkt&p GnW Grease* 52 m* 

25 31/12/93 74 Sbn Han ytata % High Una 


Belgian Franc 

4{3 

-4fi 

4 a 

■4il 

4 B 

■ 4,1 

54 

- 5 

54 ' 

■ 5*4 

6 - 

54 

DteMi Krona 

b* 

- 5*2 

5^, 

-54 

54 

- 6*2 

64 

• 6 

64 ■ 

■64 

74 

- 7 

0-Mark 

5i*( 

-41S 

5 - 

4% 

5 - 

44 

5ft - 

5ft 

54 ■ 

■54 

5ft 

-5,1 

Dutch Gutder 

5 - 

4^ 

5ft 


5jt 

- 4|J 

54- 

54 

54 

■ 54 

5JI 

-S4 

Franc* Franc 

sh 

-SH 

5ft 

-5ft 

5ii 

-5ft 

5ft- 

SA 

54 ■ 

•54 

8ft 

- 6ft 

Portuguesa Esc 

8 - 

an 

9- 

8 H 

94 

-84 

104 ' 

‘94 

10ft- 

■ 10 ft 

104 

• 104 

Spartak Pam* 

fit 

-Tft 

7ft 

-7ft 

7 A 

- 7ft 

74- 

74 

8ft 

Bft 

9,'c 

■ ail 

Stmang 

5*« 

-5 

5>+ 

-54 

54 

-5ft 

64 

- 6 

6ft 

■6ft 

7 A 

-7ft 

Stare Franc 

3^ 

- 3*9 

3 h 

-34 

34 

- 34 

3U - 

3,2 

4ft 

it 

44 

■44 

Can. Dotar 

5ft 

■5k 

5& 

-54 

54 

-54 

54- 

54 

64- 

84 

7ft 

- 7ft 

USOoOar 

5*2 

-5k 

5ft 

-5ft 

54 

-5*2 

sa- 

5(2 

6ft 

6ft 

BIS 

-6U 

ktast Lira 

9 - 

7*2 

8ft 

-Bft 

flit 

-8ft 

84- 

84 

9*4 ■ 

•94 

10 ft 

•oil 

Yan 

2** 

-2ft 

2ft 

-2ft 

2ft 

- 24 

24 - 

2ft 

2*2 ■ 

■2ft 

2 a 

-2B 

Aslan S9ng 

2\ 

■ 2*2 

4 - 

3% 

44 

-4 

4ft- 

4ft 

44 

44 

44 

-44 



Belgium 

(BFf) 100 

19.04 

16.71 

4B81 

2024 

5045 

5.448 

21.31 

498.3 

405.9 

M?q 

4.119 

1.998 

4283 

1119 

307.9 

2564 


Denmark 

PKl) 52_5, 

10 

8.772 


1.0G3 

2649 

2.060 

11.10 

280.6 

213.1 

12.23 

2.183 

1.048 

23S4 

1.638 

161.7 

1341 

».• : • 

France 

(FFr) 59.86 

11.40 

10 

2910 

1.211 

3020 

3260 

12.76 

297.1 

243.0 

1334 

2.466 

1.195 

2570 

1.067 

1845 

1.629 

: / 

Germany 

(DM) 2037 

3-917 

3.436 

I 

04 Tfi 

1038 

1.120 

4384 

102.1 

8330 

4.781 

0847 

0411 

0583 

0.042 

6334 

0.525 

‘ 

Ireland 

(IQ 49.42 

0411 

0256 

2.402 

1 

2483 

2881 

1053 

2453 

200.6 

1151 

2.036 

0986 

2-121 

1541 

1523 

1362 

■ • *■ 

Italy 

<L) 1.962 

0^77 

0331 

0.096 

0.040 

100. 

0108 

0422 

9.838 

8.048 

0482 

0082 

0540 

0585 

0062 

6.104 

0051 


Netherlands 

(R) 1038 

3-407 

3.087 

0893 

0.372 

926.3 

1 

3314 

81 13 

74.53 

4370 

0.756 

0388 

0.788 

0573 

5654 

0460 


Norway 

(NKr) 4092 

8.935 

7.B38 

2.281 

0848 

2367 

2,665 

10 

232.9 

1904 

1093 

1333 

0.938 

2514 

1.463 

1445 

1.199 


Portugal 

(E&j 20.15 

0837 

3388 

0978 

0.408 

1016 

1.087 

4394 

100. 

01.79 

4.082 

0830 

0402 

0.855 

0.620 

62.04 

0515 


Spain 

(Pta) 24.64 

4.682 

4.116 

1.198 

0499 

1243 

1.342 

5.251 

1223 

100. 

5.737 

1.015 

0492 

1.058 

0.788 

75.86 

0.629 


Sweden 

(SKr) 42.94 

8.177 

7.173 

2.087 

0869 

2168 

2J330 

9.152 

213.1 

1743 

10 

1.769 

0557 

1.843 

1339 

1323 

1.097 


SwRzerland 

(SFr) 24-28 

4.B24 

4.056 

1.180 

0.491 

1225 

1.322 

5.174 

120.5 

98.55 

6.654 

1 

0484 

1542 

0757 

74.78 

0620 

^ ' 

UK 

(Q 50.11 

0543 

0371 

2438 

1.014 

2528 

2.729 

1038 

2407 

2034 

11.67 

2.064 

1 

2.151 

1.563 

1543 

1380 


Grade 

(CS) 2330 

4.437 

3.892 

1.132 

0471 

1175 

1.209 

4365 

115.6 

9436 

5.425 

0360 

0485 

1 

0.727 

71.73 

0585 


US 

(S) 32.06 

6.106 

5.356 

1.568 

0649 

1817 

1.748 

Rare, 

158.1 

130.1 

7488 

1321 

0840 

1376 

1 

96.72 

0.B19 

' -■ 

Japan 

(Y) 32.48 

8.185 

5.425 

1570 

0.657 

1638 

1.789 

6322 

1613 

131.8 

7.563 

1.338 

0.848 

1394 

1513 

100 

0830 


Ecu 

38.15 

7.455 

0540 

1.903 

0782 

1975 

2.132 

8344 

1943 

150.9 

9.117 

1513 

0781 

1.680 

1321 

1205 

1 

■ i 

Bank* Ktorar. French Franc. Nmpgan Kierar. and SmrSleh Manor par tct Belgtan Frtvvc. ran. Escudo, tarn ant PoaM 

a par !<M 









6oM I 


Pfl 


193433 -113 

181537 

4737 

10000 

223 

238740 176252 

3125.18 -5.4 

316752 

7fi.CS 

3194 

436 

371157 2304.45 

247B8S -73 

242951 

638 

13.43 

255 

301389 217186 

140001 -194 

,407.41 

24 93 

52.63 

008 

2039.65 144957 


Short term rates are cad tar the US Dciar and Yen. otoera: taro dbys 1 rodeo. 
MONTH EURODOLLAR (IMM) Sim points of 100% 


Africa <14 
Austratata (71 
North American!) 

CapyrrcpL The Ftaencst Times Lotted 1BQ4. 

Figures in Brackets shew raanbai of c wnmnras . Basis US Dolera. Bbm Values- tootXOO 31/12/92. 
nwctocvaor Sett Mnas toctec Nor 25 - 23&A -Bek'S cmngar • 17.0 points: roar ego: 235 JL 


LONDON RECENT ISSUES; EQUITIES 

Issue Amt Mid. Ctase 

price paid cap 1994 price 

p up (Em.) Ugh Low Stock p 



Open 

Sett price 

Change 

High 

Low 

Em. vd 

Open tot 

Dec 

93.96 

83.94 

- 

93.96 

9353 

101524 

380.975 

Mer 

9339 

93.40 

- 

93.40 

93.37 

190.646 

467 565 

Jui 

92.83 

92.84 

-051 

92.05 

82.81 

118554 

321,191 

■ US 1TCUSURY HILL FUTURES (IMM) Sim per 10096 



Dec 

9459 

9458 

-0.02 

9459 

94.58 

2.574 

12.664 

Mar 

94.05 

94.04 

-051 

94.05 

94.03 

3.615 

11589 

Jim 

33.48 

93.49 

+051 

93.49 

83.4 8 

119 

1.681 




Met Dry. Gre 
Oh. cot. ytd 


P/E 

net 


- F.P. 

- F.P. 


183 

132 


63 


70 AMust Latin Am 
48 Do Warranto 


■ D-MARK FUTURES (IMM) DM 126.000 per DM 



Open 

Sett price 

Change 

High 

Low 

EsLvd 

Open inL 

Dec 

06433 

06416 

-0.0023 

05437 

0.6411 

23,562 

96538 

Mar 

0.0436 

05428 

-0.0024 

05436 

08423 

418 

8597 

Jim 

06448 

05451 

-05023 

05448 

0.6448 

17 

1537 

■ SWISg HUMIC FUTURES (IMM) SFr 125500 par Sft 



Dec 

0.7600 

0.7501 

-0-0026 

07608 

07570 

15.796 

55,528 

Mar 

0.7626 

0.7615 

-00027 

07626 

07807 

818 

3517 

Jut 

0.7664 

07661 

-00027 

07667 

07660 

35 

305 


■ Pound In DM York 


Her 25 

— Ctosa — 

-Pnn. don 

£sgol 

15630 

15700 

1 m» 

15629 

15699 

3 mth 

15628 

13696 

IP 

1.5583 

1.5666 


FT GUIDE to WORLD CURRENCIES 

The FT Otids to Work! CmnciM 
tabta can be land an the Compotes 
8 Finance page In today's edWon. 


_ 

F5. 

11.6 

192 

ISO ifAdtee PrrrtQ 

192 

fQHK 

ai 

1.4 

11^ 

150 

FJ>. 

708 

149 

145 Ashbourne 

147 +1*2 

WN3.0 

ai 

2j6 

1S5 

100 

Fi». 

685 

93 

85 BZW CammfiUes 

85*2 

- 

re 

- 

- 

- 

FJP. 

5.78 

47 

37 0a. ms 

37 

re 

- 

re 

- 

_ 

F P. 

455 

104 

55 $Ca!kma 

85 -1 

- 

- 

- 

- 

260 

F.P. 

303 

207 

200 ChurcM CHru 

285 

rnqm 

22 

A3 

iao 

100 

F.P. 

204 

130 

101 Euddlan 

102 

. 

- 

- 

- 

141 

F.P. 

23-5 

143 

143 EiVOTein 

143 

WN&2 

1.8 

5.4 

11-4 

. 

FJ>. 

4675 

495 

485 Rdefty Spec Unts 

487 

- 

- 

- 

- 

+ 

F.P. 

66,3 

176 

108 FTtrorac Ctak 

158 -5 

RN0.75 

ZB 

0.6 

5X2 


AS Open IMaram figs, are tar provtaia day 

RIGHTS OFFERS 

Issue Amount Latest 


dosing +or- 


price 

P 

paid 

up 

Rerun. 

data 

1884 

Lott Stock 

price 

P 

77 

NO 

30/12 

3pm 

2pm Apola Metals 

2pm 

295 

N* 

6/1 

90pm 

34pm Lard 

34pm 

27 

Nl 

20/11 

3*zpm 

2 * 2 pm Martin ln9 

2'jpm 

37 

M 

3/1 

5pm 

3pm OM 

3pm 

BS 

M 

23/12 

15pm 

0pm Preasac 

8pm 

295 

Nil 

671 

57*2pm 

40pm Saton Harth. 

40pm 


■ JAPANESE YBi FtRIHISS (IMM) Yen 123 per Yen in 




Sett price 

Change 

Hgh 

Low 

Eat-vol 

Open InL 

Dec 

1.0186 

1.0144 

-00043 

147195 

147142 

15564 

74.448 

Mar 

1.0273 

15231 

-00043 

1.0273 

1.0230 

567 

10582 

Jun 

1.0344 

14)342 

-00043 

15346 

14)340 

22 

842 


LONDON MONEY RATES 

Nov 26 Over- 7 days 

night notice 


100 FJ». 
too FJ>. 
100 F.P. 

- F.P. 
180 F.P. 
215 FF. 
120 FF. 
115 F.P. 
170 FF. 
100 FF. 


113 101 100 Fkotuy Sn* C 100 

293 102 98ft For 8 Cat Ewg C 101 +4 

303 102 98 Hoars Gorett 1000 101 

261 tOO 90 INVESCO Korea C 97 


1885 

223 

205 Irish Permanent 

221 

UN95 

25 

54 

7.7 

695 

232 

229 4JB Sports 

231 

RN&O 

2j4 

32 

14.1 

67.4 

138 

120 SaaParfed 

137 

•8 

- 

- 

- 

2225 

126 

117 TLQ 

125 

WN35 

24) 

35 

173 

104 

173 

165 T)tfe-Ctae Clef 

165 

RN5A4 

25 

4.1 

11 A 


173 102 102 Wtengton Un. 


102 


One 

month 


Three Six 
months months 


One 

year 


(MM) 682.500 per E 


Dec 

1.5840 15624 

-00068 

15660 

15610 

11.733 

46.174 

Mar 

1.563+ 1.5620 

-00070 

1.6654 

15600 

543 

2598 

Jun 

■ 15612 

-00070 

“ 

15610 

65 

122 

■ PMUtDeUtflABEE^OFTIOHS £31 550 (cento, per pound) 




Merten* Sterling *12 - 4 5ft - 4^ 
Storing CDs 
Treasury Oh 
Bank Bite 

Load authority deps. 4}J - 4[i 5ft - 4 8 
OoooM Marie! daps 4ft - 4 5 - 4ft 


Up to 1 

month 


5ft - 5ft 

6k -6 

6i» - As 

rk-7k 

5*2 - 5ft 

511-5% 

6,’a-Bft 

7k -T 

Bft-53* 

sil-s\ 



5U-5H 

5S 5^ 

07. -8*4 

- 

5*s-5ft 

6-5* 

Bft - 6ft 

7ft ■ 7ft 

nt bom September 12. 1994 


1-3 

3-6 

6-9 

9-12 

iiMith 

months 

morens 

months 


M. 


3*2 


Doc 

- CALLS - 
Jan 

Feb 

Dec 

— PUTS — 
Jan 

Feb 

3.67 

4.30 

4.78 

on 

056 

1.06 

1.91 

256 

3-17 

060 

129 

1.91 

0.65 

158 

1-99 

1.83 

2.63 

3.11 

014 

052 

1.16 

3.75 

422 

4.73 


023 

0.61 

608 

651 

068 

- 

006 

028 

850 

856 

B.75 


Strike 
Prico 
1325 
1350 
1378 
1300 
1325 
1350 

PrevtaiB (toy's vpL. eras m/a Puts M/A Prey, day's open «*- Cate wa Puts wa 


Certs of Tax dep. (571 Oa 000) 1>] 4 34» 

CettB at Tax dto>- mtar DiOtMXD is 1 >zpc. Depaaes wffiim-n tar cedi liec. 

Am. ander rata of dscoux S7182pc. ECQD trad rata Sdg. Export Ftaanca Maka ip day Om 31. 
19M. Agreed rata tor pwtod No* 26. ISM la Dec 25. IBM. Sdurrat R S Ui 7 _23pc (to toret aj rare tor 
pared Oa 1. 199+ to Oct 31. 1994. Schemes rv « v LBOpc. Runes house Bare Ada £pe from Nov 
1. 193+ 

BANK OF ENGLAND TREASURY BILL TENDER 

Mov 5 Mw IB Mm 25 


Nov 18 


BANK RETURN 


B»s in Oder 
Total of tepUcteom 
Total stocalacJ 
Mkv accepted M 
Motment g mto. lovd 


E35ftn 
El 216m 
£350ni 
E98570 
71% 


Q50m 

nasam 

E350m 

£98390 

55% 


lop s ca pt a l rate 57357% 53555% 

fere, rate of account 5.7182% 53236% 

Average peU 53009% 67036% 

Oder « mad tetaer £350m £3S0m 

Mte accapL Ud 182 days 


Wednesday tncrease or 

November 211994 decrease for weak 


UeNBHrai 

Capital 

Pibta deposits 

Bankers depoeltt 

Reserve raid othw accounts 

E 

14,553.000 

687513561 

1.705598548 

35902+6536 

£ 

-393.487.567 

+87.962572 

+332576.582 


5.798,013.746 

+6551,967 

Government securities 

Advance and other accocrtrs 

Premise, equtpmerd and cttier secs 

Notes 

Cote 

1.045524.789 

2222.076567 

2525.480763 

5295.676 

148551 

+070.000 

-1,137,769282 

+1.146.190602 

-2434522 

-8561 


5.790013.746 

+0851.967 

ISSUE OEPAFfTWENT 



UatritWea 

Notes tn drcuiatkm 

Notes, in eaoUrvj Oepwtment 

16544.704.324 

5295.676 

+102^434522 

-2,434522 


10.350.000.000 

+100500.000 


Assets 

Other Government seeulthM 
Other Securities ___ 


12.390336.843 

5.959383.157 


+1.321951399 

-1.228.951399 


UK GILTS PRICES 


mi% Amm 

Puce £ +/- P« 


18350300300 


Last C8y 

sd Me 


► 100300.000 


BASE LENDING RATES 


AcfemACompeny 575 

ACed Trust Bank _5.75 

MB Berk...- - 375 

•Henry Arebachar 575 

Bar* of Bauds 575 

Banco Bttiao Vhscaya-5 75 

Bar* of Cyprus 575 

Bar* of Ireland j.75 

Bar*o(lndta 575 

Bank of Scotland 575 

Barclays Bank _575 

MBkdMdEaSI 575 

•aoMiSTptaySCoUd 575 
CL Bar* Nedertant] .. .575 

CStear* AM 575 

Cfyttedaw Bar* 3.75 

TbaC&opecatee Bet* S.75 

Courts 8 Co .._ 575 

Credl Lyonnais 575 

Cyprus PopUar Bar* . .5 75 


% 

Duncan Lwne 575 

Exsfrar Bw* umted ...376 
Flrandd 8 Gen Bank -83 
•Robert Ftarxng & Co - 5.75 

Girobank 57S 

•Qremess Mahon 57S 

Head Bank AG Zreicn 575 

•fterctxmBarti 575 

Hertatte 8 Gan hw Bk. 575 

•HlSanug...... 5 75 

C HoarafiCo 57S 

Hongkong & Shanghai 575 
JiAan Hodge Bank .... 575 
•Lacpoid Joseph a Sons 575 

Uoyds Bark 575 

Mt&raJ Barfc Lid 3.75 

MdtandBar* 5.75 

•MotteBanMig 6 

NatWesmrrater . . ..575 
•Rea Brotiers 5.75 


* Roorbughe Bar* Lid a 
no longer aghodtedes 
a banking * nunt i o n. 8 

Royal Bk of Scottard 5.75 
•ftrteiaWRnsnSeca 5.75 

TSB^ 5 75 

•IMad Bk ofKtMM .. .575 
Ur*y Truat BerV Pt .5.75 

Western Trust 5.75 

W tea w a y Laktew ... 575 
Yorkshire Bank 575 

• Mambereol Lcndcn 
•wasanM Banking 
AGeodteon 




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FT-SF 100 1328.77 132895 131133 1331 53 1351.1 7 1648.19 1286.48 1640.19 900 45 

FT -SC Eirtrack 200 1380.81 138140 137051 13B1.75 1411 82 1807.10 133598 1807.10 93882 

FT Ontea* 23213 23265 23218 23811 2399.0 27135 32555 27116 484 

FT Goto Startles SZJB 9133 9257 9156 91.74 10754 8954 17740 49.18 

FT Read hens 100.89 10655 108G8 106.33 108.15 13187 10150 13187 50.53 

FI Gold Mnes 1934.33 191557 189653 194694 136670 2387.4 176252236740 9221b 

RedKesorGddUnes 2385 238.7 2385 247 5 2506 2319 1810 7347 415 



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APPOINTMENTS ADVERTISING 

appeals in the UKedilioo every Wednesday & Thursday 
and in tbe International edition every Friday. 

For further information please contact 
Phillip Wrigley on +44 71 873 3351 


CENTRA LE NUCLEAIRE 
EUROPEENNE 
A NEUTRONS RAPfDES 
SA-NERSA 
FRF 700.000.000 
GUARANTEED FLOATING 
RATE NOTES 1996 
ISfN CODE : XS00150460fiZ 

For the period November 25, 
1994 to February 27. 1995 
the new rata has been fixed 
, at 5.625 % PA 
Next payment date : 
February 27. 1995 
Coupon nr : 21 
„ Amount: 

FRF 146,86 for the 
denomination of FRF 10 000 
FRF 1468.75 for the 
denomination of FRF 100 000 
THE PRINCIPAL PAYING 
AGENT SOGENAL 
SOQETE GENERALE GROUP 
15. Avenue Emiie Reuter 
LUXEMBOURG 



' & Financial 
HbtOT} oa Com part 
Dak 

PyMn of historical fnlaro price* 
rod h rnl a mcn Ul mfomuHwn 
iaaieduvly ai your (inpcniptiT By 
ding cvrryihujp you need moot cmyio- 
r source CRB InfoTrch help, yus perfonn 
■nalyita. hsctap-imp, 
modeling prcscmsiions red tea morc— 

35 YEARS OF HISTORICAL PRICES FOR 
CASH FUTURES. OPTIONS AND 
INDEX MARKETS. 

50 YEARS OF FUNDAMENTAL DetWMAlTON 
CN OVER 100 CCfeMCmiES 
Sknibc N> the tetoniBTHH fauad io the CRB 
Coanncdtty You Book. dK bOric' of the 
futures ladarey. la nidhicu 10 
hsurial don, CRB lnfaTeeh ako pmvUc* duly 
price spdues via KR-Ouute. Kaiflil-RiddeiH 

software q rcrifi caUy dn+gncd k> 
dpwnkud red hxpon cn4*4-day price* 
directly ire, your ihi +haie 
INFORMATION: Buwfrt Vika 
KRHaBK.iaFtacl Saco. Lenka EC4Y IHY 
TeL *44 fOl 7| (M2 40K3 


CALL FOR EXPRESSION OF INTEREST 
FOR THE PURCHASE OF THE GROUPS OF 
ASSETS OF HYMOFIX HELLAS SA. 
of Athens, Greece 

‘ETHNIXl KEPHALEOU SA, AJminisi ration of Asset* and Liabilities”, of I 
Sfcouteniou Sir.. Aliens. Greece, in its capacity ss Liquidaior of 'HYMOFT.V 
HELLAS SA”. a Company with its registered office in Athens. Greece (the 
“Company”) presently under special liqnidaiioa according 10 ibc provisions of 
Atlicle 46a of Law J892/1990 by virtue of Decision 5)04/64 of ibc Alliens 
Court of Appeal, invites interested parties to submit within twenty (20) days 
from die publication of ibis Notice, non-binding written Expressions of Interest 
for the purchase of 00 c or all of the groups of assets described below. 

BRIEF INFORMATION 

Tbe Company was esuMbhed in >958. On 7/1 JAM n was placed under special 
liquidation according to tbe provisions of article 46a of Law 1972/1990. hs 
objects included ifae production of fruit juice, tomato paste, lomain juice, 
compotes, vegetables and whole tomatoes (tinned) and (mil puree. 

GROUPS OF ASSETS OFFERED FOR SALE 

1. A factory, standing on a plot of 30.750 sq. m kxalcd in Pella. Gianni is a. 
togrihet with the machinery and mechanical equipment, contained in ii. This 
is believed to be renied by a third party. Tbe Company's Lrade name e> also 
included in this group of asses. 

2. A factory, standing on a plot of &530 sq. m. located in Tynuvos. logUher 
with the machinery and mechanical equipment contained in it. 

3. A pfan of land equal to 2,695 sq. m. located In Thessaloniki, together wiih ihc 
buildings standing on ii (fonneriy a factory). 

4. Other Assets: 

a. Agricultural plots of land covering an area of 394 sq. m. in Xerokabos. 

b. AgrindwraJ jdotsof land covering an area oT 199.9 sq. m. in LescnaN. Ellas. 

c. Agriculnirel plots of land covering an area of 34 1,1 sq.m, in SavaIia,N. Elba. 
The above agricultural plots of land are being rented by ihhd parties. 

SALE PROCEDURE 

Tbe sale of the assets of the Company shall take place by way of Public Auction 
in accordance with the provisions of Article 46s of Law J 892/1 994. 
supplemented by an. 14 of Law 2000*1991 and subsequently amended and ihe 
tarns sei ota in ihe Call (or Tenders (or ibc purchase of the above tawets, lo be 
published in ihc Greek and foreign pres* on ihc dales provided by Ihc law. 

SUBMISSIONS OF EXPRESSIONS OF INTEREST - OFFERING 
MEMORANDUM - INFORMATION 

For the submfcsiMi of Expressions of interest, as well as in order tu obtain a copy 
of the Offering Memorandum for each of the above groups of assets, please 
contact the Liquidator ‘ETHNIKI KEPHALEOU SA. Admiosiraiion of Assets 
and Liabilities". I SkouknioQ Str., 105 61 Athens Greece, Tel: 430-1-323.14,6+- 
7. fna: +30-1-321.79.05 (alleuinn Mrs Marika Frangakis) or the Liquidator's 
agent. Mr Konstantioos Kyriaka. 120 Sotems Str. Athens. TW: +30-1 -381. WL29. 


A Prime Site for your 
C.Q M M S B C t A.i P Lim R..T 1 
AJ L V - EJULL SX I L£ 

Advertise your property 1 o 
approximately 

lliou FT readers in 160 countries 

For details: 

Call Sophia C a n 1 1 1 1 i o n on 
+ 44 7 1 873 321 1 
or Fax; +44 71 873 3098 










FINANCIAL TIMES MONDAY **MK ^ S 

— " • : ^ - * 































































































































































































t> Pi*v/>;7*r.~ 7 &tiw ■**/ 't&’&i r jywsi.vst -?.■?#* 




27 


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28 


ITTMiWrTAT TTM1S MONDAY 


NOVEMBER 284$94. 


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018 1.1 38 70 17 1S% 10% 

108 Z4 21 1157 70$ 68$ M’% 

108 1076 S9% 48$ 49$ 
12 95 3$ 3% 3% 
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0.76 24 17 2288 31% 31% 

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052 23 12 9 

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16% 12% A L Labs A 
79% 57% AW 
72% 48% AM 
5 3% MX 
56% 38% ASAX 
33 26% AU88. 

15% ll$AM9Pr 
23$ 17$ ASM U 
18 11% Acorabt 
31 21% ACELH 

12% flACMMta IDS 11.4 
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B% ACM GVI Sp 096110 
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7% ACM MU 10B1Z7 
BACMMangd 072 8J 
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13% 5%flcn»B«cl 13 

28% 23AconSax OflO 11 14 
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048 IJ 12 148 34% 34 34% 

088 03 fl 554 16% 16% 16% 

1 67 1% 1% 1% 

098 12 21 1524 43 

030 10 9 X 10 
32 229 25' 

134 11.8 11 8 15‘. . „ 

114 8520 26% 28% . 

020 12 29 109 18% 16 16% 

035 10 23 5 17% 17% 17% 

020 1 j 17 83 13% 413% 13% 

26*2 19% AJDCD8 028 1.1 16 4 25% 25% K$ 

24%17%ACU«(A 028 1J? 17 4 23% 23% 23% 

044 1.5 2D 6Z6 29% 29% 29% 

030 121V 1623 23% 

10* 1.8 43 535 55% 

070 17 4 9 26% 

OIO 05143 12 18% 


31% 16% AduHC 
6% 5A4K3lOp 
20 ISAdrehc 
64 4S%A4»inA0H 
65% 42%AflbaL 
36% 25% Atari 
22% 15% Ammon 
4 1% Adeen he 
50% 38% AIM 
39% 18 few fit 
29% 19% fepihc 
17 14% Akteta 

aft 21% web 

16% 13% AtHaAlr 
21% 16% Alanytat 
17% 13% Atari 
2ft 19% AftCnB 
. 17% ACM A 
39% 25% ASlIsa 
28% 19% AftnMx 
65% 48% AksSI i 
30% 23% Atadream 
22% 14 fertile 



43% 43% 
19% 19% 
25% 25% 
15% 15% 


23% 23% 

54 55 

26% 25% 

2B*2 134t AlegP 1.64 7.7 11 369 21% 20% 2ft 

25% 13% AlwCtn 016 07 20 388 23% 23 23% 

044 10 16 342 Z7% 2G% 27% 

0 103 H d£ % 

1.64 89 10 65 18% 18% 18% 

018 11 104 9% 48% 8% 

090 19 13 11 23% 33 23% 

067 11 12 2119 32% 30% 32% +1% 

DM 8-6 69 6% ft 9% ♦% 

OU 14 17 203 26% 27% 

17 128 6% 6 

14 1612 27% 25' 

1.60 104721612 80% 

43 1918 19% 

0.96 116 255 7% 

025 14 IB 7 7% 

008 12 IT 2544 6% 

052 15 12 21 21 

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024 16 112 9% 

31 20% Am Baric* r 010 05 26 9144 21% 

37% 29% AmBmd 200 6.0 10 655 33% 

25% 1S%AnBU9Ani 020 41 IT 30 19% 

6 6% Am Cap Ik X OB5 9.6 128 6% 

20% IBAnCVBd 104 19 30 
23% 18 Am Cap CV 1.08 08 0 2 

27%AmfiPw . 140 12 113319 
090 11 11 2664 
1.16 44 20 1778 
077 11.6 265 

130 115 46 60 

066 3.7 11 272 
100 42 12 910 
075 Z06 43 12 

048 05 13 1206 
1.00 113 107 

088 19 11 95 22% 

0.40 1.7 10 217 23% 

0.44 6.0 4 43 7% 

0.48 1.6 11 268 26% 


24% 17 Alegh Lad * 048 26 77 539 18 

26% 19% AlegP 
„ 13% AlwCtn 
30% 20 Alapan 

4% A Alta 
27% 17% Aim Up 
10% 8%AanceQ 
27% 21% fettdi 

40% :»$«sgi 

11% B%ABmer 
29% 24 AIM Dp 

7% 4% AKnxxtn 
35 21% Alim 
«J% 6*% Alcoa 
30% 17AhaQiA 
11% 7AmGovtac 
B% 6% AmPrscb 
8% 6%AmxGd 
25% 19$ Aocasl M 
52% 44AmtSdb 
8% Am A(3 A 



33% 25% Atfupr 
30% 24$ AmGfld 
9% S%Ao6wtta 
27% 18$AreMiR 
20% 16% An Hongs 


9% 9% 

21 21 % ♦$ 
33 33% 4% 
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6% 6% 

77 17% 17% 17% -% 

18% 18% 18% +% 
33% 32% 33% ' 

29% 29% 29% 

26 26% 


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FINANCIAL TIMES MONDAY NOVEMBER 28 1994 * 


tpmdssa HikES 


NYSE COMPOSITE PRICES 


29 

NASDAQ NATIONAL MARKET fpm doss Mur 2S 


hr a 

HEW 


55? 

I *Mt 


9H 4%S*d0p 10 6 S 9 5 

«% 31%SMtoM» 140 46 6 1126 32 % 32% 32% -% 

13% rrsatanmarxox a < 23 301 11 % «i 11 % ♦% 

92% 35%SjIoiwi 004 17 zh 1109 
25 17%SnOoCE IX 7.7 18 SSI 
ID 7l]SmAOh 0.16 IS 9 32 
38 4278 
280 OS 0 13 

0.10 OB 13 GS07 l 

D6B 2 7 54 4305 24% 

282 6.6 12 130 42% 

1.00 7.1 9 1713 14% 

29 419 42% 

£W 23 15 1705 
120 22 2 1919 
Oja 09 14 1810 
7 12 

DOB 03 37 1408 20* 

0.10 OB 12 M' 

030 IS IS 873 

05 21 
140 9 


l? 7 e K% SMO 
33% 31%SWPto 
26%12%S®W 

26 19% Santee* 

50% 41 Scans Cop 
i2%SoBcm 
44% 31%S(UnfflP 
5 *%Scwh 
83 50% SCUT* 

37 23% SdnabfQ 
10% SUSctamre 
22% 12,5 saw* 

10 % uscnm 

67% 37% SC0JB** 

28% 18% ScKKHifeF 021 10 
12% ^ScutHU 016 U 


37 36% 

§ 'aja a% 

13 12% 13 r% 

33 32% 33 «% 

' 1S% 18% t% 
24% 24% >1% 
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14 14 -% 

42% *1% 

+5 


18% 13% SoCnB DTD S3 
16% 14% SraCl.46251 1.46 11X2 


32% 28%Saapm 
28% 20% SeriUBEn 
36% 2£%Seata0» 
55% 42% Staff! * 
13% 9%Sdon8d 
39% XSeamml 
38% 22% SBQuaAi 
40% 25% SaquaBx 
28 22% SovQi 
28% 23 SMav 

a 13% snwhd 



48 «1% 
10% 

31% -% 


DB0 2.1 22 2161 28% 

35 369 21' 

20 98 34' 

150 13 14 2668 48 47 

884 7.7 31 li il 

D22 D7 28 490 32% 31 

060 17 B 40 22% d22% 22% 

D50 20 13 IS 25% OSS 2 

042 tJ 17 77 S% 25% 25% 

092 4.0 13 237 23% 22% 22% 

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a lB%Sna*mutM 080 4.4 7 714 1B% 17% 18% 

14% 8%SMbyWI 026 13 18 IS 8% 08% 8% 

" - - 2.44 37 22 36 65% 85 66% 

056 1.9 U 467 30% 30% 30% 

8 637 13% 13% 13% 

OtO 08 12 X 12% 12% 12% 

1.12 6.1 10 7B 18% 18% 18% 

1 8 
100 14 8 1033 
29 2438 
1.12 102 a 41 
016 25 1 
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006 1.4 12 7100 
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. 17 102 14% 

151 11 13 S 32% 32% 32% 

1.18 19 2042 30% 30% 30% 

052 25 16 58 25% 25% 25% 

0L5D 21 20 19 23% 23% 23% 

158 15 13 134 31 30% 30% 

026 1.7 a 56 15% 15% 15% 

19 343 Z8% 28% 26% 
1.08 18 14 635 28% X 28% 


043 OB 7 
024 21 28 


71% 56% SMUi 
35% 2B% Staff* 

25% 12% Sum 
22% IT% ShoMMai 
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43% 27% SgnaUtak 
33% 18% SfconGt 
13% 10% Staler x 
9% 5% Staler 
24% 17%£*yftM 
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17% 8%SmflMi 
35% 26% SXBAA t 
32% 23% rtpfrf 1 
26% 18% Saute Fd 

a 20% swap j 
44% SSniOnTx 
21% 15% Snyder CH 
34 23% Sckcstm 
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63% 49% Sony 

19% »%««0S7 _ 

48% 38% Sana Cap * 350 9.2438 
45% 30SQomCw5% ISO 8.1 
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30 15% Staton 
22 15% SCallR 
22 (7% SlMferiCp 
22 17% Stand) 

33% 24Sou8mGEx 
38% 28%SNE1H 
38 20%SWMT 
19% 14%SoffMIGu 
18% 16% Oau BiW Diu i 024 15 13 
30% Z3% SouMBnPS* 120 U 11 
12% . 8% SpdO Pm) 046 50 
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18 % it%&ptaaDx 
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18% 13% SFXx 
19% 11% SUQnrm 
26% 14% 6U Motor 
12% 5% StnffacU 
38% 21% SttPt 
32% 24% Start* 

37 31" 



050 28 42 180 17% 
120 7J 10 

aao 44 7 m 
1.18 55 13 4064 
146 flB 10 30 
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004 02 16 666 21 1 
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572 51% 51% 51% >1% 
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3 31% 31 31 

13 17% 17% 

’ 17% 



7 

018 14 9 
US 3-2 12 80 37 
1.00 12 12 1481 31 
040 25 4 27 18 
040 £7 5 239 14! 
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0.12 1.9 42 42 6% 
088 10 12 _ 

084 20 14 


24_ - _ . _ 
32% 33% 4-1% 
21% 21% 4 % 
54 15% 15% 15% 

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123 26% 26% 26% 

50 8% 9 8% 

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27 12% 12 12 

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48 31% 31% 31% 


2 

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44 % 34 % sum 
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35% SStatoSara 
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£1 


146 34 12 32 32% 311 
1.40 34 14 1366 38% _ _ 

1.40 19 9 24 35% 35% 35% 
088 34 14 7 20% 20% 20% 

OM 27 0 255 34% 23% 21% 
024 18 11 2 8% 8% 6% 


008 04 30 655 1 
B 37 1 
X 497 
012 24 3 10 

34 27% StmeSMMj 040 14 35 31 

21% 9% Stem CM. 071 47 41023 
27% i9%&topShcu 18 115 

18% 13%Sk£«l 088 6.6 12 75 13. 

