World Economic Forum Envisages 3 Scenarios For Financial Services Industry.

“The global financial services industry faces three possible and completely different scenarios as a result of a rapidly changing technological landscape and needs to prepare for all three to survive, the World Economic Forum (WEF) said in a special report Monday. …

Released during its East Asia summit, the [Technology and Innovation in Financial Services: Scenarios to 2020] report on likely scenarios into 2020 is designed to enable companies to ‘stress-test their strategies, to think about possible futures where their current assumptions may no longer hold true,’ the Forum said.  

Among the three scenarios, ‘Global Ivy League’ describes a highly concentrated financial services sector dominated by a small number of large, global players. … The second scenario, ‘Next Frontier’ is a world in which governments pursue deregulation and technology enables a variety of new business models to emerge. …Scenario three, ‘Innovation Islands,’ describes a world in which globalization stalls due to geopolitical tensions and global instability. Government policies toward the financial services sector differ widely among countries. …” [Dow Jones (06/25)/Factiva] 

           
Meanwhile in WEF related news, AFP writes that “From China to Singapore, Asia must nurture a culture of innovation if the region is to emerge as a formidable global player, the WEF on East Asia was told Monday. …

Speakers at the forum, attended by about 300 delegates from 26 countries, said governments will play an important role in nurturing creativity among their people. …” [Agence France-Presse (06/25)/Factiva]

           
AP adds that “Asia should use some of the $3 trillion lying idle in foreign exchange coffers for sorely needed infrastructure projects that are crucial for the region's development, [Asian Development Bank (ADB) Managing Director General Rajat Nag] said Monday. …Nag said foreign exchange reserves need not be used for ‘risky investments, but certainly in good solid infrastructure projects. …” [Associated Press (06/25)/Factiva]

           
Xinhua reports that “participants…have agreed that the likelihood of another Asian financial crisis is minimal. ...They pointed out that Asian countries have learned from the past experience, noting that banks have cleaned up the problem of non-performing loans, and that Asian economies, unlike before, are now in a stronger position, most of them enjoying trade surpluses, and have accumulated huge foreign exchange reserves. …

Some panelists suggested to create an Asian reserve bank where Finance Ministers would meet regularly to update each other on policies and to establish the debt/GDP ratio for each country. They said this institutional set-up will put Asia on par with North American and European regulatory systems and it will also lead to greater confidence in Asian financial systems and provide stability to currencies. …” [Xinhua (China, 06/24)/Factiva]

           
AP however, notes that “Asian economies may have overcome the 1997-98 financial crisis but now face new threats such as income disparity, climate change and a possible global economic meltdown, government and business leaders said Sunday. …

Asia's government and corporate sectors must join hands to develop policies and new leadership to tackle these new pressing global challenges to ensure sustainable growth in the region, delegates [said]…” [Associated Press (06/24)/Factiva]

           
Dow Jones writes that “The security of Southeast Asia's energy supply is ‘not bad,’ but more oil should be set aside in certain countries to cushion the blow of a supply disruption, ….Association of Southeast Asian Nations (ASEAN) [Secretary-General Ong Keng Yong] said Sunday…on the sidelines of the WEF… 

ASEAN's plan to build a regional network of natural gas pipelines - a security measure that's been on the drawing board for many years - is ‘happening by parts’. He acknowledged concerns that foreign energy investors may be put off by the slow pace of development in certain areas, or the sometimes-inconsistent policies of governments. …”   [Dow Jones (06/24)/Factiva]

Gazprom And Eni Propose EUR 10 billion Pipeline

“A EURO 10 billion-plus pipeline to bring Russian gas to Europe has been proposed by Gazprom, the state-controlled gas company, and Eni, the Italian energy group…

With the backing of the Russian and Italian governments, Gazprom and Eni, which struck a strategic partnership in November, signed a Memorandum of Understanding at the weekend to begin a feasibility study for the pipeline.

