ID: 1
HEADLINE: FT  14 MAY 91 / (CORRECTED) Jubilee of a jet that did what it was designed to do 
TEXT: Correction (published 16th May 1991) appended to this article. 'FRANK, it flies]' shouted someone at Sir Frank Whittle during the maiden flight of a British jet. 'Of course it does,' replied Sir Frank, who patented the first aircraft gas turbine. 'That's what it was bloody well designed to do, wasn't it?' Exactly 50 years ago yesterday, the first British jet made a brief 17-minute flight from RAF Cranwell in Lincolnshire. To celebrate the event, Mr Eric 'Winkle' Brown, a 72-year-old test pilot of the prototype Gloster Whittle jet, Mr Geoffrey Bone, a 73-year-old engineer, and Mr Charles McClure, a 75-year-old pilot, returned to RAF Cranwell. They are seen in front of a restored Meteor NF 11. Sir Frank was unable to attend because of ill-health. The Gloster Whittle was not the first jet to fly: a Heinkel 178 had its maiden flight in August 1939, 21 months before the British aircraft. Correction (published 16th May 1991). THE PICTURE of a Gloster Whittle jet on Page 7 of the issue of Tuesday May 14, was taken at Bournemouth Airport and not at RAF Cranwell as stated in the caption. 
ID: 2
HEADLINE: FT  14 MAY 91 / (CORRECTED) UK Company News: Geevor merger hits rocks over pre-conditions 
TEXT: Correction (published 16th May 1991) appended to this article. Geevor, the UK mining group which has been fighting for survival since the Canadian Imperial Bank of Commerce called in a Pounds 2.1m loan in extraordinary circumstances in January, has suffered another set-back. Its proposed merger with European Mining Finance, a Luxembourg-quoted investment company, has run into problems and will not go ahead on the terms announced in March. Two of the pre-conditions for the merger have not been satisfied - the raising of bank finance for the enlarged group and the termination of the management agreement between EMF and its manager, Lion Mining Finance. However, Geevor said it remained in talks with EMF and other parties 'which may result in modified proposals'. Monarch Resources, the UK-quoted mining group with operations in Venezuela, has appointed Mr Anthony Ciali as president and chief executive officer. This follows the recent boardroom shake-up which resulted in the departure of seven directors and the arrival of Mr Michael Beckett as chairman. Mr Beckett was managing director of Consolidated Gold Fields and Mr Ciali was once a vice-president of Gold Fields Mining Corp, a US subsidiary. Correction (published 16th May 1991). Lion Mining Finance is not the manager of European Mining Finance as we reported on May 14. 
ID: 3
HEADLINE: FT  14 MAY 91 / International Company News: Contigas plans DM900m east German project 
TEXT: CONTIGAS, the German gas group 81 per cent owned by the utility Bayernwerk, said yesterday that it intends to invest DM900m (Dollars 522m) in the next four years to build a new gas distribution system in the east German state of Thuringia. Reporting on its results for 1989-1990 the company said that the dividend would remain unchanged at DM8. Sales rose 9.4 per cent to DM3.37bn, but post-tax profit fell slightly from DM31.3m to DM30.7m. In the first half of the current year sales rose 23 per cent. Mr Jurgen Weber, currently vice-chairman of Lufthansa, the German airline, is today expected to be named as the successor to the chairman Mr Heinz Ruhnau who retires at the end of 1992. Mr Weber is currently the technical director on the Lufthansa board. 
ID: 4
HEADLINE: FT  14 MAY 91 / World News in Brief: Population warning 
TEXT: The world's population is growing faster than predicted and will consume at an unprecedented rate the natural resources required for human survival, a UN report said. 
ID: 5
HEADLINE: FT  14 MAY 91 / World News in Brief: Newspaper pays up 
TEXT: A Malaysian English-language newspaper agreed to pay former Singapore prime minister Lee Kuan Yew Dollars 100,000 over allegations of corruption. 
ID: 6
HEADLINE: FT  14 MAY 91 / World News in Brief: Khmer Rouge snub 
TEXT: Khmer Rouge guerrillas refused a UN observer team's request for a visit to the front line to observe the Cambodian ceasefire. 
ID: 7
HEADLINE: FT  14 MAY 91 / World News in Brief: Cocaine ring broken 
TEXT: Spanish police said they had broken up a cocaine-smuggling ring, arresting 15 Chileans and seizing Pta92m (Dollars 900,000) in cash. 
ID: 8
HEADLINE: FT  14 MAY 91 / World News in Brief: Malawi frees poet 
TEXT: Malawi has freed dissident poet Jack Mapanje, 46, detained without trial for more than three years, Amnesty International said. 
ID: 9
HEADLINE: FT  14 MAY 91 / World News in Brief: Booby-trap murder 
TEXT: A Northern Ireland businessman and senior member of the loyalist Orange Order died when an IRA bomb exploded under his car in Armagh. 
ID: 10
HEADLINE: FT  14 MAY 91 / World News in Brief: Brussels rioting 
TEXT: Almost 200 North African immigrants were arrested in Brussels at the weekend during the worst racial rioting ever seen in the normally placid Belgian capital. 
ID: 11
HEADLINE: FT  14 MAY 91 / World News in Brief: Soviet deadlock 
TEXT: The Soviet parliament was deadlocked over a bill to guarantee the right to travel abroad. Many deputies suggested authorities could not cope with a flood of tourists and would-be emigrants. 
ID: 12
HEADLINE: FT  14 MAY 91 / London Stock Exchange: FT-SE 2,500 lost in nervous trading 
TEXT: FRESH indications of the depth of the UK recession, wavering optimism for base rate cuts this week and a poor lead from Wall Street all combined to undermine the UK stock market yesterday. Pressure for a further reduction in base rates was increased by the news yesterday that the monthly rise in domestic consumer borrowing was at a six-year low in March. However, last week's cautionary views on interest rates from the Bank of England have cast uncertainty over hopes in the City of London that UK base rates will be cut this Friday in the wake of the expected fall in the UK retail price index. Attempts by the equity market to hold on to FT-SE 2,500, reached at the end of last month, proved fruitless yesterday and the market closed 37.7 points down at 2,486.6. The final picture was exceedingly gloomy, with the London market extending its losses to finish virtually at the day's low as Wall Street continued its overnight fall of 51 Dow points by losing a further 9.39 early in the new session. Confidence was not helped at the close by sudden rumours that another large rights issue is in the offing. Institutional coffers are beginning to feel the weight of a 1991 rights issue burden already approaching Pounds 4bn, without including a substantial number of share placings. In the face of Wall Street's heavy setback on Friday night, the London market opened 23 Footsie points off, quickly abandoning the FT-SE 2,500 mark attained at the close of business on April 30. There was no significant recovery during the session but further losses were restrained at first by the relative absence of sellers and a FT-SE June futures contract which managed to hold above 2,500 until late in the day. But losses in share prices were rapidly extended in late trading as the big institutions backed away from the stock market. Market volume, as recorded by a Seaq-traded shares total of 354.9m shares, was low, even by comparison with Friday's 423m figure. The institutions were believed to be top slicing, selling a small part of their holdings in blue chip stocks in the expectation that these shares will be bought back more cheaply in the weeks ahead. Weakness in oil shares set the trend for widespread losses among Wall Street-orientated stocks. The industrial blue chips featured falls in BOC, BAT Industries, Reuters and ICI. However, share losses in the international sector were mostly suffered early in the session and did not increase disproportionately after Wall Street opened lower; some analysts commented that this indicated that domestic factors were the most significant in the market yesterday. The uncertain political scene in the UK, ahead of Thursday's by-election in the Monmouth constituency acted as a further discouragement to the big institutions, which are increasingly of the view that there will be little to attract them to the UK stock market until the third quarter of the year. Trading specialists suggested yesterday that, with their cash holdings drained by rights issues, the institutions are now less willing to buy cheap stock whenever the market gives ground. Some believe that fund managers may wait until the FT-SE falls by a further 50 or more points before making serious buying forays. However, optimism for a further strong rise in the UK market over the next 12 months, perhaps to around FT-SE 2,750, remains undimmed. 