41% 25Snca 177 1582 30% 

39% 22% Statm 29 87 36% 

18% 12SMtMtoX 038 11 21 147 12% 12% 12% 

33% 23% Stamen x 140 44 10 63 27 28% 27+148 

4% 2SMSn 030114 0 5 2% 2% 2% 

11 1<J%SueDtaA* 1.10107 0 B 1D%alO% 10% +1 A 

8% 4Sua0kBX 044 54 4 48 4% 4% 4% +M 

7% 4% SUn Bug x 020 44 22 13 4% «% 4% 

40% 33*2 Sonaror 080 14 10 155 36% 38 38% -A 

52 41 Sndta 140 ZB 15 >16 43% <3 43% -% 



• 11 % a 


1.19134 


3% IHSOM 2310 2 1% 

51% 43% Suita x 144 10 11 299 40% 47% 47% *1 

14% 10% Sum taxi *048 17 12 21 10% *10% 10 % 

48% 25%SrtMilir • DIB 07 15 » 27% 27% 27% 

40% 23% Sued * 094 19 B 643 M% 23% 24 

20% 11% SUJ CM* 0.10 08 19 148 1B% 18% 19% 

23% IBStaMHahX 047 14 87 I®5 1B ^ 1^* 

34% 15%SynMlK X 217 30% 30% 30% 

10% 8% 5)wnCup 040 29 14 33 7 d6% 7 

19% 1B%SlRMare 045 2.4 IS 586 19% 18% 18% 

29% 21% Sysco 044 1.7 X 372 X 25% 25% 


IBM 


9% 5% Tfftoytod 
1B% IQTfayP! 
44%34%Trrhri 
19% 10% fa— 

49% 

12% T%7ta»IUx 071 7.9 
4 2TCCM 
22% 18% Taco Emu 
40*2 23% Ittnx 
2B% 24% TefcDa 
28% W%TM0yw 
48%34 %TMEbU 
78 49%TfflteX 
58% 43%fa|Mx 


HN » 
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042 54 21 121 

W 74 W 
1.76 « tt 2» 
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m t-4 1* 1877 
10 

30 22 
141 5.1 13 430 
080 1.7 16 127 
2 98 
OJD 451(5 320 
188 « 7 792 
151 28 snaoi 

148 24 3 1309 


are* 


30% 18% TanpB&rMi OIO OB 147 
8% 8% TareftSebx MO BJ I0B 
8 6%T«o|*GH 080 M 7135 
88% 37 Innocox 180 42 11 3844 

30 25% Tama FIS 240 91 8 7 

33% 2D%T*Mm 18 130 

9% 4%Tm 040 08 1 85 

13% 5% fan Ms* 040 08 20 260 
12% 5% Team ' “ 

£8% 53% Texaco 
39% 29% Tans tad 
SS 1 ! 61 T— 

22% 18% Tam PM 
43% 2S%TxU8 
4% 2% Tod bda 
80% 48% T«Ba 
4% tVttOawf 
24% 14% Tied Cap 
38% 23% TW ftM 
47% 36 TtamoBae 012 03 22 170 

» &%TtaMx 088 28 8 158 

71% 58%Hi9rt 224 14 19 557 

16% 13%1tafflHtad 040 28 14 zlOO 

2fill%TkMr 040 20 24 IS 

43%3%TUtav (L2B 07 22 SB 

44%32%TnMtoto 036 1.11201811 
37% 28% Tmfitt* 148 3-5 33 430 



BI-* « 


38% 3i%faamx 
8 2% TBuOp 
13% tO%1tanPt 
5 4 Todd S^p 

15% 8%TattubnC& 058 B.610B 
27% 24%T«taS81 241 109 
19% 9% Til Bros 
75 57% Toofcfc Rl 
49% 32% TUart 
3D 1 ; 2D% RnCdrp 
a 27% Toko 
18% BATo«Sl« 

40% 32%TysMh 
26 20%Tiaantoc 
57% 46% Ttftnf 
58% 45% Transtw 
iG% 12% Tmsca 
14% 12% Tranaoxfl 
17% 10%lftaStoCh 
43 31 TlW* 


18% 13% 1 
' 31% TiKaiOS 


37%; 

28% 11 Trfcre 
64% 49%neuax 
24% 21% TriCui 
47% 3D%Trtr**j 
40 a% Than 
37% 24% Triton 
4% 2 % Tocson B 
7% 4% Tides Crp 
14% 8 % Tultata 
28% 8 % 1Mb CM 
24% 18% Tata Ota 
55% 42% Tyoot 
10 5% TjcoT 
8*2 3% Tjtar 


180 11 78 

13 144 
180 98 2 

38 18 
40 
9 

9 236 
044 08 1$ 39 
1.12 3.4 6 634 
048 IB 10 22 
084 2.1 13 1B0 
009 06 48 17 

21 1561 
2.05 9.7 9 8 

280 4.2 9 176 
038 07 12 233 
060 4.7 64 106 
10 2100 
02B 22 11 36 

050 18 7 1601 
024 18600 3 

280 78 26 

7 98 
TJH 21 15 1327 
080 17 333 

On 21 17 877 
088 23 IS « 

a .10 as & 004 

40 217 
020 06562 75 
012 1.7 7 

064 OI 1 290 
070 IS 11 2 

040 08 15 427 
0.10 18 2 379 
19 143 


10 % 


- U - 


184 4.2 


410 98 


1881120 
186 7.0 


I 


380 78 
460 88 
244 07 
f.72 27 
002 44 
020 18 

277 304 


8% STCBYEmr 
43% 28%TGFFtaa* 
9% BTCWCttwS 
48% 34% UK Cup * 

2% 1% TfSHtge 
29% 14%TJE 
18% 13%TW&Brpx 
77% B1 TRW 
3^2?%T*0iFd 


- T- 

020 38 17 63 
1.W 28 8 130 
084105 « 

0.43 09114 noo 
000 4.0 10 82 
066 38 11 488 
080 57 9 8 

200 21 14 408 
002 01 325 


S% 5% 5% +% 
35% 35% 35% 

8% 08 a 

14% 14% 14% 

14% 14 14% +% 

85% 84 64% +1% 

28% 25% 28% +% 


23% 23% IMBFta 
8 4% IMS 
51% 44%U5F8fi41 
SB 17% US8 
SI % 23% UST 1.12 40 

51% 48%USXQtaPtx408 88 
150 83% URL 
10>2 1% (JOCItaa 
24% 17%UaCupX 
11% SIMInc 
24 20% Itatoai 
27 20%UMBtae 
17% 11% UMM 
74% 58%IMur 
izo 3 iioo%itaffff* 

3% 42%thCta|> 

35% 21% UnCtott 
14% 8% Union Cup 
54% 42%ltaB3.50 
67 51 Ufi450 
38% 30% IkBac 
87% 45(Wac 
28% 20% UntarftM 
22 10% IMonTam 
2% %UddFn 
8% itaJaya 
2% (Ht (tap 
. . 29%Ud4mS 
15% 12% WOonrity 
22% !7%UM)Mta 
55% 36AUU«bM 
40 28% UbCuin 
A 4%UkMM 
13% (0% UbKgdarfed 005 OS 
% JJUtdPaVrai 
15% 4U5Mr 
16% 11% USf86 
23^2 18% USHta 
29% i4USHem 
41% 30%(JSUfa 
24 11% USShm 
32% 15% USSugx 
46% 35% UMM 
72 5SUKfncx 
14% I2%u«abtar 
21 13% (MU* 

34% 2£%lMr!teta 
18 15%Ur*rMX» 

% OJSlHvttadL 
14% B%lHnrQrp 
26% 17%UMQp 
30% 24% Unocal 
58 35%lMaiCup 
37% 25% lUtat 
24 15%USUCO 


10 302 24% 24% 24% •% 

9 2100 5% 5% 5% 

9 45% 45% 45% +% 

155 1B% 19% 19% 4% 

4S> 28% Z7% X 

17 49 048% 484383 

258 92 91% 92 4% 

» 1 % 1 % 1 % •% 

147 19% 19% 19% -% 

. 245 5% £5% 

74 1723 23% 22% 23% 

22 120 24% 24% 24% 4% 

12 11 11% 11% 11% 4% 

B S B9% 90% 


180 8.9 
040 18 
OIO 09 

188 28 - - . 

2.75 25 14 346 111% 110% 
186 34 
075 28 


41 300 45% 44^ 


15 3639 27% 

18 116 14% 14% 
3 45 45 

7 54% S3 
12 437 36% 35% 
10 1338 48% 46% 


7 135 20% 
30 2*3 
0 280 
B 5565 
12 4Q 
17 B5 
X 152 


_ _ sf & 

11 11 19% 19% 

31 1002 48% 48% 
11 178 29% 29% 



81083 21% M’ 
12 822 36% 38*. 
12 1380 56% 55% 
11 17 13 12% 

X 250 19% 18 

14 98 27% 26% 

10 14 18% 16% 

0 101 & £ 
14X100 11% 11% 
29 7 22 21% 

38 1785 27% 26% 

15 1277 37 36 

9 652 30% 30% 

10 87 19% 19% 


KM M N to 

■* 1MSM Dto * E WOi HBb Ida 

10% 9% USUt kK * 080 96 0 18 0% 0% 

19% 15% USX M 088 38 Z7 1798 16% » 

*5% 30% USX US 140 38 11 744 34% 33% _ 

17% 11% USX DM 0.20 1.7 5 178 11% 11% 11 

31% 25% OMearpT ( 72 68 12 2C 25% 25*2 


Ota 



53% 44% VFCp 
24% 1&%MenE 
8% 4% MM tic 

S 6%nrtnmpN 
7% UBfKaapNar 
12% 9«anUM4M 
7% 5%VtacoM 
38% 26% vats 

Ufa* 
n%ltata* 
90Vk£8PS80x 
37%«farW 
19%itata(taa 

_ , 20% fan he 
35% 24%faHM 
14 8% Malta 
21% 15% fai Cob 
17% 30% 

58% 44 


- V- 

1.36 28 12 141 
052 26 78 

008 1.1 88 3 

094142 180 

120145 90 

084 9l2 59 

IB S 
024 07 15 42 
IS 44B 
183 88 0 35 
580 88 270 

21 19 
8 noo 
20 288 
044 18 28 750 
I 3 
23 150 
290 02 18 23 

182 20 20 130 


49 48% 
19% 18% 
7% 7% 



- w- 


182 


2B% 15% M£ M 
32% 28%W.Hgldta 
20% 13MMPK 
35% 30% taw 1.32 
16% 12% Mdaniu 030 
5% 3% Mans 

b%vmuh ore 
"I* 074 
017 
004 
244 
’* 780 
32«nhGL~ 222 
25% l9%ffaHH 1.08 
294221%WatfB 420 

36% 19% MWkta 048 
3% 1 % Waxnax kit 208 
18% 73% Mfa£W> OJD 
40% 33% WHagartn 228 
ti 6% manta 0*4 
X 23% 


36% 28% I 

29% 22%V 

5% 2% Waiartaa 
86% GO VMM 
lof u% 1 


a-® 



....127% 

18% i3%Wandys 
29% 21%HMCB 
18% 14% WedCK E 
50 39%*A2an 
16% 9% WSfMa 

20 % 8%iwnB 

35% tBWeataQu 020 
25% ifi% item tag 023 
34% 28% Malta 1.98 
15% 10% NfaB 020 

6% 3%WtaaCM 032 
20% 13% WdnMcff 
20% 14* 

38 

51% , 

2T% 13% l 
73% 48Vn*t** 

34% 70% IMM 
IB 14%VMbm 
20 13% WOtar 
32% 25% Wax tac 
8% 5%W9cu*G 
33%22%W*m> 

7% 585HMH 
12 8% Wodmaax 
68% 42% WlnnQx 
13% 7%wnmtaoo 
27% 23%Hbc8i 
33% 27W(d>Ufi* 

18% 14 Wad x 

35 25% MU Cup 
30% 22% WMXT 
Z7% 18% WBtariM 

26 % 12 % WMavi 

18% 13% fart Wkta 
10 3% Wbrtaxp 
53% 38% Wrtffey 
20% 18% WjtoUbar 
231; iSUWymlm 


034 

180 
910 
084 
006 
080 
156 
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181 
182 
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OIO 

080 

OIO 

086 

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08 11 88 27% 27% 

281 84 16% 16% 

4.1 10 390 32% 32% 
2J 34 X 13% 13% 

9 3 4% 4% 
18 17 41 B 41% 40% 
28 12 72 26 225% 

07 21 B2B7 23% 23% 
18131 44 2% 2% 

38 Z7 487 75% 74% 

7.7 7 48 14 13 % 

68 11 44 33% 33% 

5.4 6 33 20% 19% 

1.7 17 9 246 1 } 245% , 

1.4 14 X 33% 33% 

58 4 12 1% 1% 

IS 11 287 76 75% 

07 X 73 34% 33% 
78 12 33 1% 8% 
31 14 45 24% M% 

22 13 55 10% 10% 
18 18 191 24% 23% 

27 10 13B 149% 147% 

1.7 15 953 14% 13% 
18 IB B 26% 28% 

58 12 X 16% 18% 
24 flB 43% 43% 

9 182 17% 17% 

7 2059 IB 17% 

1819 87 20% 20% 
18141 1149 22% 22% 
88 10 161 28% 28% 
18 17 2532 12% 12% 
88 0 2 4% 4% 

10 9 15% 15% 

38 5 119 10% 15 

13 21 IX 33% 32% 
13 15 1217 X% 36% 

07 14 589 14% 14 

28 11 405 49% 49 

20 2 18 >9 

11 18 1142 16 15% 

15 57 16% 16% 

59 12 26 37% 27 

18 14 380 6% 8% 
11 14 750 27% 27% 

08 74 « 6% 6% 

28 B 58 fl% 9% 
10 17 157 51% 51% 

1.1 13 101 9% 9 

55 15 578 25% S% 
58 11 111 27% 27% 

2.8 45 X 14% 14% 
43 26 341 26% 2B 

23 16 3506 26% 25% 

07 IS 101 22 " 

4.1 21 1183 14 

07 32 13^ 

105 172 

13 23 335 48% 

18 19 5 18% 

19 11 34 22% 


X - Y - 2 - 


112% 87% Xerox 
53% 40XtnCBipx 
251; 20Vb4m£» 

42% 33% YOritM 
5% 1 ZnpBU 

14% 72nd£] 

27% 29% 2MB MU 
7% BJjZMxhCX 
18% 1T% Zero 
29% 18 %ZudM 

13% l 0 % 2 aaaRnd 
10% 7% Mg TaB 


100 10 B9 
056 13 12 
132 57 II 
016 05 14 
014 15 12 
S 

190 48 0 

083 115 
040 12 14 
088 5.1573 
108 103 

084 99 


490 98% 88% 
660 43% 43 

7 21% 21% 
443 34% 34 

X 4 3% 
446 12% 11% 
5 21 20% 

* 6 % 6 % 
41 12% 12% 
14 17% 17% 
189 10%tf10% 
485 8% 8% 


98% +% 
43% *% 
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6% 4% 


12% 

17% 

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tak to precatog 12 mxta. 



AMEX COMPOSITE PRICES 


1pm dose Nov 25 



Mrt InarOon Chap 

41% 41% 41% 

Z3 ith 25 +?B 
9% 9% 9% ■»% 
1A 1A *{• 
7% 7% 7% +% 

a a a 

19 Igs +% 
13% 13% 4 % 

19% iS 
Z7 27% *% 

IS *8 3 

*s5 1S 5 . 

13% 13% 4% 



P7 


CufaFM 
CnusATA 084 30 
CnwnCA 040 8 
Crown CB 080 11 
CubB OS3 31 
Curtmuix 10 


Da. E 100a Wrt LuaDoaaBap 
4 noo 8% 8% 0% 

23 15% 15% 15% 

11 1S% 15% II 
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3 17% 17% 17 ! 

3 2% 2% 


mMi 
DM 
Ouconaan 


048 


1 g’S’S’S A 

6Z100 8% 8% 8% -% 


EastnCpx 046 11 7100 13 13 13 ♦% 

Echo Bay 007 782908 11 10% 11 +*J 

EhX Eft A OX 9 83 10 10 10 4 % 

IB 12 238 7% 6% B% +% 


3S 411 34% 33% 34% 

19 332 13 12% 12% ,, 
12 106 19% 18% 19% 4% 


Efdtope 

Fab tana 064 12 31 30%d30% 31^ 

Rib A 480 19 15 M 84% B5 +1 

RstCSyfinc 020 10 24 11% 11% 11% 

RutefJ) QfiB 21 5 29% » » , 

Fuasm 23 172 ««% « *% 

Fnuaota 4 13 4& 4% 4A +1* 

Ctart 080 8 18 16% 16% 16% 

SaKFdA on 15 113 22% 8% 84 
SHUT 070 01 53 15% 15% 15j 

GokWd 

BdfCtt 034 7 528 3% 3ft 3* 

Mn» ffl 304 SJ| 3% 3% •% 

Hasbro 028 15 934 30% 30% 30% -% 
Oi 19 10 2% 2% 2% +% 


MOcftn 

Hefco 

MmntanA 


Oh. E !OOt Htt IwCta CI»g 

I 103 li 1 li +i 

015 8 7100 9% 9% 9% 

II X 5% ifi% 5% 


bistranCp 012 17 10 11% 
M. Caras 3 167 3 

btaroagn 134 77 14% 

tear OK 161417 19 % 


11 11 


18% 19 4 % 


JuiBtB 

tamo 

KkwfcCp 

Kktr/Em 

latana 
las arm 
Lae Pham 
liimtac 
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3 US 5 4» 4% 

85 9 14b 14% 14% 

10 MOO 3% 3% 3% 

28 101 17% 17% 17% 4 % 

8 12 7% 7% 7% -% 

9 15 1% 1% 1% 

5 ’J 19 3 , 

49 11 12% 12% 12% 4% 

17 4 29% 29% 29% 


Ax 044 24 
MunCb 020 30 
MnU 

A 48 

EM 37 



B 34% 34 341 

37 29 22% , 

2 4% 4% 4l, 
37774% 
7 8% 8% 8% 

20 1% 1% 1% +£ 


OUbi 024 20 -. .. . 
ngu8 OIO 81580 12% 


4 337 l!2 1% 1}1 
16 106 8% 8% 23% *f c 
14 X 1D% 10% 10% 

19 10 5% 5% 5% 

12 110 5% d5% 5% 

a " 3 ?sa a 


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on ia 5 

184 97 2 

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OIO 23300 % 

19 ZlOO 337 



PtWPwB 
PWLD 

nffay* 

Ply Gan 
PMC 
PrwttoA 

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SJffCup £10 107(00 36% 35% 35% -% 
SCMHon 41 3 18 17% 18 4 % 

SfaJtB 3 484 2% 62% 2% 


20 8% 8% 8% 
32 44 43% 44 

61 13% 13% 133 
14 29 r 

48 13 12% 13 

371 1 1 1 

55 1,1 1& 1,1 
137 5 5 5 

81 75% 15% 15 


TrtPTOdSXlUO 13 
TB&Dasa OX 51 
TTwmadts 44 
IhemoBB 24 
TcXPH* 020 13 
TownCoby 4 
Trnut 2 

Tito* Max 8 
TiilBflflx 007158 ... 

TuntftBx 0 071575 738 16d1S% 

UtFoodsA 5 3 2 2 2 

IMreodeB 020 42 X 2% 2 2% 

UrtPhrt 44 10 6% 6!a ^s 

USCatof m 19 31% 31 31% 


a 


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ltaxxrt 


wrerx 

women 


Xytruto 


1151666 39% 38% M% ♦% 
2813 38% 37% 37% ♦% 
26 8222 11% 9% 10% . 

1.12 1212019 12% d12 12 -% 

an 10 17 26% X 2612 4% 

3 24 3% 3% 3% 4 % 


H Sto 

mb* oto e rats 
ABSkdi 020 15 198 
ACC Cup 0.1212 X 


ACOMbE 
tans MBs 
Aadon Cp 
AOSpMtt 
ADC TUa 
Adanrtw 


IB 1795 
51216 
X 10 
17Z7D2 
311424 
5 235 


ATyoa 
AgnkaEa 
AbExpr 
Aim ADR 


At* PS 
ABdCaffl 
AAdCao 
AtaeoaC 
AOaGdd 
Alton Co 


MfsSanx 018 18 S3 
MMffSys 020 233504 
AdasacaC 9 73 
A* Logic IS 19 
WiP don 0 43 
ArtTcttJb 23 79 
027 10 324 
14 251 
ai0 32 825 
016 16 189 
1.51 14 BO 
HOB i 0*8 13 50 
AfagbSW IT 8 
AienOrg 1 052 12x100 
« 222 
100 12 40 

on 11 si 

uz 11 45 
006 E8 193 
252342 
AnBsrtv 072 7 329 
AmCfltay 018 45 IB 
Am Qy Bb 23 2 

Amltoma 18 044 
JWUrdB 12 249 
Aro Sofas 032 B 272 
AmFftays 23 7D1 
AnGrtAx 058 141021 
AdMP 1 540 

AsMto 221 9 

AmPwiCuw 233248 

Aeo Trot 10 333 
Arafufln 024 12 247 
Anguilnc 10 1811 

AnrndrCp 000 12 04 
Adtofin 5 24 

Arataglc 18 103 
AMyrt 052 16 52 
AmgdtAai tm 14 28 
AtoearCp 28 942 
AnffotAn 10 141 
Apogee Ea 032 34 22 
APPBu 44 0 

AopMMal 234731 

AppteCx 048 14 7520 
004 27 029 
OX 23 9 

019 17 117 
1.16 8 6 
47 
28 


Aotoeex 
Arbor Or 
Aren 
ArgonaU 
ArmrMx 064 10 
Arnold In <144 18 


/topeerro 

ambbB— 

AST fad) 


191214 
321 80 

831440 
7 25 
MSEAlrx 032 9 468 
Art* 024 X 4609 
AutnWo 10 4 

Abondrt 08041 51 


14 13% 

16 15% 
18% 18 
15% 815 
26% 25% 
22% 21% 
43% 41% 

9 «% 
X 35 
32% 31% 
12 % 11 % 
4% 4% 
4% 4% 

17 18% 
25824% 

17% 17 
11 % 10 % 
27% 27% 
5B% 56 

23% 22% 
10 % 10 % 
35% 35% 
7% 7% 
14% 14 

13% 13 
2 % 2 
V. 1ft 

38% 37% 
X 19% 
10% 18% 
16% 16 
16% 16% 
8% 6% 
4% 3% 
19% 19% 
27% Z7*a 
1£ 1 
<7 46% 
18% 16 
16% 15% 
20 019 
X 55% 
9% 9% 
8 8 % 
19% 18% 
19 18% 

15 15 
48% 46% 
15% 14% 
17% 17% 

4% 44% 
51% 49 

37% 38% 
16% 14% 
21% 21% 
19% 19% 
29% 27% 
29% 20% 

19 ia% 
30% 30 
2S% 25% 
14% 14 

9% 9% 
15% 14% 
35% 34% 
2% 2% 
7% 7 


IM Stag 

13% 

15% -% 
18% 

15% 

a% 

22 % 4% 
43% 43% 
8% % 
35 

32% +% 

12% 4% 

4% 


4% 

16 % 

25 

17% 

1* 

27% 

»% 

22% 

10 % 

35% 

7% 

14% 4% 
13 -% 
2 

1 % 

38% 4% 


16% 

16% 

16 

16% 

6% 

3% 

19% 


li *i 


4 % 

4 % 

4 % 

4 % 

-% 

-% 


BEI 0 one X 
BaDbagas 54 
BrtvtiWt 
Bator J 006 8 
BUtaLB 024 4 
Bandac 13 
BnISouBi OS 10 
BartaraCp (WO 8 
Baaknuaxon 12 
BantaCao 052 13 
Basel F 080 16 
Bay View an 10 
Bqbanla 1-8010 
BBSJRnx US 8 
BE/toro X 
Sea atom 042 17 
BanBJeny X 
BerteyffR 044 16 
BHAapX Ot2 17 
Bine 44 

0*8 018 14 

BbrtayWx 008 13 
Biogan 101 
BUM 18 

BtackDrgx IjOB 14 

eucsoitw i6 
BoabnanSxm 8 
Bot) brans x 028 17 
BDQtaOB 22 
ButaO ID 
Ba*xi BX x 07B 5 
Dasonlc X 
BndyWA an 17 
tamo 024 X 
BnnoS 028 15 
BS8 Bcp* 088 B 
BTSNpno 048 2 
BUt« 12 

BrttoSl 15 
BwiBnm X 
Bostnessfl 15 
BrtertUg 040 7 


- B - 

5 ft 5% 
5o14% 14% 
150 i Oi 
80 15%d15% 
40 15% 15% 
509 21% 2D% 
840 17 18% 

334 13% 12% 
2 23% 23% 
384 31 30% 

3D4 29 28% 

200 18% 18% 
BOB 52% 52 
348 27 2B% 

252 B% 7% 
xlOO 14% 14% 
194 1lVM% 
7 33% 032% 
5 12% 12% 
125 5 4% 

7 12% 12% 
2 13% 13% 
2098 37 38% 

1338 11% 11% 
82 33% X 
798 43% 42 

£66 28% 27% 
168 20% X 
34 24% 24% 
1357 0% 9% 
82 26% X 
1267 15% 14% 
20 47% 47% 
58 12 12 

8 % 8 % 
27 28% 
2,’e 2& 
9% 9% 
120 11% 11 
124 13% 13% 
1100 34% 34% 
25 34 33% 


339 

157 

55 

1796 


47 
16% 

18% 

19% 

56% 

»% 

8% 

19% 

19 -% 
15 

48 4% 
15% 

17% 4 % 
4% ♦% 
51% +2 

37% 4% 
15% 4 % 
21% -% 
19% 

28% 

20% +4B 
18% +% 
30% ♦% 
2S% 

14 

8% 

14% 4 % 
34A -3 
2% +% 
7% 4% 


5% 4% 
14% 4% 

3% 

15% 

15% 

21% 4% 

17 4% 

18 •% 
23% 

30% -% 
28% +i 
18% -% 
52% 4ft 
27 41ft 
8 

14% -% 
11% +% 
33% 4 % 
12 % 

4% 

12% -% 
*3% 

38% -% 

11 % 

33 +23 
42% 

28% 4% 
20i 4i 
24% 4% 

9ft -A 

26% 4% 

15% ♦% 
47% % 
12 4% 

6% -A 

a% 

2ft +A 
9% ♦% 
11% 

13% -% 
34% 4% 
33% 


- c - 


CTec 4 34 

CabatMed 6 4 

CBdScfapa 099 14 27 

ttrofliwdiai x s 


Caere Cp 

Cffgane 

CM Muo 

CmfetaL 

CMas 

Canon tac 

Csnrte 


OceyS 

Cetara 

CBI Cp 

Certncor 

GWriFW 

0*1 Spf 

Chsndtor 

Chapter) 

CnraCh 

Chandab 


54 544 
£25 4 609 
X 142 
18 5 

1 90 

053 71 2100 
X 57 
CarUonCni OS3 X 2100 
Cascade* 08017 2 

008 17 188 
5 199 

16 3 
B 1168 

1.12 9 101 
14 X 

11 X1Q0 
068 6 348 

009 11 1239 
18 14 

12 99 
31 280 
94 3252 

IX 12 44 

017 X 86 
113850 
31 380 
2420332 
TOO 13 181 

17 175 
70 13 
77 143 

X 
24 


Chtf»6Ta 
One Cp 
OnFto 
OnuCp 
carosLoB 
OS Tech 
□saSp 
CQBaocp 
OeanHbr 

CBBatt 

eweam 
CocaCotoBkin 15 
CodaEngy 130 


CodeAtona 13 14 
CognaCp 27 7D 
Copra 40 625 

Coheres 14 154 
Ctrtgan ai5 35 101 
CaHGax 13611 X 
GoHQrp an 12 73 
CcmMr 032 11 1131 
GmatAx 006 192028 
CstCSlASp x 008 55 5009 
CumfitoBdlffl 10 117 
Commd 070 21 4 

CommC 18 71 
Campilabs 800 404 



X 19% 
4% 4% 
27% 27% 
16% 18% 
15*2 15% 
7% 7% 
29% 29% 
2% 2% 
1% <fl% 
88 % 86 % 
5% 5% 
27% 27% 
22 22 
13% 12% 

7 Oft 
11% 11% 
10% 18 

27 26% 
10% 9% 
4% 4% 
16% 18% 
0% 5% 
13 12% 
4% 3% 
6% 8*2 
78% 77 

47% 47 
34% 33% 

zs% 25% 

3 2% 
32% 31% 
27 28% 

B d5% 
12% «% 
3% 3% 
54% 1124 
6 % 8 % 
10% 1D% 
22 % 21 % 
14% 13% 
14% 14 

20% 20 
19% 19 
31% 31% 
18% 18% 
16% 15% 
18 15% 

29% a 

17 16% 
27% 27% 

8 7% 
12 % 11 % 

3% 3 

6 % 6 % 
24% 24% 
6% 5% 
16 % 16% 
Hi 5ft 
56% 57 
15 15 
19% 18% 
lii 1% 

5 *% 
3% 3% 


X 
4% 

27% 

18% 

15% 

7% 

29% 

2 % 

*% 

88 % 

5% +% 

27% 

22 

13% ♦% 
7 4 % 


+% 

♦% 

+% 

+h 

-*a 


+% 

■4% 


11 % 

18% 

27 
6% 

4% 

18% 

6% 

13 

3% 

6% 

77% 4% 
47 -% 
34% 4% 
25% 

2% -% 

32% ♦% 

26% 4% 
5% -% 
12 

3% +% 
24 -% 
8% 

10% 4% 

22 -A 

14ft 4ft 
14% *% 
20 % 

19 +.77 
31% 4 % 
16% -% 
16 -i 
16 +i 
2B +ft 
16% •% 
27% -% 

8 4 % 
12% 4% 

3 -A 
8 % +% 
24% 

8 -% 
16% -% 
5K +% 
57% +% 
15 

19 +% 

1% -A 

5 

3% -% 


30% 3696 +» 
63 B3 -% 
2 % 2 % 

9% 8% +A 
16% 17% +% 
23% 24 
5% 5% +% 
14% 14% -% 
28% 28% 



H 

fa 

Ito* 

fa l 

ita IM i> wcto 

DdetanpG 044 11 

3 16% 10% 16% 4% 

DM Cua* 

103839 43% 42% 43% •»% 


030 25 312 29%dZB% 29% +% 

Dap 07 

1.12 7 

X V 26% 27 *% 

Dsn* 

ax a 

7 6 6 8 

DHlMb 

16 

X X% 22% 22% -% 

DWll 

080 18 

56 20% X 20% +58 

dpi to 

14 

1SG 1G% 18% 18% 

flBJffas 

9 426 15 14% 14% +% 

DgSoutd 

34 

107 2% 2% 2% *% 

no%* 

82 386 12% 11% 12ft +ft 

DUrwCp 

*3 

5 38% 36% 36% 

DtdeYta 

0X33 

21 7% 8% 7 4% 

DNAPtoat 

1 

162 3% 3 3%+% 

DdkrGax OX 27 90S X% 27% 27% +h 

DmhHB) 

0917 

25 13% 12% 12% -% 

DrecaBv 

8 

13 8 0% 9 

Ontufiam 

M 

153 tt% 10% M>% *% 

DreyHJ 

024KQ 

00 24% 24% 24% 

QrogEnpo 006 W 504 4% 4 % 4% 4% 

DSBarcor 

US 10 

21 22% 22% 22% -% 

DuVOO 

04217 

S 17% 17% 17% +ft 

Dyndeeh 

10 

109 X 27% 27% 4% 




- E - 



Eatfeft 

1 

383 2% & 

2*8 

-ft 

Earoicp 

1 

IM 3 2% 

3 

4% 

EdBota 

4 

40 ii 3 

3 


EOT* 

032X2444 18% 17% 

18 4li 

rnrdi ■!! J 

cgSPOBo 

1S3 

590 9% 9 

9ft 

♦ft 

BPaanB 

0 

788 % dd 

3 


BecbSei 

14 195 16% 18% 18% 


BacH 

DBS Si 

72 61% 51% S1% 


BadAita 

X 1281 X 19% 

X 

+% 

Brian as 

X 

9 6 5 

5 

+% 

bate 

52 

54 11% 11% 11% 

-% 

EhgyVMra 

30 

58 13% 13% 13% 


EwtrSs 

43 

32 1% 1% 

1% 


Enzontac 

3 

187 2% 2% 

2% +ft 


E««yoi aioia 10 4% 4% 4% 
Erics* 048 302208 56% 56% 68% 

BNd 94 X 6% 6% 8% 

Enos SOi 31 5 12% 11% 12% +% 

Exabyte 152788 20% 20% 20% 4 % 

taafar 7 32 5% 5% 5% 

ExtoeBee U 56 18% 18% 18% 4 % 

Expert lx OIO 21 62 21% 20% 21% +ft 

EaupAp* 83 54 12% 12 12% 4% 


- F - 

map 9 10 4 % d4% 4% 

ftnCp 02(40 X 6% 6% 6% 

FfcfcnM DM 46 160 40% 40% 40% +ft 

FHPM 14 711 2B% 25% X -% 

FWiTUd 124 13 135 49% 48 48% +% 

fifty OH 13 154 4% 4% 4% 4% 

RgrtA 024 0 18 7% 0% 7 4% 

Hurt 19 41 X% 24% 24% -% 

fat Are 1JD0 7 954 27% 26% 27% +% 

FstScfibfaX IM 10 IS Si 2% 23i 4 }] 

faKHBk 080 17 58 20% 19% 2D% 4 % 

FstSectyx 1M B 506 24%d24% 24% -% 
RdTeoi 128 11 719 42% 41% 42% 4% 

FBfatMcx on 6 309 19 18 % 18% +ft 

Rreier IM 10 451 31% 30% 30% 

Rntafa 31 X 9 9 9 

Rare Zt 239 X% X 20% 4% 

fib* tat X 10 6% 6% 6% ~% 

RxxLA 009 15 927 5% 5% 5% 4% 

Fox 18 009 65 824 5% 5% 5% 

Rnmt in 12 160 32% 32% 32% 

Fuartner 9 202 11% 10 % 11 

Foster A 11 107 3% 3% 3% 

FRbFta IM 10 74 30% X% X% +% 

fafW <M0 7 61 14% 14% 14*2 4% 

Fit fatal 1.18 11 11 27X% 27+lft 

FrterHB 058 17 44 30% 30% 30% 4% 

fiJtanRn on 11 21 17% 17% 17% 4 % 

Fan* 024 17 4 S% 21 21% 

FubnedADR 10 17 2% 2% 2% -i 


-Q- 

6BA|«l 37 5 2% 2% 2% 4 % 

G&KSUV 007 X 4 15% 15% 15% -% 

GMoa 5 60 2ft 2 2 

GamatRi 10 X1M 3% 3% 3% -% 

GeHOa 0(6 9 15 6% 6% 8% 4% 

Matadx 042 17 5 18% 18% 16% 

GBrtyta 9 118 4 3% 3% 

Genstfh 1 738 4% 4% 4% ♦% 

Centex Cp 400 23 156 21% 21 21% 4 % 

Genoa tac 72 452 6% 5% 64 % 

Gaaqena 41 2205 X% 29% X 4 % 
fibuxia 040 13Z708 14% 13 13% 41% 

ebtdtagM-X 012 13 444 141; fll4 14% 4% 
QtaartA 080 9 4 14% 13% 14% 41% 

CHlBtan 13 3 6% 8% 6% 4% 

QoriGuya 11 110 12% 11 % 12 % 4% 
GoMdiPmp OX 21 222 20% 20% X% 4% 
OadeaSys X 5 3% 3% 3% -% 
taria OX 12 124 20% 20% 20% 4% 
Green tf>x QM 13 2 18% 18% 18% 4 M 

Oosanans B 2 60 2ft 2ft 2% -i 
Grrifa 17 78 13% 13% 13% -% 
6(1 (top X 239 16% 15% 16% 
GbWSrg 5 62 8 7% 84 % 


- H - 

Hanks A X XI 7% 8% 7% 

tarty* 008 16 2 23% 22% 22% -% 

Huprefa OX 14 6 14% 14% 14% 

HurtsCmp 19 11% 11% 11% 

HBOOCb flW 37 1041 31% 30% 30% 4% 
ItaMtac* 21 1174 29% 28% 29% +% 


Hrifacw 

on is 

31 12% 

12 12% 


Hcrtbdyn 

X 

no 8% 

8% 3% 

4% 

Hactangar 

aw is 

290 10% 10% 10% 


fada| 

17 

X 9% 

9% 9% 

+% 

HateoTioy 

10 

3 18 17% 17% 


fat* 

on io 

80S 17 18% 17 


Hagan Eys 01515 

73 6% 

S% 6% 


Hataglc 

10 

350 13% 

13 13% 


Horn Bed x08D 9 

7 19%d19% 19% 


Hanbrtv 

044 15 

11 »% 

X X 


Honrick 

21 

504 13% 13% 13% 

4% 

Hantofies 

044 X 

164 5% 

4% 4% 


Hud JB 

OX 14 

100 15% 

tf15 IS 

-% 

Kudtagtn 

on a 

562 18% 

17% 18ft 

+ft 

faeoQi 

on i 

X 4% 

3% 4ft 


MchTach 

22 

2X 24% 

24 24% 

+% 

HycreBio 

It 

62 4% 

d4 4 

-% 


fits* 

48 

-1 

49 

8% 

9% 

9% 


EB Demos 

4000 

8% 

8 

8% 

-ft 

K total 

8 

342 

3 

2% 

3 

+% 

bnracar 

53 

54 

0% 

5% 

s% 

+% 


hnunngen 2 803 5 4% 4% 4 % 

Imped Be 040199 5 14 14 14 4% 

tadfa 024 59 88 11% 10% 11% 

total *D 706 14% 14 14 

Humh 287096 28% 25% 25% -% 

trfasMO OS 11 18 10% 10% 10% •% 

Wegrirt 15 2723 X% 28% 28% +% 

H rtSya X 46 18% 16% 15% -% 

mgtttt 10 340 2% 2% 2% 449 

kto 024 1123522 SS 62ft 63% -1% 
tatto 101013 2% 2% 2% +% 

MguS OW 11 1223 13% 12% 13ft 4% 
Mr fa 13 IX 7% 7% 7% +% 
Meta* 024 13 67 10ftffl0% 10ft V« 


tol 

3 

543 

8% 

8 

8% 

-% 

MM 

2 

432 

4% 

4% 

4% 

+% 

rare** 

7 ' 

1048 

16% 

18% 

16% 

-% 

tatarirtc 

331 ' 

1044 

13% 

13 

13% 

4% 

HDBkyOA 

13 

6 

17% 

18% 

17% 


HRB 

0X12 

69 

2% 

02% 

2% 

+% 

hi faff 

275 

IB 

6% 

5% 

5*2 


torture 

00518 

276 

31% 

31 

31% 

4% 

Iomega cp 

3 

374 

aft 

3ft 

3ft 

+ft 

teomafa 

13 

750 

18% 

18 

16% 

♦% 

Benia* 

1.14152 

2 

208 

206 

206 

-3% 


“ J “ 

JSJSfB* 14 9 11% 11^ 11% -% 

jntatac 026 15 11 9 8 % 9 +% 

ASM aiDII M 41% 40 41% + 1 % 

tonrenff 18 2 X OX X -% 

JUW 8 K 10 15 14% 13% 13% -% 

jucsIM 010 12 52 8% 8% 8% 4 % 

JoriynCp 1XX 56 26% X 28% 

JSSFtl (WO 13 37 23% SO% -% 
jaoUo 026 15 1 43 18% 18% 18% 

Jtan 016 8 115 12% 12% 12% >*4 



rt 

Ita 


fa* 

fa G 

Hh l* in Ifftai 



- K - . 


KSrtS 

on 9 

12 21% 20% 21% 


KamaeCp 

04411 

952 10 9% B% 

-% 

bfeyoe 

2 

498 5% 5 5ft +ft 

WjrSv* 

072 17 

IS 26% 26% 2B% 

-% 

Nuridqr 

011 31 

9 5% d5% 5% 


nta 

084 14 

123 a% X% 23% 


OBffnr 

X 

71 10% >0% 10% 


HAW 

X 1345 49% 48% 49% +1% 

KnowMBb 

2 550 3% 3% 3% 


KBIA 

1 

70 ft ti si 

*4 

tasagte 

41 

235 26% 24% 21% 

-% 

KrichtS 

151035 10ft 18% 19% +ft 




- L - 


trim 

072 33 

3 IB 16 16 

-% 

Lari Fun 

DC 22 

194 8 S% 5?1 

-ft 

Iren ftadl 

X 1671 40% 38% 40% 

+1% 

Lancaster 

on is 

61 32% 32 32 

-% 

trtwtae. 

