Monthly Archives: April 2013

Activists of the Indian right-wing Hindu organisation Shiv Sena burn a China national flag in protest against Chinese troops moving onto disputed territory on April 25 (NARINDER NANU/AFP/Getty Images)

Activists of the Indian right-wing Hindu organisation Shiv Sena burn a Chinese flag in protest against troops moving into Indian-controlled territory on April 25 (NARINDER NANU/AFP/Getty Images)

Rising tensions with Japan are evidently not enough to keep China busy. The People’s Liberation Army has now also pitched tents in a bit of disputed territory, controlled by India, creating an embarrassing security dilemma for the Delhi government. Official India’s initial reaction has been to play the incident down. I encountered an Indian diplomat in Beijing last week, who speculated that the whole thing was probably an initiative by an over-zealous local Chinese commander – and assured me that it would all be smoothed over. But that was five days ago, now – and the Chinese are still there.

As a result, the Indian government is increasingly open to charges of weakness – or even appeasement. Brahma Chellaney, one of India’s most hawkish commentators, fumes that “China is encroaching little by little on Indian land” and accuses the government of Manmohan Singh of “bending over backward at a time of aggression”. Read more

More on the Great Tax Race
Luxembourg is set to share currently confidential information about multinationals’ bank accounts, showing how much it wants to shed its image as a tax haven at a time of a political and popular backlash against tax avoidance.
♦ One of the biggest hedge fund service businesses on the Cayman Islands has tried to block sweeping reforms to make the tax haven more transparent.
♦ Jeffrey Sachs writes about how austerity has exposed the threat of global tax havens: “In the new world of austerity following the 2008 crash… they are increasingly seen as a cancer on the global financial system that must be excised.”
The rest of the world
Despite Dutch politics being roiled by waves of populist anger and anti-elitism, Willem-Alexander ascends to the throne amid an outpouring of popular enthusiasm – polls show support for preserving the Dutch monarchy running as high as 85 per cent.
♦ President Hamid Karzai acknowledges that the Central Intelligence Agency has been dropping off bags of cash at his office for a decade: “Not a big amount. A small amount, which has been used for various purposes.”
♦ Reuters takes a look through the confidential report prepared for the Cypriot central bank, which found that the Bank of Cyprus had been willing to invest in risky, high-yield Greek debt in its efforts to offset an erosion of its balance sheet from non-performing loans. The report also alleges that 28,000 files, containing emails from a crucial period during which the Bank of Cyprus spent billions of euros buying Greek bonds, were erased before investigators could copy them.
♦ A singer’s lament for Syria, broadcast on “Arab Idol”, has become a hit in the Arab world.
♦ Bangalore, once an advertisement for a new, confident India, is losing some of its sheen.
 Read more

Barack Obama is meant to be the most powerful man in the world. But it looks increasingly as though he may be dragged into a conflict in Syria, against his own better judgment.

In at number one: Joan Roca of El Celler de Can Roca (Getty)

Natalie Whittle, of FT Weekend, reports that a gastronomic boom in emerging economies has propelled restaurants from Peru, Brazil and Mexico up the rankings in a prestigious annual list of the best places to eat in the world.

The highest riser in the latest S. Pellegrino World’s 50 Best Restaurants list, compiled by Restaurant magazine, is Astrid y Gaston from Lima, which jumped 21 paces to number 14. And if you’d never thought of Lima as a gastro-paradise, think on this: it now has the same number of eateries on the list as London.

As for top spot, Copenhagen’s Noma, which has been at number one for three years running, was finally knocked off its perch by the Spanish restaurant El Celler de Can Roca, self-styled purveyor of “emotional cuisine” run by the Roca brothers.