The study, which will look at the political implications of the project, as well as its technical and economic viability, is expected to take about 18 months, with the pipeline taking three years to build. …The pipeline could be 3,200km long. Known as South Stream, it would run from southern Russia 900km under the Black Sea to Bulgaria. From there it could take either, or both, of two routes: 1,000km to Greece, from where the gas could go on to Italy or 1,300km north into central Europe. …” [The Financial Times (UK, 06/25)/Factiva]

The Daily Telegraph adds that “…Russia's President Putin said the new project would improve European energy security and had EU blessing.” [The Daily Telegraph (UK, 06/25)/Factiva]  

           
ANSA writes that “…According the agreement, the cost of the project and the distribution of stakes among the partners will be decided after the feasibility study. … 

The South Stream project is a part of the strategic agreement signed by Eni and Gazprom in 2006 and is aimed at improving the energy supply to the EU, given the expected gas deficit. The EU gas demand is seen to increase by 200 billion cubic meters by 2015. …” [ANSA (Italy, 06/25)/Factiva]

           
WSJ notes that “…Saturday's deal has wide-ranging implications for Europe as well as the companies involved. …But just as Europe needs new pipelines, European politicians are increasingly concerned with the continent's dependence on Russia for future energy supply. Russia supplies more than a quarter of the EU’s gas, a figure slated to rise in the coming years. …  

Policy makers are worried that if Gazprom controls the supply of gas and the distribution infrastructure, it would have excessive control of the market. That adds to a concern that Russia could one day use its gas supply as a political lever in its relations with Europe. … 

[Meanwhile]Italian politicians say forging tighter ties with Gazprom is essential for Europe's energy security. …” [The Wall Street Journal (06/25)/Factiva]

WTO Sets Three Week Window To Get Talks Back On Track. “The 150-member World Trade Organization (WTO) has three weeks to get multilateral talks back on track in the wake of failed talks by four key powers in Germany, trade sources said Friday.

WTO Sets Three Week Window To Get Talks Back On Track. “The 150-member World Trade Organization (WTO) has three weeks to get multilateral talks back on track in the wake of failed talks by four key powers in Germany, trade sources said Friday.  

WTO director general Pascal Lamy brought all members together to discuss the way forward for the stalled Doha round of trade talks, which remain mired in an impasse over agricultural subsidies and trade tariffs among other issues.  

Multilateral talks would continue at the WTO headquarters in Geneva until mid-July, at which point a decision would be taken on whether to hold a ministerial meeting, the sources said. …” [Agence France Presse (06/22)/Factiva]

  
Reuters adds that “…Even a modest global trade pact may be better than nothing, according to economists and analysts who say the implosion of faltering WTO talks would carry big costs. …” [Reuters (06/22)/Factiva] 

Xinhua writes that “…At Friday's meeting, all WTO members expressed their disappointment at the result of the Potsdam negotiations, but they also expressed their full support to the continuing multilateral process in Geneva, trade sources said. … 

According to WTO sources, the chairs of different Negotiating Groups, particularly those on agriculture and NAMA (Non- Agricultural Market Access)… are expected to present revised draft texts on agriculture and NAMA in early July, which might be the basis for compromise among WTO members.  

Lamy has indicated that WTO members need to reach interim agreement on agriculture and NAMA before August so that they could conclude the whole round of talks at the end of the year or early next year. … 

At Friday's meeting, developing members stressed again that the Doha Round is a development round and special concerns of developing members must be addressed in any final agreement.  They also urged the US, EU and other developed members to offer substantial cuts in agriculture subsidies and tariffs in exchange for proportionate concessions of developing members in industrial market access. …” [Xinhua (China, 06/22)/Factiva]

           
Meanwhile AP reports that “China should play a more proactive role in bringing global trade talks to a successful conclusion …US Trade Representative Susan Schwab told reporters Friday. ‘China is a member of the WTO that has a great deal to gain from a successful Doha round, and a great deal to lose from the failure of the Doha round,’ she said…” [Associated Press (06/23)/Factiva]

FranceHosts Meeting On Help For Darfur, Chad

“France hosts a meeting of senior officials from more than a dozen countries on Monday aimed at providing funds and other support for international efforts to stabilize Sudan's violent Darfur region. …

           
Delegations from the world's top aid donors, members of the Group of Eight industrialized nations and powerful Sudan ally China are due to discuss the situation before moving on to ‘international support for the reconstruction of Darfur,’ according to the meeting's agenda. Sudan's neighbor Chad, which has seen the Darfur conflict spill across its borders, will also be on the agenda. …

           
Monday's meeting - which will include representatives from Egypt, the United Nations and the World Bank but not the African Union - will likely support an AU-UN mediation initiative which hopes to have all factions ready to begin talks around August.” [Reuters (06/25)/Factiva]

BBC News reports that “Speaking before the start of the conference, [French President Nicolas] Sarkozy called for the swift deployment of thousands of UN peacekeepers to support the current small African Union force presently operating in Darfur. He also pledged an additional 10m euros ($13.4m) to the AU force. "The lack of decision and the lack of action are unacceptable," he said.”