09617 

53 17%tf!5% 15% 

-% 

tdffufcriti 

i 475 

144 10 18% 19 

+% 

ItaOdteB 

13 

6 6 5% 8 

4% 

HWiniD 

X 

38 3% 3% 3% 


LttnS 

131729 16% 16% 16% 

4% 

LaKSXI Pr 

04B 18 271 25% X 25% 


LOOS 

21 2578 21% 21 2lft 

-i 

UUCP 

016 1 

64 5 4% 4% 


bednare 

121 

165 17 18% 17 

+% 

Lagan! Cp 

XB102 X X% 3D 

+% 

Ufeirih 

OX 14 

X 17 16*z 16% 


UMtaa 

19 

22 5% 5% 6% 


LfjtadA 

0X14 

2 13 13 13 

-% 

LtaBr 

IX 

11313B%138%130% 

+% 

UncataT 

052 14 

IM 14% 14*2 14% 


UndKryttf 

12 

X 29% X X 

-% 

LhearTec 

OX X 

670 47 48 47 

4% 

LfguBn 

04015 

0 33(02% 33 


LoeamGp 

on X 12U 25% 25% 25% 

+% 

tune Star 

14 

32 7% 7% 7% 

+% 

LobaO 

391 6039 3B% 38% 39% 

4% 

LTXCp 

3 

223 4% 4 4% 

♦ft 

LVWs 

046 21 

38 31% 31% 31% 

+% 



- 

M - 

MQCrox 

005 168228 21% 21% 21% +% 

MS Carts 

19 

14 21% 20% 21% 

Mac MI 

080 19 

4 12% 12% 12% 


UrtbaoGEZin 14 14 33 32% 32% +1% 
MagowPwr 14 2B038X 35% 3030 +JD5 
MajpUStP 078 10 114 17% 17% 17% •% 

UaSBuc 24 X 10% ID 10% 

Martaofa 105 80 9% 9% 9% 

Hart* Dr 15 X 3% 63% 3% +% 

IfatoiCp 11 46 41% 41 41% 

Manfrtt 2 30 1% 1% 1% 

MarrUta 11 6 8% 8% 8% +% 

MarshSmkA 044 11 5 10% 10% 10% 

Itortalx an X 102 X 10% 19% •% 

Wrt: 1B4 82 7% 7% 7% -ft 

Martin 42 131 83% 83% 83% +% 

Maxtor Cp 0 327 4% 3% 4% +% 

tttirctan 044 10 18 16% 15% 16% 

McCanUe 048 14 578 19% 18% 19% +% 

Medal he 016 IS 8 18% 15% 18 % 4 % 


MadctaeSxOM 

12 

80 

23% 

X 

X 


Mtantag 

024 

71 

31 

10 

9% 

10 

4% 

Mentor Cp 

016 

13 

m 

16% 

18% 

18% 

4% 

Media 

024 

33 

367 

13% 

12% 

12% 

-% 

MuanLB 

080 

10 

598 

20% 

19% : 

20% 

+% 

MercuyG 

070 

10 

32 

X% 

28% 

28% 


MuMtan 

IX 

9' 

1413 

Z7% 

26% 

27% 

4% 

Merita 


10 1827 

8% 

8% 

8% 

*% 

MaOntaA 

012 

15 

91 

15% 

16 

15 


MFSCm 


22 

416 

S 

34% 

35 

4% 

ifttoffF 

OX 

21 

27 

10% 

10% 

10% 

4% 

HdiNBS 

£00 

5 

702 

74% 

74 

74% 

+% 

llenHUl 


9 

e 

3% 

3% 

3% 

4% 

tflueaga 


B 

131 

11% 

11% 

11% 

+A 

Mkraun 


54 

798 

s% 

9% 

9ft 

-ft 

lOugifa 


9 

40 

5% 

6% 

5% 

+% 

Hop* 


3 

50 

8% 

8% 

8% 

-% 

Heart 


31 7851 

82% 

81% 

82% 

4% 

MdMM 


24 

8 

X 

27% 

X 


UUbntk 

an 

52773 

25% 

25% 

25% 

4% 


050 

15 

43 

27% 

27 

27% 

4% 

MBtorH 

052 

14 

37 

24% 

24% 

24% 


Maun 



X 

27% 

27% 

27% 

♦% 

MhntBM 


16 

63 

14% 

13% 

14% 


HafftoTal 


081000 

18% 

17% 

17% 

-% 

MutoraCo 

ax 

21 

B7 

7% 

7% 

7% 



MQdhe WxOSZ 15 144 27% Z7% 27% +% 

Mete 004 259 38% 37% 37% +% 

muv he OMSioae <1 »40% +1 
Mnaan 004150 113 9 8% 9 

Moataaep 036 17 6 24%d24% 24% 

M15Sys 056 9 7 20%d20% X% -*2 

MBmed 12 9 X 28% X 

Mtcogao 4 as 9% 09% 9% +% 


N - 


NACRa 

018 13 

287 

26% 

24% 

26% 

+ft 

Ita* Rich 

07210 

59 

18% 

15% 

18 

-% 

Net Compt 

0X184 

18 ill 5% 

14% 

14% 

-% 

Wre&tnx 

0X18 

2 

14 

14 

14 

+%• 

fadpfa 

on 5 

2 

15% 

16% 

15% 


ICC 

043X3 

5 

58 

58 

58 

+% 

Netor 

S 

216 

33% 

a 

33% 


Nab* far 

a 

438 

X% 

a>% 

20% 


Netrifi 

X 

571 

7% 

7% 

7% 

+% 

favogon 

8: 

nn 

0% 

6% 

8% 

♦ft 

NawEBta 

OX 14 

77 

18% 

18% 

18% 

+% 

New taupe 

X 

18 

s% 

5% 

5% 

+% 

Mn«aMM 

22HM 

30% 

29% 

X 



fatetfa OM 21 19 7% 6% 7% +% 

Nat* DA 314018 6% 5% 6 4 % 

Nonfeon 084 X EB 56% 55% 55% J 4 

Ndrtrex Q40 19 1S7H 46% 44% 48% +1% 
ttoatnl 12 7 18% 1fi 2 J8% +% 

NStarlta 4 13 6% 5% 5% 

KutMfa IM 101050 34% X% 34 4% 
Mb Air 7 150 17% 17% 17% 4% 

Novel 2413816 19% 18 % 18% 

Nawanu X 1383 52% 50% 51% +% 
MCA 11 42 5% 5% 5% +% 

NSC Cap 11 62 2% 2% 2% 


- o - 

OCtetoys 19 15 11% 10% 10% 

Octal Cm S3 180 21 29% 21 4 % 

OdetkaA 19 31 6% 8 6% 

OIMaatO 13 64 13% 12% 13 +% 

OglebayNxIX 5 10 30% X% 30% -% 

CHoCBx 1.48 10 62 X 28% 28% +1B 

OUKent l» 9 1187 31% 30% 30% 4 % 
OUnOBiOff 16 24 38% 38% 38%4l.ia 
O ntaneup JiM 8 256 25% X 25 -% 


One Price 

12 

88 9% 9% 9% 


OractaS 

3818907 40% 38% 40% 

+1% 

OTOScnca 

61 

752 20% 19*4 19% 

+% 

Ortrtecb 

099 21 

X 7% 7% 7% 


OclidSmi 

77 

40 9 6% 9 


OregoaMet 031 12 

5 0% 6% 8% 

-% 

Ortap 

11 

X 2 1% 1% 

-% 

OrtMUx 

0X441 

152 13% 13% 13% 

% 

OffriaabT 

050 8 

4 10% 10% 10% 

-% 

OttarTrt 

1J2 t3 

75 31 30% 30% 

4% 


-P-Q - 

Pacurx too B 243 41 40% 41 

Ptaftrtop 082 51 85 10% 10% 10% 

PTdCffl U2 14 IX 29ft 29% 29% 

PMOCre 21 142 67 65% 88ft +£, 

Parenrtrc X2885 32% 31% 32% 4 % 

Paychex 038 34 240 38% 35% X 

PaycoAo 18 148 7% 7*2 7% •% 
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I 



FINANCIAL TIMES MONDAY NOVEMBER^ UK* 



MONDAY 


Norway on a knife-edge 


The Norwegian government and its 
allies in business and industry hope to 
pull off the surprise of the Nordic 
autumn by winning a Yes vote in the 
country’s referendum on joining the 
European Union. With Austria, Finland 
and Sweden already having voted in 
favour of membership, Brussels is hop- 
ing Norway win make it a clean sweep 
of the applicant countries. 


Russian first deputy prime minister 
Oleg Soskovets visits Japan to sign 
trade and investment accords desi gned 
to put some life bade into economic ties 
between the two states. Soskovets has 
said that “political interests should be 
set aside as a subject of negotiations" - 
meaning he does not want to talk about 
the Kurile Islands, which Russia has 
had since the end of the last war and 
which Japan wants back. 


UK politics: The government could 
fall if a rebellion by Eurosceptics in the 
ruling Conservative party forces a los- 
ing vote on increasing Britain’s Euro- 
pean Union budget contribution. If that 
happens, the cabinet has pledged to 
resign, precipitating a general election. 


NM-East peace: Yassir Arafat, 
chairman of the Palestine Liberation 
Organisation, meets Israeli foreign min- 
ister Shimon Peres tn Brussels on the 
eve of a critical two-day meeting of 
international aid donors. 


European Union foreign ministers 
prepare in Brussels for the European 
Council summit in Essen on December 
9-10. Subjects include: Bosnia and a 
strategy for enlargement to central and 
eastern Europe. A draft agreement of 
Turkey's planned customs union with 
the EU, scheduled to take effect on Jan- 
uary 1 1996, will also be discussed. 


Dry crossing: 

The English 
, High Court 

begins hearing 

^ a request from 

In ** Eurotunnel, 

■• Saw ILJ j|p operator of the 
In J® Channel tunnel, 

for duty-free 

PWsFZy sales within the 

European Union 
to be declared 
unla wful Duty- 
free sales are 

not allowed on Eurostar trains travers- , 
ing the tunnel. Eurotunnel says present 
duty-free regulations give ferries and 
airlines an unfair advantage and are a 
nonsense in the single market 


Saleroom: A colourful landscape. 
Flower Garden, by the Austrian artist 
Gustav Klimt is the highlight of Chris- 
ties' auction of Impressionist and Mod- 
em art in London tonight Painted 
about 1906, it should top £4m. 


FT Surveys: Pakistan and Energy 
Efficiency. 


Holidays: Albania (Independence 
Proclamation Day), Panama. 


Other economic news 


Wednesday: The initial 
estimate of US GDP growth in 
the third quarter is expected to 
be revised upwards, from 3.4 
per cent to 3.5 per cent A more 
substantial upward revision 
would spark speculation about 
further interest rate increases 
from the Federal Reserve. 

Thursday: The purchasing 
managers' index is one of the 
month's earliest economic indi- 
cators in both the UK and the 
US. The UK version should 
give a further guide to the 
price pressures on the corpo- 
rate sector; the Bank of 
England has expressed concern 
that output price inflation 
might be passed through to the 
High Street Prices are also a 
concern in the US; in October, 
the index's prices component 
was at its highest level since 
June 1968. 

Friday: The increase in non- 
farm payroll employment has 
been one of the most closely- 
watched US indicators. Last 
month, the figure which pro- 
voked inflationary concern was 
a jump in average hourly earn- 
ings. A fall in the unemploy- 
ment rate from October's 5.8 
per cent would also be seen as 
a sign of future price pres- 
sures. UK official reserves are 
expected to have edged up by 
$25m in November. 


TUESDAY 


WEDNESDAY 


. '• V. ..-*v »•■■£■*... 


llsslil 



Britain awaits its Budget 


Ireland seeks a government 




Chancellor 
Kenneth Clarke 
(left) unveils his 
second Budget 
this afternoon 
against an 
unusually 
favourable 
background of 
stronger than 
expected eco- 
nomic growth 
and low infla- 
tion. in spite of the government’s 
unpopularity, the chancellor is expec- 
ted to refrain from cutting taxes and 
focus instead on cutting government 
expenditure and reducing the budget 
deficit in 1995-96 and subsequent years. 

It is thought likely that Clarke - a 
self styled “son of the industrial 
Midlands" - will act to help small busi- 
nesses as part of a strategy for sus- 
tained growth and low inflation. 


Ireland's parliament is due to 
reconvene to vote on a new govern- 
ment, after the break-up two weeks ago 
of the Fianna Fail-Labour coalition and 
the resignation of Albert Reynolds as 
prime minister. He has been replaced 
as party leader by Bertie Ahem, the 
former finance minister, who hopes to 
replace him as prime minister as well. 


-. •• ' ■** - . • : Jr; * 


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• * . 2 v. "i, . ■*? v’ r ' 


tfti: flS 

r? ■ . -T.V- 


.v --- 

•'£-'3 m 



Italy’s Berlusconi government will 
hold a crucial meeting with trade union 
leaders. Its outcome will determine 
whether an eight-hour general strike 
goes ahead on December 2. The strike 
has been called to protest against the 
1995 budget and in particular plans to 
cut benefits in Italy's state pensions 
system. The government is ready to 
make concessions but the unions will 
keep everyone guessing until the last 
minute - not least those planning to 
travel to Italy on Friday. 






Congress tackles Gatt: The US 

House of Representatives meets in a 
special Tame duck” session to vote 
for the implementing legislation giving 
approval for the Uruguay Round pact 
agreed last December. Supporters say 
they may round up almost 300 votes, 
well above the 213 that are needed for 
passag e 

Then an Thursday, the Senate votes 
on the Uruguay Round legislation, 
which needs 60 out of 100 votes to pass. 
It Is expected to be dose, although the 
endorsement last week by Senate 
Republican leader Robert Dole should 
help to carry the day. 


BCCI affair: 

Creditors of the failed 
Bank of Credit and 
Commerce Intema- 

I H I flU tional will be watching 
j fPB 1 M carefully as a planned 
U| settlement put forward 

by the liquidators 
Touche Ross goes 

before courts in Luxembourg. Further 
ratification of the deal, based on a 
$l-8bn contribution from the govern- 
ment of Abu Dhabi, is needed in Lon- 
don and the Cayman Islands. An earlier 
deal fell on appeal in Luxembourg. 


vSV> 


Hands across Europe. Prime ministers John Major and Silvio Berlusconi demonstrate their aerial prowess 


THURSDAY 


FRIDAY 


WEEKEND 


Nato ministers meet 


Strife in former Yugoslavia Taiwan votes for governor 


Mi d C ast peace: Israel and the 
Palestine Liberation Organisation start 
talks in Cairo on the next stage or 
Pales tinian self-rule: the redeployment 

of Israeli troops out of areas of the 
West Bank that are still occupied, and 
the procedures for holding national Pal- 
estinian elections. 

After a recent upsurge in violence 
and tension between the PLO and its 
Islamic opponents, Israel and the PLO 
are seeking ways of speeding imple- 
mentation of the peace accords which 
are naming some 9 to 12 months 
behind schedule. 


Asylum in Europe: Justice and 
home affairs ministers of the European 
Union begin a two-day meeting in Brus- 
sels. They are expected to conclude two 
agreements on asylum policy, on mini- 
mum procedural guarantees and a draft 
model for bilateral readmission agree- 
ments with third countries. 

There is some concern among human 
rights groups that the proposals fall 
short of international standards. 


Nato foreign ministers in Brussels 
confer in the shadow of mounting US- 
European differences of policy on Bos- 
nia, and arguments over how quickly 
the alliance should expand eastwards 
(to Dec 2). The US Is expected to press 
for clearer and faster procedures for 
admitting members. 


Franco-German summit 

Chancellor Helmut Kohl and President 
Francois Mitterrand will lead their 
respective delegations to the 64th Fran- 
co-German summit, a two-day affair in 
Bonn. 

Foreign, defence and economic minis- 
ters are among those who will be , 
speaking to each other about handing 
over the European Union presidency to 
France, the European council in Essen 
in early December, and the forthcoming 
s ummi t of the Conference on Security 
and Co-operation in Europe to be held 
In Budapest on December 5S. 


Saleroom: Anything by Beatrix 
Potter, the children's book writer and 
illustrator, is always much in demand 
and Sotheby's expects bids of up to 
£4,000 for a fragment of a diary she 
kept in August 1905. It covers her reac- 
tion to the death of her fiance and pub- 
lisher Norman Wame from leukaemia. 
A watercolour of Cinderella's coach 
(detail below) that she gave to Warne 
on the day he proposed in July 1905 is 
expected to fetch about £20,000. 


Andrei Kozyrev, Russian foreign 
minister, addresses the Western Euro- 
pean Union in Paris. Kozyrev is expec- 
ted to moot a new security order for 
Europe: he has recently talked of “sur- 
passing” Nato and the CSCE in search 
of an all-European group. 


Foreign ministers from the “contact 
group” - consisting of the US, Russia, 
the UK, France and Germany - try to 
reach agreeme n t an how to promote a 
peace settlement in Bosnia and if possi- 
ble Croatia as welL The meeting fol- 
lows a wanting from John Major, the 
UK prime minister, that the group 
must intensify its efforts because time 
is running out. 

Russia, in a sharp itirngiwwiant with 
the US, has warned against farther use 
of air power by Nato and blamed the 
Rn«mian government for the latest 
fighting. 


On Saturday, Taiwan holds for the- first - 
timp popular elections for the mayors 
of Taipei and Eaohsiung cities and the 
governor erf Taiwan province, the area 
outside the two biggest cities. The polls 
represent an important step in the 
island’s damocratisatioai and are seen- 
as a vote of confidence in the ruling 
Knomintan g- They are also a gauge of 
public sentiment on relations with 
Chinn, which regards Taiwan as a rene- 
gade province. - 


Mexico’s president-elect Ernesto 
Zedillo starts a six-year term, continu- 
ing the Institutional Revolutionary par- 
ty's 66-year grip on the post Zedillo’s 
inauguration speech will stress stable 
economic growth and political and judi- 
cial reform as the theme of his presi- 
dency. 


FT Surveys: Bristol and Global 
Custody. 



World Aids Day: The French 
government and World Health Organi- 
sation hold the Paris Aids Summit - 42 
countries are expected to attend. 


Georgia’s president Eduard 
Shevardnadze and rebel AhHuw. Tewf*”* 

V ladtalav A nirinh a hnlri talk* in 

Geneva with Boutros Boutros-Ghali, 
UN secretary-general, and Andrei 
Koiyrev, Russian foreign minister. 

Negotiations between officials in . 
Geneva in November produced some 
progre ss towards apolitical settlement, 
but none on the vexed issue of 
the return to Abkhazia of 250,000 
refugees. 


Japan’s Diet is scheduled to finish .. 
its extraordinary session on Saturday; 
but it Will probably be extended to 
ensure ratification of the Gatt Uruguay 
Round agreements. 


Northern Ireland’s hardline . 
Democratic Unionist Party holds its 
animal conference in Dungannon on 
Saturday. Its leader; the Rev lan Pais- 
ley, is becoming incrasingly Isolated " 
in opposing the Northern Ireland peace 
processbeing orchestrated by the gov- 
ernments in Loudon and Dublin. 


Saleroom: The autograph of 
Schumann's Second Symphony is auc- 
tioned at Sotheby's in London a-nri may 
fetch £800.000 (51.3m). 


FT Surveys: Management Buy-Outs 
and Software at Work. 


Saleroom: Sotheby’s in London offers 
for sale a letter written by Alain-Four- 
nier, author of the romantic novel Le 
Grand Meantnna. It Is the only known 
letter written to bis first love Yvonne, 
the inspiration for the heroine of the 
same name in the novel. It is estimated 
up to £3^00 ($5,740). 


The Swlsa vote <m Sunday on a law 
which would give the police powers to 
de tain foreigners indefinitely. Tourists 
need not worry, however. It is aimed 
mainly at drug dealers who, once insiifc 
Switzerland, throw thanr passports . . 
away and apply for asylum. Zurichers’ 
patience with the open drag scene 
seems, to be running out 


Holidays: Albania (Liberation Day), 
Liberia. 


HolMays: Philippines (Bonifacio Day). 


Holidays: Portugal (Independence 
Day). 


Holidays: United Arab Emirates 
(National Day). 


Compiled by Patrick Stiles and Angela 
Bleasdate. Pax: (+44) (0)171 873 3194. 


ECONOMIC DIARY 


Statistics to be released this week 


BUSINESS GIFTS 


Prattaw 

Adust 


Day 

RateaMd Country 


Nov 29 .US 

Japan 


Oct existing home sales 
Nov co nsumer cc nfl danoB 
Johnson redbook w/e Nov 26 
Oct unemployment rate 
Oct ioto crffera/saelcos ratio 


Oct personal income 
Oct personal consumption expand 
Nov Not Aas Piachaslng Managers 
Oct construction spending 
Nov auto sates- 


Oct rets* sates** 


Nov forax reserves' 


Nov 30 US 


Nov.wteale ppea Indx (2nd 10 days) 

9ept current a/fcf . 

Oct producer prices mat** 

3rd qfr (33P prelim 
Scd qtr GOP deflator pre flra 
3rd qtraftw tax corporate profit 
Nov Chicago ass punch manggersf 

Qd export price fndx 

Oct Import price [ndx 

Nov ag riculture prices 
Oct construction orcters*" 

Oct housing starts'* 


-ASIJbn 


-A$1.8bn 


Oct Banfcof Japan carp sMce price* 

Oct BoJ corp service price- 

Nov non-tann payfoOs 

Nov manufacturing payroAs 

Nov hourly earrings 

Nov average work week 

Nov unemployment rate 

Oct lea ding In dicators 

Oct Eactory orders 

Oct factory inventories 

Dec official reserves 


226,000 

25,000 


Oct construction starts** 


Oct industrial produetfonf 

Oct shlpmentst 

Oct urrempfoyment rate 

inhannlrrwf 
UC* j00588K8ra 

3rd qtr GDP- actual* 


During the week... 
Japan 
Germany 

Germany 

Italy 

Italy 

Spain 


Oct currant a/c 


Oct industrial production* 

Oct manufacturing output* 

Nov official consumer pric es Indx** 
Oct balance of payments 
Sept tedustrtal production" 


'month on month, "year on year, tseasonafy adjusted Statistics, courtesy MMS International. 



Pakistan 


k.v. : .... _ 


f- v; . 


ACROSS 

1 Drink with people in competi- 
tion (4,4) 

6 A farm-worker exercises in 
the end (6) 

9 Having to dress several can 
be wearying (8) 

10 Taking break in Sooth Africa 
or ancient Greek dty (6) 

19 No longer stress deferment (9) 

13 A northerner’s retirement 
causing dismay (5) 

14 Frank wants nothing put 
down on paper (4) 

16 Mixed-up characters in need 
of sorting out! CD 

19 Grimace after tea showing 
dissatisfaction (7) 

21 Dissembles in the friendliest 
fashion (4) 

34 The country is not fancied by 
a very large number (5) 

25 Endorsement certain to 
encompass giant merger (9 

27 The high-flier’s support 
melted before the inevitable 

crash (6) 

28 The boards without work 
start preparing for a strike (8) 

29 “Studies at Oxford?”, the old 
monarch scoffs (6) 

30 The most eminent of the 
French cutting donation 0) 


DOWN 

1 Individual posing as an easy 

target (6) 

2 The artist's surrounded by 
pets. They're worth their 
weight in gold (6) 

3 Got up in a bad temper - is 
enraged in fact (5) 

4 Flora, a writer of verse (7) 

6 Set out please, and walk (9) 

7 Go into liquidation through 
father retaining money (8) 

8 Followers will see the light 
(4,4) 

11 She may be sent up, but 
remain just the same (4) 

15 The average sum is of the 
utmost importance (9) 

17 Refusing disdainfully to make 
a song about foot trouble (8) 

18 Shell of vehicle speedily con- 
structed (8) 

20 This could well be one’s cen- 
tral feature (4) 

21 Bright®:, but more frivolous 
(7) 

22 Benevolent fellow put in the 
shade (6) 

23 Where there’s low rainfall 
many trees appear contorted 
( 6 ) 

28 Shivering while going over a 
prison (5) 



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PAKISTAN 


|e 


Monday November 28 1994 


s Benazir Bhutto, the 
P akistani primp minis- 
ter who is visiting the 
UK this week, leads a country 
which is now at a critical point 
in its history. 

In the past five years, Pakis- 
tan has made a stormy transi- 
tion from military dictatorship 
to Parliamentary democracy. 
Despite six changes of govern- 
ment, it has established a solid 
consensus in favour of liberali- 
sing the economy and op ening 
op to foreign trade and invest- 
ment It has also gone some 
way towards improving rela- 
tions with the US and other 
western powers, despite their 
continuing concern about 
Pakistan’s nuclear p rogra m me. 

However, these achieve- 
ments still stand on fragile 
foundations. Pakistani politics 
is riddled with violence and 
corruption. The small ruling 
Site has shown little willing- 
ness to share the fruits of pros- 
perity with the great mass of 
ordinary Pakistanis, some of 
whom are falling prey to the 
temptations of crime, political 
extremism and Islamic funda- 
mentalism. And although Ids 
Bhutto has a good personal 
rapport with many we st erners, 
the US administration and 
most European capitals remain 
somewhat wary of Islamabad. 

Nevertheless, P akistan is at 
least making progress and at a 
pace which has Quickened 
noticeably in the year since Ms 
Bhutto took office for the sec- 
ond tima in fast autumn's gen- 
eral election. 

In politics, despite persistent 
efforts by Mr Nawaz Sharif, the 
ex-prime minister and Ms 
Bhutto’s bitter enemy, to make 
trouble , the go v e rnm ent 
achieved a measure of political 
stability. After the storms of 
1983, which culminated in the 
overthrow of Mr Nawaz Shar- 
ifs government, 1994 has, by 
Pakistani standards, been 
fairly rabn Ms Bhutto’s gov- 
ernment retains a firm grip on 
the administration, and on Par- 
liament. 

In the economic sphere, Ms 
Bhutto has successfully pulled 
Pakistan ont of a foreign 
pyrhang H crisis which loomed 
large in nrid-1993 and has put 
the country’s finances on an 
even keel, with the help of a 
squeeze on credit, imports and 


public spending. Foreign 
exchange reserves have soared 
from a paltry US$S00m to a 
record $3bn. 

The feud with Mr Nawaz 
Shar if has fortunately not pre- 
vented Ms Bhutto from con- 
tinuing with her predecessor's 
economic liberalisation pro- 
gramme, inniudmg import tar- 
iff cuts, financial deregulation 
and the most radical privatisa- 
tion programme in south Asia. 
International companies say 
the incentives for foreign 
investors are among the most 
attractive in the developing 
world. 

“Pakistan bag truly come to 
believe that foreign investment 
is a must,” says Mr Nisar 
Memon, president of the Over- 
seas Investors' Chamber of 
Commerce and Industry in 

XaTadii 

Foreign companies have 
responded by increasing their 
actual investments and pledg- 
ing a big increase in the future, 
notably In power, where the 
government has collected pro- 
posals for new generating sta- 
tions worth US$1 2bn. These 
would, if realised, double the 
country's capacity. 

In the finanraai mar kets, thp 
overseas sale of shares in 
Pakistan Telecommunications 
Company, the state-controlled 
utility, raised $90Qm, a greater 
figure than all previous portfo- 
lio investment in Pakistan. 

Yet, despite these gains 
much more needs to be done if 
Pakistan Is to see broad-based 
political, enonnittlr and social 
modernisation. The root cause 
of the country's chronic politi- 
cal instability is the failure of 
tiie dominant land-owning 61ite 
to share power with the rest of 
P akist an’s fast-growing popula- 
tion of 128m. 

More than half the members 
of the National Assembly are 
feudal landlords, voted in by 
their mostly Illiterate share- 
croppers. The country is run 
by a few hundred famili es who 
inter-marry and place their 
sons in the three pools of 
power - politics, the bureau- 
cracy and the army. 

Many of these people, though 
not all, have come to regard 
government office as a per- 
sonal fipfdnm, in which nepo- 
tism, tax evasion and corrup- 
tion undermine good 



Ms Bhutto, above, has Introduced radcal measures to help solve Hie problems of crime and poWcai bwtabBify In Karachi (right) and other m 

Big test for Benazir Bhutto 

In her second term in office, Pakistan’s prime minister has made a good start 
by promising a firm response to her country's deep-rooted problems. Now Ms Bhutto 
has to prove she can deliver, writes Stefan Wagstyl 


administration. As Farooq 
Leghari, the president, said 
this month in a Parliamentary 
policy speech: “Corruption has 
permeated all w alks of Kfe.” 

The Site has also failed to 
distri b ute resources adequately 
to the great mass of its fellow 
countrymen. According to 
United Nations data, even 
though per capita income in 
Pakistan is considerably 
hi gher than in neighbouring 
India ($1,970 per head in 1991 
on a purchasing power parity 


basis against $1,150), Pakistan 
is weD behind India in educa- 
tion and health standards. 
Only 37 per cent of Pakistanis 
can read, compared with 50 per 
cent of Indians and life expec- 
tancy at birth is 58.3 years, 
compared with 59.7. 

The explanation lies partly 
in the defence burden imposed 
on P akistan by its fend with 
tpdia over the troubled region 
of Kashmir. Fully one third of 
the government budget is 
spent on the military, starving 


social development of funds. 
The scale of military spending 
also- virtually guarantees the 
generals a powerful Influence 
over the whole of public life. 

Even though General Wah- 
eed, the army chief of staff, is 
avowedly apolitical, his succes- 
sors may not be. And while the 
conflict also puts a strain on 
India’s public finance and on 
politics in India, Pakistan is. a 
much .Rmaller.country and Jess . 
able to contain its baleful 
effects. Few voices in Pakistan. 


however, challeng e the consen- 
sus that military spending 
retains a high priority. Wash- 
ington, for example, failed in 
an attempt to secure a cap on 
Pakistan’s nuclear programme 
in return for a shipment of F-16 
Jets; Islamabad refused to con- 
sider such d move tudess India 
did likewise. 

The TtnpMinaa distractions of 
Kashmir have .beep com- 
/pomided- by, "the .’effects of tha 
continuing fighting to Afghan- 
istan, where P akis tan remains 


involved in the rivalry between 
warring Mujahideen groups. 
The legacy of the anti-Soviet 
war has left huge quantities of 
arms in Pakistan, particularly 
In the tightly-administered 
mountainous tribal areas in 
the north, where, under trea- 
ties dating back to indepen- 
dence, the government’s writ is 

fonitecL 

Power rests In the hands of 
tribal elders, some of whom 
have used It to amass fortunes 
smuggling guns and narcotics. 
According to the UN, Pakistan, 
which knew little even of 
opium 20 years ago, has 
become the world's second 
largest source of heroin after 
Burma. It has also spawned 3m 
drug addicts. 

The country's uneven politi- 
cal and social development and 
its ready access to guns has 
created fertile ground for crime 
and for 1 political and religious 
extremism. The most pressing 
problem is in Karachi, the com- 
mercial capital, where more 
than two years of army deploy- 
ment bag failed to end criminal 
and political violence. 

Populated largely by refu- 
gees from northern India and 
their descendants, Karachi, 
furnishes about 60 percent of 
government revenue but its 
people mostly feel excluded 
from a political system domi- 
nated by indigenous Sindhis 
and Punjabis - see report, page 
three. ■ 

to the northern tribal areas, 
some chiefs and militant mul- 
lahs have proved themselves 
powerful enough to challenge 
the central government, nota- 
bly in Malakand district, where 
armed supporters of a radical 
Islamic preacher have staged 
two uprisings this year! - 

To their credit, 1& Bhutto 
and her minis ters recognise 
the scale of the problem. She 
talks of the, need for “social 
revolution* to Pakistan. 

Mr Leghari’s speech, cited 
above, is a model of objective 
analysis Of matters which 
many governments would pre- 
fer to ignore. As well as deal- 
ing with corruption, he makes 
tough remarks oh drugs, law 
and order, and the “woefully 
low" education standards. 
Moreover/ the government is 
taking action. Anti-corruption 
and anti-n&rcotics laws have 


been tightened. Karachi has 
been promised better policing 
and long-term investment In 
public services. 

Military spending is being 
kept under dose control while 
social spending' is being 
increased through a Social 
Action Programme, backed by 
international aid donors, 
which envisages spending $7tm 
over 199S-98 mainly on educa- 
tion and health. 

W ith luck and good 
weather, the economy 
should recover this 
year after two sluggis h years 
and give Ms Bhutto some room 
to manoeuvre in financing 
these ambitious plana. She 
says: We don't believe in 
ten rm g . We believe in doing." 

But she has yet to show that 
she has the determination to 
force the rural elite to become 
more accommodating to the 
needs of ordinary Pakistanis. 
One example of the landown- 
ers' reluctance to countenance 
change has been the delay over 
the introduction of ah agricul- 
tural inenma tax, imposed on 
the feudal elite. This was 
passed last year by the 
National Assembly and has 
since been ratified by provin- 
cial assemblies in Sindh, 
North-West Frontier Province 
and Baluchistan but Punjab, 
home of the richest fanners, 
has refused to comply. If the 
landowners do not pay tax, 
who will pay for the education 
of their tenants? 

Ms Bhutto knows as well as 
anyone that a powerful and 
fH«rrpiineri army can Suppress 
social conflict but cannot 
remove its causes. She has 
marie a good start in her sec- 
ond term in office by identify- 
ing Pakistan's deep-rooted 
problems and promising a 
response. She has now to prove 
she can deliver. 


ON OTHER PAGES 

Economic prospects „ 

Fofflcal tenatofts 


Sock marirat, privatisation .... 
Pressure on ttie banks 


■ Page 2 
Page 3 
-Page 4 
,Page5 

Foreign *WBsfrnerrt increases ...Page B 

Textile industry ki trouble Page 7 

istam and social needs Page B 

Agricultural problems PegB 9 

interview with Ms Bhutto Page 10 

Fad ffie on Pakistan : Page 10 


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PAKISTAN 


The economy: new incentives are offered to foreign investors, reports Stefan Wagstyl 


Foundations laid for stability 

A t a faster pace than Nisar Memon, general manager jumped 12 percent in 1992-93. in 1994-95. Much depends on have hit industrial outpu 

seemed possible a year of the Pakistani operations of fell almost 15 per cent last agriculture, especially the cot- which has grown at an averaj 

ago, the government of IBM, the US computer maker, year. Foreign exchange ton crop, which determines the of just 5J5 per cent in the pa 


J_— ~ W -»■< ; 

-- — — — —yr~ 


A t a faster pace than 
seemed possible a year 
ago. the government of 
Ms Benazir Bhutto has pulled 
Pakistan out of a foreign 
ex chang e crisis and laid the 
foundations for economic sta- 
bility. 

Ms Bhutto has also given a 
new impetus to efforts to 
attract foreign investment by 
offering extra incentives and 
further liberalising an econ- 
omy that was already among 
the most open in the develop- 
ing wortcL 

Overseas companies have 
responded by pouring hinds 
into the stock market and 
pledging to increase direct 
investment, notably in power 
generation, to which the gov- 
ernment attaches the highest 
priority. 

Yet, as Pakistani and foreign 
businessmen are united in tell- 
ing the government, all this 
progress in the economy could 
stall be wasted unless Pakistan 
also tackles its non -economic 
problems - above all the crime 
and violence in Karachi As Mr 


Nisar Memon . general manager 
of the Pakistani operations of 
IBM, the US computer maker, 
and president of the Overseas 
Investors' Chamber of Com- 
merce and Industry, says: “The 
number one priority is the law 
and order situation." 

The economic turnaround 
dates back to the caretaker 
government of Mr Moeen Qure- 
shi, the former World Bank 
economist, who led the country 
for three months last year 
between the fail of Mr Nawaz 
Sharif and Ms Bhutto's elec- 
tion victory. But the new gov- 
ernment deserves credit for 
persevering with his tough 
curbs on public spending, bank 
lending and foreign exchange 
outflows. 

Since the summer of 1993. 
the budget deficit has been cut 
from over 8 per cent of GDP in 
the year to June 1993 to 5.8 per 
cent in 1993-94. The target for 
1994-95 is just 4 per cent 

The expansion of domestic 
credit has dropped from 24 per 
cent in 1992-93 to 9.3 per cent 
last year. Imports, which 





jumped 12 per cent in 1992-93. 
fell almost 15 per cent last 
year. Foreign exchange 
reserves have risen from a low 
of $300m to a record US$3bn. 

Inflation has fallen but is 
still to be brought under con- 
trol Prices have been pushed 
up by increases in power 
charges and other adminis- 
tered prices and by the influx 
of foreign exchange which has 
expanded the domestic money 
supply. 

However, the government's 
short-term economic manage- 
ment has been so good that it 
has brought plaudits from 
international observers includ- 
ing the International Monetary 

Fund. 

The squeeze on credit, 
imports and public spending 
has contributed to a slow down 
in economic growth. GDP rose 
only 4 per cent last year after 
22 per cent the year before - 
down from 7.7 per cent in 
1991-92. However, the govern- 
ment, which is now easing 
credit restraints, is forecasting 
a sharp increase to 6.9 per cent 


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in 1994-95. Much depends on 
agriculture, especially the cot- 
ton crop, which determines the 
commercial health not just or 
cotton farming but of textiles 
production, Pakistan’s biggest 
industry and largest contribu- 
tor to exports. As Mr V.A. 
Jafarey. the prime minister's 
adviser on financer. says: "As 
far as growth is concerned, the 
key question is the cotton 
crop." 

The drought and disease 
which have hit cotton in the 
past two years have been the 
principal reason for slow eco- 
nomic growth. This year, the 
government is planning for a 
recovery in cotton production 
from 7.6m bales to 9.5m. 

S ome cotton farmers have 
said the lingering effects 
of drought and disease 
will hold back output, but no- 
one can be certain until the 
harvest reaches its peak in 
January. The finance ministry 
estimates that each 1.5m bales 
of cotton output is the equiva- 
lent of 1 per cent of GDP. 

Given the uncertainties, 
some economists doubt 
whether growth will be as fast 
as the government plans. They 
believe 5-6 per cent GDP 
growth is a more reasonable 
target There is also concern 
about the state of business con- 
fidence. Power shortages and 
the disturbances in Karachi 


have, hit industrial output, 
which has grown at an average 
of just 5.5 per cent in the past 
two years. 

Karachi bankers say that 
local businessmen are notice- 
ably less enthusiastic about 
prospects than foreign compa- 
nies. One reason is that domes- 
tic companies are more 
involved than overseas groups 
and their Pakistani subsid- 
iaries in the depressed textiles 
industry. Exports, mainly cot- 
ton and textiles, actually fen 
last year, albeit by only 0.1 per 
cent, for the first time - 
despite a 10 per cent devalua- 
tion in the rupee in mid-1993. 

By contrast, foreign inves- 
tors are responding favourably 
to the Bhutto government's ini- 
tiatives. Foreign investment 
inflows rose 20 per cent to 
S693m in 1993-94, including 
$339m in portfolio investment 

This year’s figure could come 
close to $2bn, given that the 
overseas sales of shares in 
Pakistan Telecommunications 
Company, the state-owned car- 
rier. raised $900m this autumn 
and that construction is 
starting on the Slittm Hub 
River power station. 

The government is also hop- 
ing to attract foreign invest- 
ment in future privatisations. 
Though perhaps not on the 
scale of PTC, stakes in state- 
owned power and gas produc- 
ers and distributors could also 








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raise large sums. Even greater 

15 the arnnrmt minister s hope 
to attract intn the construction 
of new power stations. A new 
energy policy, launched in 


The new government has out public borrowing but inflation 


Aa a percentage of C23P 
10* - - 


PwcortaoB Bang* owr previous yaar 

15% • 


1988-60 90-91 


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Percentage crwige ovw previous yew 

20 % - - ■ — 


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— — — « 111 ■ ■ ■ ■ . ... 