ID: 13
HEADLINE: FT  14 MAY 91 / London Stock Exchange: Equity Futures and Options Trading 
TEXT: LONDON derivatives continued to trade under the shadow of Wall Street, opening weaker following the decline in the US in the previous session and then slipping still lower as New York extended its slide in London hours yesterday. The UK equity futures market began weakly and helped to pull the stock market down. The premium of the June FT-SE 100 index over the spot index narrowed from 20 points to around 10 on selling by independent traders. At one stage, the futures market attempted to rally and succeeded in widening the gap over the share market to 20 points. But with Wall Street on the defensive, prices were again marked lower and by the close June was back to less than a 10-point premium to the spot market. The June FT-SE closed at 2,494, down 42 points on the day. Its premium finished at 6 points, against fair value of 15. In traded options, the stock market's inability to break out of the range of the past fortnight prompted investors to sell calls against stock holdings. Elsewhere, there was a buyer of 1,000 Asda July 130 calls; a buyer of 500 GrandMet October 650 puts; and a buyer of 250 Barclays June 460 calls. The Euro FT-SE was boosted by a seller of 1,000 July 2,625 calls and a buyer of 1,000 July 2,525 puts. 
ID: 14
HEADLINE: FT  14 MAY 91 / World Stock Markets (America): Bond recovery fails to bring joy to equities 
TEXT: Wall Street THE STOCK market remained subdued yesterday in the wake of last Friday's sell-off, with the Dow Jones Industrial Average rallying only marginally in very light trading from the 50-point drop, writes Patrick Harverson in New York. At the close the Dow was 4.25 up at 2,924.42, having spent most of the day in negative territory. The more broadly based Standard &amp; Poor's 500 moved in similar fashion, recovering 1.02 on balance at 376.76, while the Nasdaq composite picked up 0.51 to 493.93. Turnover on the New York SE totalled just 130m shares, while rises showed a small lead over falls at the finish by 786 to 742. On Friday it was the sharp fall in bond values which led share prices lower, but yesterday's modest recovery in the bond market failed to stimulate a similar movement among stocks. The weakness in the US economy continues to trouble investors, who can see little reason to invest more of their money in equities. Yesterday's industrial production data provided no real comfort on the economic front. Although the data showed an expected 0.1 per cent increase in April production, the Federal Reserve also revealed a revised 0.6 per cent decline in March production, previously estimated at 0.3 per cent. Banks featured, with American Express dropping Dollars 1 1/4 to Dollars 22 3/4 on turnover of 4.1m shares after announcing that it would take a Dollars 144m pre-tax charge to account for the 28 per cent stake held by Shearson Lehman Brothers, its securities subsidiary, in First Capital Holdings, the troubled Californian life insurance group. Bankers Trust was down Dollars 1 at Dollars 48 5/8 after the New York-based banking group confirmed it was laying off 200 staff, while JP Morgan, which had been actively bought since it was announced over a week ago that the stock would join the Dow index, slipped Dollars 1 1/2 to Dollars 50 3/8 on meeting profit-taking. Square D jumped Dollars 6 3/8 to Dollars 87 3/8 after the company agreed to the bid by Schneider, of France, of Dollars 88 a share, or Dollars 2.23bn. AT&amp;T bucked the trend, firming Dollars  5/8 to Dollars 36 1/2 in active trading after reports that the merger with NCR is proceeding faster than expected. On the over-the-counter market, Nordstrom jumped Dollars 2 3/4 to Dollars 44 on turnover of 1.5m shares on the back of an improvement of almost 100 per cent in first-quarter profits. Apple Computer climbed Dollars 1 1/2 to Dollars 52 3/4 on volume of 2.2m shares after the company introduced its System 7 operating system software and said it would cut prices on logic board upgrades and memory kits for the Macintosh. Metcalf &amp; Eddy fell Dollars 1 1/2 to Dollars 15 1/4 after the water treatment and waste management company issued a second-quarter profits warning. Canada AFTER spending most of the day in lower territory, the Toronto market managed a mild recovery during the afternoon to end on a mixed note. The composite index was finally a net 2.9 up at 3,492.7 but declining issues still held an edge over advances by 273 to 240. Volume amounted to 21.6m shares, down from Friday's 23.3m. Lincoln Waste Management topped the most actives list after one of the company's largest shareholders and one of its directors sold more than 4m shares, approaching one-fifth of the session's moderate volume. The share price was steady at CDollars 10 7/8 . John Labatt, which rose CDollars 1 to CDollars 23 5/8 , said it is considering selling its JL Foods Inc unit. 
ID: 15
HEADLINE: FT  14 MAY 91 / Foreign Exchanges: Dollar and yen lose ground 
TEXT: THE DOLLAR fell against European currencies but improved in terms of the Japanese yen yesterday. A rise of 0.1 per cent in April US industrial production was roughly in line with expectations, while a revised fall of 0.6 per cent from 0.3 per cent in March output brought little reaction in the US currency. A decline to 78.3 per cent in April US capacity utilisation, from a downward revision to 78.5 per cent for March, also had no effect on a market waiting for today's data on US consumer prices and Friday's trade figures. At the London close the dollar had fallen to DM1.7140 from DM1.7255; to FFr5.8050 from FFr5.8400; and to SFr1.4430 from SFr1.4580. On the other hand it rose to Y139.40 from Y138.75 against a generally weak yen. The dollar's index dipped to 66.2 from 66.4. Speculation about an early cut in the Bank of Japan's discount rate depressed the yen. This helped to boost the D-Mark after rumours subsided that Mr Karl Otto Pohl was about to resign as president of the German Bundesbank. The rumours led to D-Mark nervousness in early trading, but by the end of the day attention was focused on interest rate factors and this pushed the German currency up against the yen. It finished in London at Y81.35 compared with Y80.40 on Friday. In the European exchange rate mechanism the D-Mark improved against the weakest placed French franc and also the Italian lira, but lost ground to sterling. The Bank of France left its money market intervention rate unchanged at 9 per cent at a securities repurchase tender, keeping interest rate differentials steady as the Bank of Spain and Belgian National Bank also left rates unaltered at similar tenders. The lira weakened against several of its partners in the ERM after Sunday's one-point cut to 11 1/2 per cent in the Bank of Italy's discount rate. However, it remained the second strongest ERM currency, according to figures from the European Commission, in spite of losing ground to the D-Mark, French franc and other members of the ERM at the Milan fixing. Sterling was the third strongest ERM currency as speculation continued about the possible timing of another reduction in UK bank base rates. Mr David Mellor, chief secretary to the Treasury, said on BBC radio that 'the chancellor will not cut interest rates until he considers it prudent to do so'. The Bank of England has signalled that it does not consider this an appropriate time, but the market still believes an early cut is possible as political pressure increases on the government. Sterling rose 1.30 cents to Dollars 1.7320, while improving to DM2.9675 from DM2.9650; to Y241.50 from Y238.50; and to FFr10.0550 from FFr10.0400, but it eased to SFr2.5000 from SFr2.5075. The pound's index put on 0.2 to 91.8. Sterling gained a further 20 points in New York to end at Dollars 1.7340. 