Since many of The World’s readers are the jet-setting type – and, dare we say it, the type that likes to chalk off another long lunch at the planet’s finest restaurants – we supply the top 50 below. Bon appétit… Read more

On Friday, South Korea advised the 175 workers left at the Kaesong industrial park in North Korea to leave for their own safety. Photographer Chung Sung-Jun captured part of the journey for Getty Images. In a set of striking photos, cars and vans are shown piled high with factory goods, to the extent that some of the drivers appear to have had no clear view through their windscreens. The workers joined compatriots who have left the zone since work was suspended earlier this month as a result of the escalating tension between Pyongyang and Seoul.

Seven South Koreans were held back on Monday, according to the BBC:

“Officials said the North insisted that some South Korean staff remain to negotiate unpaid wages. They did not believe the seven would be at risk.”

APRIL 27: South Korean workers arriving from the Kaesong joint industrial complex in North Korea at the inter-Korean transit office on April 27, 2013 in Paju, South Korea. (Photo by Chung Sung-Jun/Getty Images)

The FT’s Song Jung-a reported on the start of the exodus a few weeks ago:

“Long lines of cars and trucks loaded with heavy luggage crossed the border gate into South Korea this week as South Korean workers brought raw material and half-finished products back to minimise losses.”

APRIL 27: South Korean workers arriving from the Kaesong joint industrial complex in North Korea at the inter-Korean transit office on April 27, 2013 in Paju, South Korea. (Photo by Chung Sung-Jun/Getty Images)
Kaesong began operating in 2004 – the product of the first inter-Korean summit in 2000, and a symbol of the potential for economic cooperation between the two Koreas.

According to a US congressional research note from 2011, products manufactured in the industrial park include “clothing and textiles (71 firms), kitchen utensils (4 firms), auto parts (4 firms), semiconductor parts (2 firms), and toner cartridges (1 firm).” Read more

♦ In the first installment of our Great Tax Race series, Vanessa Houlder examines how the Netherlands and Luxembourg managed to book more foreign direct investment than the US, UK and Germany together. Exploitation of cracks in the international tax system has ignited intense anger from an austerity-weary public. Matt Steinglass looks at how the Netherlands wants to change its tax haven image, but is wary of scaring businesses away.
♦ Italy has a new government and it has already been met with mayhem.
♦ Just after winning the most votes in Iceland’s parliamentary elections, the head of the centre-right Independence party has said the government needs to focus on restoring growth.
♦ Anne-Marie Slaughter thinks President Obama should keep the Rwandan genocide in mind when weighing up action in Syria.
♦ The 26-year-old Chinese entrepreneur who was kidnapped by the Tsarnaev brothers describes his harrowing experience. The Boston Globe has also pulled together a timeline of the hunt for the bombing suspects.
♦ William Zinsser, author of “On Writing Well”, is still counselling people on the subject at the age of 90. He holds one-to-one sessions with people who read their writing out to him, as he cannot see, and only accepts sandwiches as payment.
♦ Maryam Sharif takes to the street to canvass for her father who is likely to become Pakistan’s PM for a third time: “It’s a beautiful feeling to be loved”.
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(DOMINIQUE FAGET/AFP/Getty)Austerity appears to be an increasingly dirty word in Europe. The past week alone has seen European Commission President José Manuel Barroso, Bill Gross of Pimco and Italy’s new prime minister Enrico Letta calling for an easing of austerity.

Spain’s surpassing of the 6m unemployed mark on Thursday added fuel to the debate. But even in Germany, the austerity police of the eurozone, cracks are beginning to show ahead of the elections with the emergence of an anti-euro party.

a) Are there any austerians left? Yes. Here are some of them.

- UK: Chancellor George Osborne hit back at criticism over his apparent excessive austerity by claiming there is no other alternative. And after a tough week when he was criticised by the IMF over the excessive pace of his austerity programme, this week has brought better fortunes for his stance as figures showed a lower deficit and the economy expanded 0.3 per cent in the first quarter.

- Germany: Chancellor Angela Merkel’s view as articulated this week couldn’t be clearer: “I call it balancing the budget. Everyone else is using this term austerity. That makes it sound like something truly evil.” Germany is the only eurozone country with a 2012 budget surplus.