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March 1994, offering attractive 
terms to private sector inves- 
tors, including a guaranteed 
jKlce for power purchases, has 
encouraged US companies to 
sign letters of intent for build- 
ing power stations worth $4bn. 
Mr Gordon Wu, the Hong Song 
entrepreneur,' has unveiled an 
even bigger programme, offer- 
ing to h niM generating capac- 
ity worth.. $8bn. . 

T here is some doubt 
about how fast these 
investments, which 
would almost double Pakis- 
tan’s electricity output, might 
materialise. But for Ms Bhutto 
they already represent a pow- 
erful boost to confidence in her 
economy. 

These investors are attracted 
partly by P akistan ’s chronic 
need for power and . partly by 
the consistency with which 
successive governments have 
pursued market-oriented poli- 
cies favourable to fbnngn trade 
and investment. Despite .the 
political divide separating 
them, Ms Bhutto - and Mr 
Nawaz Sharif have few differ- 
ences on economic policy. 

Ms Bhutto's government has 
pursued her predecessor’s ini- 


tiatives in virtually all impor- 
tant areas including liberali- 
sing trade through tariff cuts, 
deregulating foreign exchange 
rules and finan cial markets , . 
and privatisation.. . 

The sate of shar es i n a le ad- 
ing state-owned bank, UBL, is 
top of the privatisation agenda; 
to be followed, as mentioned 
above, by sales of, stakes in 
utilities currently operated by 
the Water and Power Develop- 
ment Authority. Although 
there were plans to privatise ft 
en bloc, WAPDA Is now seen as 
too unwieldy for such a sale. 

. ait this'is mnsic to business- 
mens' ears. But the govern- 
ment's tune is -in danger of 
. befog drowned . out by the 
country’s political turmoil. 

. Investors canJeam to live, with 
chao tic Parliamentary politics, 
as they, have in Italy, for exam- 
ple. They can also cope with 
corruption, which is wide- 
spread in Pakistan, but which 
is common in almost every 
developing country and most 
.developed nations as welL But 
•the; riafle of befog robbed or 
even murdered on foe streets 
of Karachi has made more 
than -one potential investor 
think twice about Pakistan. 


P akistanis will find it 
hard to forget this 
year's long hot summer. 
Up to six hours of power cuts 
in many urban areas caused 
huge production losses for 
businesses and industries. In 
Karachi, Pakistan's business 
capital, some wealthy residen- 
tial areas were left without 
electricity for several days. 

The cuts were a repeat of 
widespread black-outs in the 
early 1990s, at a time when 
the gap between supply and 
demand was widening rapidly. 

Yet while, for many Pakis- 
tanis, this year's experience 
may have been dispiriting, the 
country^ new energy policy 
alms to improve the electricity 
supply by attracting private 
investment 

A series of complicated 
bureaucratic layers, which 
served only to delay new pro- 
' jects, has been replaced by a 
j “one window” operation in 
i Islamabad, capable of process- 
ing all inquiries and problems. 
Businessmen and western 
economists have generally 
welcomed, too, a generous rate 
of return being offered to 
investors. 

“There bas never been a 
power policy in this country,” 
Says Mr Shahid Hasan Khan , 
foe prime minister’s adviser 
on economic affairs, and head 
of a special committee which 
recommended the new incen- 
tives - “the thrust is now on 
the private sector.” he says. 

I nvestors will, in other 
words, be expected to take 
their cue from the fresh 
ground that the government 
believes it has broken with its 
new policy. 

The government is claiming 
the credit for commitments 
worth more than S12bn, which 
have been made since its 
announcement early this year. 
These include a S8bu coal -fired 
power generation project 
being undertaken by Mr Gor- 
don Wu, the Hong Kong-based 
business leader, and almost 
$3£bn of Investment promised 
by American businesses. 

“We've actually reached a 
point where a lot of people are 
very conscious of Pakistan, 
and see it ffi a place in which 
they can look for investment 
opportunities,” says Mr Daniel 
Michael Woodroffe, chief exec- 
utive of foe Karachi-based Hub 
Power project - a joint ven- 
ture, with Xenel group of 
Saudi Arabia and National 
Power of the UK among foe 
largest sponsors. 

The 1.292MW hub-power 
project, foe largest private sec- 
tor power project in foe devel- 
oping world, was first con- 


Private investment is seen as the key to much-needed improvements in 
electricity supply, writes Farfian Bokhan . 

Power policy starts to emerge 


celved eight years ago. and Is 
likely to begin producing in 
1998. 

Despite foe optimism from 
many sides over the schemes 
that have been put in the pipe- 
line this year, Pakistan still 
faces foe challenge of ensuring 
that most of these projects are 
successfully completed. 

Many prospective Investors, 
able to provide between 28 and 
30 per cent of foe frill costs, 
are aware of the difficulties 
involved in arranging frill fin- 
ancing by such means as 
loans. 

“For every four to five dol- 
lars of demand worldwide, 
there’s only one dollar that 
can be raised. You've got to be 
very competitive," says one 
American businessman. 

“Some {proposals] will fall 
by the wayside, because they 
are not well thought through | 
or because there are problems 
funding them, but a signifi- 
cant proportion will come 
through," says Mr Woodroffe, 
who is optimistic about the 
future. 

However, other businessmen 
and some officials are less cer- 
tain. Part of tbe concern is 
tied to the extent to which 
Pakistan can improve its ail- 
ing transmission infrastruc- 
ture, to improve the quality of 
power supply, so that all 
power generated reaches con- 
sumers. 

The government now plans 
to Invite offers for new con- 
tracts worth up to $5bn for 
investment in transmission 
lines and related facilities. 

P ower tariffs, however, 
will seed to be increased 
- by some estimates, 
between 40 to 50 per cent - in 
order to pay for foe overhaul 
of the system. 

“It is difficult for a political 
government to raise these In 
one go,” says one senior offi- 
cial privately. He explains that 
a detailed plan to Introduce 
higher rates, to be phased In 
over a period of time, will be 
the most important element in 
the success of the new initia- 
tive. 

Some officials are also con- 
cerned that up to 80 pm* cent 
of the added load Is expected 
to come from central and 
northern parts of foe province 
of Punjab, at least 1.000km 


away from the port city of 
Karachi. They argue that new 
projects set up close to the 
coast, to avoid breakdowns in 
tbe supply of fads, could face 
power losses by the time that 
the transmitted energy 
reaches Its destination. 


Despite such concerns, most 
officials and businessmen are 
convinced that the energy ini- 
tiative stands at foe top of foe 
government's economic 
agenda, and that the recent 
incentives have improved 
prospects for new investments 


- “tim population of investors 
in private power has decided 
that Pakistan Is a good {dace 
to look [for opportunities],” 
adds Mr Woodroffe, describing 
foe mood of prospective Inves- 
tors after foe new energy pol- 
icy. 





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Former Pakistani prime mWster Nawaz Sharif adcfreeses a rafiy at Naela Butt In PaUstan-hetd Kashmir- Ha 
wa ne d India that Pakistan has a nuclear bomb to meet any eventuafity. ptaM zamu> 


Political power has been retained in the hands of an 
elite group of families, says Stefan Wagstyl 

Alienation tends to 
breed violence 



The most anmadtate need is to deal with the threats to law and order, 
especialy in Karachi. Above: the Pakistan army's presence on the 
streets of Karachi carder this year encouraged m o t orist s to come on the 
roads which had remained deserted for four days. Hanw drear let law 


Karachi’s rapid expansion has produced ethnic tensions 

Sense of unease 
stalks the streets 


M s Benazir Bhutto, the 
prime minister, and 
Mr Nawaz Sharif; the 
opposition leader, show no sign 
ctf relenting in the bitter feud 
which has poisoned Pakistani 
politics for the past five years. 

To the dismay of Pakistanis 
concerned about the quality -of 
the country’s democracy and 
about its international Image, 
the consequences of the two 
leaders' bad-tempered rivalry 
were recently put on display in 
the National Assembly build- 
ing. 

Addressing a joint mpptfag 
of the assembly and the senate, 
Mr Farooq Leghari, the presi- 
dent, was barely able to deliver 
an important policy speech, as 
government and opposition 
members pushed each other 
about and exchanged insults at 
the foot of his podium. 

“Leghari thiefi Leghari go," 
opposition members shouted 
throughout the speech. Ban- 
ners were draped around the 
hall condemning the govern- 
ment for alleged corruption. 
Later, an opposition member 
was taken to hospital after 
being beaten by student sup- 
porters of Ms Bhutto’s Pakis- 
tan People's Party. 

Afterwards, Ms Bhutto 
blamed the opposition for 
starting the row. Mr Nawaz 
Sharif s M uslim League party 
retorted that the government 
had provoked the attack by 
arresting Mr Mohammed 
Sharif, the opposition leader’s 
75-year-old father only a day 
earlier on charges of fraud, 
forgery and tax evasion. 

T he roots of the quarrel 
go back to the conflict 
between Ms Bhutto’s 
father, Mr Ztdfikar Ali Bhutto, 
the former prime minister, 
General Zia ul-Haq, the late 
dictator, who in 1977 imposed 
military rule and later ordered 
Mr Bhutto’s execution. 

After General Zia’s death in 
1988, democracy was restored 
and Ms Bhutto came to power. 
But it was only 20 months 
before the army and bureau- 
cracy chas ed her out of office 
and installed Mr Nawaz Sharif, 
a prot6g6 of General Zia. 

However, last year Mr 
Nawaz Sharif overplayed his 
hand by provoking rows with 
the army, over the appoint- 
ment of a new chief of staff; 
and with the president, Mir 
Ghulam Ishaq over a 

plan to curb the presidency’s 
powers. 

After monthR of turmoil, Ms 
Bhutto was returned to office 
in a general election which 
was widely seen as the fairest 


ever held in Pakistan. 

But fair elections have not 
brought political peace. Ms 
Bhutto is pursuing a wide- 
ranging corruption inquiry 
into the business interests of 
the Sharif family, especially its 
rapid growth during Mr Nawaz 
Sharif s periods in office, first 
as ohirf minister in Punjab, the 
largest of Pakistan's four prov- 
inces, in the 1980s and later as 
prime minister. 

Mr Nawaz Sharif has 
responded with allegations of 
corruption against Mr Arif Zar- 
dari, Ms Bhutto’s husband 
a 1 racing h vurinegginan. Among 


the banners paraded during 
the stormy demonstration in 
the National Assembly this 
month was one declaring: 
“Pakistan for Sale. Contact 
Zardari and Associates.” 

Mr Nawaz Sharif wants Ms 
Bhutto's resignation and an 
early general election - “she 
has lost all legitimacy,” he 
says. 

Ms Bhutto insists that 
despite the rnnfrnntatinn, the 
corruption charges and even 
the scuffles in Parliament, 
democracy is thriving in Pakis- 
tan. Italy anri Japan have also 
seen parliamentary storms, yet 


no-one questions their demo- 
cratic credentials, she says. 

Certainly, the battles are 
being fought within constitu- 
tional norms and, the army has 
stayed out of the fray nnlikp in 
some previous episodes in 
Pakistani history. Moreover, 
the two main forties have few 
disagreements on policy - 
whether it is over the econ- 
omy, defence or international 
relations. 

The feud does Pakistan con- 
siderable barm, however first, 
the leaders set a poor example 
for other Pakistanis, some of 
whom need little encourage- 
ment to try to take the law 
into their own hands. Next, it 
harms the country’s interna- 
tional image. Finally, it dis- 
tracts attention from the coun- 
try’s deeper political 
difficulties. 

The mo6t immediate need is 
to deal with the threats to law 
and order, especially in Kara- 
chi, (as described in a separate 
article on this page), and in the 
tribal areas in the north, where 
many have died In an insur- 
gency in Malakand district thfo 
year. 

The supply of guns and 
ammunition left over from the 
anti-Soviet war in Afghanistan 
and the spread of the drug 
trade have put considerable 


power into the famrts of armed 
groups. Young men with auto- 
matic weapons are almost 
every day turning conflicts 
over religion, politics and 
crime into vicious gun-fights. 

Deploying the police, para- 
military rangers and the army 
is only part of the answer. 
Without economic, social and 
political initiatives, the roots of 
violence will sink deeper into 
Pakistani soil. Ms Bhutto’s 
government is pledged to 
improve social and economic 
conditions through its Social 
Action Programme, which 
involves increasing social 
spending. 

But the crux of the matter is 
that too few Pakistanis are 
involved in the running of 
their country and so feel alien- 
ated from authority. 

The nation is ruled by an 
elite of Sindhi and Punjabi feu- 
dal landlords, whose sons 
(apart from Ms Bhutto, few 
women are active in public 
life) fill the national awrt pro- 
vincial assemblies and the 
upper echelons of the bureau- 
cracy and army. Over half 
National Assembly members 
are rural landowners. Mr Altaf 
Gauhar, a veteran political and 
economic commentator, esti- 
mates that just 500 families 
rule Pakistan. 

The only politician who man- 
aged to reach out beyond the 
land-based dhte was Ms Bhut- 
to's father, Mr Zulfikar Bhutto, 
a populist who won support 
from the urban crowds of Kara- 
chi »nrt Lahore. Even though 
his daughter has claimed Mr 
Bhutto’s mantle, she has felled 
to reach the hearts of ordinary 
Pakistanis in the same way. 

With domination of a small 
elite, has come the transforma- 
tion of public life into the per- 
sonal Seldom of a few wealthy 
families. Corruption and 
patronage have become 

onrtpmlc anrt the few has been 

turned into a tool of political 

m anipulation 

To her credit. Ms Bhutto is 
aware of the challenges 
involved in malting Pakistan a 
more just society. Her govern- 
ment has strengthened anti- 
corruption laws, tax collection 
measures and controls to pre- 
vent the powerful extracting 
excessive hems from hanks. 

But it is not yet dear that 
Ms Bhutto has the will to per- 
suade her class to share at 
least some Of its privileges. As 
Mr Gauhar says: “The only 
way this problem will be 
solved is if the poor gang 
together. Then the elite win 
have to. change." 


W hen an army jeep 
speeds through Lift- 
quatabad market in 
Karachi, a machine gun jut- 
ting out across the bonnet, the 
crowds barely give it a second 
glance. After more than two 
years on the city’s streets, 
army patrols have become a 
feet of life in Pakistan's com- 
mercial capital. 

But they have not brought 
peace. Since the beginning of 
the year about 500 people have 
died, mostly in gun-battles 
between rival armed gangs 
and the security forces. About 
200 have died since early Sep- 
tember. In one incident t his 
month, a leading local politi- 
cian was lolled with bis wife, 
sister-in-law and infant son, 
when gunmen sprayed their 
car with bullets. The next day, 
eight people were killed and 
40 Injured in revenge attacks 
and counter-attacks. 

Karachi is not a city in 
flames. Is much of the sprawl- 
ing metropolis of 12m, there 
are no signs of violence. Dur- 
ing the day, the soldiers try to 
be discreet Their patrols come 
ont in force only at night, 
when tbe gunmen are also 
most active. Yet a deep sense 
of unease stalks Karachi. 

“There is a feeling of uncer- 
tainty. A lot of people say that 
in the 1970s this was a won- 
derful place to live. They don’t 
say that any more,” says Mr 
Suhail Abbas, editor of the 
Financial Post, a business 
daily. Mr S.M. Muneer, the 
president of the Federation of 
Pakistan Chambers of Com- 
merce and Industry, is more 
blunt. He told a press confer- 
ence earlier this month that 
there was “a complete break- 
down of law and order." 

The government recognises 
the urgency of the matter, par- 
ticularly at a ttmg when it is 
encouraging foreign business- 
men to send executives to 
Pakistan - “peace and tran- 
quillity in the country is our 
top priority . We cant neglect 
law and order if we want eco- 
nomic development," says Mr 
Iqbal Haider, the justice minis- 
ter in Islamabad. 

The origins of violence in 
Karachi lie in the city’s rapid 


expansion since independence 
and the frustrations generated 
by a constant influx of refu- 
gees and migrants. The biggest 
wave was composed of the 
Mohajirs - people who fled 
India in 1947 to escape reli- 
gious riots and start a new life 
in a Moslem country. These 
Urdu-speaking people estab- 
lished themselves as a major- 
ity In Karachi to the dismay of 
local Sindhi-speaking farmers. 

In the first years after Inde- 
pendence, the work of building 
a new country kept the latent 
ethnic strains in check. But 
arguments over language and 
quotas for government jobs 
and college places gradually 
polarised tbe two communi- 
ties. The Sindhis resented the 
well-educated Mohajirs’ suc- 
cess in business; the Mohajirs 
hated their exclusion from 
power. They produced figures 
showing that despite account- 
ing for about half the popula- 
tion of Sindh province, Urdn- 
speakers accounted for only 
95,000 of 456,000 provincial 
government posts. 

O ther conflicts also sur- 
faced - between Sunni 
and Sbda Moslems, for 
example, and between rival 
criminal gangs. But it was the 
large and well-organised 
Mohajir community feat had 
the biggest impact. In the 
19S0s, Mr Altaf Hussain, a 
charismatic speaker, now 41, 
launched the Mohajir Qaumi 
Movement, which took control 
of tbe Karachi Municipal Cor- 
poration and won tbe lion’s 
share of the city's national and 
provincial assembly seats. 

But successive alliances 
with Ms Benazir Bhutto’s 
Pakistan People’s Party and 
with Mr Nawaz Sharif s Mos- 
lem League failed to bring fee 
MQM tangible benefits. Frus- 
tration pushed militant fac- 
tions towards political vio- 
lence and to crime. Wife the 
anti-Soviet war in Afghanistan 
over, guns were easy. 

Drag smuggling generated 
easy money. In June 1992, Mr 
Nawaz Sharif ordered the 
army to send 60,000 troops to 
restore order in Sindh, includ- 
ing 40.000 in Karachi. More 


than 400 MQM activists were 
killed in the first few months 
of “operation clean-up” and 
hundreds of others arrested. 
The army promoted divisions 
In fee MQM, and tbe growth of 
a strong faction called MQM 
(Haqulqui), which it encour- 
aged to fight against fee main- 
stream groups. 

MQM militants fought back. 
Mr Altaf Hussain, who was in 
London when fee army started 
its campaign, refused to return 
for fear of capture - and con- 
tinued to lead his movement 
from exile. This summer he 
was sentenced in absentia to 
27 years’ jail for alleged 
offences including murder and 
arson. 

Tbe MQM has responded to 
military pressure with increas- 
ingly radical demands, includ- 
ing this year asking for a new 
province to be carved out of 
southern Sindh, incorporating 
Karachi Ms Bhutto and her 
ministers rule out such ideas. 
Yet, government officials and 
MQM representatives are fre- 
quently in contact Sir Shoaib 
Bokhari, the acting MQM 
opposition leader in fee Sindh 
assembly, says: “We don’t 
want separation from Pakis- 
tan. We want equal treat- 
ment” 

The violence obscures the 
fact that many of Karachi’s 
problems are those of any fast- 
growing city. Water, sewerage, 
power and transport services 
are all inadequate. While the 
city generates about 60 per 
cent of central government 
revenues, little is ploughed 
hack into Karachi. 

Mr Abbas, the newspaper 
editor, says, Karachi-ites are 
self-made dynamic people. He 
believes they will respond to 
the challenge posed by vio- 
lence. But like others, he is 
not sure how long this may 
take. For businessmen, it Is a 
matter of deciding whether 
potential rewards justify the 
possible dangers. Many might 
agree with Mr Nisar Memon, 
fee country manager of IBM, 
fee US computer manufac- 
turer, who says: “It’s a risk, 
but it’s a containable risk." 

Stefan Wagstyf 




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INVESTMENT LANDSCAPE 


During tbe past years Pakistan has seen a very rapid pace of development At 
present there are over 30,000 incorporated organisations in the country, of which 
533 have foreign capital. The focus has been on encouraging private investment in 
the economy, both local and foreign, in order to expand the industrial base. The 
stock market alone has witnessed tbe injection of Rs. 19.68 billion (USS 6.55 
billion) in capital. Private investment has been invited successfully through the 
process of privatisation of government owned operations. 

Foreign exchange controls have been eliminated wife a view to progressing to full 
convertibility of the Rupee in the short term. In particular, cumbersome procedures 
relating to foreign investment in Pakistan have been removed and approval 
requirements restricted to minimum. Capital and profits can now easily be 
transferred out of the country in hard currency. Investor confidence resulting from 
deregulation will serve to attract foreign interest, know-how and technology, 
facilitating the opening of new sectors of industrial activity. 


POLITICAL RISK INSURANCE 


Pakistan, like many developing countries, has seen several sudden changes of 
Government. However, all the succeeding governments have supported and 
pursued the same economic policies of liberalisation, de-regulation, privatisation 
and non-nationalisation of fee foreign capital. Since the new government of 
Benazir Bhutto has been elected through the democratic process, it is expected that 

the policital clima te in the country will become more stable. Political risk 
kgurance for investment in Pakistan is available. 


HOW TO ENTER THE PAKISTAN MARKET 


l Establish a felly owned and controlled private company, (equity up to Rs, 100 
million / US$ 33 million). 

rf Establish a public limited company, retaining majority control but seeking 
“* . j- c participation through floatation. This serves to reduce the foreign 
corporation's level of equity exposure to achieve the same level of operations. 

3 Establish a company in co-operation with joint venture partners, who supply 
local expertise, management and capital. This may be as a private or public 


company, m 


which case it can have the benefits of point two above. 


estment in Pakistan lends itself to the joint venture route. Pakistani 
^trenreoeins who have built a substantial base in their industrial sector now wish 
“ loTtheir resources in diversification. They seek to combine their knowledge 
to fTcal markets and business conditions with the know-how of foreign 
° f rations. Some of the industries in which joint ventures have been established 
Pakistan are: automobile, fertilizer, electronics, financial services, food and 

consumer products. 


i) three year tax holiday fin all new industries; 

ii) five year tax holiday for industries established in delineated rural areas 
and Special Industrial Zones; 

iii) eight year tax holiday for industries which are established in less 
developed areas; 

iv) exemption from customs duty and sales tax for import of machinery, 
not manufactured in the country, for units located in rural or less 
developed areas or those classified as Export Processing and Special 
Industrial Zones; 

v) maximum tariff rates have been reduced and non-tariff barriers have 
been largely done away with; 

vi) foreign companies are allowed to undertake export trade, and public 
sector monopoly in the export of rice and cotton has been done away 
with; 

The industries set up in Special Industrial zones are entitled to additional 

exemptions such as:. 

a) Income tax holiday has been allowed for a period of 5 years* from the 
date of commencement of commercial production, to those units set up 
between 1st January, 1993 to 30th June, 1994; 

b) exemption from custom duty as is in excess of 15% ad valorem and 
whole of sales tax, on import of plant and machinery, not manufactured 
locally; and 

c) capital gains to (he extent of foreign equity share would be exempted 
from taxation for a period of five years from the inception of the unit 



ENERGY 

* OS end gas drilling and refining. 

* Power generation particularly coal fired units using high quality coal 
resources in the country. 

COMMUNICATIONS 

* Development of Phils. Ship building. Highway construction. 

* Expansion of telecommunications network based on fibre optic technology. 

* Rail road construction linking Pakistan with Turkemanistan. 

AGRIBUSINESS 

* Processing, including dehydration, packaging, preservation etc. of fruits 
and vegetables. 

SERVICES 

* Hotels, Tourist resorts including ski resorts. 

MANUFACTURING 

* Precision technology and heavy industry 

■ Cement 

* Chemicals including fertilizers. 

* Plastic based products including PVC items. 

■ Electronics. 

* Software development. 

* Value added Textiles. 


INVESTMENT PROMOTION AGENCIES 


BOARD OF INVESTMENT (BOD 

The BOI functions as the focal point of contact between potential 
investors and all the agencies of the Government which may be 
concerned with investment proposals and may be responsible for 
providing infrastructure facilities. The Board is attached to the Prime 
Minister’s Secretariat, working directly under the Prime Minister. 

MINISTRY OF INDUSTRIES (MO I) 

The MOI oversees the formulation and implementation of policies 

regarding industrial operations. 

For further details please contact: 

BOARD OF INVESTMENT 

PRIME MINISTER'S SECRETARIAT 
12TH FLOOR, SAUDI PAK TOWER 
tfl-A JINNAH AVENUE ISLAMABAD, 

TEL: 817162 

FAX: 92-51-215554, 217665 


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FINANCIAL TIMES MONDAY NOVEMBER 28 1994 


PAKISTAN 4 



Privatisation projects: telephone, power and shipping companies are being lined up for sale, reports Farhan Bokhan • 


T he beginning of the privatisation of 
Pakistan's telephone company, the 
PTC (Pakistan Telecommunications 
Corporation), this year, could well be the 
most important development in tbe coun- 
try’s four-year-old privatisation pro- 
gramme. 

So far, only small companies, making on 
average less than 2 per cent annual profits 
as a proportion of turnover, have been 
offered for sale. Following tbe sale of 65 
such companies during the past four 
years, the government plans to transfer a 
further 80 companies to the private sector 
by not spring. 

The importance of the public sector in 
the economy is obvious. Large and small 
public sector companies account for about 
half of the manufacturing sector, virtually 
all power generation and transmission, 
and a substantial portion of banking 
But the sale of the PTC marks the start 
of the sale of what many would regard as 
the ‘ family silver.' 

Other potentially lucrative enterprises 
be which may offered next year include 
portions of two large power companies, 
two gas companies, at least one public 
sector bank, a government-owned shipping 
company and even portions of the port. 

“We are very much on a “war footing* in 
the privatisation programme,” says Mr 
Naveed Qamar, ohairamj of the rmtinnal 
privatisation commission. 

The offer of public sector utilities could 
be the most important step to liven up the 


The programme gathers pace 


effort, he says. Among new ideas to 
increase public interest in the offers, is 
scheme being considered by the govern- 
ment for registering a privatisation fond 
on Pakistani stock markets. This would 
comprise shares of state-owned companies, 
in whi ch investors would be invited to buy 
shar es through mutual funds. 

Despite Mr Qaznar’s confidence, and the 
novel concepts which are just being 
attempted, there are few dear indications 
as to how far the programme can be expec- 
ted to succeed. 

The government is convinced, however, 
that Pakistan’s public sector utilities can 
attract large investments from domestic 
and foreign investors. 

The PTC (Pakistan Telecommunications 
Corporation) - the government-owned 
telephone company which maintains an 
absolute monopoly, has alone been esti- 
mated to be worth up to USKJObn. Tbe 
thermal power generation units of the 
Water And Power Development Authority 
(Wapda) - the largest power company of 
those due to be sold, could be worth 
another US$5bn, according to same esti- 
mates. 

However, those claims by no means give 
the final figure. In recent weeks, share 
prices in PTC have fallen, amid fresh sell- 
ing pressures. Hie selling followed fears 



Hie privatisation of many companies — targe and sntaR - in the public sector 
chalenge. Pictured here are steel workers d famanl ttig old sh%w In Gadani 


pre sents a big 


which had arisen over allegations that 
investors were not provided with accurate 
Information when up to 6m shares were 
offered this summer, in the company’s 
first public offer. Senior officials say that 


the ommission was merely an “oversight” 
due more to inexperience than deliberate 
misinformation. However, that 
Hag alerted the g o ve r nment to the possibil- 
ity of setbacks, unless future offers are 


planned properly, one official involved 
w ith the privatisation effort chu ms pti- 
vat fl y. 

&rmre investors are also c on ce rne d over 
the extent to which full financial details of' 
the companies being offered would be 
made available. Mr Qamar Is committed to 

providing full details on public sector 
fwff Hri «rtfous i ncfodfog the large hank s, 
currently reefing ™der the pressure of 
extensive bad loans. 

The PTC and WAPDA are also raced 
with large scale Clients owe 

more tf»gn feerflhn (US$580m) in unpaid 
bills to the two companies. Hie govern- • 
TTtont hag announced that it will introduce 
new laws, carrying stiff penalties for 
definfites, but such, measures stiff need to- 
be enforced an a large scale to dement; 
strate that an extensive campaign to 
recover *h<* money Has prepared the 
ground to p r ev ent further abuse of tbe 
companies. 

However, some businessmen are con- 
vinced that tbe most crucial need is to 
accelerate the pace of the programme. 

*Tbis process must be expedited because . 

tiie liwiggr these companies remamin tbe 
public sector, the longer will be the 
itowwnri rm the public prrhtvj ner" says 3fr ■ 
Nisar Memon, Head of IBM's Pakistan 
operations and presutext of the influential 


Ow tomi Chamber- and 

tndustr y-(OCC0 wh^i^ewuiCsforagn 
businesses in Pakistan. • ' -1 -.-L ‘ 

■ Mr Memon da also ouncemed t hat th e 
county's borwacracy te.staiiwt mrtirdiy 
to support, following jests of offioal ecB* 
tools over lucrative corporations. Pur note 
convinced that such resistance c an be ea s- 
ily remo ved, if the goventoisn^ oa^tnSBS 
to press ahead- aggressively. 

to spto of initial tears (tf resistance ftmn 
Train™ there are so far tew signs, of any 
labour unrest; which could upset tbe gov- 
ernment’s. plani Workers have - been 
assured of job protection -Jar up. to. one 
yw n* following privatisation. . ; . . • • • 

■ Tbe gover nm ent . has also given * corner 
^lritment of a *gcilden han d sh a k e* or a large 


sum 


length of service* tf redundancies are nap- 


Bbwever, Mr Memon wants to s ee new 
safeguards to prevent -any social unrest 
such as might resulting from sharp price 
rises after privatisation of utilities, -Mr 
Qarnai- says the government will set. up ■ 
price monitoring- bodies before services are 

privatised, to protect coustaner interests. 
ffq wfw»r, many officiate and busine s s:. 

men say privately that price increases .are 

ramrifohio, especially after years of sohri- 
: lives to the public sector. Tbe one impor- 
tant qu es tion - is whether, these price 
increases rfrn be spread over a period of 

tlrnp tn pr vmmt amrroff crmmnn- 


I n a year when the Karachi 
Stock Exchange (KSE) has 
been forced to suspend trad- 
ing in at least two new share 
issues, amid concerns that 
investors' interests were at 
risk, no one can take for 
granted the safety of Invest- 
ment in Pakistani stocks. 

However, the potential dam- 
age has not been enough to 
inhibit the market’s fast 
growth or a sharp rise in seat 
prices on the KSE. 

In a closed shop of just under 
200 members, prospective bro- 
kers need to spend up to 
Rs27.5m ($800,000) to buy a 
licence in the open market - 
three times more than was 
charged four years ago, when 
the' country's economic 
reforms allowed the entry of 
foreign investors. 

Those reforms have attracted 
up to 8800m from foreign inves- 
tors. Although still a small por- 
tion of the overall market capi- 
talisation of $13bn, the entry of 
foreign funds has prompted 
increased Investment by 
domestic investors. The mar- 
ket’s average daily turnover 
has trebled to 10m shares since 
1991, while capitalisation has 


STOCK MARKET EXPANSION 


Spurred on by foreign investors 


almost doubled in the past 
three years. As a result of 
increased business activity, at 
least six new brokerage bouses 
have been formed. 

The changes have also given 
birth to a new breed of “yup- 
pies” who are East emerging in 
the market According to Mr 
Nasir B ukhari , nhfef executive 

Of Khariim Ali Shah B ukhari , a 

leading brokerage firm, up to 
half of the new graduates from 
the country's two top manage- 
ment schools now want to join 
a brokerage house. Before the 
reforms, virtually none wanted 
to. But behind the impres siv e 
change, the KSE is stffi faced 
by concerns over lax laws and 
a potentially “overheated” 
environment 

“We asserted ourselves in 
such a way that we pre-empted 
any chance of the small inves- 
tor being misled.” is how Mr 
Yasin Lakhani, president of 


the KSE, defend s his record. 
Critics argue that this year's 
suspension of two new issues 
hardly gives reason for com- 
fort The action was prompted 
when one annninirwl an exces- 
sively generous rights issue; 
while another did not deliver 
share certificates to the public, 
even after receiving subscrip- 
tion money. 


T he market “is not becom- 
ing unsafe for investors - 
there are scandals and 
dubious issues, which come in 
every market of the world,” 
comments Mr Fhrrnkh Kh»n , 
chief executive of BMA Capital 
Management a leading broker- 
age house, who also defends 
the record. However, he con- 
cedes that there is room for 
changes to protect investors’ 
interests. 

He wants to see tighter regu- 
lations, to require underwriters 


to take full legal responsibility 
for the prospectus issued 
before shares are brought to 
the market Mr Lakhani says 
the government is planning to 
increase the powers of the KSE 
management, which ran only 
suspend trading or delist a 
company. Among other con- 
cerns, some foreign fund man- 
agers and their representatives 
also complain of inadequate 
mechanisms to clamp down on 
insider trading. 

“The market is still not 
geared to deal aggressively 
with such issues,” says one. 
“This is not the New York 
stock exchange, but still, if it 
wants to be taken seriously, it 
will have to prove that its tak- 
ing action to prevent fraud.” 

Even if regulations are tight- 
ened, that alone will not 
resolve issues which could pre- 
vent further growth. Investing 
in the market is yet to become 


a popular concept for small 
P akistani investors, many of 
whom still rely upon bank 
deposits as their main invest- 
ments. 

According to Mr Khan, the 
KSE growth could take off if 
open-ended mutual funds, pen- 
sion funds and insurance com- 
panies from the domestic mar- 
ket were allowed to invest 
freely. The government is 
reconsidering the rules on 
these matters, but it is not 
dear how soon changes, if any, 
will be announced. 

To keep up the investment 
momentum, Mr Lakhani is also 
urging the government to 
announce a further five-year 
extension to a capital-gains 
exemption before it expires 
next s ummer , to avoid uncer- 
tainty and large-scale specula- 
tive trading. 

Many brokers also see devel- 
opments in the market as an 


important dement in the suc- 
cess of Pakistan’s p r i v ati sation 
programme, especially the 
plans to sell government- 
owned utilities. A beginning 

halt hopn maite thin year With 

the first international and 
domestic share offers in the 

giantf Pakistan ToWnwimniri. 

cations Corporation (PTC), the 
biggest com pany to be listed 
on the KSE. 

The gove rnm ent is consider- 
ing plans to offer some of the 
power-generation plants run by 
Water and Power Development 
Authority - Pakistan's largest 

POWH- flfim pa n y - ilur f n g - the 

next year, and at least one of 
the two largest public-sector 
banks. It p ropose s that part of 
this win be through the KSE, 
althoug h the exact size of the 
offer has not yet been 
announced. 



Farhan Bokhai 


Tha Karachi Stoclc eacehangv e pWMpe c H— brotori need to ; 
RsZUo) ($880j000) to tally a Bckk* ip Ite Often nwrirat 


I np to.- 


Your Trust Is Well Placed 



In Us 



900 million 
subscription of five 
million PTC 
vouchers in the 
international financial 
markets is a testimony of 
the trust by the 
international investors, 
both institutional and 
individuals, in Pakistan’s 
most profitable corporation 
- Pakistan 

Telecommunication. 



fj ndeed, it’s trust well 
/ placed in the present 
government’s economic 
reform programme of 
promoting private 
investment, liberalisation 
and deregulation, thereby 
accelerating the overall 
economic growth . 



V-:* 1 " < -*•- » 





■ • J I'yi 


H aith placed in PTC and 
/ Pakistan’s economic 
future will prove to be 
rewarding in times to 
come. 

Welcome to Pakistan . 
Welcome to a world of 
investment opportunities. 


Pak Telecom 

Government of Pakistan 
Ministry of Communications 
Islamabad, Pakistan. Facsimile: 92-51-210424 


2 

bo 

73 

< 




X 






FINANCIAL TIMES MONDAY NOVEMBER 28 1 994 


V 


★ 


PAKISTAN 5 


Farhan Bokhari on banking and bad loans 

Hopes pinned 
on new rules 



The country's largest bank - possMy leaning under the pressure of bad debts 


M r Badraddin Khan , president 
of Schon Bank, in Karachi - 
Pakistan's newest private 
bank - laments from his office in the 
heart of the business district at Chnn- 
diigar Road, that very few poor people 
come to bis bank to do business. 

_ He wants to open two branches in the 
city for small merchants, trait vendors, 
gro cery sellers and traders in cheap 
consumer items, in order to find rffents 
who would otherwise stay away from 
the East-moving business quarters. 

Mr Kh a n has joined the ranks of 
bankers who are becoming cautions 
over a history of bad bank debts, and 
who feel that small borrowers may be 
more reliable than large and 
ones. 

Ia a country where public sector 
banks are reeling under the pressure of 
almost Rs76bn ($2.4bn) in bad loans, 
almost no one is convinced that all the 
money can ever be recovered. 

Many of these loans were given out 
under political pressures during the 
past two decades, following natumalisa- 


“The performance of public 
sector banks could 
improve if the management 
is handed over 
to the private sector" 


tkm of the banks in the early 1970s. 
That legacy has cast a shadow over the 
fixture of the country's two largest pub- 
lic-sector banks - Habib Bank and 
United Bank - which successive Paki- 
stani governments have planned to pri- 
vatise for more than four years. 

The two banks are together faced 
with a “classified debt”, or loans which 
are difficult to recover, wrath almost 
Rs34bn.That is almost one quarter' of 
their combined portfolios at Rsl40bn. 

The government claims that stronger 
regulatory powers, given to the central 
bank last year to monitor new loans 
from banks, wfll at least help to ensure 
that the extent of bad loans does not 
increase, ffthat policy works, it may in 
time reduce the portion of such loans in 
overall lending s and help give stability 
to the financial system. 

“The bad debts may not come down 
sharply but, with growth in lending, 
they will decline in their overall propor- 
tion," says Mr VA. Jafarey, the prime 
minister's adviser an finance: 

- Whatever the future trend, Mr Khan 
is-raioouragBd that the past legacy of 
the bad loans corner with a J silver ttn-' 


ing. He hopes that private banks will 
eventually attract more clients, espe- 
cially those looking for efficient ser- 
vices and better profits. Drawing a les- 
son from that bitter past, Mr Khan 
wants his bank to diversify beyond tra- 
ditional commercial banking, to become 
involved in a wide variety of activities 
which would also minimise the risks 
attached to lendings - “in a couple of 
years, new demands for merchant bank- 
ing, financial and brokerage houses will 
be made on the market,” he says, fore- 
casting his bank’s future in a changing 
corporate environment 
A few kikrafetres up the road, at the 
offices of Muslim Commercial Rank - 
Pakistan’s first public sector bank to be 
privatised, three years ago - Mr Hus- 
sain Lawai, the president, is convinced 
that private bardring is the way of the 
future. “The performance of public sec- 
tor hanire could improve If the manage- 
ment is handed over to the private sec- 
tor," he says. The MCB’s record 
supports his claim. Profits have dou- 
bled, and deposits have trebled in the 
three years since privatisation. 

In addition to the nine new local com- 
mercial banks which have begun busi- 
ness since licences for private banks 
were issued in 1991, Mr Lawai sees a 
bright future fra foreign banks. Deregu- 
lation cm foreign exchange has encour- 
aged many Pakistanis to deposit their 
savings in foreign currency, to seek 
added protection against devaluation of 
the rupee and possibly as a way to 
facilitate foreign travel. 