ID: 16
HEADLINE: FT  14 MAY 91 / Commodities and Agriculture: Farmers' Viewpoint - Machinery rings seem an all-round success story / The time is coming in the UK for a co-operative idea already working very well on the Continent 
TEXT: Farmers love government grants. But the flurry of urgent activity in recent weeks to beat today's deadline for applications for grant aid to help set up machinery rings has been out of all proportion to their value. There are much more significant reasons for farmers to co-operate in an effort to cut the capital costs of machinery. The ending of the modest Pounds 10,000 per ring grant payable over three years merely concentrated minds. Machinery rings began in Germany about 25 years ago. Born out of hard times, they brought together groups of farmers in local areas who were prepared to work some of their machinery on other people's farms where the appropriate tackle was worn out or did not exist. In other words, one member of a ring might provide the combine harvester and deal with the grain on a number of farms while another would bale the straw and yet another might plough and plant all the land for the following year's crops. Rings formalised local arrangements of this kind which had been going on between farmers in the same village for years and set standard charges for given tasks. By broadening the area over which such arrangements operated, it also gave members access to more specialised equipment. By employing a manager to co-ordinate the work it provided organisation and a guarantee of payment to those who did the work. Today, there are about 260 machinery rings in Germany and the idea has spread to other European countries, especially Holland and France. There were no rings established in the UK, however, until 1987 after a visit to Germany by a Scottish agricultural adviser who came home and enthused his clients over the concept. Since then, 10 machinery rings have been set up in Scotland. Although most are still developing and expanding, it is expected that the total turnover of the Scottish rings this year will reach Pounds 2.5m. Moreover, the single most successful Scottish group, with 220 members already, has a turnover in excess of Pounds 1m. The first English machinery ring was formed in Sussex and Kent only last year. Since then, 15 more have been established across the country. All have or are hoping to qualify for the Pounds 10,000 grant, 25 per cent of which comes from the EC and 75 per cent from the UK government. The scheme is administered by Food From Britain. At least another two rings are thought to be in course of formation but they will almost certainly not meet today's grant deadline. Within four years, therefore, Britain has gone from no machinery rings to close to 30 and the majority of them have been set up during the last few weeks. The ending of the grant had undoubtedly speeded their formation (it has been available since 1986) but Pounds 3,333 per year for three years split be-tween perhaps 200-300 farmers is insufficient motivation on its own for what has happened. The plain fact is that the machinery ring is an idea whose time has now come in the UK. To some extent there is an element of following fashion because the concept has received a great deal of publicity in recent months. The main reason for the rush of activity, however, is declining farm profits and the realisation by a growing number of farmers that they must cut their costs to survive in business. On average, the so-called 'variable costs' of running a farm - the money spent on seeds, fertilisers, sprays and so on - amount to between 35 per cent and 40 per cent of total costs. Fixed costs account for the remaining 60 per cent to 65 per cent and cover such things as labour, interest charges, power and machinery. In recent years, as margins have declined, some of these 'fixed costs' have had to become variable as numbers of farmworkers have diminished either through natural wastage or redundancy and as assets have been sold to reduce borrowings and, therefore, interest charges. Power costs are more difficult to control in the face of fluctuating oil prices while real depreciation on machinery values can be horrendous. Indeed, the depreciation rates typically used in farm accounts may well be insufficient to allow for the replacement of machines whose purchase prices continue to rise with inflation. Add to that the fact that many farms are over-mechanised for the understandable reason that farmers like to feel on top of any job, whatever the weather, and it is clear that economies in machinery costs are overdue in the current financial climate. The machinery ring has obviously been recognised as a possible solution. For Pounds 50 per year membership charge and a modest purchase of share capital, a farmer can plug into a source of extra income or extra help, whichever he prefers. Commission charges of 2 per cent are levied on both the demander and the provider of the work to cover the costs of the co-ordinator and his computer. Otherwise, the charges for work are set at similar rates to the most competitive contractors. Experience shows, apparently, that most rings lose money in their first year or two but that as the organisation develops and as members begin to review their machinery replacement policies, the flow of work offered and done builds up dramatically. Indeed, it is possible to foresee situations where some farmers decide to buy bigger machines than they can justify in order to earn extra cash working on other members' farms. At the same time, other farmers may see opportunities to earn more money off the farm and be pleased to pay a ring member to do most of his farm work. The pattern is already established in Germany, albeit on smaller farms than are typical in the UK. It is yet another step towards the establishment of significant numbers of part-time farmers in this country. In any event, those groups of farmers who have their machinery rings up and running are convinced that there is a potential for many more. A couple of weeks ago, there was a meeting of machinery ring leaders at the National Agricultural Centre at Stoneleigh, in Warwickshire. They decided to set up an Association of Machinery Rings to guide those who come after and to lobby on behalf of members on such things as the presently-restricted use of red, tax-free diesel fuel in tractors travelling more than 15 miles from their home base. They see this as a possible inhibition to the efficient working of rings which may cover an area 30 to 40 miles wide. The success of the concept relies on the willing co-operation of farmers. In this country, agricultural co-operation, with a few notable exceptions, has seldom succeeded beyond the first flush of enthusiasm. I believe this machinery ring version of co-operation will work. In any case, the other day I signed up to join one. 
ID: 17
HEADLINE: FT  14 MAY 91 / Commodities and Agriculture: LME monitors copper market as squeeze tightens 
TEXT: THE LONDON Metal Exchange executive yesterday said it was carefully monitoring events in the copper market where a technical squeeze has been causing severe volatility. As the squeeze reached its climax yesterday the price of borrowing (buying cash and selling forward) for one day reached Pounds 40 a tonne. During recent upheavals in the zinc market, the LME executive persuaded those with metal to lend to restrict the cost of borrowing for a day to Dollars 20 a tonne and some dealers asked last night why the cost of borrowing copper had been allowed to rise much more substantially. Mr Martin Abbott, the LME's director of marketing, said: 'Our duty is to run an orderly market - not to limit the cost of borrowing or the back-wardation (the premium for metal for immediate delivery compared with the three-month price).' Copper's backwardation widened to Pounds 100 a tonne at one stage yesterday and traders said this would continue to stimulate a flood of the metal into LME warehouse stocks. Copper stocks already stood at 261,775 tonnes at the weekend, the highest total for seven years, and traders estimated that today's stock report would show a further increase of about 10,000 tonnes. Mr Abbott said however, that, although the LME's copper stocks were relatively high, it would be wrong to assume that all the metal was available to be sold on the market. The owners might well be 'parking' the copper briefly in LME warehouses. The copper market was going through a 'choppy period' of volatility because there was still a split of opinion about whether there would be a surplus this year, Mr Abbott suggested. This choppiness could go on for some time before there was a clear consensus of opinion about the fundamental direction of the market. However, many analysts now insist that the recession which is begining to make its mark on even the strongest economies will far outweigh any interruptions to copper supplies this year. In the latest Metals and Mining Monthly Update from Carr Kitcat &amp; Aitken, part of the Banque Indosuez Group, analyst Mr Robin Bhar says key copper consuming sectors in the US (construction, autos and capital goods) will remain depressed and consumption in Germany is likely to be restrained by slowing economic growth caused by the mounting costs of reunification. Consequently, says Mr Bhar, copper stocks will keep rising during 1991 and the price is likely to fall decisively below Dollars 1 a lb, perhaps to between 70 cents and 80 cents a lb. The dollar price ended at Dollars 1.04 a lb last night. In sterling terms, cash copper ended at Pounds 1,443 a tonne, down Pounds 6.50 from Friday's close, while three-month metal was Pounds 1,346, down Pounds 11.50. 