- US: The situation here is different because of sequestration, which triggered automatic spending cuts and tax rises. And the White House faces a July deadline to raise the borrowing limit or default on its debt.

- Latvia: The tiny Baltic state is emerging from a state of uber austerity – part of its bid to join the euro later this year – and it could end up being seen as a poster child for successful deficit cutting implementation, with real growth of more than 5 per cent in 2011 and 2012, despite the broader recession in Europe.

- Spain: The push by Europe’s fourth-largest economy to cut spending and raise taxes has led to record unemployment topping 6m for the first time in its recent history. The government of Mariano Rajoy announced economic reforms and structural measures on Friday.

- Italy: The technocrat government of Mario Monti has been steadfast in carrying out fiscal consolidation. All eyes will be on Mr Letta, who has already said: “Europe’s policy of austerity is no longer sufficient”. Read more

Across the world, the ability of multinationals to exploit cracks in the international tax system has angered an austerity-weary public. But as policy makers draw up plans to close such gaps, the spotlight has fallen on the countries that help them pay less tax. Does it really make financial sense for Ireland to have a corporate tax rate of 12.5 per cent? Why are some American states looking to cut their corporate tax rates even as they struggle to pay for basic services? Why do countries compete instead of collaborate on tax?

As part of a new Financial Times’ series, the Great Tax Race, the FT’s taxation correspondent Vanessa Houlder was online on The World Blog on Tuesday and answered your questions about tax avoidance. Please see the comments section for her answers.

Here is a sample of some of the pieces in the series: Read more

♦ The collapse of Rana Plaza this week and the fire at Tazreen Fashions last year have raised questions about the Bangladeshi government’s ability to regulate its garment industry, and the intimate ties between this industry and the country’s political elite.
♦ President Obama is pushing to overhaul the US immigration system, giving some of the 11m unauthorised residents legal rights and the economy a much needed boost.
♦ A growing sense among Guantánamo prisoners that they will never go home, has led to a revolt: a hunger strike is now in its third month with more than half the inmates participating. Read more

Fire at Albion Mill, Blackfriars Bridge, London, March 1791. Painting by T. Rowlandson

Fire at Albion Mill, Blackfriars, London,1791. Painting by T. Rowlandson

The history of mass manufacturing is stitched through with accidents and peril. The first factories, which powered the industrial revolution in 18th century Britain, brought death and injury to many workers, including children. Mill fires in the UK were so common that some industrialists bought their own steam fire-engines in an effort to bring down insurance premiums.

The factory model spread fast. By the 19th century, the word ‘sweatshop’ had begun to enter popular parlance, with Charles Kingsley referring to ‘sweaters’ – or garment workers – in his 1850 tract ‘Cheap Clothes & Nasty’ (“Men ought to know the condition of those by whose labour they live”, he warned). Meanwhile, in the US:

“The term ‘sweatshop’… was meant to describe “sweated labor,” work that a big clothing manufacturer contracts out to a smaller firm… The labor was “sweated” because of the conditions of the factories – cramped, crowded, and full of damp heat from the steam-driven pressers.” – Bill Buford, ‘Sweat is Good’, The New Yorker

How did things get better? Safety standards encoded in law, industrial design improvements, the growth of unions, and public outrage helped bring change to the factories of western economies. But all too often, the impetus for reform seemed to require the catalyst of a terrible accident.

Today, the majority of factory accidents (though not all) take place in the developing and newly industrialized world – places like Bangladesh, Pakistan, China and India. The death of more than 200 people this week in a factory on the outskirts of Daka is a challenge both to the Bangladeshi government, and to western retailers.

The cost of change, to some observers, seems prohibitive – but if passed on to western consumers, it might actually be tiny. Jason Motlagh and Susie Taylor report: “An analysis by WRC estimates the garment industry would have to spend some $3 billion over five years to bring Bangladesh’s roughly 4,500 factories up to Western standards. That amounts to less than 10 cents a garment.”