Some bankers are convinced that new 
contracts ^i gripd this year in the energy 
sector, wrath up to $12bn, have created 
opportunities for foreign banks to fur- 
ther improve their impressive perfor- 
mance of recent years. According to 
estimates by Pakistan's central bank, 
all the local commercial hanks (public 
and private) had total deposits worth 
Bs436bn by the end of this summer at 
their 7,738 branches across the country. 
However, the foreign banks, with a 
total of 74 branches, had deposits of 
approximately RsJSObn, or mare than a 
quarter of those of Pakistani banks. 

“The nationalised banking sector has 
become so inefficient that new commer- 
cial and investment banks have an 
opportunity to eat Into their market 
share,” says Mr Nessar Ahmed, presi- 
dent of Cresbank, one of the 11 invest- 
ment banks. However, such optimism 
does not hide the memory of this year's 
large banking scandal involving the 
Mehran Bank - a private bank. 

The bank's chief operating officer was 


arrested an charges of fraud, after alle- 
gations that he had given large loans to 
influential clients in return for personal 
favours which eventually led him to 
amass a fortune running into several 
hundred million rupees. The govern- 
ment claims credit for moving last to 
protect depositors' interests in that 
hank, despite concerns over inadequate 
laws. 

Even if Pakistan is able to live up to 
the challenge of regulating private 
banks to protect consumer interests, 
the sector would stQl be left to deal 
with the public sector banks. Some 


bankers say that, before putting up the 
two hanks for privatisation, the govern- 
ment wifl have to reveal their exact 
financial picture, and give the new 
management full power to hire and fire 
in order to trim overstaffed operations. 

“When we bring these issues [banks] 
to the market, we would have to make a 
full disclosure, and that is the only way 
to get a genuine investor,” concedes Mr 
Naveed Qamar, chairman of the privati- 
sation commissi on, responding to those 
concerns. Despite that commitment, no 
one knows what the response would be 
to such an offer. 


Case study. Pakistan Telecommunications 


Privatisation flagship 


As the country 
celebrates this year’s 
first public offer of 
shares in the Pakistan 
Telecommunications 
Corporation (PTC), no 
one can be entirely 
certain of the 
company’s future, 
reports Farhan Bokari 


T he government claims 
that the offer of PTC 
shares is a huge success. 
But some analysts regard it 
as a grave setback - possibly 
one which has left the FTC’s 
rep u ta t ion in tatters. 

At the root of the contro- 
versy lies the claim that cli- 
ents were provided with mis- 
leading information about 
the scale of the company’s 
operations and the number of 
lines in use before 6m shares, 
representing 12 per cent of 
PTC, were placed on the mar- 
kets in Pakistan «nii abroad 
ffrf* year. 

T his included lm shares, 
sold through vouchers of 100 
shares each, in Pakistan. 
After a s tr o ng show of public 
interest in that effort, the 
government abruptly 
changed the initial terms and 
derided to keep all the sub- 
scription money. 

But that triggered protests 
from brokers and Investors, 
many of whom expected to 
make windfall profits of up to 
160 per cent, based on projec- 
tions for future price rises. 

At the same time, some 
bankers also expressed con- 
cern over the government’s 
last-minute decision to caned 
an agreement with Union 
Bank of Switzerland (UBS) 
for a subsequent placement of 
5m shares in international 
markets. 

The cancellation came in 
response to protests from 
investors, many of whom 
claimed that the price fra the 

international placement was 
undervalued and would then 
force down the market value 
of shares already sold in 
Pakistan. 

In the light of that criti- 
cism, a contract for the place- 


ment of the 5m shares was 
given to Jardine Fleming. 
That placement brought in 
approximately 9900m, as 
opposed to an earlier esti- 
mate of 9500m. 

This gave Pakistan an 
opportunity to claim that it 
was right in changing the 
terms of the sale. 

Bui that view has hardly 
helped to save the company's 
hue, especially in view of the 
subsequent troubles over the 
disclosure of information. In 
less than three months, share 
prices have fallen by over 20 
per cent, due to the uncer- 
tainty. 

Among other troubles, a 
delay in the declaration of 
the results for the fiscal year 
ending this June haa also 
intensified anxieties among 
investors. 

Despite these difficulties, 
the government continues to 
insist that Its plans remain 
on track. Some officials 
that problems such as the 
delay in the results have 
occurred because the govern- 
ment Is carrying out detailed 
assessment of the company’s 
assets, so that future inves- 
tors are provided foil infor- 
mation. 


Strong international 
competition to take 
over the management 
is expected 


“We want to give confi- 
dence to the investor that the 
telecommunication sector 
will not be part of the whim 
and fancy of a state, but that 
anybody who comes within 
the framework [of the new 
terms] will know very dearly 
what Ms rights and what Ms 
obligations are, 1 * explains Mr 1 
ShaMd Aziz Siddiqui, a senior 
nfffrial in the government's 
communications m inistry and 
a member of the Pitt's board 
of directors. 

According to Mr Siddiqui, 
the company's new manage- 
ment will have exclusive 
rights to the market for up to 
seven years, so that it has a 
certain degree of security. 

The government plans to 
start inviting offers by the 


end of next summer from 
“strategic investors" - a term 
used to describe large tele- 
phone companies or business 
groups which are willing to 
buy at least 26 per cent of the 
shares and take over the 
management. If there are no 
further delays, the new man- 
agement may step in by early 
1996. 

Some officials expect strong 
International competition, 
based cm the diff erent compa- 
nies which have made inqui- 
ries. According to one official 
involved In the preparation of 
the privatisation plan, these 
have included AT&T, Austra- 
lian Telecom, Singapore Tele- 
com, Alcatel and Cable & 
Wireless. 

In addition to inviting 
these offers, it is planned that 
a new company shall be set 
up, called the National Tele- 
communications Corporation 
(NTQ, to provide service to 
the defence forces and gov- 
ernment offices. This Is in 
response to concern that pri- 
vate ownership, especially 
foreign, taking over the tele- 
phone company would create 
new security risks for the 
country. These concerns have 
delayed privatisation efforts 
for almost three years. 

Some businessmen are wor- 
ried that Islamabad risks 
alienating international 
Investors if there are any far- 
ther delays. 

“The more the delay, the 
greater the possibility that 
companies looking at PTC 
will look elsewhere,” cau- 
tions Mr Farooq Hasan, chair- 
man of Paktel, Pakistan’s 
Largest mobile telephone com- 
pany, a joint venture with 
Britain's Cable ft Wireless as 1 
the lead foreign partner. 

“Nowadays, there are other 
countries which are trying to 
privatise the telephone Miri- 
ness, too,” he adds. 

However, Mr Hasan con- < 
cedes that the government 
faces a dUamma, because of 
all file work that needs to he 
done, such as the provision of 
full financial details and 
preparation of the latest com- 
pany results - “they face a 
dilemma too, the PTC cannot 
be given when it is only half- 
cooked,” he says. 


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With an international outlook and a regional focus, MCB is a dynamic, forward looking hank com- 
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With a 47 year old history, this recently privatised bank has posted impressive grins in recent 
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VI 


FINANCIAL TIMES MONDAY NOVEMBER 28 »94 



Committed 
to the growth 
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economy 


National Development Finance Corporation, since 
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TERMFUND. Telex: 20842 NDFC PK FAX: 525353 


PAKISTAN 6 


P akistan has opened its arms to 
overseas investment with some 
of the most libera! economic 
policies yet seen in Asia: it has been 
rewarded with an inflow of foreign 
capital which Is the envy of some of 
Its neighbours. 

In the past four years, successive 
gover nme nts have reduced tariffs: 
deregulated the market: made the 
rupee fully convertible; and begun to 
sell-off state industries. The moves, 
encouraged by the World Bank and 
IMF, have resulted in a total of 
$1.24bn of direct investment being 
attracted since 1990. 

Portfolio investment has risen to 
$865m - a figure likely to rise sharply 
after the public listing earlier this 
year of Pakistan Telecommunications, 
the state telephone company. 

While foreign fund managers have 
been wooed by privatisation, more 
than 200 multinational companies 
have embarked on joint ventures and 
partial acquisitions. Their presence is 
reflected on the Karachi Stock 
Exchange, where the KSE-100 is pep- 
pered with foreign names such as ICL 
Lever Brothers, Glaxo, Shell and 
Reckitt & Colman. 

The government of Ms Benazir 
Bhutto has also signed a host of lucra- 
tive investment deals which, accord- 
ing to the Overseas Investors Cham- 
ber of Commerce, could push the total 
value of direct investment beyond 
$25bn by the end of the decade. 

It is an extremely positive environ- 
ment for foreign investment,'* says Mr 
Nisar Memon, president of the cham- 
ber. “We've seen an acceleration 
which has surprised even those who 
said it would never happen." 

The cynics point out, however, that 
initial contracts signed by overseas 
companies may not be taken up. 


Tim Burt reports on the growing multinational presence 


Surge of foreign capital 


ufiie. wltt sated .Wrt' 

says his company paid to “fix- 

ing agents” -who helped secure a 
lucrative deaL. 


There is also concern that the growth 
in portfolio investment has not been 
matched by any sizeable Increase in 
direct investment This has remained 
steady at $300m-$350m a year, while 
portfolio investment has Increased 
from $84m in 1990 to $339m last year. 

“The challenge now for the govern- 
ment has to be converting portfolio 
investment into direct investment, 1 ’ 
says Mr Farrukh Khan, chief execu- 
tive of Karachi-based BMA Capital 
Management. “For that to happen 
there has to be better infrastructure, 
consistent policies and a solution to 
the law and order problem." 

With limited reserves to spend on 
infrastructure projects and no end in 
sight to violence in Karachi, the gov- 
ernment is in a difficult position. It 
has secured some invaluable invest- 
ment projects - dominated by the 
$l.6bn Hub power project, backed by 
National Power of Britain and Xenel 
of Saudi Arabia - and others are tan- 
talisingiy close. But business leaders 
warn that unless it gets a grip on 
unrest in the commercial capital, the 
investment effort will be undermined. 

Mr Byram Avan, chairman of the 
diversified Avail hotels and manufac- 
turing group, warns: "Direct invest- 
ment will suffer if disorder worsens. 
Pakistan may be considered too risky 
and companies could have trouble 
raising loans for developments." 

There are similar concerns at ANZ 
Grindlays Bank, where general man- 
ager, Mr Azhar Hamid says: "We need 


strung arm tactics to control the situ- 
ation. If Sindh, and Karachi are not 
stable it will be a serious Mow to 
investor confidence." 

At the Overseas Investors Chamber 
of Commerce, Mr Memon admits secu- 
rity measures could affect the cost of 



Gordon Wu: Hong Kong business leader 
investing In Pakistan 


setting up in P akis tan but he takes 
heart from the fact that most multina- 
tionals have mam tamed a presence 
despite periodic outbreaks erf violence. 

The government has played down 
the security fears, concentrating 
Instead on its privatisation record - 
Rsl3bn has been raised from the sale 
of 60 state companies - and its suc- 


cess in attracting investment from 
south-east Asia and the Pacific Sim. 

Its «H<rfWrjr/>n is imderstandahle. 
Toyota, Honda and Suzuki have estab- 
lished joint ventures; South Korea’s 
Hyundai Motors has submitted out- 
line plans for a plant in Lahore an &, 
in the biggest deal yet, Hong Kong 
business leader Gordon Wu has 
si gnpd an a greement to bmldan $8bn 
coal-fired power station. 

Investors in the energy secto r have 
alsn stepped up their activity. Union. 
Texas Petroleum plans to spend 
$173m over the next three years, 
white Tasmn - the UK exploration 
group — is moving towards full, pro- 
duction in its Eadamwazi gas field, 
where $ 18 Qm has been invested. - 

Mr Joel Dykstra, business coordina- 
tor at Las ma ’s international division, 
says the group may consider b idding 
for state-owned gas facilities. Nationa l 
Power is looking at Pakistani privati- 
sation issues too. Mr Philip Snritfa, 
director of treasury, says It “would 
tak« an interest where . there's an 
opportunity to develop a stake". 

AH this suggests that overseas exec- 
utives are not as concerned about the 
law and order problem as their Paki- 
stani counterparts, but other hurdles 
remain. One senior- western econo- 
mist in Islamabad warns that difficul- 
ties in raising deb t finance co uld slow 
down the pace of investment 

Concerns remain that corruption, 
too, may prove a powerful deterrent 
to some companies. One foreign exec- 


don warn u ~wi,i ,;75~- 
stolen a- march on ftsjieigHxntf* 
growing investment opportu^^te-. 
.countries such 

inflow of foreign captaL 

and institutions are .yang spare jagt .; 

to chase these deals- It sanwtswfc. 

. deterred them or they saw netig*. 
-prospects elsewhere? the Sow - 
dry op in six months," says 
lyst Seme investors we ago 
have been unnerved by “gj* 0 *™: 
mentis handling of the;P TC sa fe: 
which .was overshadowed by. exrars m . 
its prospectus and ptoblems wifir 
voucher dfstributitoJ- : _ '• 

With fishn of privatisations 
planned before the. end of the decade. ; 
the government is, thaefore, keett to 

■ reassure investors and has turned to : ■ 
the Pakistan Investment Board to - 
help overseas companies- This pro- 
vides a one-stop shop wttchsmoothas L .. 
the way through the bureaucratic 
paw pul obtains miidstesaal author- . 
ity far new projects. “We market a 
packag e of incentives tailored to 
investors* needs," says Mr Mohib 
ITiiah shah,- secretary trf the FIB. - . 

Citing its success in winning- . 
approval for new investment, headds 
that 1CI. Pakistan received- clearance 
for a $4(K)m plant to manufacture pure 
terephthalic add within 30 days. 

Mr Naseem Mira, chairman of the 
company, was impressed. “There .was 
a time when that would have taken, 
three years,” he says. “We have over- 
come the problems because we’ve 
here for a long time. New inves- 
tors have more anxieties — for them it ; 
may not be so easy." •' . 


S oon after arriving at 
Khewra. Mr Richard 
B anks decided that the 
salt mines of the Punjab would 
sustain a lucrative new off- 
shoot for Imperial Chemical 
Industries, as the British 
group was then known. 

His 1929 excursion - over- 
land to Marseilles, steamer to 
Bombay and train to Lahore - 
proved extremely worthwhile. 
The business, founded on soda 
ash, has grown into one of the 
company’s most important 
overseas subsidiaries - boast- 
ing sales last year or Rs4.7bu. 

“ICI bad expansionist ideas 
and a number of us were 
selected to go foreign parts,” 
recalls Mr Banks, now aged 
92. “The company knew it 
would have to start manufac- 
turing overseas, and it wanted 
to find the best sites.” 

By negotiating a deal to 
extract Khewra’s salt free of 
tax, the ICI engineer enabled 
his employers to exploit cheap 
reserves of the basic material 


Profile: ICI Pakistan 


Soda ash leads to much more 


for soda ash, an important 
ingredient in products such as 
soap, paper and glass. 

He helped persuade the com- 
pany to set up a manufactur- 
ing plant iu what was to 
become Pakistan, a country 
where today it is a leading 
supplier of not just soda ash, 
but also polyester fibres, 
paints, agrochemicals and 
seeds, chemicals, pharmaceuti- 
cals and consumer products. 

Rising demand for those 
activities, with the exception 
of agrochemicals, helped lift 
pre-tax profits last year by 30 
per cent to Rs639.5m. 

FTom its beginnings at Khe- 
wra, ICI Pakistan - in which 
the UK parent retains a 61 per 
cent holding - has become the 


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fourth largest company on the 
Karachi stock exchange with 
fixed assets of RsLSSbn and 
reserves of Rs 128.6m. 

Mr Naseem Mina, chairman 
and chief executive, says the 
company's strategy has not 
changed much since Mr Ranh* 
was dispatched from England. 
“We want to grow aggres- 
sively where we have market 
strengths and step ont into 
new areas.” 

As part of that vision, ICI 
Pakistan plans to spend $400m 
on building a chemicals plant 
to manufacture pure tere- 
pbthalic acid, used in produc- 
ing polyester fibre. 

The plant will have a capac- 
ity of 400,000 tonnes a year, 
and represents one of the 
country's largest-ever indus- 
trial investments. 

The company will also spend 
np to Rs4bn to expand its poly- 


ester stable fibre operations in 
Sheikhupora, increasing 
capacity by 50,000 tonnes a 
year, while investing a farther 
Rs200m on a new power gener- 
ation facility «nd RR y> m plant 
to manufacture wirinm car- 
bonate at Khewra. 

It is spending another Rslbn 
to expand its soda ash capacity 
in Punjab by 50,000 tames a 
year, and is hwrfaTtiwg a new 
plant to manufacture 10,000 
tonnes of sodium bi c arbo na te. 

By investing more than 
Rs3bn on expanding its bust 
nesses over the past 10 years. 
Id Pakistan has emerged with 
considerable muscle in the 
ino-easingly Important Indus- 
trial lobby. Unlike smaller 
companies, It has no reserva- 
tions about offering advice to 
the government on economic 
policy. 

In Its last annual report, the 


company says tire government 
must mobilise resources “par- 
ticularly to improve popula- 
tion control, hesdth,- education 
and infras tructure”. 

It «kn Mih for the “elimina- 
tion of exemptions and conces- 
sions given to toe past; which, 
according to some estimates 
amount to a staggering 
RslSbn per aimnm m lost rev- 
enue”. 

Mr Mirza applauds govern- 
ment efforts to liberalise the 
economy and attract foreign 
investors, but he warns the 
Bhutto administration not to 
neglect the Interests of its 
largest domestic companies. 

While welcoming the 
principle of tariff reductions, 
he adds: “To suddenly 
dismantle the tariffs would be 
a disaster. AH industry in 
Pakistan have been hrippd by 
[protection] barriers, so there 


mHst be help to adjust” 

Before considering its latest 
ro un d of investment — funded 
from borrowing and rights 
issues - the group also sought 
government assurances that 
fiscal policies would remain 
consistent. 

' Mr Mirza, who has an armed 
guard outside his office in 
yurflrftf, wants' the govern- 
ment to take action too on 
curbing violence In t be dty. 

“This is, the gateway to 
Pakistan and this Is where 
everyone arrives first. We 
must get the law and order 
situation sorted, out or it could 
create anxieties among new 
I nvestors.” • 

ICI Pakistan, however, has 
• no surii. anxieties. As it pre- 
pares to' celebrate fine fiftieth 
anniversary of soda ash pro- 
duction, Mr Mirza says fit Is 
hereto stay. 

“This is a good place to 
invest.? says the chairman. 
“But a* we -have found oat. 
you most have, the right, prod- 
ucts and "mb* sure ftat they 
w*w capture the market.” 


77m Burt 


W hen, more than four 
decades ago. a young 
reporter with leftist 
leanings resigned from his job 
in protest after his editor was 
arrested in an anti-left clamp- 
down. he began a journey 
which has made him one of 
Pakistan’s most successful 
businessmen. 

Mr Yusuf Shirazi, chairman 
of the Karachi-based Atlas 
group which owns seven com- 
panies listed on the stock mar- 
ket, now wants his country to 
make a similar sharp turn 
around away from years of 
government-backed industrial 
growth to one driven by its 
own competitive edge. 

He is convinced that Pakis- 
tan’s acceptance of interna- 
tional Monetary Fund condi- 
tionalities and the 
government’s decision to 
reduce tariffs in line with the 
new global trade agreement, 
will force businesses to prepare 
for stronger international com- 
petition - “the entrepreneuri- 
alism should now begin, led by 
competitiveness, rather than 
state subsidy. Only the fittest 
will survive,” he says. 

Mr Shirazi claim; that Atlas 
group has succeeded in keep- 
ing up with changing times. 
Starting with an initial invest- 
ment of Rs5GO.OOO in 1962. Atlas 
has now emerged as one of the 
leading companies on Pakis- 
tan's business horizon. Some of 
its more visible interests 
include insurance. Investment 
banking and leasing, as well as 
a Honda car plant which 
opened this year in Lahore, a 
Honda motor-cycle factory, an 
engineering spares company 
and a vehicle battery produc- 
tion plant 

Results for its listed compa- 
nies last year saw profits rise 
to Rs437.5m and paid-up capital 
at RsLlbn ($35m). Fixed assets 
stood at Rs5bn (S160m) and 
sales reached Rs8bn (8255m). 
Earnings per share for the 
entire group were Rs4.37. or 
roughly 40 per cent of paid-up 
capital 

On the back of that success, 
the group’s plans include 
exporting motorcycles to Ban- 
gladesh. Nepal. Sri Lanka, 
Ghana and the Middle East 
The Atlas investment hank 
and leasing companies are also 
examining prospects for open- 
ing branches in the UK. Middle 
East and southeast Asia. 

Mr Shirazi concedes, how- 
ever, that doing business is not 
always easy. Policies pursued 
by successive Pakistani gov- 
ernments, for example, 
exempted from tax under-de- 
veloped parts of the country, 
giving these areas large incen- 


Profile: Atlas Group 


Keen for competition 


fives to encourage industrial 
growth. This placed areas of 
developed industry at a severe 
disadvantage, denting profit 
margins. Mr Shirazi also criti- 
cises the taxation system - he 
is well placed to do so, having 
served as a tax official for 
almost eight years). One of the 


biggest problems faced by 
many businesses is the grow- 
ing practice of deducting tax at 
source, rather than allowing 
businesses to pay at tile end of 
the year, he says. As a result, 
the system is abused with 
some employees of the tax 
department allegedly demand- 


ing up to 38 per cent of the 

rafimds in bribes. 

Mr Shirazi retains a strong 
belief in Pakistan’s future, 
even if some problems make 
the country look “unpromis- 
ing” in the short term. 


Farfian Bokhari 



-tk* 


* .*1 



United Bank Limited 

wishes the 

Prime Minister of the Islamic Republic of Pakistan 
Mohtarma Benazir Bhutto 
& 

the Prime Minister of Great Britain 
Mr. John Major 
success in their efforts to enhance 
trade, finance and. understanding between the lwo countries 


[UTElfU Un * ted Bank Limited 

— — mj Incorporated in Pakistan 




- 


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v,'-V' 


'*•’ SI A 





-■'i. " '*■> W* 

- 5 - - v 


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; | ^ct*. OU r * lot 






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FINANCIAL TIMES MONDAY NOVEMBER 28 1 994 


VII 


★ 


PAKISTAN 7 


Farhan Bokhari on the textile sector’s problems 

Pockets of hope sought 



SanfiMumy 



The cotton market will the crop tafl short of Initial estimates? 

Cotton farmers and manufacturers are anxious for a 
good harvest, writes Tim Burt 

Textile industry may 
need imports 

Cotton 

Area, production (rralion) Yield (Kg per hectare) 



Pakistan's large textile 
industry is reeling under the 
pressure or mare than two 
years of losses suffered by 
most of the country’s spinning 
units. As a result, many textile 
industrialists are convinced 
that they will not be able to 
recover, unless balled out by 
the government. 

"The industry is heading 
towards collapse,” compl ains 
Mr Riaz Tata, chairman of the 
All Pakistan Textile Manufac- 
turers Association, (APTMA) 
the national association of the 
textile Industry. 

The spinning sector has been 
hit hardest by the crisis. 
According to Mr Tata, up to 30 
per cent of the country's 8.3m 
spindles have been forced to 
stop production. Some officials 
estimate that up to 90 per cent 
of the largest 446 spinning 
units have defaulted on hank 
loans. 

Once again this year, the 
extent of the problem will be 
determined by the cotton crop, 
which the government hopes 
will reach its estimated 9.5m 
bales, as opposed to newspaper 
forecasts of a possible shortfall 
of at least lm bales. After crop 
failures for two years in a row, 
Pakistan's textile sector can ill 
afford another year of failure 
which would only lead to 
higher raw material prices. 

Despite such concerns, the 
government is convinced that 
recent agreements with the 
European Union and the US to 
increase the quotas for Pakis- 
tan’s textiles would help to 
improve exports. That could be 
crucial for the country's trade 
balance as it relies for up to 60 
per cent of its export earnings 
on cotton-related products. 

At the same time, Islamabad 
has agreed to open up its 
domestic market to garment 
imports as part of the govern- 
ment’s commitment to reduce 
tariffs to an average 35 per 
cent by July 1996, from more 
than 75 per cent 
“The sky is the limit It now 
depends on the industry," says 
Mr Ahmed Mukhtar, the com- 
merce minister, who has been 
urging businesses to become 
more competitive in response 
to the new opportunities. 
Senior officials at the com- 
merce ministr y are convinced 
that Improvements in the qual- 
ity of T-shirts and fabrics dur- 


bislda a sffit shop in Peshawar 

tag the past few years will help 
the country’s exports, and cre- 
ate new pockets of hope for the 
textile sector. 

The ministry is urging 
exporters to enter into joint 
ventures with established for- 
eign enterprises in quality gar- 
ments, so that they can have a 
stronger edge over their inter- 
national competitors. “A shirt 
costing the equivalent of US$8 
in Pakistan can fetch at least 
twice that price in retail on 
Oxford Street in London. We 
have to become aggressive 
enough to be able to force our 
way ahead.” says one official. 

Some exporters take the cue 
from such encouragement and 
say that they are prepared to 
meet the challeng e, “There are 
countries that don’t have cot- 
ton of their own, and they are 
competitive and surviving.” 


A new system of 
selecting quality cotton 
may be introduced 


says Sheikh Mohammad Obaid, 
Pakistan's largest exporter of 
towels and bed-linen. 

Mr Obaid discounts fears 
over the effects of the cotton 
losses and expects the new 
quotas to generate increased- 
bustaess. He now wants to see 
a greater push towards manu- 
facture of quality garments so 
that textile exports generate 
more revenue. 

However, Mr Tata is con- 
vinced that the textile sector 
will need to improve its own 
performance after years of 
neglect He believes the gov- 


ernment should immediately 
privatise the large public sec- 
tor banks, so that the money 
which is wasted in the large 
administrative costs for run- 
ning over-staffed and ineffi- 
cient banks could instead be 
used to give more credit to 
businesses. 

Other industrialists are also 
urging the government to 
introduce stringent regulations 
for grading of cotton and 
improved quality of ginning, so 
that the textile business can 
prepare itself to produce inter- 
nationally recognised products. 
“The quality of ginning is not 
up to international standards,” 
concedes Mr Mukhtar. 

Senior officials say that the 
government has begun to look 
at these problems with a view 
to introducing a new system of 
selecting quality cotton before 
it is processed. Despite the 
country’s ambitious targets, 
especially after the recent 
quota increases, some industri- 
alists are convinced that a 
solution to the sp inning crisis 
holds one of the most impor- 
tant keys to long-term growth 
prospects. 

In an effort to stimulate 
growth in all sectors of the 
economy including textiles, the 
maximum bank lending rate 
has been lowered from 19 per 
cent to 17.5 per cent this 
month. The government has 
also waived interest payments 
on loans given by the public 
sector banks since 1992 to help 
the textile sector repay its 
debts. 

However, it may be some 
time before any signs of recov- 
ery become evident 


F armers across Punjab, 
the heartland of the 
cotton industry, are 
anxiously scanning their crops 
for signs of a good harvest 
They are not alone. A 
bumper crop would draw sighs 
of relief not only from the 
farming community but also 
from the textile industry, 
which depends on home-grown 
cotton. The government would 
be similarly relieved after 
seeing production of its main 
export earner fall from 9.1m 
bales to 7.9m bales last year - 
almost 40 per cent below the 
record 12 £m bales produced in 
1991. 

The collapse - blamed on 
pest attacks and heavy rains - 

sent shock waves through the 
economy. For cotton prod- 
uction underpins a textile 
industry that employs 35 per 
cent of the total labour-force, 
and supplies raw materials to 
more than 1,000 ginning 
factories and hundreds of 
mills. 

Hopes of a recovery this 
year, however, have been 
dented by reports or a poor 
harvest in Sindh, where 
prolonged rainfall has ruined 
much of the crop. Although 
the southern province 
produces less than 20 per cent 
of Pakistan's total output, the 
Small Landholders and 
Farmers Association says the 
situation is no better in 
Punjab, home to the prog- 
ressive farmers who once 
boasted some of the world's 
highest yields. 

Mr Ishtiaq Jafari, chairman 
of the association, claims that 
only 5m bales will be harv- 
ested this year, far short of 
government estimates of 9.5m 
bales. Pests have destroyed 
about 30 per cent of the crop, 
while up to 20 per cent may 
have been rained by rain, 
according to the association. 

Its gloomy forecasts are 
rejected by Mr V.A.Jafarey. 
adviser to the prime minister 
on finance, who accuses Mr 
Jafari of deliberately playing 
down the industry’s prospects. 

“The growers say the crop is 
bad just to push prices up," he 
says. “The real position is far 
from clear. There has been 
damage in Sindh, but some 
parts of the Punjab have 
harvested more than last 
year.” 

Privately, government 
officials and western econ- 
omists admit the crop will 
probably fall short of initial 
estimates, with output 
hovering in the region of 
about 8m -8. 5m bales. 

That may be bad news for 


the textile industry, which 
together with raw cotton 
accounted for 68 per cent of 
Pakistan's total exports in 
1991-92. Domestic consump- 
tion alone has exceeded 8.5m 
bales in recent years, and the 
country could lose Rs7bn 
($228. 6m) of foreign exchange 
earnings if there is insufficient 
production for overseas sales. 

If the crop fails to meet even 
domestic needs, the textile 
companies would be forced to 
import higher priced overseas 
cotton, increasing their costs 
and squeezing profit margins. 

T he knock-on effect could 
be dramatic. The textile 
companies represent 
almost a third of all companies 
listed on the Karachi Stock 
Exchange, and the market 
invariably falls on bad news 
from the cotton growers. 

Aware of the grim prospects 
for Pakistan if output 
stagnates, the government has 
set np a Cotton Resource 
Group to investigate the fall in 
production and snggest 
remedial measures. In its first 
report, the group blamed the 


1882-3 04-5 86-7 

Bamoor hMnvoi AflrioAn 

decline not only on persistent 
rain and viruses, but also on 
the decision by many farmers 
to abandon cotton altogether 
or their failure to protect 
crops with adeqnate pest- 
icides. 

A large number of fanners 
have switched to sugar cane in 
Punjab, prompting a 
1.89m-hectare contraction in 
the area used to grow cotton. 

Yields per hectare, 
meanwhile, fell 14 per cent 
bum 574kg' to 493kg last year 


804 . 90-1 • 92-3 1803-4 


- almost half the 1991-92 total 

- following an attack of 
cotton-leaf virus. Some 1.88m 
bales were lost, worth more 
than Rsl9bn at current market 
prices. A further L65m bales 
were also lost to attacks by 
whitefly and aphids. 

“I don’t think production 
will ever get back to 12m 
bales," says one Panjabi 
cotton fanner, who asked not 
to be named. “Too many 
hybrid species have been 
introduced. They are more 


susceptible to viruses, and the 
first crop has been 
horrendous." 

In a bid to improve yields, 
the Cotton Resource Group 
has drawn np a list of 
recommendations. Imple- 
menting them requires 
significant government 
intervention at both federal 
and provincial levels, to 
ensure that new rules take 
effect and existing regulations 
are followed more tightly. 

The group, for instance, 
wants the government to 
reduce pesticide prices by 
abandoning the 27 per cent tax 
on imported products, which 
puts some of the best brands 
out of reach for small farmers. 

They also recommend 
tougher control of pesticide 
dealers, who have been 
accused of diluting products. 
Other demands include 
improved water supplies, 
better seed distribution, and 
new credit facilities for 

farmers. 

Although most of the 
measures have not been 
costed, the group said Rs55m 
was need just for research on 
combating pests and viruses. 

The Pakistan Central Cotton 
Committee has gone further 
and urged the government to 
give fanners interest-free 
credit facilities; incentives to 
combine production in 
co-operative farms; and crop 
insurance. 

This leaves the government 
with a dilemma. It has few 
reserves to meet all the 
farmers' demands, but the 
knock-on effects of ignoring 
them may be even more costly. 

Leaving the cotton industry 
to market forces could 
persuade more farmers to 
switch to other crops, and 
deprive the textile industry of 
raw materials. In turn, that 
could lead to widespread 
factory closures and higher 
unemployment. 

With the ruling Pakistan 
People’s Party relying on rural 
areas of Punjab and Sindh for 
the bedrock of its political sup- 
port, it is unlikely to abandon 
the industry in a hurry. 

Indeed, the findings of the 
Cotton Resource Group have 
already been endorsed by the 
National Agriculture Co-ordi- 
nation Committee, which 
helps to formulate policy. 

An injection of government 
funds and incentives is likely 
to boost the industry, but it 
may he only a temporary 
diversion for a fanning com- 
munity moving inexorably 
towards a more diversified 
crop base. 


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BARINGS 


Thi* i, „MicJ hy B.umi;* plw .inJ approved hj Raring Sccuririo Limnr J, a member nf ihc SFA. The kivko im nnirnt J may ilk In- 

tuit. iMr fur. nr avail.ihk' in, prn.ili: mvc«MR If In .fiiuhr, private invtsmrt diuuld imnMih their invcMinmr .iiiritnri. Any innate rums he 
U S. i nvr. < i.hi miiM k: carried .nil (hr. tilth fcnn« Seeunne* Inc. 




•rii^-muiaiT'na v> croc 



FINANCIAL TIMES MONDAY NOVEMBER; 


28 1994 



PAKISTAN 8 


Q ari Saeed-ur-Rahman, 
an Islamic scholar and 
preacher, shook his 
head sadly and said: “I 

am afraid Pakistan jg becom- 
ing less Islamic by the day. 
People have no image of 
i ttiamit! society in their minds." 

Even as he spoke, earlier this 
month, in his mosque in 
Rawalpindi, another preacher 
working a few hundred miles 
away was trying to make a 
reality of his particular image 
of Islamic society. Armed mili- 
tants acting in the name of 
Maulana Soafi Mohammed had 
seized control of die district of 
Malakand in the mountains of 
the north-west frontier and 
imposed Islamic law. It took 
the security forces a week to 
recapture the territory. 

While one mullah bemoans 
the decline of religious faith, 
another leads his believers into 
battle. There could not be a 
greater contradiction over the 
role of Islam in contemporary 
Pakistan. 

In the country as a whole, 
the intensity of religious obser- 
vance is almost certainly on 
the decline - as Qari Saeed 
notes. But, on the margins, 
fundamentalist fervour is 
almost as strong as it was at 
its peak in the 1980s during the 
Islamic jthad (holy war) 
against the Soviet occupation 
of Af ghanistan. 

The arsenal of guns and 


Religious o b s e r vance has declined but fundamentalists continue to wield influence, reports Stefan Wagstyl 

Islamic fervour still affects public life 


ammunition left from the 
Afghanistan war has put 
power into the hands of armed 
groups, some of them commit- 
ted to a new jihad in Pakistan. 
Radical preachers often take 
advantage of the country’s mis- 
erably low levels of education 
to 531 young minds with ideas 
they are unable to question. 

F nwdann» n faiifeTW is a diffi- 
cult rhaiigngp for Pakistan. As 
a country created tor Moslems, 
it must necessarily have a 
strong Tslamir identity. Yet, it 
also has to accommodate sig- 
nificant minorities of Hindus 
and Christians, and cope with 
the competing demands of a 
Sunni Moslem majority and a 
Shia minority. 

Moreover, the government 
must pursue economic and 
social development without 
alienating too many conserva- 
tive Moslems who hold strong 
views over matters like the 
social emancipation of women. 
Finally. Pakistan 's tWO biggest 
foreign policy issues - the 
long-running conflict with 
India over the troubled region 
of Kashmir and the civil war in 
Afghanistan - are overlaid by 


religious considerations. 

While Moslems, Hindus and 
Christians have clashed for 
centuries in the Indian sub- 
continent. the need to live 
together in close proximity 
also brought long periods of 
peace. 

M ohammed Ali Jinnah, 
P akis tan’s founder, 
and the country's 
early leaders showed little 
interest in rigidly enforcing 
Islamic codes. Often educated 
in miss ion schools and in Brit- 
ish universities, their views 
had little in common with the 
faith of their people. 

Yet as the euphoria of build- 
ing a new country evaporated, 
religion became an Increas- 
ingly powerful force in public 
life. Ironically, it was Mr Zulfi- 
kar Ah Bhutto, a western-edu- 
cated prime minister, who in 
the 1970s was forced by pres- 
sure from the mullahs to move 
the weekend from Saturday- 
Sunday to Frlday-Saturday. A 

connoisseur of whisky and fine 
wines, Mr Bhutto was also per- 
suaded to ban alcohol con- 
sumption. 


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However, it was left to Gen- 
eral Zia-ui-Haq, the military 
dictator who overthrew Mr 
Bhutto to pursue Islamicisa- 
tion in earnest. Using the sup- 
port of the mullahs to give 
legitimacy to his undemocratic 
regime, he imposed strict con- 
trols on public displays of art, 
films and theatre, extended the 
teaching of Islam in schools 
and encouraged the strict 
observance of public prayers, 
notably in government offices. 

Cosmopolitan Pakistanis 
remember the 1980s as grim 
and repressive, but for most 
mullahs it was a golden age. 
when the country's energy was 
focused on the jihad in Afghan- 
istan. Qari Saeed says: “Gen- 
eral Zia did not bring full 
Islamic laws, but he made 
progress.” 

General Zia's death has been 
followed by a moderate easing 
of pressures in society to con- 
form to Islamic codes or con- 
duct Among the elite, people 
hosting parties at home have 
become less cautious about 
serving alcohol, though public 
consumption remains illegal. 
Video recordings of western 
films abound. Art galleries and 
theatres are broadening their 
offerings a little. 

Jamaat-e-Islami and other 
Islamic parties, which held 
considerable influence under 
General Zia, have seen their 
support slump - to just five 
seats in the 217-member 
National Assembly in last 
year's general election. The 
vociferous condemnations of 
the Islamic clergy, who believe 



offences- Also; toany . sniUafcs : 
believe that Islam ; invests In'; 

them the right to be ; jaflgBS- 
Bot the government wnq&rpre- 

- StSug existlh^ ; toBS'fSjfl , 

courts to give them 8 
Mami e flavour, - . ;. 

This is not a theordti^al 
argument The upristeg^m 
. jfajakand followed 8 «#ae; 
court decision m’Febrdajj aStit 

king down eristinr 
eming the trfijal areas fejEfe' 

. T tffr ** 1 aR d north-westaf -Pafcis- 
tan. The court . ' ‘ 

laws nniymstitatiopal ; Q&- tfafr 


Children being taught about Mam: wffl they keep the taitfa? 


a woman cannot lead an 
Islamic country, have tailed to 
prevent Ms Benazir Bhutto 
w innin g two general elections. 

For Mr Altaf Gauhar, a vet- 
eran journalist and magazine 
editor, this is evidence that 
talk of “rising fundamental- 
ism” in P akistan is “a huge 
hoax. 