…On Sunday, the US Secretary of State, Condoleezza Rice, said the world had failed the people of Darfur. "I do not think that the international community has really lived up to its responsibilities here," she told a news conference with the new French Foreign Minister, Bernard Kouchner.” [BBC News(06/25)]

India's Boom Aids 'Untouchables' - High-Tech Revolution Raises Fortunes, Hopes For Those Of Low Caste.

“… For thousands of years, advancement in India has been restricted by its caste system, which is enshrined in the country's dominant Hindu religion. … But India's rapid economic expansion - and its booming high-tech sector - are beginning to chip away at the historical system that reserved well-paying jobs for upper castes and menial jobs for Dalits [members of the ‘untouchable’ caste at the bottom of Indian society],” writes the WSJ.

           
“With annual growth in gross domestic product exceeding 9 percent, companies that have hired tens of thousands of workers in recent years are looking beyond their traditional sources of employees. High-tech firms, both foreign and domestically based, are at the forefront of that search. As a result, some Dalits are rising into India's middle class. Technology giant Infosys Technologies Ltd. now recruits from 700 colleges around India, many of them in semirural areas where lower-caste people often live, up from about 50 urban colleges 10 years ago, says T.V. Mohandas Pai, the company's director in charge of human resources. … International companies are also having an impact. …

           
The ranks of Dalit entrepreneurs have also been growing, as India morphed in the past 15 years from a socialist-modeled economy to a market-driven one and a new generation of young earners began to spend freely, take vacations and rack up shopping bills. That has created opportunities for Dalits to open hotels and restaurants, as well as find jobs as plumbers, electricians, air-conditioning repairmen and construction workers. …  

           
Still, success stories … are rare. Estimates of the number of Dalits with skilled jobs and steady salaries in India's New Economy vary from tens of thousands to around 100,000, according to employers, workers, experts and government officials. That's out of a total Dalit population estimated at about 167 million, or about 16 percent of India's total population of 1.03 billion. Many Dalits, especially in rural areas, don't have a shot at a decent education - a must for the fastest-growing areas of India's economy such as software development, medicine and engineering. Those that are educated are typically taught in their native language, leaving them ill-prepared to compete with wealthier, English-schooled job applicants. …” [The Wall Street Journal (06/25)/Factiva]

Also in this Edition: The Sovereign Loses Its Crown - Emerging-Market Debt; Briefly Noted...

The Sovereign Loses Its Crown - Emerging-Market Debt.  “Who says sovereign debt is king? Firms in emerging markets have raised more than twice as much in international markets as have sovereign borrowers this year, a complete turnaround from just five years ago.

           
The shift has struck even China, home to some of the biggest share issues ever in the past year. … Meanwhile, some companies, like Russia's biggest energy company, Gazprom, and India's ICICI Bank, are now rated by Moody's, a credit specialist, higher than their home-country governments. Investors, too, often see an advantage in betting on a country's most competitive industries, such as mining, rather than on the whole nation.  

           
With all the liquidity have come laxer lending standards. According to a recent report by the World Bank, private lenders have granted borrowers more flexibility with loan covenants and demanded fewer third-party guarantees. … The World Bank also notes that, on average, emerging-market companies that tapped international markets were ten times larger in assets than their domestic rivals, giving them great strength at home.  

           
Of most concern to creditors is global liquidity. When risk aversion mounts - as it surely will again at some point - emerging-market borrowers are usually quick to feel the effects.  