Here are five of the worst factory accidents. There are many, many more. You will notice that we’ve focused on recent decades, but only because these were the best documented online. You may also notice that there are certain factors that the worst incidents have in common. The most frequent is locked doors.

1) May 25, 1911: The Triangle Shirtwaist Factory Fire, New York

Firefighters at the Triangle Shirtwaist Factory, March 25, 1911. Photographer: Brown BrothersDeath toll: 146 people, mostly Jewish and Italian immigrants, mostly women.

The owners of Triangle Shirtwaist, Isaac Harris and Max Blanck, were indicted by a grand jury on charges of manslaughter a few weeks after the fire. You can read a transcript of the proceedings of the case via Cornell University. The chief prosecutor, Assistant District Attorney Charles S. Bostwick, pulled no punches.

“Others ran to the Washington place door. One of these was Margaret Schwartz, now dead. And it is for her death that these defendants are now on trial.

Gentlemen of the jury, that door was locked. Those who ran to that door cried out ‘That door is locked. My God, we are lost.’ They were lost. That locked door barred their escape.”

 Read more

♦ The ever-growing ranks of unskilled and unemployed youth in Spain not only pose a challenge to the economy but are also threatening the fabric of Spanish society – a problem Madrid is only now beginning to address.
♦ Voter outrage sparks José Manuel Barroso’s concerns about eurozone belt-tightening.
♦ Paul Kevin Curtis, who has been cleared in the ricin letter investigation, might have been framed, according to his lawyer. James Everett Dutschke, another entertainer, is now the focus of the investigation and it seems that the two men’s lives have coincided before.
♦ Thirteen female corrections officers were charged with federal racketeering at a state prison in Maryland, US.The indictment described a jailhouse seemingly out of control. Four corrections officers became pregnant by one inmate. Two of them got tattoos of the inmate’s first name, Tavon — one on her neck, the other on a wrist.”
♦The 200m emails to be kept in the George W. Bush Presidential Center are creating years worth of work for archivists, a growing problem for the U.S. National Archives and Records Administration, the federal agency that keeps the nation’s trove of historic documents.
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Prospects for a new Italian government
The political chaos in Rome seems to be about to come to an end as the bickering parties prepare to form a broad coalition government led by Enrico Letta of the centre-left Democrats. Will the coalition be able to rise to the challenges facing Italy, including an economy now entering its eighth consecutive quarter of contraction. Ferdinando Giugliano, FT leader writer, and Guy Dinmore, Rome correspondent, join Ben Hall to discuss.

A kind of digital shiver went across the internet on Tuesday, after the Associated Press sent out a message saying two explosions had taken place at the White House, and that Obama was injured. Several things were suspicious about the tweet, and within minutes, AP announced that their official account had indeed been hacked:

Tweet from AP: "The @AP Twitter account has been suspended after it was hacked. The tweet about an attack on the White House was false."

While markets recovered their losses almost immediately, the incident leaves troubling questions about the capabilities of the group that claimed responsibility for the hack: the so-called ‘Syrian Electronic Army’. As one former US official involved in cyber security told the FT’s Michael Peel and Geoff Dyer on Wednesday:

“When you start to do things that have a big impact on the stock market, you are getting away from hacking and moving much closer to something that resembles an actual cyber attack on the US – which takes things into a different area altogether.”

It shouldn’t come as a surprise that the SEA have become good at what they do. They were already in full swing two years ago, when Max Fisher and Jared Keller looked at their efforts for The Atlantic.