"Ordinary people saw the 
Islamic system in action under 
Zia. They don’t want it back,” 
he says. Yet. even if people are 
willing to dispute the clergy’s 
will at the ballot box, and to 
some extent in their private 
lives, they are still cautious 


Need for social progress 

Labour force of 
10m children 

P akistan's record on aid agencies. Over five year 
social welfare is visible the programme envisage 
on almost every street S7.7bn being spent on until 


P akistan's record on 
social welfare is visible 
on almost every street 
corner. Malnourished children 
wait at traffic-lights to beg 
from motorists or sell newspa- 
pers which they will never 
read. In rural areas, many 
work the land or provide 
labour in rice mills and brick 
kilns, writes Tim Burt. 

In Peshawar, capital of 
North West Frontier Province, 
children as young as six work 
in the kilns, miring mod and 
filling brick casts. Impover- 
ished families — most earning 
less than Bs2,000 a month - 
cannot spare their children for 
school and send them to work 
as pathems, the brick mak- 
ere.' 

A survey of 20 kilns by the 
United Nations Children’s 
Fund (Unicef) found almost 
400 school-age children at 
work. In a damning indict- 
ment of a country where the 
labour force includes 10m chil- 
dren under the age of 15, Uni- 
cef says It was startled fay the 
“high rate of ilUteracy. lack of 
family planning, exposure to 
health hazards, inadequate or 
total lack of medical facilities, 
deplorable sanitation and a 
general impression of being 
bonded to this way of life.” 

Those problems are not con- 
fined to child labour. They are 
endemic in poorer parts of 
Pakistan. The 1994 Homan 
Development Index, compiled 
by the United Nations Develop- 
ment Programme (UNDP), 
ranks Pakistan behind neigh- 
bouring countries in many of 
the key measures of social 
progress. 

Its annual population 
growth exceeds that of India, 
Sri Lanka and Bangladesh. Its 
performance, moreover, in 
school enrolment, adult liter- 
acy and the percentage of peo- 
ple in work also lags behind, 
while access to health and san- 
itation facilities are among the 
worst in the region. Address- 
ing the international confer- 
ence on population and devel- 
opment earlier this year, Ms 
Benazir Bhutto admitted: 
"Pakistan cannot progress if it 
cannot check its rapid popula- 
tion growth." 

That is a tall order for a 
country where the population 
has grown from 50m in 1960 to 
128m today, and is set to dou- 
ble by the year 2017. 

Anxious to improve Pakis- 
tan's standing on human 
development, the Bhutto gov- 
ernment has embraced and 
extended an ambitious Social 
Action Programme (SAP), 
launched last year by the gov- 
ernment of Nawaz Sharif fol- 
lowing mounting pressure 
from international donors and 


1 Soto BBRS 1983 


Comparative profiles of human development 



Morin 

Mi 

tagMnfe 

SrfUria 

56-3 pa 

59.7 yra 

52.2 pa 

712 yis 

$400 

$330 

$220 

$500 

23% 

22% 

2.7% 

1M 

3.4% 

8.0% 

3.2% 

3.7% 

24% 

50% 

32% 

68% 

38% 

91% 

37% 

89% 

28% 

38% 

47% 

41% 


puwtti 

H Ktteeotisro 1 
Eduettjc avotenaP 

AMtRmy 
Labor fra 3 




about making any kind of pub- 
lic challenge. The mullahs 
retain the sole right to inter- 
pret the faith - and are apt to 
condemn any challengers as 
heretics. For example, when 
Ms Bhutto visited France 
recently, she intervened in the 
con tr oversy over the protests 
of French Modems against a 
ban on their daughters wear- 
ing headscarves to schooL Ms 
Bhutto told them that it was 
enough to wear the veil in 
one’s heart Qari Saeed. for 
one, was furious - "she has no 
right to speak on this matter.” 
he says. 


An equally serious debate 
concerns the implementation 
of Islami c law, or Sharia, In 
Pakistan. All political parties 
are agreed* on the principle of 
introducing Sharia. The debate 
centres on how to put it into 
practice. 

I n its purest form, Sharia 
prescribes only physical, 
punishments for crimes - 
from Hogging to death - and 
fines play a very small part 
But it would be difficult for 
Pakistan to evolve a modem 
economy without financial 
penalties for business-related 


aid agencies. Over five years, 
the programme envisages 
S7.7bn being spent on initia- 
tives to enrb population 
growth, improve primary edu- 
cation, health care, rural 
water supplies and sanitation. 
In the first three years, the 
government plans to build 
more than 32,000 schools, 
improve teacher training and 
ensure that teachers stay in 
rural areas where demand is 
greatest 

It also aims to revamp 
health education and train 
female paramedics. A village- 
level initiative on family plan- 
ning is also under way to 
encourage contraception. 

Only a small cumber of vil- 
lagers have access to safe sani- 
tation and dean water. Public 
bodies have a poor record in 
maintaining water services, so 
control of new schemes will be 
transfered to local communi- 
ties. Hailing the programme as 
a step forward, Ms Bhutto says | 
it wiD "educate and motivate 
our people to a higher stan- 
dard of living." 

Some international aid agen- 
cies are not so sure. They 
claim the programme Is too 
narrow and the government 
will have few resources to 
fund its commitment while 
military expenditure remains 
at 6 per cent of gross national 
product - the highest figure in 
the sub-continent - and debt 
servicing continues to drains 
its reserves. 

"I haven’t seen any evidence 
of political groups being inter- 
ested in far-reaching social 
change," says a senior aid 
agency official in Islamabad. 
“Pa ki stan is not addressing 
land reform, women's rights 
or defence spending." 

Such officials want the SAP 
to become a community-based 
reform programme focused 
particularly on educating 
women, who take primary 
responsibility for family 
health care and education. 
Female literacy in Pakistan is 
among the lowest in the world 
at 20 per cent, and fewer than 
one-in-five girls complete even 
primary education - "b uilding 
more schools is irrelevant Hie 
problems are more basic than 
that," says Dr Tariq Bannri, 
head of the Sustainable Devel- 
opment Policy Institute. "We 
need to develop a cohesive vil- 
lage-based education system. 

It can’t be done through cen- 
tralised management” 

His view is echoed by Hr 
Jim Mayrides, head of tbe Uni- 
cef mission in Islamabad, who 
says female literacy is the key 
to improvements in basic 
healthcare and hygiene. "If 
they could read and write, it 
would help spread the message 



Young ctekken tofi in the brick Mbis to pay partit a' d e bts 


of how to treat diarrhoea and 
respiratory infection.” Eradi- 
cating those two ailments 
along would cut infant moral- 
ity by more than 60 per coxt. 

“Ike political will is there to 
improve things, but there is a 
paralysis in the bureaucracy 


and the changes are very 
slow,” says Mr Mayrides. 

Failure to address these 
issues could prompt wide- 
spread social discontent 7 “if 
the rural people were to 
become aware of the resis- 
tance in Malakand and Kara- 


legal writ runs anlri&J&e ipt- 
tied regions ,of Pakistani shd 
not In the tribal areas, -wWg i; 
joined the country -in -1347 
under a special treaty between 
tbe government and * tribal 

leaders. ' 

■ Islamabad was stow to react 
to fee Supreme Court order 
Mr Maulana Soofi, a fundamen- 
talist who refuses to have Ms 
photograph taken for fear of 
offending God, took advantage 
of the delay to Implement rau 
sharia law in Malakand. \ 

But even such an extreme 
development as - an armed 
lip rigfag generates cmly muted 

protests from many P akis ta nis : 
The fear of offending the mul- 
lahs afreets even politicians. 
As Mr Fateh Mohammed Khan, 
the senator for Malakand, says: 
"They (the insurgents) held me 
in my house (during the upris- 
ing). Rut if I spoke out against 
thqm they would tear oat my 
tongue. They would kill me.” 

allows fee mullahs to 
win arguments by default. 
Extremists in the lawless tribal 
areas are free to establish, and 
train armed baud* So the reli- 
gious flmdamenlalists are able 
to exert far more power than 
the people are wflhng to give 
them at the ballot box. 


chi it could prompt disorder 
elsewhere,” says Dr BannrL 
vlhe risk is complete break- 
down in the community.” 

The government, however, 
Haims the SAP - partly 
funded by a 6200m World 
Bank loan - deserves praise 
for- at. least -promising .to 
upgrade basic serrioes in rural 
areas, where .some ,24m people 
are firing In absolute poverty. 

.TUspeaea a dflemma fertile 
aid agencies. They, have no 
wish to derail the programme 
but they want to broaden its 
scope to a 10-year . horizon, 
with day-to-day management 
of. the initiatives transferred 
from local politicians 'to new 
community groups. 

"These issues are not suscep- 
tible to a quick fix,” says Mr 
Philip Began, deputy, resident 
representative of flu UNDP in 
Islamab ad. “More people can 
be trained, more hulldhigg put 
up. But they' went have an 
impact untiL: the long-term 
problems are addressed.” 



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' ' V,v F . 


FINANCIAL TIMES ' MONDAY NOVEMBER 28 1994 


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Life in Qillah village 

Luck is a place 
at school 


AgriorfUire employs more than 50 per cent of the country’s working population 


Tim Burt looks at government plans to revive the sector 

Agriculture faces a crisis 


Dre 




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I qbal Mustafa is disillu- 
sioned with agriculture. He 
has tried cotton, grain and 
horticulture on his 150-acre 
farm in Punjab. Now he has 
put the land to a new use - 
housebuilding. 

One of Pakistan's small 
group of entrepreneurial farm- 
ers, Mr Mustafa warns; "The 
industry is stagnating. Produc- 
tion c ann ot keep pace with 
population growth. There are 
not enough development funds, 
no infrastructure for getting 
goods to market, and rural 
education has totally col- 


it is a gloomy assessment of 
a country in which agriculture 
employs more than 50 per cent 
of the working population and 
accounts for 24 per cent of its 
GNP, For modem, efficient 
farming, Pakistan needs to 
consolidate agricultural land 
holdings. But rapid population 
growth is restricting the 
amount of land available. 
Moreover, feudal landlords, 
whose power is based upon 
keeping people on the land, 
resist change. 

Mr Mustafa's verdict is all 
the more depressing because 
he is not citing personal griev- 
ances, but the finding s of the 
prime minister's Task Force on 
Agriculture, set up last year to 
assess the state of the industry 
and proposals to widen -the tax 
net to include fanners for the 


first time. The task force - 
bringing together politicians, 
farmers and rural interest 
groups - told the government 
that agriculture was facing a 
crisis, which was exacerbated 
last year by a sharp foil in cot- 
ton production, the country's 
principal cash crap and largest 
forming export 

Output peaked at 12itm bales 
in 1991, but foil to 9.1m bales in 
1992 and to 79m bales last year 
under the twin impact of heavy 
rain and viral infections. 

The dismal performance by 
the cotton sector which, 
together with textiles, 
accounts for more than half of 
Pakistan's total exports, 
pegged agricultural growth to 
a modest 2.6 per cent 

The disproportionate effect 
of two years' poor weather and 
virus problems underlined the 
structural difficulties of an 
industry in which only cotton 
and livestock have outstripped 
population growth over the 
past 10 years. 

Prolonged dry spells in 
wheat-growing areas, mean- 
while, could reduce yields by 
mare than 6 per cent this yean 
and rice formers, who saw out- 
put increase 28 per cent to 
3.99m tonnes last year, are 
uncertain whether there is a 
ready market for any excess 
produce. 

-' Pakistan's inability to feed 
itself, let alone develop a com- 


mercially-minded farming com- 
munity, has been further ham- 
pered by the absence of an 
organised seed industry; inter- 
mittent or non-existent power 
and water supplies; and 
increasingly fragmented land 
holdings. 

Together with the drain on 
foreign exchange reserves 
caused by food imports and the 
reluctance of some feudal land- 
lords to improve conditions for 
villagers, it adds up to a mas- 
sive structural problem for a 
government already con- 
strained by heavy defence and 
debt servicing costs. 

E ven so, Mr Shah Meh- 
mood Qureshi, parlia- 
mentary secretary at the 
ministry of agriculture and for- 
mer chairman of the Agricul- 
tural Task Force, is undaunted. 
He says the government is 
determined to solve the mal- 
aise - "we have no option but 
to implement new initiatives. 
The government is In office 
because of strong support hum 
a rural population let down by 
its predecessors." 

The Bhutto government has 
tailored agricultural policy to 
the main recommendations of 
the task force, which identified 
four broad strategies to trans- 
form the industry; 

■ The development of a 
demand-driven industry using 
credit to boost production. 


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The drying of bay. Wheat yields ooidd be htt by dr ou gh t Sman Mmr 


along with aid for a new pro- 
cessing industry. 

■ Reducing the transfer of 
resources from agriculture to 
other sectors. 

■ Fresh investment in rural 
Infrastructure and the forma- 
tion of new institutions to 
monitor the policy framework. 

So for, these policies have 
been dominated by the deci- 
sion to make farmers pay 
income and wealth taxes, lev- 
ied by provincial authorities 
and the federal government 
respectively. Collecting those 
taxes, however, could run into 
opposition from feudal land- 
lords, whose patronage plays 
an important part in the 
careers of some politicians. 

“I had a feeling I was going 
to be lynched when I first pro- 
posed it" says Mr Qureshi. 

Other new initiatives have 
also run into problems. Plans 
to offer formers credit to buy 
low-priced tractors, imported 
from Poland and Belarus, have 
prompted strong resistance 
from local manufacturers, 
which argue that it would lead 
to large-scale losses. 

Government critics, mean- 
while, claim that increased 
fixed procurement prices for 
main crops and new credit 
facilities for small farmers 
could lead to abuse of the 
reform process. 

Wheat formers, who saw pro- 
duction rise from 14.7m tonnes 


to 16.4m tonnes last year, have 
enjoyed price increases of 
almost 20 per cent while sugar 
cane prices have risen 14 per 
cent 

“We must reduce govern- 
ment intervention in agricul- 
ture,” says one lobbyist “Sup- 
port prices were designed to 
save formers from ruin, rather 
than generate profits.” 

Others ask where the gov- 
ernment will find the resources 
to fund schemes, such as those 
to improve the rural road net- 
work, computerise land 
records and ensure year-round 
fertiliser supplies. 

Upgrading rural roads would 
cost Rs240bn alone, according 
to the Agricultural Task Force, 
and a further Rsl20bn is 
needed for education in outly- 
ing villages. 

Although some of the 
demands will be met by the 
government's Social Action 
Programme, Mr Qureshi 
admits that It will not cover 
the frill financial requirements 
- likely to run Into "billions of 
dollars”. 

Nevertheless, he claims 
Pakistan could become self- 
sufficient in food production 
within five years if the govern- 
ment implements measures to 
modernise the sector. 

But if it foils to raise poor 
farmers above subsistence 
level, or reduce the reliance of 
richer forms on state hand- 


outs, there could be a 
far-reaching upheaval in the 
industry. 

That process may be acceler- 
ated if this year’s cotton crop 
falls short of government tar- 
gets of 9Am bales. 

M ost industry analysts 
expect a crop of no 
more than &5m bales, 
amt the Small Landholder s and 
Farmers Association has 
warned that heavy rain and 
pest problems could leave full- 
year production lang uishing at 
about 5m bales. 

Mr Mustafa, who helped 
draft the task force report, sug- 
gests that rapid contraction of 
the industry could be a bless- 
ing in disguise - forcing a 
shake-out of inefficient and 
loss-making forms and increas- 
ing the pressure for land 
reforms. 

Changes, to make land acqui- 
sition and disposal easier, 
would allow more efficient 
farms to expand, he says. But 
successive governments bave 
avoided tackling the Issue. 

“What Pakistan needs is 
fewer, more technically 
advanced farms supplying 
higher quality produce.” he 
says. 

“The problem is that land in 
this country Is associated with 
political power, rather than 
commercial potential- That 
won’t change overnight" 


Mohammed Maqbool does not 
enjoy the rice harvest By the 
time he starts work in the 
fields, he will have been up 
since 5 in the morning and he 
will not rest until sunset 

Gathering crops is hard work 
for a nine-year-old boy, espe- 
cially after a morning of chores 
and schoolwork. Wiping the 
dust from his face, Mohammed 
says he would rather be a 
policeman. 

Ufa in uniform is an alluring 
prospect for boys hrought up 
in the fields and alleys of Qil- 
lah, a ramshackle collection of 
mud and brick huts in the 
heart of Punjab. 

The landlord of the village is 
unimpressed. “You want to 
take bribes and beat people 
up," he jokes. “What kind of 
life is that?" The sarcasm hides 
a deeper concern - that today's 
childr en will leave the village 
for the bright lights of Lahore, 
Pakistan's second largest city, 
less than 40 miles away. 

Mohammed has never trav- 
elled beyond the nearby mar- 
ket town of Mandi Faizabad 
but he has glimpsed the out- 
side world an one of the 17 
television sets In the village - 
home to some 80 households. 

“What will they make of 
MTV?” asks the landlord, 
whose family has owned the 
surrounding 550 acres for more 
than 40 years. “My great worry 
is that the next generation will 
want nothing to do with the 
land.” 

His pessimism is probably 
exaggerated. Fears that today's 
children will abandon forming 
underestimate the grip of agri- 
culture on the rural workforce. 

For all Its drawbacks, most 
labourers prefer village life to 
the unplanned urban develop- 
ment of Mandi Faizabad. The 
congested market town is lit- 
tered with abandoned vehicles, 
broken-down shops and the 
skeletons of tractors stripped 
for spares. Food stalls cast a 
pall of smoke across the area, 
and residents defecate in the 
road. 

It is not surprising villagers 
stay on the land, which at least 
promises fresh produce and 
modest profits. Qillah may be 
under-developed, but it is rela- 
tively prosperous compared 


with settlements in poorer 
provinces such as Sindh or 
Baluchistan. 

“About 10 per cent of the vil- 
lagers can read and write,” 
says the landlord. “But that’s 
better than in the more back- 
ward areas." 

More than 100 children are 
officially enrolled in the two- 
room school, although their 
numbers are depleted by 
chronic absenteeism. 

It is a problem throughout 
the Punjab, where only a third 
of children attend primary 
school. Nevertheless, the pros- 
pects are brighter in this vil- 
lage than others. If children 
complete full-time education, 
the landlord promises to pay 
for a college place and the first 
villager has just received a 
degree. 

“We respect hhn, but it has 
not made anyone else want to 
do it," says Mohammed Rafiq, 
the head former. 

Instead, Mr Rafiq encourages 
young men to concentrate on 
crops: rice, potatoes, guava and 
citrus, in a good year they can 
grow 12,000kg of potatoes and 
sell enough rice to pay for new 
amenities, although there is 
still no telephone. 

Their prosperity depends on 
one essential resource - water. 
The Qadirabad to Baloki canal 
runs through the village, giv- 
ing it a high water table. That 
In turn produces a soil capable 
of sustaining a variety of pro- 
duce. 

The village also rears buffalo 
and goats for slaughter - a 
rare source of income in a 
country where most livestock 
is used for motive power. 

“This is one of the most pro- 
gressive villages in the area,” 
says the landlord, who visits 
once a week to check the led- 
gers. “We don't prevent them 
from improving their situation. 
Not everyone is so lucky." 

Luck for the people of Qillah 
is the right to an education of 
sorts; the right to leave for the 
city and to sell their own pro- 
duce. Mohammed Maqbool, 
whose family relies on dried 
dung for fried and canal water 
for washing, hopes his luck 
will Chang e. 

Tim Burt 




nr 


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oj»i?a-paiBC))B rca« eti» c a ch-essejs ac-e.a»ssjH isroR-e* 


X 


PAKISTAN lO 


< ^"*k nestkm from the Financial 
I 1 Times: Pakistan's economic 
policies have been praised 
by many observers, includ- 
ing foreign businessmen. But there 
is concern about the country's 
political stability. What assurances 
can yon give? 

□ Benazir Bhutto: Pakistan went 
through a transition period in 
which there was tussle between 
democracy and dictatorship. That 
tussle ended last year in July 1993 
when the military said they wore 
not interested In intervening. 

Today in Pakistan we don't have 
a constitution in name, we have a 
constitution in fact, we don't have a 
democracy in name, we have a 
democracy in fact The militar y is 
totally neutral now. It's not doing 
political work for the government, 
and its not doing political work for 
the opposition. Its doing military 
work, and military work is defend- 
ing the frontiers of Pakistan. 

In the past, many [economic and 
social] schemes have come on paper ' 
but they have not been imple- 
mented, but that has been because 
there has been no popular base in 
the government- Now there's a gov- 
ernment in Pakistan with a popular 
base. When there’s a government 
with a popular base and grass roots 
support, it's in a better position to 
implement its programmes. 

There is also concern about law 
and order in Pakistan. We are 
addressing the problems of crime. 
We have inherited a very bitter leg- 
acy of sec tarianism and of ethnic 
violence. We have introduced a 
socio-economic package for Karachi 
in an attempt to go to the genesis of 
the causes of resentment among the 


INTERVIEW 


Our economy has tremendous potential’ 

Pakistani Prime Minister Benazir Bhutto talks to Stefan Wagstyi and Fartian Bokhan 


people of Karachi - that is the lack 
of transport and the lack of water 
and lack of sewerage. The govern- 
ment is continuing 1 discussions with 
the MQM [the radical ethnic politi- 
cal movement in Karachi]. But it's a 
problem that some people are 
involved In heinous crimes, such as 
kidnapping and murder. 

□ FT: What can be done about 
corruption in Pakistani politics? 

□ BB; We are committed to the 
elimination of corruption- That's 
why we have reduced through insti- 
tutional means the scope for corrup- 
tion. For example, we have tight- 
ened up our banking laws. In fact, 
we have declared a morale crusade 
to cleanse our society from this evil. 

□ FT; What are your economic 
aims ami achievements? 

□ BB: We are a role model for the 
IMF... we have been able to pro- 
vide very competent management 
for Pakistan's economic problems. 
We aimed at macroeconomic stabil- 
ity because we believe that without 
macro-economic stability, micro- 
economic activity cannot take place 
at its full potential. 

We cut the fiscal deficit to 5.8 per 
cent of GDP last year and we aim 
for a 4 per cent deficit next year. 
Now if this deficit [cut] takes place, 
we can address the problem of infla- 
tion which is the most common 


problem which ordinary people in 
Pakistan complain about We have 
also, in keeping with our IMF com- 
mitments, begun lowering peak 
import tariff rates, which will be 
lowered further as the years pass 
by . . . also we have sought to 
improve the taxation collection sys- 
tem. 

Much depends now on weather 
and crops but given good weather 
and good crops I think Pakistan will 
be in a good position by next year. 
So, if within 18 months [of taking 
office] we can bring real economic 
stability, we would feel proud of 
that achievement It would allow 
Pakistan's economy to take off. I 
think Pakistan's economy has tre- 
mendous potential winch needs to 
be realised. 

Agriculture is also an Important 
concern as it employs 70 per cent of 
the people. We have increased the 
wheat support price to promote the 
growing of wheat and we are 
expanding edible oil cultivation to 
cut dependence on imports. We 
have imposed an agricultural tax on 
rich landlords. It was with much 
trepidation that we introduced the 
bill to be passed by the National 
Assembly, because oar assembly is 
traditionally dominated by people 
from the feudal class. But by the 
grace of God it was passed. 



Benazir Bhutto: "We have been a bfo to 
provide very competent management 
for Pakistan's economic pro bl ems’ ap 


In the energy field we have suf- 
fered a tremendous electricity 
shortfall. . . so we announced an 
incentive package for foreign inves- 
tors interested in setting up thermal 
plants. We have had tremendous 
response from the world over - and 
we hope that within five years we 
will have increased our energy out- 
put at least by 50 per cent if not 
more. 


The massive investment of 
OSSLZbn, which we have attracted 
to Pakistan, will trickle down to the 
people in' about two years. Some 
Pakistanis are very sceptical about 
foreign investment in Pakistan, but 
I flunk it is because they are not 
aware that the world has changed 
so dramatically. And in the 21st 
century we are going to be witness- 
ing a global economy. 

□ FT: How wfll you deal with 
Pakistan’s urgent social needs? 

□ BB; WeH, I think that if one 
had to talk about a theme for the 
government that theme must surely 
be Social revolution, because unlike 
past governments we have really 
concentrated on the social sector. 
This is al$n evident from the bud- 
getary allocations made by my pre- 
decessors and by our government 
on sectors such as women's devel- 
opment, population planning minor- 
ity affaire and other development 
works. 

We have set up a human rights 
cell in the ministry of the interi- 
or. . . we have also set up an Site 
anti-narcotics force which is headed 
by a serving general . . we want to 
send a message that nobody is 
above the law. The government is 
committed to upholding the law 
irrespective of how high or influen- 
tial any in di vi d u a l may be. 


Once we stabilise the economy 
and give a sound socio-economic 

baas to the society we hope to pour 

tdnue on to the larger political pratF 
leans of . how narcotics barons ran 
mafias, how certain tribal chiefs 
pm their own mafias with their- 
own guards and their own laws, 
how sectarian groups, funded from 
God knows where, preach the pot- 
ties of hatred and violence, and how 
ethnic parties preach hate at one 

another . 

□ FT: What are you doing to 
improve the lot of women? 

□ BB: I’ve seen myself that with- 
out economic independence, a 
woman cannot do anything. If my 
father not left me with indepen- 
dent moans , there's no way that the 
male mem h ers of my family would 
have permitted me to enter politics. 
They would have made sure that I. 
didn't have funds or a home or 
sp ace or a telephone to do a thing. 

So that’s why I've always believed 
that the key to a woman's indepen- 
dence is economic independence. 
We have tried to make Pakistan, a 
role model for other Moslem coun- 
tries by introducing a system for 
women’s rights in a Moslem society. 
We have done that by lifting the 
ten an women takfog part in inter- 
national sports, by setting up a 
women’s development bank which 


has allowed ; a nwiwgbomtag ' bC 
. wonten-orien tod im aflV 
. like garments, stomping 

' and beauty saloBS, w vtvm-. 

areas of Pakistan.-. 

We have also dime that by setting 
tip women's police stations, brsome 
Moslem societies, women rtOgjt . 
behind locked doors, Jfere to Pan* 

•‘ tan. women go kmxatog.tui . dooas 
inv«stigaticng crimes., So it's a ; 
^tartly different society - ifsasoy- 
:ety on the move and on -toe march. . 

. ■ Ft Thesre fa international ccsr- 

.• cent abort Pakfatan’S matofr 
* gramme and about 'its dispute with 
Infliaover Kashmir/ 

' As/fer as- Pakistan’s 

- programme is concerned, it 

Is a peaceful, srogramme, but wa 
have shown tremendous restraint in 
not exporting toe technology,, in not 
■ detonating a device arid we fed that , 
this restraint ought tu be recog- 
nised. : 

After all, if this restraint is not 
recognised than what is the use of 
restraint, especially wtienltookan 
opinion poll and 99 per cant people' 
in Pakistan said that we should det- 
onate, so I think it must be recog- 
nised that there are tremendous 
domestic pressures on tbe govern- 
mcnf And if we have an interna- 
tional concern an nonproliferation, 
we must all work together to' 
strengthen the goal ctfiwni*olifexa- 
tion and not take a myopaeview 
that results in something opposite 
taktog place. , . 

1 feel that root cause of tension in 
the sub-continent ought to ; be 
addressed, and that root , cause is 
the political dispute over . Jammn 
and Kashmir, a dispute which is 
recognised by international law. 




si 

_* 'W. ** 


- •+ 


w #© 1 

reap 


l resident Mr Farooq Leghari. 

Prime Minister: Ms Benazir Bhutto, 
(Pakistan People's Party). 


post offices and large stores. Basic 
English Is taught in schools and is the 
medium of instruction for higher 
education. 


PAKISTAN FACT FILE 


degrees cetehis; driest month, October. 


Population and area 

The latest estimate is 128m. Density (per 
sq km) at mid- 1992 was 149.6. The main 
cities are Karachi, Lahore, Faisalabad, 
Rawalpindi, Hyderabad, Islamabad (the 
capital) and Peshawar. Pakistan’s tend 
area; 796,095 sq km (307,374 sq miles). 
This excludes the tisputsd territory of 
Jammu and Kashmir. The Pakistani-held 
parts of this region are known in Pakistan 
as Azad ('Free'] Kashmir, with an area of 
11,639 sq km (4,494 sq miles). Northern 
Areas (including Gilgit and Batttetan) have 
an area of 72,520 sq km (28,000 sq m3es). 
Also excluded are Junagardh and 
Manavadar. The population figures 
exclude refugees from Afghanistan 
(estimated to number about 3.8m). 


Languages 

Urdu is the national language. English is 
used extensively in aB governmental and 
commercial circles and is used fairly 
widely in hotels, airports, railway stations. 


Ethnic mix 

The driving force behind the creation of 
Pakistan was religion, and 97 per cent of 
the population is Muslim. Of these, the 
majority are Sunni, the rest being Shia (15/ 
25 per cent). There are small communities 
of Hindus, mainly in Sindh. There are also 
Christians in the main cities and P arsis in 
Karachi. 

The main ethnic groups in Pakistan are 
the Punjabis, the Sindh Is, the Baluch and 
the Pathans, plus a number of small tribal 
groups in the more remote northern areas. 
The muhafirs, or refugees from India at the 
time of independence, who for the most 
part speak Urdu as their mother tongue, 
can also be regarded as an ethnic group. 

A relatively new element in the population 
is the Afghan refugees, mainly 
concentrated along the tribal areas. 


into 100 paisa. The average exchange rate 
of the rupee in 1994: Rs46.56 =£1; 

Rs30.51 = US$1 . The exchange rate on 
November 8, 1994 was Rs49.5545 to £1; 
Rs3Q_6194 to $1. 

Government deregulation now allows 
freedom of currency exchange. Visitors 
are advised that some false currency 
notes are in circulation. 


Currency 

Pakistan's currency is the rupee, divided 


Visa requirements 

A valid passport is required by ail visitors. 
All nationals of India, Afghanistan, South 
Africa, Bangladesh, Iran, plus any country 
not recognised by Pakistan must have a 
visa. Israeli passport holders are not 
permuted entry. 

Tourists from most other countries need a 
visa only If they wish to stay for more than 
30 days. Nationals of a few countries may 
stay up to 90 days without a visa. Check 
with the Pakistan Em ba ssy or consulate in 
your own country. 

Visas are not issued at entry points. In 
some circumstances visas can be 


extended for short periods by applying to 
Passport Offices in Islamabad, Karachi, 
Lahore, Peshawar or Quetta. However 
both the rules and the practice are subject 
to change without warning. 

Visitors are restricted from certain areas, 
such as parts of NWFP, Baluchistan and 
the Northern Tribal Agendas, are not open 
to tourists without special permission. 

The cost of visas is variable according to 
the nationality of the applicant and the 
type of visa applied for. 

Arrangements for visa application and 
collection vary from office to office, and 
should be confirmed by phone with the 
relevant office. 

Tourists from countries which do not have 
Pakistani representation may apply to 
resident British representatives. 


Business and ban long hours 

Government and business; 
(Sunday-Thursday) generally 0900-1400; 
banking, (Sunday-Thursday) 0900-1300; 
shops: (Saturday-Thureday), 0800/ 
0900-1800/1900. 


Climate 

Sub-tropical, cold in the highlands. The 
hottest month in Karachi is June, with 
temperatures ranging from 28-34 degrees 
Celsius; the coldest month, January, 13-25 


Public holidays 

Certain public holidays In 1995 are 
dependant on the Islamic lunar calendar 
and may vary by one or two days from the 
dates given here (see asterisk). They - 
include: 1 February* (Ramadan begins), 3 
March (end of Ramad an), 23 March 
(Pakistan Day), 14 April (Good. Friday), 1? 
April (Easter Monday), 1 May (Labour . 
Day), 10 May*, 31 May*, 9 June", 9 
August", 14 August (Independence Day), 6 
September, 11 September, 9 November, 

25 December, 26 December (Boxing Day). 
Some holidays are optional for Christians 
only. 


Time Zone 

Greenwich mean time, plus five hours. 



Our plans lor 
investment 


^The Heart Of Asia: 


Pakistan 


say 

we have 
confidence 
in Pakistan's 
future. 


For be 



Pakistan : a place with a rich variety of 
culture^ heritage and exotic scenery lies in 
the heart of Aria. Nature chose it to be the 
passage to the orient It is at the same time 
the gateway to Central Aria and a link 
between South - East Asia and Western Asia. 


We made our very first investment in the area that is 
Pakistan as far back as the 1930's. Our association with 
the country, for the last half century or more, has brought 
steady growth, consolidation and diversification of our 
business with returns that have been most rewarding. 
Giving us much reason to have a strong sense of the 
future of Pakistan and its potential. 


Limitless investment opportunities therefore await you in the tourism sector. 
The government has provided substantial facilities which are ideal for 
fordjgn investors who are looking for enormous investment opportunities to 
capitalize oil 


Over the years we have made additional investments in 
new opportunities and to strengthen our existing 
businesses. During the years 1989 to 1993, Rs 2 billion 
was invested in expansion and diversification. In the 
current year alone, plans for fresh investments of FIs 15 
billion have been announced for two major projects in 
Pakistan, a high-tech, world scale plant for the 
manufacture of Pure Terephthalic Acid (PTA), and a 
significant enhancement in capacity by 50,000 tonnes per 
annum of our existing Polyester Staple Fibre plant. We 
believe these projects will add significantly to our 
shareholder value by... 


The diversification of these opportunities provides you with the highest 
profits possible on your investment. 


Investing in success 


F^kist^tra 

Not only a tourist's delight hut an investor's heaven. 


Pakistan Tourism Development Corporation § 
H-2, $t 61 , F-7/4, Islamabad p 

Tel: 092-051-811001-4 S 

Telex : 54356 PTDC-PK. 3 

Fax; 092-051-824173 ^ 















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FINANCIAL TIMES SURVEY 


President Clinton’s cleaner 
atmosphere campaign faces 
a moment of truth: PAGE 2 


ENERGY EFFICIENCY 


Does a virtuous drive to 
the bottle bank bum more 
fuel than rt saves? PAGE 4 


Monday November 28 1994 


Anxiety over global warming is now the strongest 
impetus for saving energy. But fear of oil scarcities 
is a more durable argument, says David Lascelles 

Better technologies 
reap big rewards 


Not long ago, the Impetus for 
energy efficiency came from 
traditional concerns: the high 
cost of energy, the need to con- 
serve finite resources, and a 
desire by countries to reduce 
their dependence on imports 
for national security reasons. 

Today, all those concerns 
have weakened. Despite a 
recent blip, the price of oil is at 
its lowest point in real terms 
since the early 1970s. World 
reserves of ofl and gas have 
been boosted by large finds in 
places as far apart as Colom- 
bia, Vietnam and the Shetland 
Isles. The lowering or East- 
West tensions and the decline 
in Opec’s power have reduced 
worries about import reliance. 

But in their place, there is a 
new worry. As Mr David Nem- 
tzow of America’s Affiance to 
Save Energy puts it “The poli- 
tics have changed. Now, it is 
n v B H g h rimin g riy driven by the 
environment" 

Specifically, the worry is 
over global warming, and the 
threat to the climate posed by 
growing concentrations of car- 
bon dioxide in the atmosphere. 
More than 100 countries are 
signatories to the 1992 Rio con- 
vention which requires coun- 
tries to try and bring CO, emis- 
sions back to 1990 levels by the 
year 2000. But while this has 


given a fresh impetus to 
energy saving, it has yet to 
prove particularly strong. 

The global improvement in 
energy efficiency which 
occurred in the 1970s and 1980s 
has flattened out fn the last 
few years. This should improve 
this year because the world 
economic recovery will bring 
on stream efficient new plant 
and people will buy new cars 
and appliances which need less 
energy. But on the whole, prog- 
ress is disappointing. 

The threat of global wanning 
is not as potent as the fear of 
oil running out Individuals 
who care deeply about the 
environment have been slow to 
insulate their homes or drive 
KmaUgr cars. And businesses - 
apart from those where energy 
is a major cost - tend to treat 
energy saving as secondary. 

A t a recent conference in 
India, Mr Michael Jeffer- 
son, deputy secretary 
general of the World Energy 
Council (WEC), said: "There is 
little evidence that either 
energy consumers or most 
energy policy-makers recognise 
the importance of raising 
energy efficiency and conser- 
ving energy in terms of effec- 
tive action, or that this situa- 
tion will change in the near 


future." The fact is that gov- 
ernments have been reluctant 
to pass draconian laws to 
enforce greater energy effi- 
ciency. Most of them have pre- 
ferred to set up “partnerships" 
with energy users in which the 
main role is played by public- 
ity, persuasion and a few 
tightly focused - and tightly 
financed - projects to promote 
energy saving technologies and 
information. 

“We want to avoid excessive 
command and control," says 
Mrs Christine Ervin, the US 
assistant secretary of state for 
energy efficiency who oversees 
a broad range of initiatives 
designed to encourage electric 
iiHiitiiw, ap pliance manufactur- 
ers, car makers and bumnesses 
to produce more with less. 

The low cost of energy in 
most countries is one of the 
greatest stumbling blocks to 
the elimination of waste. Mr 
Andrew Brown of the energy 
efficiency division of the EU 
Commission in Brussels, 
(which has several information 
and technology programmes of 
its own) says: “The challenge 
we face is detaching energy 
efficiency from prices,” and 
that will probably have to be 
done by persuading people that 
environmental damage is a 
“cost” which everyone will 



Ford assembly workers at Hatewood, Merseyside, whose energy load is handed by BP Energy; a towing UK co ntact energy ma nagement group 


IN THIS SURVEY 

UK SETBACK: foe Energy 
Trust. Whitehall’s favourite 
project, refuses to take oft 
Clinton’s dilemma: ambi- 
tious policies - but wfl they 
work? Page 2 

BUILDINGS; London devel- 
opers hope to tempt clients 
with an ■Intelligent' office. 
Profile: Energy Systems 
Trade Association Page 3 

RECYCLING: drink can col- 
lecting makes sense, but Is a 
trip to the battle bank really 
necessary? CHP In Britain: 
Brussels may hold the key to 
more co-generation. Ingenu- 
ity: examples from foe UK, 
US and France Page 4 

BRITAIN: plenty of Ideas but 
still no national target for 
energy saving. Mr Save It 
profile of foe DoFs Robert 
Jones MP Page 6 

GLOBAL WARMING: Russia 
and China are foe main 
source of greenhouse gases. 
Aluminium motor cars: the 
low-fuel lightweight body 
comes closer Page 6 


Editorial production: 

Maurice Samuetson 
Design: Robin Cotes 
Graphics: Robert Hutchison 


ultimately have to bear. 

But until that detachment 
comes about, the raising of 
energy prices through taxation 
Is still seen as one way of driv- 
ing home the message. Several 
European countries including 
the UK have recently intro- 
duced forms of energy tax. But 
even here, achievements have 
been mixed. 


President Clinton faile d to 
gain acceptance for his BTU 
tax last year, and the EU*s pro- 
posed carbon tax has yet to 
leave the drawing board. 

But there are other methods. 
One is technology. The energy 
efficiency industry has made 
great strides in producing new 
methods and products: refriger- 
ators which consume 30 per 


T he European Commission 

is working bard to 
improve energy effi- 
ciency by EU-wide regulation. 
But tile results fall far short of 
its ambitions. 