ID: 18
HEADLINE: FT  14 MAY 91 / Commodities and Agriculture: Total in Algerian gas field deal 
TEXT: TOTAL, THE French state-controlled oil group, has signed a FFr3bn (Dollars 512m) agreement with Sonatrach, Algeria's state oil company, for the development of the Hamra gas field, writes George Graham in Paris. The French group will provide financing and technological assistance for the development of the field, expected to start production in 1994. In return, Total will have access to Hamra's entire output of condensates and liquefied petroleum gas - an estimated 150m to 200m barrels petroleum equivalent - for a period of 14 to 17 years. The deal shows the continued willingness of big Western companies to invest in Algeria, despite the political uncertainty that has been hanging over the country's future since the rise of the fundamentalist Islamic Salvation Front. Total also agreed yesterday to renew for a further five years its joint venture with Sonatrach for the operation of the Mereksen oil field, which currently produces around 600,000 tonnes of oil a year. It also signed two exploration contracts covering 6,458 square kilometres at Djebel Bottena and Hamra Southeast. 
ID: 19
HEADLINE: FT  14 MAY 91 / Commodities and Agriculture: Fuel cell use is predicted for platinum 
TEXT: FUEL CELLS, environmentally friendly units which produce electricity and heat from a controlled chemical reaction be-tween hydrogen and oxygen, are likely to provide the next substantial industrial application for platinum, according to Johnson Matthey, the world's biggest platinum marketing group. By the end of this century about 200,000 troy ounces of platinum a year could be ab-sorbed by this new market - about the same as the chemical and electrical industries each use today, JM suggests in its annual review of the market. However, this could be a conservative estimate. If fuel cells incorporating platinum catalysts are used and if the market develops as projected by the Japanese Ministry of International Trade and Industry, annual demand for platinum in that country alone by the year 2010 would be more than 400,000 ounces. 'Beyond the turn of the century platinum consumption could soar, should the market for fuel cells in vehicles materialise and dreams of a hydrogen economy become a reality,' says Mr Jeremy Coombes, author of the JM review. The fuel cell is a prime contender to meet demand for electricity without increasing pollution, he points out. It is versatile and efficient, produces hardly any noxious emissions and so could help to re-solve the apparent conflict between continued economic growth and the preservation of a healthy environment. Fuel cells went into commercial production for the first time last year. Japan is showing the most commitment to their development. The Japanese government is spending about Dollars 27m a year on research, and Fuji Electric, Toshiba and Sanyo have developed marketable products and established production lines to build them. The US Department of Energy is currently spending Dollars 44m a year on fuel cell research while spending in Europe is about Dollars 60m. By 1995 more than 100 fuel cells will be installed and producing power in Europe, Japan, the US and the Far East. Mr Coombes says commercial units should be available in 1993 at a cost of Dollars 1,500 per kilowat of generating capacity, not much more than the cost from conventional generating plant, and the cost is likely to fall as more fuel cells are built. On the main features of the platinum market last year, the JM review reports: Demand for platinum in-creased by 5.5 per cent to a record 3.66m ounces. Supplies rose by 9 per cent to 3.73m ounces. The market moved into marginal oversupply of 70,000 ounces from a marginal undersupply of 45,000 ounces in 1989. The slight oversupply might continue for some years. Supplies from South Africa, the world's biggest producer, were constrained by production difficulties but grew modestly. Shipments to the west from the Soviet Union, at 700,000 ounces, were the highest for 15 years. This year JM expects platinum to trade at about Dollars 400 an ounce before rising as the year progresses towards Dollars 450. 'Platinum 1991', free from Johnson Matthey, 78 Hatton Garden House, London EC1N 8JP, England. 
ID: 20
HEADLINE: FT  14 MAY 91 / International Capital Markets: Citicorp in asset-backed launch worth Dollars 1.4bn 
TEXT: CITICORP yesterday launched its first global asset-backed bond issue since August last year, a Dollars 1.4bn deal backed by a portfolio of credit card receivables. The progress of the deal confirmed that investors are once again willing to buy asset-backed securities. This will encourage other financial institutions looking to remove consumer finance assets from their balance sheets through securitised bond offerings. The five-year deal, lead-managed by Salomon Brothers, is backed by credit card receivables in Citicorp's 'master trust' of credit card accounts. The main portion of the deal, at Dollars 1.25bn, carries a triple-A credit rating by virtue of an additional Dollars 155m subordinated tranche which will absorb any initial losses of the master trust. The deal will be priced today, with the senior notes at an indicated yield spread of between 95 and 99 basis points over five-year US Treasury paper. The subordinated bonds, which carry an A-2/A credit rating from US credit rating agencies Moody's and Standard &amp; Poor's, will be priced at around 145 basis points over US Treasuries. The lead manager said most of the international market tranche of the deal was placed with institutional investors based in London. However, US investors remain dominant buyers of mortgage-backed bonds, and most of the subordinated paper was placed in the US. Citicorp's last asset-backed deal in the international bond market was launched in November. The deal was then priced to yield 90 basis points over US Treasury securities, but the bonds traded out to well over 100 basis points after launch. Market sentiment, however, has been firmer over the past two months, and the deal's pricing was considered attractive. In addition, the deal had been widely anticipated in the market, and many investors had set aside funds to buy the bonds. Demand was dominated by institutional investors. 
ID: 21
HEADLINE: FT  14 MAY 91 / Government Bonds: Gilts follow Treasuries' fall in auction aftermath 
TEXT: UK GOVERNMENT bonds plummeted yesterday morning, responding to the sharp fall in the US Treasury bond market on Friday afternoon. The benchmark 11 3/4 per cent Treasury stock due 2003/07 opened at 110 9/32 and fell to a low of 109 1/2 before recovering in the afternoon. Traders said the disappointing UK credit business figures released yesterday, which were slightly higher than market expectations, may have helped to depress prices. The gilts market is this week waiting for the release of several important economic indicators which could determine whether the Bank of England decides to cut the base rate. These include the producer prices index for April today, the unemployment figures on Thursday, and the retail prices index on Friday. THE US government bond market remained unsettled yesterday in the wake of Friday's frenzied sell-off, but prices at the long end did gain ground on the back of some sporadic buying. In late trading, the benchmark 30-year Treasury issue was up 1 7/32 at 98 13/32 , to yield 8.264 per cent. The two-year note was up  1/16 at 100 5/16 , yielding 6.808 per cent. Trading activity was exceptionally light. Dealers and investors continued to digest the implications of the dramatic fall in prices which followed last week's difficult auction of Dollars 37bn in government securities. With a large chunk of that paper still to be distributed, analysts were not expecting any significant recovery in bond values in the near term. The day's only economic news had little impact on sentiment. The Federal Reserve reported that industrial production rose 0.1 per cent in April, after falling a revised 0.6 per cent in March. THE Italian government bond market jumped yesterday following the one-percentage point cut in the discount rate at the weekend. The cut, from 12.5 to 11.5 per cent, followed the cabinet's approval of L14,000bn in spending cuts and revenue increases to curb the public deficit. Yields fell across the range of maturities as retail buyers scrambled to buy bonds. The yield on the 12.5 per cent bond due 2001 fell from 13.35 per cent to 13.07 per cent. The Bank of Italy's decision to cut the reserve requirement on the net increase in banks' and credit institutions' foreign currency deposits, with effect from the June reserve month, was seen as a bullish factor by the market. The move should free around L5,000bn of funds for use by the credit system. The cut in the Italian discount rate buoyed hopes of interest rate cuts in the Spanish and French government bond markets The Spanish bond market saw strong buying interest among the shorter-dated maturities. The yield on Spain's 13.45 per cent government bond due April 1996 fell from 11.91 to 11.82 per cent as foreign buyers moved in, hoping to benefit from an expected cut in the intervention rate. The Bank of Spain left its key money market rate unchanged at 13.5 per cent at its repurchase tender for central bank certificates. Traders said that this was disappointing, but did not rule out the possibility of an interest rate cut soon. Other European government bond markets opened weak in the wake of the US Treasury bond market's fall on Friday. The German market was haunted yet again by the rumour that Bundesbank president, Mr Karl Otto Pohl, may step down. Bund prices fell after the US decline, with the longer maturities taking the brunt of the fall. Despite some buying interest in short and medium-dated bunds, they ended almost unchanged on the day. JAPANESE government bonds rallied as a fall in short-term interest rates rekindled hopes of a cut in the official discount rate. The overnight unsecured call rate was cut from 8 3/16 to 8 1/16 per cent, while the rate on three-month certificates of deposit fell from 7.9 to 7.83 per cent. The fall was interpreted by some traders as a possible sign of the Bank of Japan easing monetary policy. The yen weakened against the dollar due to the lower interest rates, and traders said the Bank of Japan intervened to buy yen and sell dollars yesterday. The bond rally was short-lived, and JGB prices closed almost unchanged as attention later in the day focused on a number of Euroyen issues, including one of Y50bn by the World Bank. The benchmark No 129 JGB opened with a yield of 6.635 per cent, moving to 6.605 per cent before closing in Tokyo at 6.63. Barclays de Zoete Wedd, the investment banking arm of the Barclays group, has obtained a seat on the Frankfurt Stock Exchange through its newly-acquired German investment bank, Merck, Finck, writes David Lascelles, Banking Editor. Skandinaviska Enskilda Banken (S-E-Banken) will use the trading name Scandinvanian Bank for its branch in London. S-E-Banken bought Scandinavian Banking Group, the London consortium bank, last year and its licence is being surrendered. 