           
During this month's Treasury-bond sell-off, emerging-market bonds held up well. However, if markets, or the economy, take a sharp turn for the worse, investors may not be so brave. In addition, lenders will have to ponder the legal difficulties of enforcing debt contracts in emerging markets. In some countries, such as Turkey and Mexico, the law is based on the French Napoleonic model where secured creditors may not collect as much as in common-law countries. Studies also find that the ability to secure repayment is closely correlated with other measures of public-sector health, such as the control of corruption and tax compliance. So government policy clearly matters. The sovereign still counts for something, after all.” [The Economist (UK, 06/23)/Factiva]

Briefly Noted... A Pan-African conference to deliberate the prospects and challenges of the proposed African Union Government opened in Accra on Friday. The two-day forum on the theme: Accelerating Africa's Integration and Development in the 21st Century: Prospects and Challenges of Union Government is a forerunner to the 9th African Union summit to be held July 1 to 3 in Accra according to Ghana News Agency report. [Xinhua (China, 06/23)/Factiva]

The Transoceanico gas pipeline being built by Colombia and Venezuela will be finished in August and inaugurated in the fall, Colombian Foreign Minister Fernando Araujo and his Venezuelan counterpart, Nicolas Maduro said on Saturday at the end of a two-day meeting in Cartagena of the commissions that study trade, energy, customs, cultural, anti-poverty and infrastructure issues along the border. [EFE News Service (06/24)/Factiva]

Japan is planning to invest billions of dollars in India through private funds and government loans to improve infrastructure in the rapidly growing economy, an official said Friday. Details will be announced when Japan's Economy, Trade and Industry Minister Akira Amari visits New Delhi and Mumbai from June 30 through July 4. [Agence France Presse (06/22)/Factiva]

Serbiaon Saturday adopted a loose 2007 budget, despite calls by the central bank, the International Monetary Fund and analysts to rein in spending and cap wages. The $9.7 billion is 27 percent higher than last year and will show a deficit of some 0.6 percent of GDP. It was backed by 133 deputies in the 250-seat parliament in an early morning vote.  [Reuters (06/23)/Factiva]

The International Monetary Fund on Friday said Slovakia was well-positioned to adopt the Euro as its currency as planned in 2009, although it still faced some challenges getting its economic house in order.  [Reuters (06/22/Factiva]

Russia's accession to the World Trade Organization (WTO) will be completed by the end of this year, Economic Development and Trade Ministry, Director, Trade negotiations department, Maxim Medvedkov said on Friday. The multilateral negotiations will resume in Geneva this July and may lead to the completion of the negotiations. [Xinhua (China, 06/22)/Factiva]

Turkeyis set to host a summit of the Black Sea Economic Cooperation on June 25 with the participation of heads of state and foreign ministers from member countries. The summit will gather 12 member countries and 13 observer countries in addition to representatives from international organizations such as the UN, EU, Organization for Security and Cooperation in Europe, Organization for Economic Co-operation and Development, World Bank, World Trade Organization. [Xinhua (China, 06/23)/Factiva]  

Israel plans to begin transferring funds to the emergency government set up by Palestinian President Mahmoud Abbas and easing some travel restrictions in the West Bank, officials said on Saturday. The money is part of an initial package of "gestures" Israeli Prime Minister Ehud Olmert will present to his cabinet for approval on Sunday before talks with Abbas on Monday in Sharm el-Sheikh. [Reuters (06/23)/Factiva]

The Norwegian government on Friday outlined steps needed for Norway to achieve its ambitious plan to reduce net greenhouse emissions to zero by 2050. Measures include banning oil-based heating of new buildings and the disposal of biodegradable waste starting in 2009. The government also said it will boost its investments in energy efficiency and renewable energy by up to 10 billion kroner ($1.67 billion) by 2012. [The Associated Press (06/22)/Factiva]

EU leaders agreed on Saturday to a reform treaty they hope will allow the bloc to focus its attention on issues such as climate change and energy security. Once the treaty is finalized, a process likely to last until the end of year, attention will shift to get it ratified. Ireland will hold a referendum and Denmark is likely to follow. [The Financial Times (UK, 06/24)]

The World Bank's 24-member board has scheduled a closed-door meeting to take up Robert Zoellick's nomination. No other country nominated candidates. Zoellick would succeed Paul Wolfowitz, who will step down on June 30. [Dow Jones (06/25)/Factiva]