Economic - pressures, 
rock-bottom fuel prices and 
political wrangling between 
EU governments have 
t h warted Brussels on the two 

main planks of its energy effi- 

dencycampaign - thefil-faied 
carbon tax and a clutch of 
energy-saving programmes. 
Both Initiatives have effec- 
tively stalled. 

Driving the ElTs campaign 
is a commitment made in the 
mid-1980s to raise energy 
savings by 20 per cent between 
1988 and 1995. Current esti- 
mates by the Commission 
energy directorate are that 
saving wfll be only 11-12 per 
cent 

Brussels officials partly 
blame the historically low 
energy prices. 

Bat confusion aver whether 
the ETTs main priorities 
should be economic or envi- 
ronmental has also frustrated 
the Commission. 

A second policy commit- 
ment, motivated purely by 
environmental concerns, is the 


■ POLICY TENSIONS IN BRUSSELS 

EU changes tack 


objective agreed at the 1992 
Rio Earth summit to stabilise 
carbon dioxide emissions at 
their 1990 levels by the year 
■ 2000. That target is also likely 
to be missed, although esti- 
mates vary over the shortfall. 
Environment commissioner 
Van ms Paleokrassas has pre- 
dicted a shortfall of 15 per 
cent by the aid of the century. 

These two objectives have 
co-existed uneasily, and much 
of the blame for the failure of 
EU energy-saving policy is 
attributed to the confusion 
between them. 

"fiie carbon tax has actually 
been the bane of energy effi- 
ciency policy because it has 
distracted everyone’s attention 
from the other measures,” 
gays Mr Andrew Warren, 
director of the London-based 
Association for the Conserva- 
tion of Energy. 

But those other measures - 
led by the Commission’s Ecu 
55m five-year Save (Specific 


Total final energy use by sector, OECD 



Actions for Vigorous Energy 
Efficiency) - programme have 
also fallen victim to the post- 
Maastricht Treaty campaign 
for subsidiarity. 

The Commission's energy 
directorate, DG17, is therefore 
drawing up a second Save 
scheme which will be mainly 
educational, with none or the 
legally-binding directives 
envisaged in the Brat one. 

The new low-key approach is 


In stark contrast to Brussels’ 
previous ambitions, which 
readied a high peak in 1992 
when Carlo Ripa di Meana, 
then environment commis- 
sioner, proposed the contro- 
versial energy tax. Now, 
although the Commission con- 
tinues to promote it, it is gen- 
erally agreed that the carbon 
tax is dead. 

According to the original 
Brussels proposal the tax 


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would have levied $10 - later 
watered down to $3 - on the 
equivalent of a barrel of olL 

Such fiscal in t e rference by 
the EU has been flatly rejected 
by the UK, in defiance of com- 
promise plans tabled by a suc- 
cession of governments in the 
EITs rotating six-month presi- 
dency. The EITs southern 
states also posed problems, 
arguing the tax would discrim- 
inate against their less devel- 
oped economies. 

The attempt to break the 
deadlock tills year, when the 
Greek presidency tried to 
tempt the sceptical southern 
EU states with compensatory 
“burden-sharing” arrange- 
ments, did not even address 
the UK’s opposition. 

The Commission, supported 
by the current German presi- 
dency, is now pushing this 
debate in a far less controver- 
sial direction. Hie latest sug- 
gestions, yet to translate into 
any formal proposal, are to 
attack CO, emissions through 
the EITs regime for excise 
duties and VAT an fad. 

The UK, although still 
deeply opposed to relax its 
grip over fiscal policy, has to 
some extent led the way along 
this path by imposing VAT on 
domestic electricity - a move 
estimated to achieve 25 per 
cent of Britain’s targeted 
reduction in carbon emissions. 

The EU excise and VAT sys- 
tem, established at the start of 
1993, is due for review by the 
end of the year but is tikdy to 
be delayed into the next Com- 
mission. which takes office in 
January. 

The debate is still likely to 
be dogged by arguments over 
sovereignty, however. 

Meanwhile, Brussels is 
adapting its other energy-sav- 
ing programmes to the new 
political climate. Gone are its 
ambitions to set EU- wide fad- 
conservation standards on 
building construction and 
management - a key failure of 
the original Save programme 
which led to the watering 
down of six directives. 

Instead the Commission 
plans to limit legislation to 
areas covered by existing EU 
internal market rales - in 
other words in traded goods, 
such as fridges and boilers, 
where Save has already had 
some success. Gone also is the 
idea of overruling national 
laws with new directives from 
Brussels. Tram now on we 
are following the added-vahie 
concept - what can Save add 
to the national programmes," 
says the Commission. 

The new approach, expected 
to be spelled out by the Ger- 
man presidency at a Cornual of 
Environment ministers in 
Brussels next month, is also 
geared more closely to market 
realities. For example, the new 
proposed directive on third 
party financing would create 
incentives for banks to find 
energy saving at piddle insti- 
tutions such as hospitals. 

Increasingly funds are bring 
directed at projects for eastern 
Europe, both from Save and 
from the EU*s £7D0m five-year 
Thermic programme, which 
alms to promote new energy- 
saving technologies. 

Adrian Strain 


cent less electricity, boilers 
with high energy conversion 
capabilities, sophisticated ther- 
mostats EUld switches, demand 
side controls. 

The modernisation of the 
highly Trerffiment economies of 
East Europe, and construction 
of new power plants in China 
should also help the global pic- 
ture. 

Alongside these develop- 
ments, there is the rapid 
growth of consultancies and 
energy contract managers who 
make a tiring by cullin g other 
people’s energy costs. 

Mr Robert Skinner, director 
of the office of policy analysis 
at the International Energy 
Agency in Paris, believes that 
much of the change trill be 
driven by technology. 

“Traditional policies are 
almost irrelevant to whafs 
going on," he says. “Technol- 
ogy is moving at such a pace 
that governments which take 
the old-style approach will get 
left behind.” 

However, one weakness of 
technology is that much of it 
still requires subsidy: for 
example “renewable” technolo- 
gies such as wind power or bio- 
mass combustion, or some of 
the more exotic gadgetry. Oth- 
ers, such as combined heat and 
power where the heat from 
electricity generation is used 
for industrial or residential 
purposes, encounter institu- 
tional obstacles, even though 
their efficiency is high. 

Mr Ton van der Does, chair- 
man of Cogen Europe, the CHP 
trade group, believes that 
Europe’s tradition of large, 
state-owned power stations 
stands In the way of CHP 


Energy intensity*, OECD 


- v, •••-/ -..v •’ ■»■■■•; ..•■y-y- 



>- > ,w « : «• ; wlir; 


m 

schemes 
nature, are local and entrepre- 
neurial. "The industry is still 
shaped by' the bid structures,” 
he says.. “The trend towards 
energy efficiency is not going 
as fast as everyone would like. 
But there is a change of men- 
tality. specially with regard to 
co-generation, and that Is 
important” 

A further element in the 
debate is competition. In many 
countries, the absence of free 
pricing of energy or of free 
access for new suppliers is a 
m^jor obstacle to efficiency. 

Although many countries 
are now following the UK in 
privatising their electricity 
industries, this process has a 
long way to go. But, as the UK 
has discovered, it can be a dou- 
ble-edged sword: greater com- 
petition also means cheaper 
energy, and that works against 
nf wft te r energy efficiency. 

In the medium term, the 
drive for energy efficien cy will 
be dictated - barring an unex- 
pected leap in energy prices - 


pm uai 

which, by their by the strength of countries' 


commitment to the Rio conven- 
tion. It is still too early to say 
whether the CO, reduction tar- 
gets will be met 

But over the coming months, 
signatories will be preparing 
for the March 1995 conference 
in Berlin where they will 
review progress and take the 
first steps towards setting Fur- 
ther targets for beyond 2000. 

Mr Michael Grubb, who 
heads the energy and environ- 
mental programme of London's 
Royal Institute of International 
Affairs, says that “much of the 
steam has gone out of it” 
because the public and the 
media have turned their atten- 
tion elsewhere. 

This makes him doubtful 
that solid progress will be 
achieved in Berlin. On the 
other han d , “no country can 
backtrack now”, be says. More- 
over, the latest scientific evi- 
dence tends to reinforce the 
view that the global warming 
threat is real, so the pressure 
for action will remain. 



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Bronwen Maddox describes the fate of a bold Whitehall initiative 


The bird that would not fly 


Energy efficiency can be a 
remarkably slippery policy to 
promote. That is the experi- 
ence of the UK government 
which has seen the Energy 
Saving Trust, an election man- 
ifesto pledge and one of the 
fondest creations of its envi- 
ronmental policy, fail to get 
off the ground. 

According to Mr Andrew 
Warren, director of the Associ- 
ation for the Conservation of 
Energy, the trust’s progress is 
“a severe disappointment - it 
originally represents one of 
the soundest programmes in 
the UK for delivering higher 
levels of energy efficiency". 

The trust is intended to help 
the gas and electricity utilities 
Identify projects which will 
help their customers use less 
energy. Ministers planned that 
the money to fund the projects 
would be passed on to all cus- 
tomers of the utilities through 
their bills. 

In January, Mr John Major, 
the prime minister, made clear 
in a high profile speech to 
spell out the UK's environmen- 
tal strategy that he was giving 
the trust a central role in the 
UK’s plans for meeting the Rio 
targets on global warming. 
Those targets specify that the 
UK must draw up plans to 
bring emissions of carbon 
dioxide, which is implicated in 
global warming, back to 1990 
levels in the year 2000. 
According to estimates com- 
piled by the Department of 
Trade and Industry, that 
means that the UK needs to 
cut around lOmtC (million 
tonnes of carbon) from the 
projected 170mtC in the year 
2000. 

The government hopes that 
most of those savings will be 
generated by measures - 
themselves controversial - to 
raise the price of heating fuel 
and petrol. 

However, ministers have pat 
a quarter of the burden - 
2.5mtC, the biggest single ele- 


ment - of the required cuts on 
the trust’s shoulders. They 
have also estimated that the 
trust will need to identify 
about £400m of projects a year 
by the end of the decade In 
order to reach that target 

It needs to raise nearly £2bn 
by the end of the decade to 
meet government targets, 
according to fts business plan, 
published in April. 

However, so ter the trust Is 
not on coarse to reach any- 
where approaching that fig- 
ure. According to its chief 

executive, Mr 

Eoin Lees, it r JIJL .r L .. , 

has looked at 7116 Ener W 
55 projects, one of tfi 
which would creations of 
cost £i«im to government 
implement. Of . 


OUJJJ lim, II r-MMn.. TV-, ,r~* SUUUIU UV1 UC 

has looked at 7116 Ener 9Y Saving Trust, ^ to 

55 projects, one toe fondest charges which 
which would creations of John Major’s were esseu- 
cost £i4m to government is nowhere Hally taxes, 
implement. Of ^ ^ Moreover, she 

these. 25 have near to meetin 9 ^ tar 9 ets made clear, 

been approved such a tax 

by Offer, the electricity regula- would be regressive, hitting 
tor. Last year, it spent £4m on the poorer families hardest. 


fited from the schemes. On the 
electricity side. Offer has 
capped the amount which the 
utilities can spend on such 
projects to £22m a year until 
March 1998, when the industry 
pricing will be reviewed. 

The position of Ofgas, the 
gas regulator, is even more 
trenchant Ms Clare Spottis- 
woode, director-general of 
Ofgas, made clear her uneasi- 
ness to such "cost-pass- 
through" at repeated hearings 
before parliamentary select 
committees. She argued that 
regulators 

T _._* should not be 
aving Trust, used to 

fondest charges wbich 
ohn Major’s were esseu- 
is nowhere Hally taxes. 
_ . Moreover, she 


pilot projects. 

Mr Lees says: “I think we 
are on coarse to spend 
between £10m and £12m in the 
year to March 1995." The pro- 
jects cover more efficient light 
bulbs, and all night lighting 
for security purposes in com- 
munal housing, which has 
proved popular with local 
authorities and housing asso- 
ciations. 

However, although he points 
out that this spending figure is 
in line with the spending the 
trust had planned to make this 
year, the obstacles in the way 
of further progress, up 
towards the £400m level, are 
considerable. 

According to Mr Warren, the 
projects approved so ter "are 
tiddlers, lids is no more than 
money which was agreed 18 
months ago”. 

Those hurdles lie in the posi- 
tion of the gas and elec tri c ity 
regulators. They are uncom- 
fortable about allowing the 
costs of such projects to be 
passed on to all customers, 
even those who have not bene- 


such a tax 
wonld be regressive, hitting 
the poorer families hardest. 

Ministers have also shown 
uneasiness in private about 
these implications. The gov- 
ernment's separate proposal to 
levy value added tax on heat- 
ing fuel started a still-simmer- 
ing political row. Ministers are 
concerned that an additional 
hike in fuel bills wonld stir 
the controversy again. 

One casualty of the conflict 
with Ms Spottiswoode is the 
progress of Homes 2000, a pro- 
posed scheme to subsidise 
home improvements such as 
insulation for lofts and exter- 
nal walls, and energy-efficient 
lights and boilers. The project, 
which would pay up to half of 
the costs of these projects, 
would need £8m next year and 
£120m by 2000. the trust has 
indicated. 

There have been other con- 
cerns with tiie trust It directs 
almost all its schemes aitown- 
er -occupiers, but, as the Insti- 
tute for Fiscal Studies has 
pointed out, owners of accom- 
modation for private rental 
make the least investment in 
energy efficiency, and their 


tenants could greatly benefit 
from such schemes. 

For the moment, there is an 
uneasy peace. Parliamentary 
committees and Ofgas have 
concluded that in deciding 
whether to approve such pro- 
jects, Ms Spottiswoode must 
balance the regulator’s respon- 
sibilities to protect the cus- 
tomer from rising prices with 
those to promote energy effi- 
ciency. 

The trust argues that the 
extra sums on fuel bills need 
not prove controversial. 
Although estimates suggest 
that households which do not 
benefit from the schemes 
could see annual fuel bills rise 
by nearly 2 per cent on top of 
inflation by 1998, the trust 
says that most projects will 
pay for themselves through 
energy savings within five 
years. 

But while in theory this 
allows some projects to prog- 
ress. the energy industry and 
some within the trust feel that 
in practice few significant 
ones are likely to progress. 

According to Mr Lees, "the 
only way forward now is 
through new legislation. The 
government has to decide how 
it wants energy efficiency to 
be taken forward in the com- 
petitive market" 

For that reason, he takes 
considerable comfort from the 
fact that gas regulation was 
included in the Queen's Speech 
at the opening of parliament 
this month. This offers the 
chance that regulators could 
be directed explicitly to allow 
such cost-pass through. 

Until then, however, the 
trust is effectively stalled, and 
its executives most devote 
much of their time to pleading 
behind the scenes with politi- 
cians to clearing a way for- 
ward. According to Mr War- 
ren, “of course the trust can be 
saved if there is political will". 
It is far from clear, however, 
that the political will exists. 


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US has ambitious policies. Frank McGurty asks if th ey will work 

Big carrot, little stick 


Environmentalists contend 
that President Clinton's plan to 
respond to the threat of global 
warming contains too much 
carrot and not enough stick. 
Conservatives say it is an over- 
wrought response to non-exis- 
tent crisis. 

But most agree on at least 
one point - the programme, 
unveiled amid great fanfare a 
year ago, Is comprehensive. It 
sets forth dozens of separate 
initiatives aimed at controlling 
emissions of carbon dioxide, 
methane and other gases, 
which some scientists believe 
could drastically alter climate 
conditions. 

The initial goal is to roll 
back over the next six years 
the amount of so-called ‘'green- 
house" gases discharged into 
the atmosphere to 1990 levels. 
Without any action, emission 
levels would increase 7 per 
cent by the turn of the cen- 
tury, according to the admini- 
stration’s projections. 

From its inception, it was 
virtually certain "the climate 
change action plan”, as it is 
known, would run up against 
at least some obstacles. Indeed, 
in committing the US for the 
first time to a specific goal and 
timetable on reducing green- 
house emissions, the president 
was launching a plan as sweep- 
ing and potentially contentious 
as his ill-starred scheme to 
reform the US healthcare sys- 
tem. 

A year later, the environ- 
mental plan is alive and well, 
in sharp contrast to healthcare 
reform, which is currently 
trapped in political limbo after 
a fierce partisan battle in Con- 
gress. During a legislative ses- 
sion when many of the presi- 
dent’s proposals were 
thwarted, the package survived 
largely intact, with 40 out of 47 
of its original proposals win- 
ning approval. 

"Overall, compared to where 
we were a year ago - when it 
was simply a proposal - the 
plan has been a very substan- 
tial success in terms of begin- 
ning to address these issues," 
says Mr Wesley Warren, associ- 
ate director of the White House 
Office on Environmental Pol- 
icy, which is overseeing a plan 
that involves six separate fed- 
eral agencies. 

Keeping the programme 
afloat may indeed qualify as a 


success for the president but 
the start has. sot been entirely 
smooth. With both houses of 
Congress to be controlled by 
the opposition Republicans, the 
next steps in implementing, the 
plan are sure to prove more 
difficult. Already for fiscal 
IMS, the DenraraticcautTOlled 
Congress slashed the proposed 
appropriations for the plan: 
There is also evidence to sug- 
gest the administration has 
nwriprgstimatpfl the magnitude 
of the problem. Its response, if 
folly funded, could prove inad- 
equate to the initial goal 

It is much too early to judge 
whether the specific initiatives 
are Irving up to their advance. 
billing. Many of them have- 
been up and running for only a 
month. Nevertheless, even att- 
ics of some aspects of the pro- 
gramme credit the administra- 
tion with getting most of its 

proposals off 

the ground. 

“In general. Keeping 1 
the plan is programme 

mormg in the . 

right direc- success, b 
tion," says Mr whs not enl 
Daniel Lashof, 
a senior scien- 
tist at the Natural Resources 
Defense Council, an environ- 
mental lobbying group. 

The package embraces a pot- 
pourri of programmes, many of 
them aimed at striking part- 
nerships between the private 
and public sectors. The initia- 
tives range from adjustments 
in tax policy on employer-paid 
parking privileges to measures 
to encourage better manage- 
ment ctf forests, which combat 
global warming by absorbing 
carbon after it has been 
released into the atmosphere. 

But the cornerstone of the 
plan is a multi-faceted effort to 
reduce emissions of green- 
house gases at their source. 
Energy efficiency is considered 
crucial because fossil fuel con- 
sumption by homes, offices 
and factories is responsible for 
more than £ pear cent of US 
greenhouse emissions. 

Many of the plan’s initiatives 
simply expand on existing pro- 
jects. The Environmental Pro- 
tection Agency’s Green lights 
programme, launched three 
years ago, offers technical sup- 
port to businesses which are 
considering upgrading their 
lighting systems. This year 400 


new organisations have signed 
up. bringing the total to about 
im 

Witheach participant realis- 
ing an average 45. per cent 
decline in energy use, t be EPA 
has stepped up its re cruitm ent, 
drive by targeting univeffsitifis, 

Chp rrfoes and Othfif HtHl-pPOfit 

groups. /“Green lights bar a 
solid track record which dem- 
onstrates that these types of 
programmes work,” says Mr 

1 aahnf. ! . . 

Other projects -would put' 
fresh ideas into play. Among 
the most promising is the 
Department of Energy’s initia- 
tive to develop new eneigy-effi- 


Keeping the Clinton 
programme alive was a 
success, but progress 
was not entirely smooth 







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fifli appliances. 

But mat least one case-hot 
water heaters - the electric 
industry is vigorously oppos- 
ing the adoption of new rules, 
which would encourage the 

; use of a more 

efficient type of 
e Clinton gas-fired heat- 

aUvewasa • er ^rhat calls 
t progress into question 
ely smooth whether .the 
industry is 
willing to 
co-operate beyond the level of 
lip service," says Mr Laafanf. 

The issue is particularly 
germane because the 
administration has chosen to 
highlight its relationship with 
the electric industry as 
evidence that its 
n on-^n f mnt q tirmfll strategy is 
working well 

The response to the DOE's 
Climate Challenge is a special 
source of pride. More than 900 
electric utilities, which 
represent 80 per cent of US 
generating capacity, have 
agreed to undertake voluntary 
measures to reduce their 
greenhouse emissions, 
employing a flexible array of 
options.. . 

The White House projects 
J80bn in private Investment in 
energy-savings technology by 
the end of the decade, against 
a commitment of just $l-9ba in 
federal funds, some of which is 
to be redirected from other 
areas. 

But public spending is 
already telling short of the 
original target. For fiscal 1995, 
the plan was granted budget 
authority of only much 
less than the 5344m sought by 


fiie president. Tho BOErfhe 
most Important .ageney 
involved in the -programme, 
was given a . tittle more , than 
ball its * 208 m request ; ■ 

Last May, Ms HazelOleary, 
the US 'energy secretary, tsfeta 
-Senate committee • that dfiep 
cuts in. ftmdiBg “would'nmSa 
the president’s: commitment 
virtualfy frnpossflde id meet”; 

' T3ae White House decHniedto 
comment specifically on flow 
spending - redactions "might - 
affect the plan, but Mr Wanna 
said the administration would 
press for extra funding 1 b 
subsequent years to make up 
for tiie shortfall in fiscal 1995. 

However, with ..-.the 
Republicans likely to seek cuts 
in federal ihcatee taxes, and 
perhaps ah amendment .to the 
US constitution -to /require 
balanced federal -'. budgets, 
funds are most likely , to be 
even , more , tight/ -as the 
emissions deadline hears.- . 
Environmentalists such as Mr. 
T ^hnf also question whether ' 
the adndnstratioh's plan has 
underestimated the .tikefy raie 
at which greenhouse emissions 
will increase in the earning 
years, assuming no action/ is 
taken. . • * ’ • 

Since the plan was unveiled . 
a year ago,, both 'private and 
government economists have 
lifted their estimates; of 1994 
gross domestic product to more 
than 3 per cent, from early 
forecasts oi -less than 2S per 
cent [ J • 

At the same time, the price 
of erode oil has fluctuated 
without showing any big net 
increase; the administration 
assumed higher prices in its 
emission projections. 

If the economy continues to 
outperform the forecasts and 
.oil prices stay low, toe natural 
demand for fossil fuels would 
surely accelerate, making the 
challenge ' of. reducing 
emissions to 1990 levels even 
more daunting than a year ago. 

- Such questions are to be 
addressed squarely in about a 
year. The White House has 
promised to reevaluate mid- if 
necessary, modify the climate 
programme next aut u mn to 
keep the .emission reductions 
an track. 

"We are simply not going to 
look at this oil a 
montb-to-month basis," Mr 
Warren, says. 


Petroleum; 


our 

goal 






But most of all we can offer an effective and efficient co- 
operation in solving ail problems connected with toll 
processing, keeping In the very center of our mind your 
requirements. This has been our work pattern during 
the past thirty years of activity; we have explored new 
opportunities, built plants with full respect to the envi- 
ronment, we have granted our customers the most ad- 
vanced services. Summarizing we have worked with the 
interest of who. from the very beginning, has had a cen- 
ter goal: petroleum. 


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FINANCIAL TIMES MONDAY NOVEMBER 28 1994 


in 





ENERGY EFFICIENCY 3 



Post-recession breakthrough: model of the new City of London office block being constructed by the London and Manchester Group 


David Lawson charts the rise of the state of the art office block 


Tempting the tenants 


The disappearance of belching 
smokestacks is generally seen as a sign 
of how far we have progressed towards 
a more efficient, civilised society. Few 
would accept living and working in 
such conditions today. 

But most of us still do. Gleaming 
modern factories, warehouses - and 
even homes and office blocks - pour 
out a noxious wastes. We just cannot 
see them. 

Buildings emit twice the amount of 
carbon dioxide as vehicle exhausts, 
making a major contribution to fears 
about global wanning: This has led to a 
major rethink by the British govern- 
ment in the light of the 1982 Rio de 
Janeiro agreement to cut CO, emissions 
over the next decade. 

Housing, for instance, which con- 
sumes half the UK’s gas and a third of 
its electricity, has been uprated under 
new building regulations. Minis ters 
c laim this will increase energy effi- 
ciency by 20 per cent, with a corre- 
sponding reduction in emissions from 
their chimneys and power station 
stacks. 

Factories face a similar tough regime, 
but the ubiquitous office block has 
proved more of a problem. Aircondi- 


tioning appears to be a minor irritant, 
contributing less than 1 per cent of the 
UK’s carbon dioxide output Yet It has 
become a symbol of energy excess in 
the commercial sector. 

Designed to cope with the extra heat 
generation of electronic equipment, 
developers insist it is necessary in town 
centres, where windows must remain 
sealed against dirt and noise. But such 
energy-hungry techniques became 
almost a s tandar d fixture during the 
property boom no matter where build- 
ings grew. 

Building regulations aimed at 
restricting this growth were shelved 
earlier this year - but only for further 
investigation into workable rules. Prog- 
ress is more likely to come from the 
bottom up, however. Almost 90 par cent 
of occupiers in a study by property con- 
sultants Richard Ellis said they did not 
want air-conditioning. 

A few years ago such complaints 
might have been ignored. Tenants had 
to take what they could get when space 
was in short supply. Now the boot is on 
the other foot In a market awash with 
empty buildings, landlords are desper- 
ately trying to anticipate what will 
attract occupiers. 


Air-conditioning will not disappear. 
Fund managers who have a strangle- 
hold on development of new buildings 
insist that it is essential for modern 
working conditions. And Mike Warner, 
a senior partner with Richard Ellis, 
admits that occupier complaints proba- 
bly stem from poor maintenance and 

ifftdg n 

B ut air-conditioning is only part 
of a growing demand among 
occupiers for cheaper accommo- 
dation. These complex networks of 
ducts and fang arid not just to building 
costs - which push up rents - but can 
also add 30 per cent to service charges, 
according to another property consul- 
tant, Jones I .aing Wootton. The pendu- 
lum is now swinging towards blindings 
which more closely match occupiers’ 
needs. Healing and ventilation should 
be both more user-friendly and energy- 
efficient in future. 

But with so little development taking 
place, it is hard to find examples of this 
change in approach. One is a striking 
glass and steel block going up at Fins- 
bury Pavement in the City of London. 
The 125,000 sq ft of offices over a Marks 
& Spencer store is being watched 


closely by the property industry, as this 
is the first important speculative devel- 
opment in the City since the crash. 

Developer London & Manchester 
called in two pioneers in energy-saving 
design, engineer Ove Arup and archi- 
tect Sheppard Robson. The building 

makes maximum use of natural fight - 

one of the key demands by occupiers in 
the Richard Ellis survey - controlling 
solar gain through a system of external 
louvres which automatically adjust to 
internal temperatures. 

More significantly, however, this has 
been balanced by a ‘‘low-tech” method 
of cooling known as chilled ceilings, a 
technology widely used on the Conti- 
nent but ignored in favour of energy- 
hungry variable air volume (VAV) 
systems in the UK 

ther developments are also on 
the drawing board which show 
how developers are adjusting to 
demand. Sheppard Robson is 
working up plans for a 140,000 aq ft 
block in Croydon for Norwich Union 
with a different cooling system which 
ooold cut normal energy costs by 30 per 
cent The same partnership is also con- 
sidering chilled ftrillng g for an 
block in central Leeds. 

Another Investor, the Prudential, 
may test these waters with a 250,000 sq 
ft development in Reading being pre- 
pared by Tim Battle, a veteran cam- 
paigner for energy-saving with engi- 
neers Rybka Smith Ginsler and Battle. 

The whip-hand lies with occupiers, 
however. Most developers will not start 
building until they snare a tenant 
attracted by such low-energy offers. 
London & Manchester has economics 
on its side, as it pocketed £75m for the 
City site in the boom and then reac- 
quired it for £L7.5m in 1992. 

Even if tenants swarm in, however, 
more efficient new development will 
hardly dent the total energy bill of com- 
mercial buildings as a whole. More sig- 
nificant is the constant upgrading by a 
host of specialists. AHS Emstar, for 
instance, claims it can reduce energy 
costs by up to 30 per cent by anything 
from replacement of heating systems to 
changing the mix of fuels used. 

Emstar cut the energy bill for Hoover 
in South Wales by £750,000 a year, while 
British Gas saved Inco Alloys In Here- 
ford half its costs by designing new 
equipment Groups such as NatWest 
and Bass have ordered energy audits on 
all their property, says Ken Ordish of 
ESS Projects. One of his biggest clients 
Is the health service, as new trusts 
work their way through hospitals 
which have wasted money on poor heat- 
ing systems for decades. 

This kind of energy-saving is likely to 
accelerate over the next decade. Occupi- 
ers Who got into the habit Of examining 
costs more closely during the slump are 
now anticipating heavier fuel taxes 
because of worldwide moves against 
global warming. This is proving a fer- 
tile area for energy consultants, partic- 
ularly with the fierce competition 
between gas and electricity suppliers. 




E Profile: Energy Systems Trade Association 

Wheel turns full circle 
for a man from Harwell 


The international energy 

efficiency industry was born 

21 years ago when the armies 
of Egypt and Syria launched 
their October offensive 
against the Israelis and the 
Arab Ofl producing countries 
dramatically quadrupled the 
price of oil to the western 
world. 

The shock sent the industri- 
alised world into headlong 
flight from oil to other fuels 
and prompted energy conser- 
vation efforts, such as the 
Save It campaign in Britain, 
more intensive than anything 
since the Sec- 
ond World 
War. 

Since then, 
apart from the 
the upheaval 
caused by the 
Iran revolu- 
tion of 1979, oil prices have 
generally drifted downwards 
to become lowo: in real terms 
than even before the October 
1973 war. 

Nevertheless, energy effi- 
ciency still commands lip-ser- 
vice from politicians, indus- 
trialists and property 
developers, not only for eco- 
nomic and security reasons 
but because of the perceived 
link between carbon fuels 
and the environment 

The preoccupation with 
energy efficiency is reflected 
in the durability of many of 
tiie organisations which came 
into being during the energy 
crises which gripped the 
world throughout the 1970s. 

In Britain, these include 
the Energy Systems Trade 
Association (Esta), an 
umbrella body originally 
formed to serve manufactur- 
ers of waste heat recovery 
systems but now representing 
a diverse range of service and 
product suppliers with a 
growing emphasis on elec- 
tronic controls. 

Esta was founded in 1982 
by Dr Glenn Brookes, then a 
32 year-old scientist working 
on en er gy efficiency projects 
at the Atomic Energy Authui ■ 
tty’s energy technology sup- 
port unit (Etsu) at Harwell. 


While selecting promising 
new efficiency methods for 
government-sponsored dem- 
onstration, Dr Brookes had 
found that there was no 
umbrella body to represent 
the waste heat recovery 
industry. He resigned from 
Harwell, set up Esta and has 
never looked back. 

The energy efficiency 
industry, he says “has come 
of age”, it no longer depends 
for its existence on the 
armoury of government 
grants created in the wake of 
the world oil crises. It has 


suffered many casualties but 
a hard core has soldiered 
through and advances with 
its own momentum. 

His own association now 
represents more than 80 
members, with an estimated 
turnover of more than Elba a 
year, and comprises six spe- 
cialist branches: 

• 14 Independent energy 
consultants, with a £30m 
turnover and accounting for 
about 60 per cent of their 
market; 

• 14 contract energy man- 
agement groups; turnover 
about £200m; covers about 85 
per cent of its market; 

• 13 buflding controls sup- 
pliers; turnover £25 0m; repre- 
sent 85 per cent of their sec- 
tor; 

• controls systems special- 
ists: 13 members; turnover 
£30m; about 60 per cent of 
this sector; 

• metering and monitoring 
group: 12 members; £30m 
energy efficiency turnover, 
represents 90 per cent of this 
sector; 

• non-specialists (from heat 
recovery, lighting and boil- 
ers, to discrete controls and 
water management): total 
turnover for all members 
exceeding £500m, employing 
around 10,000 people and 


responsible for savings of 
around £2S0m a year. 

In Britain, the building 
controls market has moved 
with property values. After 
peaking in 1991 at £3 44m, 
building controls sales fell to 
£278m in 1992, hot rose again 
last year to £293m and con- 
tinues to grow at a few per 
centage points a year. 

Over the past four years, 
says Dr Brookes, there has 
been a 75 per cent increase in 
spending on servicing and 
maintenance of energy effi- 
ciency systems. 

The contract 
energy man- 
a g e m e n t 
group, which 
includes BP 
Energy, AHS- 
E ms tar and 
subsidiaries of 
regional electricity compa- 
nies, operates clients’ heating 
systems more efficiently than 
clients feel able to do them- 
selves. 

Their activities have grown 1 
by about 21 per cent since 

1991. and their workforce has 
grown at a similar rate to 
reach a present level of about 
2,000. They also cashed in on 
a 13 per cent growth in public 
sector contracts from 1991 to I 

1992, but this has since lev- 
elled out. 1 

Esta's latest initiative, 
launched a year ago, is a 
scheme which independently 
measures an organisation's 
achievements in energy effi- 
ciency under nationally 
applied rules. 

Meanwhile, the wheel has 
turned foil circle. Fourteen 
years after Dr Brookes took 
the plunge into the private 
sector, the organisation from 
which he jumped is set to 
take the same path. In the 
Queen’s Speech, the govern- 
ment announced its intention 
to privatise the Atomic 
Energy Authority, including 
its energy technology support 
unit. Would Dr Brookes be 
making a bid for it? “Defi- 
nitely not”, he said. 

Maurice Samuelson 


Twenty one years after the 1973 Middle 
East war, the energy saving equipment 
and services industries have come of age 


roleum 


♦ 

I 





frt wu^adlVi' 



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tTdne of food and solar energy to fuel-saving compound tyres. So you see, when 
^omes to saving energy, we're not sleeping. Putting the next generation first. 



COMFORT AT WORK. 

Comfortable and healthy working conditions have a 
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however, once meant putting economy last To mas- 
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computer programs simulate airflow in offices or 
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IV 


MONDAY NOVEMBERS 19* 


ENERGY EFFICIENCY 4 



Recycling economics are being challenged, says Bronwen Maddox 

Bottle bank dilemmas 


When people think of the contributions 
they might make towards saving energy, 
they often turn to recycling, as well as 
more direct measures such as insulating 
lofts and turning off lights when they 
leave the room. 

Young children frequently lecture their 
parents on the need to take bottles to the 
bottle bank, such is the enthusiasm with 
which schools have embraced recycling. 

Yet scientists and economists are 
increasingly questioning whether recycl- 
ing household material does have an envi- 
ronmental benefit, and if it does, whether 
that benefit justifies spending the consid- 
erable sums which modem recycling 
systems can demand. 

That equivocation, it should be said at 
the start, does not on the whole apply to 
recycling of industrial materials. Many 
companies have been able both to cut 
down their use of raw materials through 
recycling and to cut costs. 

A prime example is the use of water the 
Water Services Association, which repre- 
sents the 10 largest water and sewage com- 
panies in England and Wales, says that 
many industrial companies have turned to 
recycling discharged water since charges 
for abstracting water and for discharging 
waste have risen. 

However, the debate about the virtues of 
recycling domestic waste has intensified in 
the past year since the government began 
to explore the adoption of mandator}* 
recycling quotas for packaging. Consumer 


goods manufacturers and big retailers 
could now face a levy to fund the cost of 
recovering and recycling waste packaging, 
which has been put at up to £l00m a year. 

In July last year, Mr John Cummer, the 
environment secretary, told manufactur- 
ers and retailers to devise a voluntary 
system to increase the volume of packag- 
ing waste recovered or recycled to 
between 50 per cent and 75 per cent, in 
line with EU targets. 

But industrialists have criticised the tar- 
gets as potentially meaningless, given the 
difficulty in measuring volumes of waste, 
and differences in the definition of waste 
between different types of packaging. 

There have also been concerns about the 
inflationary effect: some industry esti- 
mates put the extra cost of a shopping 
basket at lp for every £10. 




one of those estimates is yet firm, 
nor has the distribution of those 
additional costs been agreed. Both 
industrialists and ministers have an eye 
on the catastrophe of German attempts to 
introduce mandatory recycling targets, 
which left unwanted mounds of waste 
paper trundling along the roads of neigh- 
bouring countries in search of a market 
But the size of the costs, and the contro- 
versy about who should bear them, means 
that all those embroiled in the debate are 
taking a harder look at whether the envi- 
ronmental benefits of recycling justify 
extra costs. 


Take glass for example, one of the most 
difficult cases, despite the popularity of 
bottle banks. Glass is manufactured by 
heating silica (essentially sand) and 
sodium carbonate. It is recycled by remelt- 
ing broken shards of glass containers. 
Whether this produces a net saving in 
energy or not is debatable, particularly 
taking into account the fuel used in collec- 
tion of the waste glass. 

The Centre for Social and Economic 
Research on the- Global Environment at 
University College, London, in a report in 
June for Nuclear Electric, the generator, 
said that if a household recycled 52 glass 
bottles a year this could save the emission 
of 6.2kg of carbon a year (carbon dioxide is 
one of the gases implicated in global 
warming). 

But it pointed out that these savings 
would quickly be eroded if people drove to 
the bottle h ank. 

Moreover, much recycled glass is col- 
oured brown or green from beer or wine 
bottles, but the demand from manufactur- 
ers is for clear glass, for use In food con- 
tainers. 

CSERGE comments that “recycling, 
though one of the most well-known energy 
saving measures, has only a small Impact 
on carbon dioxide emissions. Installing 
low energy lighting in the home, for exam- 
ple, is over 200 times more effective than 
recycling." 

There is least debate over the attrac- 
tions of recycling aluminium cans, the 



One form of recycling whose advantages are not questioned: used ahanMum cans being re-melted by Alcan, in Warrington. 


most valuable category within household 
rubbish. According to industry estimates, 
recycling can save 95 per cent of the 
energy used in original manufacture. In 
the US. manufacturers suggest that the 
average smelter to make new aluminium 
uses as much power as a town of 500,000 
people. A smelter also costs around 10 
times as much as a re-melting plant 
That gives can manufacturers clear 
incentives to collect used cans. Last year, 


for example, the US industry is estimated 
to have paid oat about 8900m for used cans 
collected by individnals, schools, churches . 
and scout troops. About two thirds of cans - 
overall are recycled, the industry esti- 
mates. 

But there is more debate over other cate- - 
gorifis of waste, such as paper. Although 
environmentalists argue that newspapers 
and magazines could incorporate a higher 
proportion of recycled material, paper 


makers say that if paper is recycled, more 
• than three or four times, the fibres become 
too short for use in. newsprint-". 

Local councils in the .UK wWchhave 
vigorously pursued recycling of do me st ic 
waste point out too .that ff such schemes 
become widespread; the. UK could finctthat 
it has created its own version of the Ger- 
man problem: mounds of expensively- 
sorted waste for which there is little 


Cogeneration industry seeks a boost in Brussels, says Andrew Baxter 

Combined heat and politics 


ages are an issue, there has 
been considerable growth in 
CHP use, almost entirely in 
the industrial sector. Here, 
and also In Spain, elec tri c i ty 
tariff changes have been an. 
important stimulus. 