ID: 22
HEADLINE: FT  14 MAY 91 / International Company News: USF&amp;G to bolster capital by Dollars 300m stock issues 
TEXT: USF&amp;G, the large but troubled US insurance group, yesterday revealed plans to bolster its capital base by raising up to Dollars 300m through issues of convertible preferred stock. Last month, the Baltimore-based multiline insurer said that it would cut its workforce by around a quarter in a major 'downsizing' of its business. It is also in the midst of reorganising its operational structure so that its commercial and personal lines become two separate businesses with independent profit centres. The company announced a Dollars 569m loss last year, and has already cut its quarterly dividend from 73 cents a share to 5 cents a share. A new chairman, Mr Norman Blake, was brought into the company in November, and other management changes have followed. USF&amp;G said yesterday that the majority of the proceeds of the new issues would be used 'to strengthen the surplus of the primary unit, United States Fidelity and Guaranty Company'. It anticipated that the funds would be raised via the issue of two series of convertible prefered stock. These would be sold to investors both through a public offering and through a separate private placement. 
ID: 23
HEADLINE: FT  14 MAY 91 / International Company News: Toyoda machinery sales surge 
TEXT: TOYODA Automatic Loom Works, a leading member of the Toyota Motor group, reported an 11.1 per cent increase in pre-tax profit to Y30.2bn (Dollars 218.84m) for the year to end-March, as sales of automobile assembly equipment rose with the expansion of vehicle production at Toyota. The company, the first founded of the Toyota group, reported an 18.8 per cent increase in sales to Y583.69bn, with a 33.5 per cent surge in textile machinery sales, a 28.2 per cent rise in automobile assembly equipment, and an 8.8 per cent improvement in industrial vehicles. Company officials said personnel expenses rose during the year because of Japan's labour shortage, and earnings were affected by the increase in the country's interest rates, but they added that the advance in sales more than compensated for those costs. However, Japan's vehicle market has softened and export markets are also troubled, so sales for this year are expected to rise only 4.5 per cent to Y610bn, while pre-tax profit is predicted to fall 2.3 per cent to Y29.5bn, the first fall in five years. Toyota Tsusho, a trading arm of the Toyota group, reported a 10.8 per cent lift in sales to Y2,163bn, while pre-tax profit increased 4.5 per cent to Y16.16bn. Domestic sales advanced 10.4 per cent, while foreign trade increased 11.6 per cent, with exports up 19 per cent, imports down 0.5 per cent, and trade between third world countries up 16.4 per cent. The company expects a 6.2 per cent increase in sales to Y2,300bn this year and an 11.4 per cent rise in pre-tax profit to Y18bn, despite higher labour costs and a heavier interest payment burden. Another Toyota affiliate, Aisin Seiki, is expecting a decline in recurring profit from the Y20.2bn in the year to end-March, up 1.1 per cent on 1989, to around Y17bn for the present year. The company announced yesterday that sales for the year to end-March rose 14.5 per cent to Y525bn, with those of automobile parts up 14.8 per cent to Y495.7bn and household machinery rising 10.1 per cent to Y29.2bn. Sales for the current year are expected to increase 4.7 per cent to Y550bn, but the expected downturn in profits is attributed to the sluggish car market, and increased depreciation and personnel expenses. 
ID: 24
HEADLINE: FT  14 MAY 91 / International Company News: Nordstrom boosts earnings 
TEXT: NORDSTROM, the Seattle-based retailer managed by the founding Nordstrom family, yesterday turned in sharply higher first-quarter earnings and said it had settled federal and state securities class action lawsuits for Dollars 7.5m. Mr John Goesling, Nordstrom's senior vice-president, said the results 'compare favourably with what we regarded as a disappointing performance during the previous year's first quarter.' Net income leapt 95 per cent to Dollars 25.7m, or 31 cents a share, from Dollars 13.2m, or 16 cents, a year earlier. Net sales grew 10 per cent in the three months to Dollars 610.6m from Dollars 555m. Shares in Nordstrom jumped Dollars 2 3/4 to Dollars 44 yesterday in active over-the-counter trading. The company attributed its improved performance to improving sales trends, better management of inventories and steps taken in the previous year to reduce operating expenses. During the quarter, Nordstrom reduced its selling, general and administrative expenses to 27.65 per cent of sales from 29.4 per cent a year earlier. Pre-tax earnings jumped 101 per cent to Dollars 41.4m, or 6.77 per cent of sales, from Dollars 20.6m, or 3.71 per cent of sales, a year earlier. Nordstrom also said yesterday that it had settled a number of lawsuits alleging that the company and six of its officers failed to disclose that Nordstrom might be liable for additional employee compensation arising from Nordstrom's past employee practices. In the last year, Nordstrom's reputation has been clouded by a union dispute and by revelations that the company's commission sales force is not properly compensated. Mr Goesling said: 'While we have not yet resolved with our insurance company their share of this settlement, we are confident that any payment made by the company will not have a material effect on the results of operations for the year.' The settlement, which is subject to court approval, provides for payment of Dollars 7.5m to shareholders who bought Nordstrom stock between February 1 1988 and March 8 1990. 
ID: 25
HEADLINE: FT  14 MAY 91 / International Company News: Two Venezuelan airlines register losses 
TEXT: THE TWO state-owned Venezuelan airlines due to be privatised this year suffered financial losses in 1990, according to figures published by the Ministry of Transportation and Communications. Viasa, the government's international flag-carrier, lost USDollars 34m in 1990 on overall revenues of Dollars 268m, compared with Dollars 4.6m profit in 1989 on revenues of Dollars 266.7m. Another state-owned airline, Aeropostal, which flies domestic and international routes, suffered a 1990 loss of Dollars 7.3m on revenues of Dollars 82.1m. In 1989, Aeropostal reported net earnings of Dollars 2.8m on revenues which totalled Dollars 68.8m. (Dollar figures were calculated using free-market exchange rates for the Venezuelan bolivar at the end of each year.) The government of President Carlos Andres Perez is keen to privatise Viasa and Aeropostal this year to demonstrate that its slow-moving privatisation programme is finally getting off the ground. Since the government took office over two years ago, it has privatised only two commercial banks from a long list of companies it plans to sell off. 