“The SEA has aggressively engaged in a wide range of online activities to punish perceived opponents and to force the online narrative in favor of the Assad regime… their primary means of attack has been to overload the social networking profiles of government institutions and Western media outlets…”

 Read more

♦ Martin Wolf argues that the UK industrial revolution shows the Reinhart-Rogoff thesis on debt is not always right.
♦ Frigide Barjot and her fellow protesters have taken the heat off Hollande as people take to the streets to protest over gay marriage rather than the state of the economy.
♦ The planting of sugar cane has exacerbated the effects of the worst drought in more than four decades in the Indian state of Maharashtra.
♦ Critics say that Nelson Mandela’s family members have been using his status for their own enrichment. Two of his grandchildren are involved in a US reality show called Being Mandela and his daughter has launched a wine business called House of Mandela.
♦ FT Alphaville take a typically irreverent look at the ‘tweet retreat’ in their Occupational Indifference series.
♦ The number of people in Britain receiving emergency food rations has more than doubled in the past year as inflation eroded incomes and government spending cuts have pushed hundreds of thousands into crisis.
♦ Jacob Heilbrunn at The National Interest examines Israel’s fraying image and the possibility that US interest in Israel’s fortune could wane: if Israel remains stymied in dealing with the Palestinians… its predicament is likely to intensify. And the range of options for dealing with the country’s mounting problems is likely to expand toward more radical solutions.”
♦ Japanese drivers are getting televisions installed in the front of their cars. “Japanese law prohibits “staring” at a screen while driving, without saying anything about glancing at one.”
♦ The New York Times is debating the usefulness of Nato.

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Beppe Grillo on the campaign trail

Two months ago Beppe Grillo came out as the big winner of Italy’s general elections. His Five Star Movement, which was created only in 2009, came within a whisker of becoming Italy’s single largest political force. His vote tally in the Lower House was an extraordinary 8.7m, more than Silvio Berlusconi’s People of Liberty party and only a few hundred thousand votes less than the centre-left Democratic Party. Read more

In this image made available by the Syrian news agency (SANA) on March 19, medics attend to a man at a hospital in the northern Aleppo province. (AFP)Someone who worked closely with Bashar al-Assad, before and after he inherited Syria’s presidency from his father, once remarked to me that he “is not really very bright”. Perhaps. But he is not lacking in cunning.

Now, as in the past, he feels his way forward by probing and constantly testing the limits of what his adversaries will tolerate before provoked to respond. Having sometimes found that these limits are surprisingly elastic, he has developed a tendency to overreach. Yet, as his regime and his country crumble around him, he is still there – just about – and it looks as though he is still testing the limits, this time by the limited use of portions of Syria’s reportedly vast chemical weapons arsenal.

In recent months, allegations have been flying that the Assad regime has fired nerve-gas shells at Syria’s rebels. On the most cited occasion last month, near Aleppo, the country’s besieged commercial capital in the north, loyalist troops were among the casualties, and the government claimed that jihadi terrorists – part of an international conspiracy against Syria in the Assad narrative – were responsible.

Last week, Britain and France told the UN there was “credible evidence” the Assad regime has started using chemical weapons. This week, a top Israeli military intelligence officer categorically asserted the government was using them. The UN team of experts tasked with investigating these claims is meanwhile stranded in Cyprus, denied entry by Damascus.

There is, thus, no certainty about what is going on, but the mounting circumstantial evidence is spine-chilling.

President Barack Obama, who has brushed aside the advice of his security officials in his determination to stay out of Syria, nevertheless warned Damascus last August any use of chemical weapons would provoke unspecified action by the US.

Obama said at the time: “That would change my calculus. That would change my equation.” On a visit to Israel last month, he reinforced the point, saying the use of chemical weapons inside Syria would be a “game changer” for the US.

So far, however, the White House and State Department are officially withholding judgment on the veracity of Syria’s alleged use of these arms, about which few close observers of the conflict now harbour doubts. There is probably more here than simply the president’s caution. Read more

US military chief Gen Martin Dempsey meets Chinese President Xi Jinping in Beijing. AP

Perhaps it is excitement over the new Chinese leadership. Perhaps it is simply a tribute to the growing centrality of the Middle Kingdom. But Beijing seems to be full of foreign visitors, trying to get the measure of the place.