In Spain, however, a review 
is now under way after strong 
g r o wt h over the past three to 
four years, and a number of 
projects are on hold. 

Mr Brown believes the 
amount of electricity gener- 
ated by CHP in theEU can rise 
to 8 or 9 per cent by dn end of 
the decade, - helped by the 
planned entry to the EU of 
Sweden and Finland. He 
believes the EU should set an 
ambitious target for tin mv 
age percentage figure, much as 
has ha ppened ifl the UK. 

The CHP A, and the recently- 
formed organisation Cogen - 


the electricity and gas mar- 
kets, and the controversial 
suggestion for ah EU-wide 
energy tax to reduce carbon 
dioxide emissions. 

The CHP industry is . also 
trying to make headway oh 
the European energy policy 
green paper now bebig drawn 
np by the Commission. Ah ini- 
tial was. fairly thin 

on environmental issues,' says 
Mr Brown. “We would like to 
see that beefed bp. " . 

- A further lobbying front 
Involves the EtTs Save pro-, 
gramme to promote - energy 
efficiency. Save -X, now draw- 
ing to a dose, was hamstrung 
by lack of sup port from mem- 
ber. States,- says- Mr Brown. 
Save t Is under discussion, 
and udiatever. emerges ought 

- to have legislative teeth, says 
Mr Brown. Lobbying - act 


E nergy efficiency and 
environmental cleanli- 
ness would make a 
strong combined argument for 
any kind of power generation 
system, but few, if any, can 
score so highly on both counts 
as combined heat and power. 

Unlike most conventional 
power generating systems, 
CHP recaptures the waste heat 
released during combustion 
and uses it to make steam for 
hot water or heating - as well 
as electricity. 

This can produce total effi- 
ciency ratings of up to 90 per 
cent, compared with 35 per 
cent thermal efficiency for the 
average coal fired power sta- 
tion or 56-58 per cent for the 
latest combined cycle systems. 
As for emissions, every 1MW 
of CHP reduces UK carbon 
emissions by 1,250 tonnes a 
year. 

It might seem odd, there- 
fore, that the popularity of 
CHP varies so widely across 
the European Union, where 
CHP overall accounts for 6 per 
cent of electricity generated. 


In Holland and Denmark, the 
figure is 30 per cent, whereas 
in France it is only 2 per cent. 

In fact, there is a very close 
link between gov ernm ent pol- 
icy that promotes CHP - or at 
least creates favourable condi- 
tions for it to flourish - and 
its success in the market 
place. Where governments are 
indifferent or a llow uncer- 
tainty to develop, CHP finds it 
harder to prosper. 

The UK is a case in point It 
is at the low end of the scale 
compared with the big Euro- 
pean users, with only 4 per 
cent of its electricity coming 
from CHP. But the UK Govern- 
ment has at lea st se t a target - 
of 5.Q003nV of CHP by the end 
of the century. 

Already, the UK has 
3.000MW of CHP at work, on 
more than 700 sites, and until 
a few months ago. it looked to 
be coasting comfortably 
towards achieving the 
5.000MW target. Over the past 
three to four years, l.QOOMW 
of capacity has been added and 
the country’s largest CHP 


scheme, a X57MW joint ven- 
ture between Scottish Hydro- 
Electric and British Nuclear 
Fuels at Sellafield, Cumbria, 
came on stream earlier this 
year. 

The problem, however, is 
that the UK does not have a 
strategy to implement the tar- 
get. according to Mr David 
Green, director of the Com- 
bined Heat and Power Associa- 
tion. In the past three or four 
months, few new schemes 
have been announced because 
potential CHP operators feel 
squeezed between rising gas 
pric es - one of the main fuels 
for CHP - and regulated elec- 
tricity prices. 

There is a “fundamental 
uncertainty,” he says, over the 
coarse of UK energy policy, 
which makes it difficult to 


invest in CHP with confidence. 
As a consequence, Mr Green is 
now less certain that the 
5.000MW target will be 
reached. 

Before the recent loll, the 
market had been growing 
steadily, with a strong surge 
of activity in the hotel Indus- 
try. and a good showing in the 
paper and board sector. Rela- 
tively unexploited sectors 
incfnde the chemicals and 
steel industry - where compa- 
nies have held back making 
investments, perhaps because 
of lack of confidence in their 
own future survival. 

According to a report* in 
July by Marketing Strategies 
for Industry, the UK market 
for industrial CHP generation 
plant, excluding plants below 
100KW, was £97.7m last year. 


up from £87.2m in 1992 and 
just £51.1m in 1989. 

The biggest segment last 
year, based on gas turbines 
with waste heat recovery boil- 
ers. accounted for £63Jm of 
the spendin g, fol lowed by com- 
bined-cycle CHP with £25.5m. 
Use of both types has grown 
strongly over the past four 
years. The remaining £8.3m 
was spent on systems based 
around reciprocating engines. 

T he CHPA believes the UK 
could have 20,000MW of 
CHP by 2020, but Mr 
Green says there will have to 
be changes in government pol- 
icy to achieve this. To tur n the 
widespread support for CHP 
into reality, it wants new and 
fair prices for the electricity 
from CHP plant, effective 


investment by the private and 
public sectors in community 
heating, incentives to stimu- 
lat e inv estment by companies 
in CHP, and action to remove 
what it calls “the distortion 
and inertia” winch limits the 
wider use of CHP and commu- 
nity heating. 

In contrast, CHP has 
“steamed ahead” in Denmark, 
and the Netherlands because it 
has been a policy priority, 
says Mr Michael Brown, the 
CHPA's assistant director 
(Europe;. The Netherlands, 
with its more i ndus trialised 
economy, uses CHP both in 
industry and in distri ct he at- 
ing, while Denmark’s CHP is 
much more focused on district 
heating. 

In Italy, the one EU co untr y 
where electricity supply short 


Europe which groups it and 
six other similar associations 
in Europe, is hoping it can 
influence a number of Brussels 


national level, meanwhile, 
continues. 

•Power Generation Plant UK 
Marketing Strategies for Indus- 
try, Viscount House. River Dee 


initiatives in favour of CHP. 

These indnde the slow-moving Business Park, Saltney, Ches-- 
plans for the tibendtsatimi of ter, CH4:8QY, UK - v ■ - 


EVERYTHING YOU NEED 
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EMISSIONS LEGISLATION... 



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Jane Martinson sees ingenuity at work in the UK, US and France 


Where there is a will... 


When a full-time energy 
manager was appointed at 
Leeds General Infirmary in 
northern England last year he 
found a number of targets for 
his efficiency drive. 

A year earlier the hospital, 
which spends an average of 
£1.65m a year on energy, 
received a “poor" rating when 
judged by environment depart- 
ment guidelines on energy effi- 
ciency. Marcus Tunaley, 
recently-appointed energy offi- 
cer at the infirmary, says: “An 
environment audit on total 
energy consumption in one 
wing was one of the worst I’ve 
ever seen." 

Faced with a National Health 
Service commitment to cut 
energy consumption by 15 per 
cent over the next five years, 
the hospital is one of a number 
managed by NHS trusts to 
have committed 10 per cent of 
its annual energy bill to effi- 
l ciency measures. Some 
£165,000 will be spent in Leeds 
over each of the next four 
years. 

The current efficiency mea- 
sures range from aluminium- 
clad radiators to updating the 
outdated building management 
system. The old system, which 
controls heating and lighting, 
was unable to adapt to chang- 
ing needs. 'The old system pro- 
vided heat to the hospital 24 
hours a day," says Tunaley. 
"We wanted it to work when it 
was needed." 

Most measures have focused 
on the large Clarendon wing of 
the hospital built In the early 
1970s before the oil crisis 
encouraged energy savings. “It 
was quite obvious that this 
wing, lovely as It (s, was built 
when fuel was cheap," says 
Tunaley. 

A “deep plan” building with 
many windowless rooms, some 
40 per cent of its electricity is 
used for air conditioning. Fre- 
quency inverters and air qual- 
ity sensors, which enable the 
conditioning system to respond 
to natural changes In tempera- 
ture, will save 80 per cent of 
the electricity used for the air 
conditioning alone, says Tuna- 
ley. With the new system the 
conditioning system works 
hardest at busy times of the 
day. In the canteen at lunch- 
time for example. 

Other savings have resulted 
from fitting ionic fuel technol- 
ogy to old boilers (with an 
energy saving of 8 per cent) 
and the installation of high-fre- 
quency fluorescent tubes (with 
a possible electricity saving of 
30 per cent). 



Environmental concerns are 
one reason for the hospital’s 
efficiency measures but the 
main reason is to save money. 
“Efficiency measures represent 
a good return on your invest- 
ment,” he says. “They are 
accepted as a good way to save 
money." 

The saving also makes sense 
in the face of the expected 
increase in gas prices next 
year, says Tunaley. He believes 
that the end of cheap “inter- 
ruptible" gas to large consum- 
ers because or market liberalis- 
ation could result in the price 
of gas going up by 25 per cent 
The hospital uses gas to gener- 
ate electricity in a combined 
heat and power (CHP) plant 
The deregulation of the 
energy market in the UK has 
encouraged some large users to 
use CHP plants to generate 
their own power and enhnnna 
the security of their energy 
supply, 

T he plants can cut the loss 
of fuel in energy produc- 
tion by using the heat 
from electricity generation for 
further energy purposes. 

The chemicals manufactur- 
ing arm of Zeneca, the biosd- 
ences group, is to install two 
CHP plants to supply 23.5MW 
for its Huddersfield and Gran- 
gemouth sites in the UK 
The new £10.6m plant at 
Huddersfield, to provide the 
steam and electricity used in 
the manufacturing process, 
alms to save an estimated 
SZ5m a year in energy costs. 
Environmental legislation 
has encouraged the new 
energy contract. Two of the 
plant’s boilers, which will be 
phased out under the new 
scheme, are over 30 years old 
and do not include pollution- 


mompson, zeneca sposesman. 
said: “This equipment needs 
replacing because of our desire 
to improve our environmental 
performance and also because 
if we don’t we will not meet 
environmental legislation 
which is coming into force in 
the next few years." 

The new plant would enable 
the company to keep ahead of 
controls on carbon dioxide 
emissions for example. The 
plant currently burns some ' 
90,000 tonnes of coal a year. 

In Europe and the US compa- 
nies have been keen to encour- 
age energy efficiency to com- 
ply with legislation - following 
government commitments at 
the Rio earth summit to bring 
carbon dioxide emissions back 
to 1990 levels by the year 2000 
- and to enhance their public 
image. 

Electricity companies in the 
US, for example, entered into a 
voluntary agreement, called 
the Climate Challenge, with 
the Department of Energy ear- 
lier this year. 

The Initiative, which seeks 
to reduce greenhouse gases 
was a direct response to a pro 
posed tax on the number of 
British Thermal Units (the 
common measure of heating 
energy) last year. 

Pacific Gas & Electricity, the 
largest power utility in the US 
and a party to the agreement, 
has allocated S2bn to customer 
energy efficiency programmes 
m the 1990s. With this invest- 
ment the company hopes 
energy bills wtil be cut by 
more than S2bn net by 2000. 

Last year more than $i88m 
was spent on some 50 pro 
grammes, resulting in a saving 
of 491m kwh of electricity 
More than 600,000 customers* 


For otne scheme lastyear 1 
company paid $30,000 
replace 150-watt incandesce 
traffic signals • wi 
energy-saving 25-watt lig 
emitting diodes (LEDs) , in 1 
city of Davis. 

In spite of these effor 
however, the company fan*»d 
meet its 1983 targets on 
efficiency, partly, it claii 
because of reorganisation ai 
the loss of 3jm jobs.- . ' 

In France, the state g 
company Gaz de France -has 
team dedicated to encourage 
energy efficiency particular 
through the installation 
combined heat and pow 
plants. 

Jean-PIerre Roncato, head 
the cogeneration developme 
mission, says that by usii 
CHP plants 85 per cent of ti 
gas used in generation can 1 
recovered and used for hoi 
electricity and heating, 

This year the company In 
started 30 CHP prqjefr 
compared with just four i 
199L At the same thne.it : 
installing boilers .wit 
^^h-energy conversio 
capabilities. 

“Being fuel efficient is 
strategic idea for us," sm 
E oacato. "Its important as fi 
as our image is concerned i 
supply an efficient produi 
which uses natural gas.” 

Up to 75 per cent of France 
energy needs is supplied b 
nuclear electricity. Gaz d 
supplies only a fractio 
Jtfthficountry’s total energ 
out ts hoping that by stresstn 
fuel efficiency - and b 
offering price warranties t 
eBay fears of a gas price rise 

it can increase its share of th 
market. 





V 




roleum: 

1 




FINANCIAL TIMES MONDAY NOVEMBER 28 1994 ★ 

ENERGY EFFICIENCY 5 


Profile: ROBERT JONES MP 


Britain's new Mr Save-lt 

Poacher turned 
gamekeeper 


The task of making Britain 
more energy efficient belongs 
to Mr Robert Jones, the newly 
appointed junior mini ntwr at 
the Department of the Environ- 
ment. Although the UK has 
previously had energy minis- 
ters with a brief to raise 
energy efficiency, this is the 
first time anyone has formally 
carried the title. 

It was an unusual choice. Mr 
Jones was previously rfioirmpn 
of the Select Committee an the 
Environment in the House of 



Robert Jones: backbench critic 
gels a mMsturial role 

Commons where he grilled 
ministers and officials on 
Britain’s rather mixed perfor- 
mance on energy saving. Last 
year, he produced a report 
which effectively said that gov- 
ernment policy in the area was 
too weak, and put forward a 
String Of mwimmandatfonje - 

Same people have therefore 
viewed the appointment as 
“poacher turned gamekeeper”, 
though" he is hi g hl y regarded 
in the energy efficiency busi- 
ness itself. 

“Hie comes to the job with 
great knowledge and sympathy 
for the subject", says Mr 
Andrew Warren of the Associa- 
tion for the Conservation of 
Energy. “But people also have 
high expectations of what he 
can achieve." 

Now, he is in the hot seat 
himself. How does the view 
look from there? “We are ach- 
ieving a lot, but there’s also a 
lot of complacency around." he 
says. 

The progress has come 
mainly in industry, he thinks, 
where companies have become 
much more cost-conscious, and 
are taking serious steps to 
reduce energy consumption. 
The government is backing 
this up with advice schemes, 
help with eco-audits and man- 
agement standards. 

The UK is also “doing quite 
well" by international stan- 
dards. “Our building regula- 
tions take us dose to the top, 
well ahead of countries like 
Germany,” he says. He is also 
encouraged by the initiatives 
taken by local authorities to. 
save energy, and by the gov- 
ernment’s target of reducing 
its own energy consumption by 
15 per cent between 1991 and 
190& 

The complacency Mr Jones 
sees is mainly in the residen- 
tial/commerdal sector where 
energy is only a small part of 
people's costs. Moreover, 
householders do not bother to 
compare one quarter’s electric- 
ity and gas bills with the same 
quarter the year before, so 
they have little idea of the 
energy trends in their own 
homes. 


“We do need to get over the 
fact that more than half of 
global wanning gases come 
from braidings," he says. 

The government has been 
running a publicity campaign 
to sharpen people’s awareness 
of the risks of global wanning. 
It recently turned the pressure 
up with a fresh campaign 
which is supposed to make 
thgm actually do something 
about it. The £6m campaign, 
using the message “Wasting 
energy costs the Earth", is 
based on dinosaur figures 
because they appeal to chil- 
dren who tend to be much 
more responsive than adults to 
appeals of this kind. 

Mr Jones has also been ask- 
ing banks to provide free 
energy ratings for homes when 
advancing mortgages to house 
purchasers. From next July, 
new bufiding regulations wfll 
require all new dwellings to be 
given an energy efficiency rat- 
ing. 

The campaign comes on top 
of the government's highly 
controversial imposition of 
VAT on home heating in last 
year's Budget But the effects 
of this tax are being eroded by 
the decline in gas and electric- 
ity prices. Does Mr Jones think 
ta«« should be pushed up fur- 
ther to keep up the pressure? 

“Bather than jack up energy 
taxes, I would prefer to concen- 
trate on educating people,” he 
says. “We don’t want to add 
unnecessarily to their costs.” 

in fact, the trend in prices 
reinforces the government's 
view that it needs to use other 
weapons besides price, such as 
persuasion, publicity, and 
pump priming exercises, par- 
ticularly for low income house- 
holds. But Mr Jones opposes 
further legislation to enforce 
energy efficiency. In a recent 
House of Commons debate, he 
told MPs that he thought suffi- 
cient progress was being 
achieved without adding to the 
legislative burden. 

This concern about costs 
also lies behind Britain’s resis- 
tance to an EU plan for a car- 
bon tax, which Mr Jones 
tiitoks would greatly harm, the 
competitiveness of European 
industry if it was imposed uni- 
laterally. “We should look at 

•We need to get over the 
fact that buildings emit 
more than half the global 
warming gases’ 

this an a world basis,” he says. 

Mr Jones concedes that there 
is still doubt about the serious- 
ness of the risk of global 
warming- But he says this is 
expressed “by a tiny minority 
of scientists”. And he believes 
that energy efficiency is still a 
worthy goal in its own right 
because it Increases industrial 
competitiveness, and saves 
householders money. 

He remains confident that 
the UK will be able to reach its 
target erf reducing CO, to 1990 
levels by the year 2000 under 
its Earth Summit commit- 
ments. The next point to be 
considered is what happens 
after that, and International 
negotiations have only just 
started. 

David Lascelles 


mr STlttVEYS INFORMATION 


ROOMING SURVEYS LIST 


Tel 071 873 3763 
Fax 071 873 3062 
rs related to energy and the environment in 1995 

WER GENERATION EQUIPMOIT May 

/IRONMENTAL TECHNOLOGY June 

ELECTRICITY June 

OTRAL ASIAN OIL AND GAS July 

AL INDUSTRY November 

PAGING AND ENVIRONMENT November 

RU> NUCLEAR INDUSTRY November 

=BGY EFFICIENCY December 

Tel 071 873 3763 
Fax 071 873 3062 

orevious. Callers at shop - £1 
Pg ^ious Tei 071 873 3324 


/SYNOPSES 



Tel 071 873 3763 

tould be sent in writing to toe 
the survey concerned, Number 
or fa* 071 873 

3197 


UK has no target but could do 20% better, David Lascelles reports 

Don’t forget the dinosaurs 


Y ou are looking at a 
model of the DhuxUane" 
said Mr John Gummer, 
the environment secretary, 
with an embarrassed laug h On 
the table before him stood a 
plastic dome with models of 
what looked like dinosaurs 
wearing human dress. 

In fact, that was precisely 
what they were. Mr Gummer 
was launching the govern- 
ment’s latest energy efficienc y 
drive: “Wasting energy costs 
the earth” - a campaign is typ- 
ical of the policy adopted by 
the government to encourage 
energy efficiency in the UK. 

It is based on what it calls 
“partnership”, a voluntary 
effort by government, home- 
owners and businessmen to 
work together to achieve the 
energy reduction goals. Shortly 
after the dinosaurs were 
launched, the government 
squashed an attempt by oppo- 
sition parties to introduce an 
energy efficiency Bill into par- 
liament on the grounds that it 
would add to costs and regula- 
tion. 

There is no official target for 
energy efficiency in the UK, 
though Mr Robert Atkins, one 
of Mr Glimmer's ministerial 
colleagues, told parliament 
that be believed the UK econ- 
omy could operate on 20 per 
cent less energy than it does 
today. The more constraining 
target is the UK’s commitment, 
maifa at the Bjn Earth Summit, 
to bring carbon dioxide emis- 
sions back to 1S90 levels by the 
year 2000. This implies a cut of 
some 10m tonnes a year, or 
about 6-7 per cent 


However, the government's 
own research shows that 
despite earlier publicity cam- 
paigns to raise awareness of 
global warming issues the pub- 
lic's knowledge is still poor 
one official poll showed that 
nearly half the population con- 
fuses the issues of global 
wanning and the ozone layer. 
The public’s willingness to 
invest in energy efficiency is 
also low. A poll by Projects in 
Partnership, an independent 
group funded by the Depart- 
ment of the Environment, 
found homeowners “disinter- 
ested, confused and mistrust- 
ful". 

A year ago, the government 
took what it thought was a big 
step forward in persuading 
people of the value of energy 
saving investment when it 
extended - after long delibera- 
tion - value added tax to home 
heating. VAT was introduced 
at 8 per cent last April and will 
rise to the standard rate of 17% 
per cent next ApriL Although 
this conflicted with the “part- 
nership” idea, the temptation 
for the Treasury to cash In on 
pressure for greater energy 
efficiency was evidently irre- 
sistible. 

However, the impact of this 
measure is already being 
eroded by the steady decline in 
gas and electricity prices 


which has been caused by 
deregulation and privatisation 
of the gas and power utilities. 
Some specialists believe that 
the entire effect may be offset 
by the end of this decade - In 
which case further measures 
may he needed to get toe L5m 
tonne CO, saving which VAT 
was supposed to deliver. 

This could strengthen the 
chances for further develop- 


nuclear power industry, and he 
will weigh the contribution 
that N-stations can make to 
reducing greenhouse gases 
when deciding whether to 
authorise construction of fur- 
ther nuclear capacity. 

Meanwhile, the government 
suffered another setback when 
the regulators of the gas and 
electricity industries refused to 
sanction further levies an con- 
sumers to fund the Energy 
Saving Trust, the agency 
winch the government had set 
up to subsidise and promote 
energy efficiency projects. Mr 
Eoln Lees, the ESTs chief 
executive, still hopes to be able 
to promote various schemes, 


such as low energy light bulbs 
and self-financing improve- 
ments- But until the govern- 
ment devises alternative ways 

nf prrw riiKng lim gJyr ro f unding , 

the EST will not be able to 
fulfil its promised role. 

Instead, much of the nffirfai 
energy saving effort is being 
directed through Neighbour- 
hood Energy Action, a govern- 
ment sponsored charity which 


vices (helping customers make 
better use of the energy they 
buy) will not be helped by 
deregulation, at least in the 
sheet term. Deregulation will 
stimulate competition to cut 
prices, and energy saving wifi, 
be sidelined. 

The report says: "Price 
reductions cannot go on indefi- 
nitely. But whilst customers 
can get significant savings just 
by g»g a new supply con- 
tract, why should they be 
interested in having new pro- 
cess equipment or heating eon- 
txols/insulation fitted?” 

The picture in industry is 


better. A recent report by 
Touche Ross, the aramintonte 
showed that energy intensive 
industry has taken steps to cut 
its power bills because of the 
strategic importance of energy 
costs. But less Intensive indus- 
tries stOl tend to treat spend- 
ing on energy e ffic iency as dis- 
cretionary rather than vital 

Mr Simon Uoyd, the market- 
ing director of BP Energy, one 
of the country's largest indus- 
trial contract energy compa- 
nies, says that energy manage- 
ment has only “scratched the 
surface” of the country’s 
annual £9bn energy MIL “But 
attitudes are changing very 
fast now", he says, as compa- 
nies try to cut costs and pro- 
tect themselves from the risk 
of changing energy prices. 

However, this has yet to feed 
through to widespread use of 
combined heat and power 
schemes. The government has 
a target of 4.000MW of addi- 
tional capacity, but so far only 
about UQ00MW has been built. 

Mr David Green, director of 
the Combined Heat and Power 
Association, says that projects 
have been squeezed by adverse 
trends in power prices. Elec- 
tricity prices are falling, while 
contracts for gas on which 
CHP schemes are based have 
been going up, contrary to the 
trend for gas generally. 


Mr Green thinks the govern- 
ment should require all new 
power schemes to provide heat- 
ing as well - something it 
could enforce since the Depart- 
ment of Trade and Industry 
has to approve all new electric- 
ity generation projects over a 
certain size. This is the case in 
a number of other European 
countries, such as Denmark, 
he points out, but government 
officials are unsympathetic, 
taking the view that CHP 
“should be able to stand on its 
own two feet”. 

One aspect of power genera- 
tion which does get financial 
support is alternative energy. 
The government will shortly 
announce a new round erf sub- 
tidy for renewable energy pro- 
jects, though with public oppo- 
sition to wind power now 
increasing, even *bis aspect is 
not without controversy. 

A further area where the 
government is being pressed is 
transport. The recent report of 
the Royal Commission on 
Environmental Pollution called 
for a massive redirection of 
resources away from roads 
towards public transport and 
other means of reducing traffic 
on grounds of pollution control 
and energy efficiency. 

However, the report received 
a cautious welcome from min- 
isters because it challenges 
many key aspects of govern- 
ment policy: the preference for 
roads, the reluctance to subsid- 
ise public transport and the 
planning process. It does, how- 
ever, reinforce the policy of 
increasing fuel taxes, which 
the government must welcome. 


ment of nuclear 
Michael. 
Heseltine, pres- 
ident of the 
Board of Trade, 
is currently 
reviewing the 
future of the 


power. Mr 


The government wants a 
partn er ship with home 
owners and business 


has a budget of £75m to help 

the heating 

problems of 
low income 
households. 

A recent 

report by the 

■hhwm fia c Consumers 
Council and the EST concluded 
that the market for energy ser- 



ways we are helping our customers co 
achieve greater energy efficiency today. 

A measure of our commitment to 
this goal is the fact that we are 
spending over £3 million a year in the 
community on energy efficiency 
measures. These are designed to show 
domestic and small business customers 
alike that saving energy is not only 
good for the environment, but also 
good for their pockets. 

Our aim is to cut the electricity they 
use by at least 758 GWh - that’s enough 
to power a town with a population of 
around 12,000. 


At Eastern we are saving 
energy for the past, the present 


and the future. 


Training and advice that will reduce 


What is more, we lead by example. 
We plan to reduce the energy used in ■ 
our buildings by 20% in five years. 
We're fully committed to more efficient 


energy usage by 30%, and aid 
preservation at over 50 historic National 
Trust buildings. 

A range of community help projects 


and environmentally friendly power 
generation and also electric transport. 

At Eastern we are taking care to 
build a better future that can be shared 


such as low energy lighting and better 


by everybody. 


insulation for low income homes. 


And, energy management systems 
and new process technologies that 
enable industry and commerce to cut 
energy consumption dramatically. 

These ate just some of the practical 


y i 


EASTERN 


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Global warming experts think again, writes Bronwen Maddox 


The problem is in the east 


Fears about global warming 
have provided much of the 
impetus behind the energy effi- 
ciency programmes of Western 
countries. But governments 
have been slower to introduce 
many long-promised measures 
than environmentalists hoped. 

Meanwhile, some politicians, 
economists and industrialists 
are now questioning the scien- 
tific basis for these fears. 

For some years scientists 
have been predicting that If 
concentrations of “greenhouse 
gases” in the atmosphere con- 
tinued to Increase, the earth 
could warm up. 

Governments took those pre- 
dictions seriously enough to 
agree, at the 1992 Rio Earth 
Summit, that the risk deserved 
their attention. Industrialised 
countries pledged to draw up 
plans for bringing emissions of 
greenhouse gases back to 1990 
levels In the year 2000, while 
developing countries commit- 
ted themselves to promoting 
energy efficiency. 

The main greenhouse gas is 
carbon dioxide, produced when 
organic material, including fos- 
sil fuels, is burnt. Policies to 
combat global warming have 
therefore concentrated on lim- 


iting carbon dioxide. Emissions 
of other gases which are 
incriminated, such as methane, 
are harder to measure and to 
control, and have so far 
inspired less political effort 

Governments’ main policy 
tool in trying to draw up plans 
for curbing carbon emissions 
has bden higher taxes on 
energy in order to encourage 
more energy efficiency. How- 
ever such proposals have run 
into fierce political opposition 
in many countries. 

In the European Union, the 
proposed tax on energy and its 
carbon content has stalled, 
even though this is the only 
tool the EU has at its disposal 
for meeting the Rio targets. US 
President Bill Clinton's propos- 
als for energy taxes, drawn up 
after Rio, met a similar fate. In 
the UK, the government's deci- 
sion to introduce value-added 
tax on heating fuel provoked a 
ferocious political row, 
although steep annual 
increases on motor fuel and 
car licences have proved less 
controversial. 

Moreover, in the past few 
years, some of the political 
momentum has been taken out 
of the issue by recession. 


which has proved unexpect- 
edly effective at restraining 
emissions. It has, Just as 
importantly, reduced the 
amount of money available in 
many countries for spending 
on measures to encourage 
energy efficiency directly, such 
as household Insulation. 

At the same time, a chorus 
of scepticism about the level of 
the threat posed by global 
warming has become louder. It 
has questioned the legislative 
and economic effort devoted to 
the problem, and arguably has 
made it harder to force 
through politically controver- 
sial measures. 


T he essence of the science 
which underpins the pre- 
dictions is not contested. 
Physicists agree that green- 
house gases can trap beat 
which Is emitted from the 
earth’s surface and so prevent 
it passing into space. 

But there is still scientific 
disagreement about the predic- 
tion that if the concentrations 
of these gases build up, the 
earth will warm up. There is 
even more disagreement about 
the amount of wanning that 
might reasonably be expected. 


The best current predictions 
of the four leading models of 
climate change used worldwide 
suggest that, if carbon dioxide 
levels double, the world will 
warm up by between 1.9C and 
5.2C from existing levels. 

Mr Bruce Callander, head of 
the working party which 
weighs up scientific research 
for the United Nations Inter- 
governmental Panel on Cli- 
mate Change, acknowledges 
that there are still problems 
with the models. Taking 
account of the behaviour of 
clouds and oceans remains the 
biggest difficulty, he says. 

While the IPCC is emphatic 
that the risk of warming 
should be taken seriously, it 
points out too that scientists 
will need years more data 
before they know whether the 
predictions are accurate. 

Global warming is one of the 
most difficult examples of a 
conundrum which politicians 
increasingly face: how to make 
policy, which may have consid- 
erable economic repercussions, 
when science is uncertain. 

Cost-benefit analysis, of the 
kind now modish in environ- 
mental economics, offers little 
assistance in the case of global 


wanning, given that the proba- 
bilities of the threat are so 
hard to calculate. 

Moreover, there Is Intense 
debate, both scientific and eco- 
nomic, about whether a small 
degree of warming in the 
earth’s atmosphere would he 
harmful or beneficial. Some 
countries, such as Russia, have 
suggested that they could ben- 
efit, as they would be able to 
farm previously ice-boond 
regions. 

Such points have highlighted 
one of the most controversial 
aspects of the international 
debate on c lima te change: the 
unequal distribution between 
countries of the costs of 
wanning, and the costs of miti- 
gation. 

Increasingly, as they try to 
put together plans to meet the 
Rio stipulations, industrialised 
countries are wondering 
whether they would do better 
to spend money helping 
improve energy efficiency in 
developing countries. 

The collapse of the former 
Soviet Union and ' Eastern 
European economies has tem- 
porarily restrained the rise of 
global emissions. But although 
the introduction of new tech- 
nology into Eastern and Cen- 
tral Europe is greatly improv- 
ing their energy efficiency, the 
emissions from those countries 
will soon begin to rise again as 
their economies pick up. 

Meanwhile, the industrialisa- 
tion and the population growth 
of China and India, and Chi- 
na's heavy dependence on coal, 
means that their carbon emis- 
sions are rising steeply. 

As developed countries 
which have ratified the Rio 
convention struggle to per- 
suade their citizens to turn off 
lights as they leave the room, 
put only one cup of water in 
the kettle and walk rather than 
drive to the shops, they are 
beginning to ask more 
urgently than before whether 
the most efficient way of tack- 
ling global warming is'not to 
start with the energy consump- 
tion of the developing world. 



What did you see first, the faces or the vase? 

To us, this test illustrates two things. The obvious isn’t 
always so obvious. And if you look hard enough you will 
see things others don’t. 

This is how we approach our customers’ power generation 
challenges - with an open mind. Where others see a dead 
end, we look again. And sometimes find a 


possible way out. 


WAR 1 SILA 


It doesn’t mean we’re smarter. It simply 
means we don’t give up. Some call it stubbornness, others 
commitment. No matter what you call it, this spirit keeps 
us motivated and one step ahead. 


GROUP 


The Warcrila Diesel Group, originally from Finland, manufactures engines for marine propulsion and power plants for electricity and heat. 

Our commitment has made us pioneers in heavy fuel, gas-diesel technology and emission control, only to mention a few areas. 
Today the Group Is a global leader in diesel engines, with 6.000 employees in 80 countries. Net sales in 1 993 e xcee d ed 1.3 billion USD. 

The ’WamilS Diesel Group is part of the Mena Corporation. 




5 W 


Ford and Alcan's AW demonstrator 7001b fighter than its steeHjotfiBd equivalent 


Aluminium cars are coming, says John Griffiths 


v- -• 


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A UK Royal Commission 
report on environmental pollu- 
tion, expressing concern at 
worsening air quality in urban 
areas, in October called for the 
fuel efficiency of the typical 
family car to be increased by 
40 per cent over the next 11 
years. 

It provided no concrete sug- 
gestions as to how this might 
be achieved. Motor industry 
chiefs immediately rejected 
the call as “technically impos- 
sible'’. 

What they really meant was 
that over that period cars 
could be made very much 
more frugal with fuel than 
they are now. But to come 
anywhere near the Commis- 
sion’s target would not only 
mean using all the technology 
and new materials now becom- 
ing available 1 but would 
require cars to be made modi 
more austere than even the 
greenest-minded driver could 
accept 

There is a motor industry 
role of thumb that If a car can 
bemade 10 per cent lighter, it 
will go 6-7 per cent further per 
unit of fuel consumed. 

If electric windows, central 
locking, sunroofs,, audio 
systems, air-comfitUnriiig and 
other non-essentials were to be 
tossed out - along with the 
mass of motor, servos, actna- 
tors and other hardware 
needed to operate them - a 
weight saving of around 25 per 
cent should be achievable. 
(The first Volkswagen Golf of 
1974 weighed 250kg less than 
the 1,000kg of the current ver- 
sion.) 

The saving would be consid- 
erably higher yet if anti-lock 
brakes, airbag systems, side 
anti-intrusion bars and other 
recent safety innovations were 
abandoned. 

Without all this heavy 
equipment, fuel consumption 
would be further cut by being 
able to use a smaller engine 
and lightersuspension and 
wheels. 

Clearly, only the most mili- 
tant environmentalist would 
advocate such a radical 
approach (particularly since 
some of the extra weight com- 
prises catalytic converters for 
exhaust emissions). 

In energy efficiency terms, 
therefore, the new car of the 
year 2005 is much more likely 
to be a compromise. 

While ail this heavy equip- 
ment will stay on board, fuel 
savings wifi come partly from 
Anther improvements in inter- 
nal combustion engines, both 
petrol and diesel. 

Today’s petrol engine, with 


multi-valves, fuel injection 
and electronic management 
already uses about one-third 
less fuel than a simpler, simi- 
larly-sized and carburettor-fed 
milt in a similar sized vehicle 
of the 1970s. 

But weight is the central fete- 
tor - and the car of a decade 
hence seems set to shed lots of 
it thanks to a fierce “battle for 
the bodyshell" being fought 
out between the steel and alu- 
minium Industries. 

Volkswagen’s Audi subsid- 
iary and Al uminiu m Company 
of America (Alcoa) say that 
the revolutionary aluminium 
spaceframe body of Audi's 
recently-launched AS luxury 
car is 40 per cent lighter than 
it would have been If made of 
steel. They also maintain that 
such lightweight bodies can be 


If a car’s weight is. cut by 
10 per cent, it shoujd go 
6-7 per cent further per 
unit of fuel consume*} 


-introduced cost-effectively in 
- high-volume' production -cats . 
.within a decade. 

Steel makers from around 
the world have struck back by 
launching a collaborative proj- 
ect aimed at designing the 
lightest possible . bodyshell 
using the latest, high-streng th 
steels. They claim that a 2D 
per cent weight saving is pos- 
sible by optimising current 
designs using current manu- 
facturing systems, and that 35 
per emit is achievable with all- 
new designs using the most 
advanced technology. 

Two weeks ago, Ford, the 
world's second biggest vehicle 
maker, and Aluminium Com- 
pany of Canada (Alcan) ream- 
firmed their determination to 
ensure viable production of 
aluminium cars early in the 
next century - 

Initially, just like Audi’s A8, 
Ford expects aluminium cars 
to make their appearance at 
the top of Fold’s product 
range and only gradually filter 
down into cheaper, higher-vol- 
ume cars, according to Mr Bill- 
Shroff, manager of Ford's 
vehicle systems engineering. 

But an indication of the 
potential is provided by the 
AIY (aluminium-intensive 
vehicle) which the two compa- 
nies are using as the showcase 
for their aluminium technol- 
ogy. It is 318kg (7001b) lighter 
than Ford’s steel bodied Tau- 
rus/Mercury Sable model on 
which it is based dnd with 
which it shares almost identi- 
cal equipment 


The bodyshell Is 182kg, a 
full 47 per east llghtOT than 
the steel equivalent; the addi- 
tional 126kg difference repre- 
, seats the Tniock-oa?* payings 
from smaUer. lighter brakes 
and other components. . ~ - 
Crucially, in Ford’s- view, 
the AlV arid' - the 7 processes 
developed by Alcan, Ford arid 
a third partner* Ciba Poly- 
mers, allow, it to be made 
mainly by conventional motor 
industry manufacturing meth- 
ods, thereby avoiding the need 
for larges cale investment hi 
new plant a nd eq uipment 
Alcan’s “AVT ( Aluminium 
Vehicle Technology), process 
uses a mixture of spot welding 
andbonding with a CSbfcdevel- 

- oped epoxy adhesive to join 
: sheet aluminium pressings. By 

welding and bonding, lighter 
gauges of aluminium can .be 
used than would be the case 
with spot welding alone. / , 

• That the partners are seri- 
ous is in no doubt: to date 
Alcan alone has spent 3100m 
on . research . with current 
. annual- spending running at 
. dOug Ford has invested $35m 
and a fleet of 40 ATVs are 
undergoing field : trials.. They 

- are said to- have exceeded 

- 50,000 miles of rough usage 
and wfll be durability tested 
well beyond ' 100,000 miles. iV / 

■ Many problems remain, such 
as the need to optimise vehicle 
design while ^remaining com-, 
patible with the plant, arid 
machinery that win stffl tarn 
out steel cars for a very kmg 
time. Even Alcan admits that 
there wfll.be a cost premium 
for such cars, although not too 
big to deter consumers. 

The aluminium producers 
acknowledge that they use 
much more more primary 
energy than the steel makers. 
But they maintain that the 
overall balance is tipped back 
in fhair favour by aluminium’s 
easier recyclability and the on- 
road fuel savings. For exam- 
ple, with the 20 per cent fuel 
saving arising from a 25 per 
cent overall weight reduction, 
a mid-sized aluminium family 
car would use 600 gallons, less 
tael over 100,000 miles. 

It is not quite that simple, 
however. An aluminium car 
would actually contain several 
alloys, which would have to be 
separated before being suc- 
cessfully recycled. 

As Mr Don MacMillan, vice 
president arid general man- 
ager of Alcan’s automotive 
division, acknowledges, it Is 
not practical to expect scra- 
pyard workers to take three 
days to take apart every 
scrapped car with spanners. 


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