ID: 26
HEADLINE: FT  14 MAY 91 / International Company News: SA Brewing expands in US water heating 
TEXT: SA BREWING Holdings, the diversified Adelaide-based brewing and manufacturing group, yesterday said it had more than doubled its share of the US water heater market through the USDollars 31.65m acquisition of Mor-Flo Industries. SA Brewing said the acquisition would give it 30 per cent of the US market for mains pressure water heaters, which accounts for around 7.6m units a year. The group entered the US water heaters market in 1989 thorough the purchase of Bradford-White Corporation of Michigan, which claimed around 12 per cent of the market. The deal, which is subject to US regulatory approval, is expected to be concluded in August. 
ID: 27
HEADLINE: FT  14 MAY 91 / International Company News: Fletcher Challenge shares placed 
TEXT: FLETCHER Challenge (FCL) yesterday announced it had successfully placed NZDollars 195m (USDollars 115m) worth of shares with international institutional investors in a move designed to ease its debt burden. However, the company did not announce the fate of a further 25m shares which were being offered as oversubscriptions and were not underwritten. It is hoped these shares would raise the total to NZDollars 292.5m. News of the unexpected placement forced the share prices sharply lower yesterday, ending a month-long rally. FCL dropped 22 cents to NZDollars 3.92, which was 2 cents above the placement price for the 50m shares. The placement was underwritten by brokers CS First Boston NZ and Potter Warburg Markets. Mr Hugh Fletcher, FCL chief executive officer, said the placement showed international investors strongly supported the New Zealand company which has diverse holdings in the forestry products and building materials industries. An FCL spokesman said the additional funds would represent a reduction in group debt levels of about 1.4 per cent. The company last month revised its forecasts, warning that full-year profits might be about 10 per cent below the NZDollars 662.4m for the year to June 30 1990. FCL, the second largest newsprint producer in the world, has suffered from declining demand for its paper and a drop in prices for pulp and timber. The spokesman said capital spending peaked last year at NZDollars 1.3bn and was expected to fall to about NZDollars 800m. He said the group had to sell all its property interests, valued at about NZDollars 500m held through Fletcher Construction and Challenge Properties. 
ID: 28
HEADLINE: FT  14 MAY 91 / International Company News: Aerolneas Argentinas sale enters final phase 
TEXT: THE privatisation of Aerolneas Argentinas, the Argentine national airline, entered its final phase yesterday, six months after the government and an international consortium exchanged contracts. The consortium, led by Spain's Iberia, delivered Dollars 810m-worth of foreign debt certificates to the government as part of an agreement reached between the two sides in April. The privatisation stalled earlier this year after the government and consortium members squabbled over the terms of the contract. The buyers refused to pay, while the government refused to deliver the 85 per cent of Aerolineas shares on sale. Under the new agreement, the consortium agreed to deliver Dollars 1.61bn in foreign debt paper in two tranches. It has also provided satisfactory guarantees from international banks underpinning its Dollars 540m investment plan in Aerolneas, as required by the original contract. Earlier, the buyers paid Dollars 142m in government dollar-denominated bonds worth 68 per cent of face value on the local market, replacing Dollars 130m in deferred payments due under the original contract. 
ID: 29
HEADLINE: FT  14 MAY 91 / International Company News: Labatt to reduce its food processing operations 
TEXT: JOHN LABATT, the Canadian food and beverage group, is putting a large part of its food processing business up for sale in keeping with its strategy of concentrating on beer, entertainment and dairy products. Labatt, which is 39 per cent owned by the Brascan group controlled by Peter and Edward Bronfman, said yesterday it will consider offers for Oregon-based JLFoods, which specialises in frozen grocery products in Canada, the US and Britain. JLFoods is the leading supplier of frozen soup in the US, and also a large supplier of breaded and battered products. The company has annual sales of USDollars 475m and employs 3,500 people at 13 manufacturing and processing plants, most of them in the US. Analysts said the sale could fetch about USDollars 300m. The company, which had sales of CDollars 5.3bn (USDollars 4.6bn) last year, has made no secret of its eagerness to expand its beer business outside Canada. Labatt's shares rose by 75 cents to CDollars 23.38 yesterday. 
ID: 30
HEADLINE: FT  14 MAY 91 / International Company News: Apple Computer upgrades Macintosh 
TEXT: APPLE Computer has intro- duced new software for its Macintosh personal computers with which the company aims to counter competition from Microsoft's popular Windows program and boost its share of the personal computer market. Apple's new System 7 is an enhanced version of the Macintosh operating system, the program that controls the basic functions of a computer. The new software 'raises the bar' in what customers will expect from a personal computer, claimed Mr John Sculley, Apple chairman and chief executive. 'Macintosh system software is Apple's greatest strength, and we intend to use this advantage aggressively to become a much bigger player in the industry,' he said. 'System 7 sets a new standard, thereby widening the gap between what one can do with a computer, and what one can do with a Macintosh.' The system includes a new graphical user interface that makes the Macintosh easier to use, as well as features that enhance the Macintosh's ability to perform several tasks simultaneously. New Macintosh buyers will get System 7 free with their computers. Most current Macintosh users, however, will have to upgrade their computers to take advantage of the new software. System 7 will be offered in the US for Dollars 99. Apple USA also announced price cuts on the add-on processor and memory boards that will be needed to upgrade older Macintosh models. The introduction of System 7 demonstrates that 'Apple is on the offensive,' Mr Sculley claimed. Many, however, view the software launch as a defensive move aimed at Microsoft's Windows program which provides IBM-compatible personal computers with many of the ease-of-use features of the Apple Macintosh. Apple acknowledged that the introduction of System 7 was delayed for over a year by technical difficulties. Although existing Macintosh applications programs will run on System 7, there are few new programs designed to take full advantage of the new operating system, analysts noted. See Technology Page 
ID: 31
HEADLINE: FT  14 MAY 91 / International Company News: Temporary rescue for French group 
TEXT: VEV, the struggling French textiles group, yesterday agreed to the terms of a temporary financial lifeboat worked out by the French government with VEV's bank creditors in a bid to save the company from outright bankruptcy. The government and banks will together finance VEV's immediate cash needs for one month - FFr100m (Dollars 17.1m) to FFr250m - while the banks have agreed to concessions on a portion of their loans to the debt-ridden group. At the same time, Mr Christian Derveloy, VEV's chairman, is to resign, and an audit will be undertaken to see if the textiles group can survive. The government has been anxious to avert the collapse of a group which employs 11,000 people, many of them in areas of northern France which already suffer high unemployment. The Interministerial Committee for Industrial Reconstruction (CIRI), a unit of the Finance Ministry, has supervised negotiations between VEV and its banks. An agreement hammered out over the weekend provides for the bank creditors to abandon an estimated FFr250m of short-term debt and to convert some FFr500m of medium-term debt into participating loans. The banks have also been asked to give up their claim on the shares of a number of VEV's subsidiaries pledged as security for their loans. This should facilitate the break-up of the group, if this proves necessary, as most Paris bankers now fear. VEV has already sold several of its most profitable subsidiaries, such as Jalla, Pennel &amp; Flipo and Gravograph, in a bid to reduce its debt burden, which totalled FFr3.3bn at the end of 1989. Credit Lyonnais, the state-owned bank, is the most heavily exposed creditor, with loans understood to total more than FFr1.2bn. Other creditors include Banque Nationale de Paris (BNP), Societe Generale, Credit Commercial de France (CCF), Credit du Nord and Banque Francaise du Commerce Exterieur (BFCE). The banks had earlier flatly refused to accept much broader concessions proposed by the CIRI. VEV emerged in 1987 out of the ashes of the Prouvost group, which Mr Derveloy then managed. Using VEV as his vehicle, Mr Derveloy not only beat off a stock market assault on Prouvost by the Chargeurs group, but also won control of the group away from the Prouvost family which had hired him. Although he succeeded in this battle, Mr Derveloy is generally thought to have got the worse of a peace deal with Chargeurs signed the following year, through which he gave up Prouvost's profitable wool trading and carding operations to Chargeurs, keeping its textiles and clothing divisions. Mr Regis Bello, formerly chief executive of the A. Dewavrin Fils group, was expected yesterday to replace Mr Derveloy at the head of the group. Mr Derveloy was expected to offer to sell his 5.4 per cent VEV stake for a symbolic FFr1. VEV's board was due yesterday to finalise 1990's accounts, which are expected to show a loss of over FFr500m. By yesterday evening, however, the results had not yet been published. 