There is me for a start – enjoying the first clear day since I arrived in the city on Sunday. Lionel Barber, the editor of the FT is also in town – or so I infer from his Twitter feed. Twitter also tells me that Niall Ferguson, the Harvard historian is here. In fact, I think he gave a talk in the hotel I’m staying in – although I have yet to bump into him in the lobby. Read more

The Austerity Debate
Europe may have hit the political limits of how far it can go with austerity-led economic policies because of the growing opposition in the eurozone periphery, according to the president of the European Commission.
Tim Harford tells the story of Thomas Herndon, the student who uncovered a mistake in a famous economic paper that has been used to make the case for austerity cuts, and considers what it means for austerity economics.

Italy Deadlock
Choking back tears in his inauguration address, Giorgio Napolitano, who at 87 reluctantly accepted an unprecedented second mandate as Italy’s president, slammed the country’s political parties for their failure to reach agreement and for the “unforgivable” lack of political reforms.
♦ Tony Barber argues that public outrage is not bred only by economic crisis, and that politicians in Italy (and elsewhere in Europe) should get their houses in order.
♦ Italy’s political and economic torpor is epitomised in the ruined and abandoned city of L’Aquila.

In northwest Pakistan, militants are using bombs as campaigning tactics ahead of the May parliamentary elections.
♦ It’s the UK’s turn to host the G8 and Richard Dowden, director of the Royal Africa Society, wants to know if it will do anything to stop companies avoiding tax in poor countries: “More important than giving aid would be to stop doing bad things to poor countries. The worst thing we – the British – do is to maintain the world’s most iniquitous secret tax havens.”
♦ In the past year, two trillion dollars has not been reported to the IRS because “ordinary Americans have gone underground, and, as the recovery continues to limp along, they seem to be doing it more and more.”
Kidnappings of ordinary Syrians are on the rise as lawlessness spreads.
♦ The byline was borne of a need to make reporters more responsible for what they wrote about the Civil War in the US.
 Read more

By Gideon Rachman

Is France on the brink of revolution? Is President François Hollande in danger of being dragged to the guillotine? These sound like silly questions. In fact, they are silly questions. Yet talk of a new revolution is surprisingly common in France these days. This week’s edition of Le Point, a leading news weekly, asks on its cover, “Are we in 1789?”, and illustrates the question with a picture of Mr Hollande, dressed up as Louis XVI, the hapless monarch executed by the revolutionaries. Even academics are making the comparison. Dominique Moïsi, a visiting professor at the University of London, has argued that the president “looks ever more like a modern Louis XVI” and that France is in the grip of a “regime crisis”.

A protest in memory of Savita Halappanavar in November 2012 (Peter Muhly/AFP/Getty)

A protest in memory of Savita Halappanavar in November 2012 (Peter Muhly/AFP/Getty)

The first time a referendum on abortion was held in Ireland, it was 1983 and I was 12. Our local church in a small town in the south east was crowded and silent as the priest told those who supported the ‘right to abortion’ to leave now.

No one left, or if they did, I was too transfixed on the pulpit to see them go. If the Catholic church didn’t fight this, I remember the priest saying, then it would slide into irrelevancy, not much good for anything except perhaps fighting to save the whale. In those pre-environmentalist days, it was a reference that completely baffled me and I assume much of the congregation. Who wanted to save the whale?

Outside the church, there were people with collection tins and petitions. Later I remember a debate at my convent school; a teacher asked who agreed that abortion was murder and got a unanimous show of hands. A pro-life campaigner came to school and I remember not just the three foot foetus on the projector but also the scary realisation that anyone who did have an abortion would most likely end up in a wheelchair.

Nearly 30 years on and several referendums later, an inquest this week investigated the death of Savita Halappanavar, an Indian woman who died in an Irish hospital last October after a miscarriage. Her family say hospital staff repeatedly refused her requests for an abortion. A midwife told her an abortion was not possible because Ireland was a “Catholic country”. On Friday – what would have been her fifth wedding anniversary – the inquest found her death was by ‘medical misadventure’. Her husband said his wife’s treatment had been “barbaric and inhuman”. Read more