ID: 32
HEADLINE: FT  14 MAY 91 / UK Company News: Business spread behind Power Corp's advance 
TEXT: POWER Corporation, the Dublin-based property development company, has announced pre-tax profits for 1990 up from IPounds 10.26m to IPounds 15.59m, or Pounds 14m sterling. Turnover increased 13.5 per cent to IPounds 35.12m. After tax of IPounds 3.38m (IPounds 2.31m) earnings per share came out at 10.54p, compared with 8.65p. Mr Robin Power, chairman, said that the company had performed exceptionally well given the difficult market conditions. 'We are the only property company quoted on the UK market to have achieved results in line with forecasts of 14 months ago. This is due to the spread of business between Ireland, the UK and the US.' The company said the value of its property portfolio at the end of 1990 stood at IPounds 352m, up from IPounds 33m when the company came to the market at the end of 1987. An independent valuation resulted in net assets per share of 198p at the year end, compared with 207p. Power has been involved with Brent Walker, the troubled leisure conglomerate, in the Trocadero site in central London and in the Blackpool Tower shopping centre. Mr Power said that the deal with Brent Walker, involving the swapping of Brent's 50 per cent stakes in the two developments and Power's 50 per cent stake in the Island site adjacent to the Trocadero, was still subject to some consents. 'We had expected things to be finalised two weeks ago but there have been some hold ups.' He added that the company intended to retain only 50 per cent of the Trocadero. When the development was completed and an attractive price could be obtained the 50 per cent from Brent would be disposed of. 
ID: 33
HEADLINE: FT  14 MAY 91 / Brent Walker shares drop ahead of loss 
TEXT: BRENT Walker's shares tumbled yesterday as the heavily borrowed leisure group confirmed that losses last year would lead to a 'major reduction in shareholders' funds'. The company has also delayed announcement of its preliminary results from tomorrow until next Monday. Brent Walker's shares closed 16p lower at 40p. 'Although the group produced profits at the operating level, it sustained a substantial loss for the year after taking into account interest, exceptional items and taxation,' the company said. It made a pre-tax profit of Pounds 82.2m in the year to December 1989. The delay in the 1990 results pushes back publication of the financial restructuring plan Brent Walker is thrashing out with Hill Samuel, the merchant bank acting as its advisers. The steering committee of creditor banks, led by Standard Chartered, has yet to see a Touche Ross report on Brent Walker's assets and liabilities on which the package will be based. The firm was asked last November for the report when the banks agreed a standstill on Pounds 1.4bn of debt. Banks expect a write-down in Brent Walker's asset values of Pounds 1bn to about Pounds 100m net of debt. London Stock Exchange, Page 40 
ID: 34
HEADLINE: FT  14 MAY 91 / TVS unveils plan to raise equity as it falls into red 
TEXT: TVS Entertainment, the ITV company for the south of England, yesterday announced pre-tax losses of Pounds 8.3m and cancelled the final dividend at the same time as unveiling plans to raise new equity. The new equity will, however, only become available if TVS retains its lucrative and hotly-contested southern franchise. TVS declined to give any details on this before tomorrow's deadline for bids for new 10-year franchises beginning in 1993. The financial package will include a new shareholder and promises of further investment from the company's existing French shareholders, Canal Plus, the subscription channel and Generale d'Images, the communications company. TVS would need the capital injection to fulfil its programme obligations because of the losses sustained in the 1988 acquisition of MTM, the US production company, in a Dollars 320m (Pounds 189m) deal. At least three well-funded bidders are going for the TVS franchise - MAI, the marketing and financial services group, Mr Michael Green's Carlton Communications and the David Frost/Richard Branson joint venture. TVS yesterday announced losses arising out of a poor performance from the US group. TVS made a profit of Pounds 16.8m in the year to end-December, compared with a profit of Pounds 20.8m in the 14 months to the end of 1989. However, an exceptional provision of Pounds 20.7m was made against US programme stock. MTM had four new series cancelled by the US networks last year - Capital News, FM, City and You Take the Kids. In addition, Pounds 4.4m has been set aside for further redundancies. An extraordinary charge of Pounds 4m, against an extraordinary gain of Pounds 30.4m a year earlier, resulted in a net loss of Pounds 10.1m, or 17.6p a share, compared with a net profit of Pounds 40m, or 8.8p per share. Turnover was Pounds 262.1m (Pounds 325.5m). Earlier this year, TVS tried to sell MTM, famous for programmes such as Hill Street Blues and St Elsewhere. Despite much interest, no one would pay more than Dollars 70m. MTM has been withdrawn from the market. In Britain, TVS increased its share of ITV advertising revenue to 11.4 per cent - the highest in its history. The decision that TVS is 'unable to pay further dividends' means that the interim payout of 3p in November is the final one. 
ID: 35
HEADLINE: FT  14 MAY 91 / Severn Trent to pay Pounds 212m for BET unit 
TEXT: SEVERN TRENT, the water company, has agreed to pay Pounds 212m to win Biffa, one of the UK's leading waste disposal concerns, from BET, the debt-laden business services group. The deal means Severn Trent will finally gain a significant presence in waste management. Last year, Severn Trent decided not to proceed with an earlier attempt to do so by taking over Caird, a listed company. BET put Biffa up for sale three months ago, as part of a review of its funding capabilities and management structure. Analysts yesterday expected the company's net debt to fall to about Pounds 250m after completion of the sale, which produced proceeds at the top end of market expectations. Mr John Bellak, Severn Trent's chairman, said: 'We are delighted to have been able to buy such a good business at a fair price.' Mr Nicholas Wills, BET's chairman, said a range of potential acquirers and joint venture partners had shown interest. Severn Trent's shares closed 3p down at 277p and BET's were 2p lower at 178p yesterday. Biffa, one of the largest presences in the UK waste management business, made profits before interest of Pounds 17.8m on sales of Pounds 102.3m in the year to the end of March. No debt is being taken on with Biffa. Mr Bellak said Severn Trent would be funding it through borrowings incurred by its public limited company. The deal intensified speculation about the fate of the 29.9 per cent stake in Caird with which Severn Trent was left after it dropped its bid last October, when Caird cut its profit forecast. Mr Bellak insisted yesterday that all options remained open. Caird's shares closed unchanged at 75p. Mr Bellak said that, once Biffa was aligned with the company's existing business, waste would account for about 15 per cent of total group turnover. For BET, the sale comes at the end of a turbulent spring which saw a bear raid on its shares early in February. A new chief executive, Mr John Clark, took over last month from Mr Wills. BET has said that it wanted to dispose of Biffa because of the risks arising from its exposure to environmental legislation. Mr Martin Bettington stays on as managing director of Biffa, which is best known for its UK collection and landfill activities. Using experience acquired in their core water business as a basis for assuming a wider role in waste management has been a priority for most of the 10 water companies since they were privatised in November 1989. Severn Trent's is the biggest step taken in the sector to date. In February, Wessex Water announced a Pounds 125m joint venture with Waste Management of the US, one of the world's biggest treatment and disposal groups. Lex, Page 20 
ID: 36
HEADLINE: FT  14 MAY 91 / Drexel details settlement plan 
TEXT: DREXEL Burnham Lambert, the US investment bank which filed for Chapter 11 bankruptcy protection 15 months ago, yesterday revealed details of a complex settlement plan. Under the agreement, Drexel's estate will be split between creditors and parties making claims against it under securities law. The settlement plan comes after judicial pressure to avoid a lengthy, litigious liquidation. There are still hurdles but lawyers in the case suggest it could be over by early 1992, leaving a small 20-person concern to handle Drexel's illiquid assets. Under the agreement, the estate - reckoned at more than Dollars 2bn (Pounds 1.15bn) - is divided so that: Administrative costs of the bankruptcy will be paid first, followed by Dollars 150m-Dollars 200m of secured claims and a further Dollars 150m payment into the Securities and Exchange Commission's civil disgorgement fund; The next Dollars 1.3bn is split 85:15 between fixed creditors and securities litigants; The next Dollars 700m is split 60:40 between the same parties; Thereafter, the split is 50:50. About Dollars 300m-Dollars 400m of particularly illiquid assets will go into a a new entity to be owned by a 'liquidating trust'. This seems likely to be sold eventually. Under the plan, all securities litigation against Drexel would cease and some 200 Drexel employees - though not Mr Fred Joseph, the former chief executive - would be released from any new litigation claims. Drexel will also 'pool' its own legal actions with those of the Federal Deposit Insurance Corporation, which regulates the troubled thrift industry, and certain securities litigants, in cases where there is a common defendant. This joint effort could apply in claims against former Drexel employees, in particular Mr Michael Milken, who headed the lucrative junk bond operation. Drexel will get 14 per cent of money collected from such litigation, up to Dollars 400m. Perhaps the biggest hurdle is the Internal Revenue Service, which has filed a Dollars 5.3bn claim and is not included in the settlement plan. Unless a deal can be struck with the IRS, the merits of this claim will be heard by the courts next month. If they grant an award above a certain sum - undisclosed - the settlement agreement could be aborted. 
ID: 37
HEADLINE: FT  14 MAY 91 / US economic hopes rise as output level stabilises 
TEXT: US INDUSTRIAL production stabilised in April after six months of decline, bolstering hopes that the recession may be bottoming out. A rise of 0.1 per cent in industrial output, while no more than a tentative pointer, follows other mildly encouraging statistics, including a slower rate of decline in employment, an increase in the index of leading indicators and the start of a housing recovery. The better figures for April, however, were accompanied by revisions to previous statistics. The Federal Reserve said production fell 0.6 per cent in March - twice as much as initially estimated. In the first quarter, industrial production fell at a seasonally adjusted annual rate of 9.6 per cent. The tiny increase in output last month does not signal that the US recession is over but it suggests that the rate of decline has eased significantly. Most forecasters expect the US economy to hit bottom sometime during the summer and then to begin a weak recovery. Last month's improvement was led by car and truck production, which increased at a seasonally adjusted annual rate of 10.8 per cent. This sector was the biggest depressing influence on the economy in the previous six months. Excluding motor vehicles, industrial production fell 0.2 per cent last month. The weakness was concentrated in non-durable goods, mining and utilities. Capacity utilisation fell 0.2 points to 78.3 per cent. The firming of production mostly reflected increases in the output of durable consumer goods generally, which rose at an annual rate of 3 per cent. Apart from motor vehicles, sectors sensitive to the cost of money  - such as furniture, carpeting and home appliances - registered increases. The industrial production index last month stood at 105.1 compared with 100 in 1987. It was 3.4 per cent below the level of a year ago and about 5 per cent below the peak hit last September. Recession hits states, Page 6 
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HEADLINE: FT  14 MAY 91 / Hurd opposes wider role for EC on labour issues 
TEXT: HOPES IN the European Community that Britain might be softening its opposition to EC labour market legislation were dashed yesterday. Mr Douglas Hurd, UK foreign secretary, told other EC ministers in Brussels that he was against proposals to extend majority voting - as opposed to unanimous voting - to labour and social issues. Majority voting would prevent Britain, or any member state, from vetoing parts of the social policy programme and allow the EC a greater say in labour and social issues. 'It would be foolish to commit the community to policies in the social and employment field which involve potentially enormous costs without regard to growth,' Mr Hurd said. Mr Jacques Delors, European Commission president, said: 'I feel like someone who at the start of this century heard people say that the abolition of child labour would cause the general collapse of the economy.' The foreign secretary said Britain had dispelled the cloud of bad industrial relations that had long hung over it. 'We do not want any pretext for leading industry back into that situation,' he said. The UK has been the only opponent of the EC Social Charter but it appeared to come to terms with some of the legislation, such as written proof of contracts. On Monday, Mr Michael Howard, employment secretary, said in an interview with the Financial Times that Britain now supported most elements of the social char-ter. Mr Delors countered Mr Hurd's complaint that social matters would be subject to over-centralised regulation by saying that the commission was relying heavily on dialogue between European employers and trade union organisations. Other EC ministers re-sponded angrily to Mr Hurd's remarks. Mr Gianni De Michelis, the Italian foreign minister, warned that Britain could not hope to get away with vetoing the whole EC political union on social policy grounds alone. Mr Mark Eyskens, Belgian foreign minister, suggested that the UK might be left out of EC social policy-making. It is unlikely such a compromise would be acceptable to other member states which might complain that UK industry was escaping the costs of labour regulation. The Luxembourg presidency was proposing to extend majority voting to issues of contractual conditions of employment and management consultation of workers. Majority votes now apply only to measures to improve workers' health and safety, which generally have UK support. Under the Luxembourg plan, unanimous voting would only be retained for social security issues. Parliament, Page 11 
ID: 39
HEADLINE: FT  14 MAY 91 / UK consumer credit growth at six-year low 
TEXT: BRITISH consumers have been holding back from new borrowing to finance household goods and other durables although interest rates have fallen and retail sales rose sharply in March. The Central Statistical Office reported yesterday that the amounts outstanding on credit agreements with consumers increased by less in the first quarter of this year than in any quarter since statistics were first gathered in the mid-1980s. The total amount borrowed from finance houses, building societies and on bank credit cards to purchase consumer goods increased by Pounds 280m to Pounds 30.03bn in the three months to the end of March. This was the lowest quarterly increase in this 'narrow' measure of consumer credit business since records began in 1985. It compares with a quarterly average rise of Pounds 758m last year. A broader measure of outstanding consumer credit, which also includes credit granted in the form of loans by banks on personal accounts and by insurance companies and retailers, rose by Pounds 840m to Pounds 51.47bn in the same period. This compares with rises of Pounds 1.03bn and Pounds 1.26bn in the two previous quarters and is the lowest figure since records began in 1987. The announcement of the figures, which suggest that recessionary conditions in the UK are continuing, coincided with the publication of slightly revised retail sales figures for March, showing a strong volume increase of 3.6 per cent over February. The figures show a strong 12.9 per cent surge in the volume of household goods sales in the month, confirming that the Budget increase in value added tax to 17.5 per cent from 15 per cent had triggered the retail sales jump. Household goods are frequently bought on credit but the monthly figures for narrow credit business showed only a relatively modest increase of Pounds 122m in the amount outstanding in March after increases of Pounds 98m and Pounds 60m in February and January respectively. Although the March credit figure was in line with City expectations and had little impact in financial markets, the difference between the strong growth in retail sales in March and the subdued appetite of consumers for credit caused some puzzlement among analysts. Mr Peter Spencer, UK economist at Shearson Lehman Brothers, said the figures probably pointed to a recent rise in real incomes as inflation fell. Consumers had been able to accumulate surplus funds in their bank accounts and were able to beat the Budget increase in VAT without increasing their indebtedness, he said. 
ID: 40
HEADLINE: FT  14 MAY 91 / Bush pledge on chemical weapons 
TEXT: THE US will renounce the use of chemical weapons 'for any reason' and destroy all its stockpiles within 10 years once international agreement is reached banning their use, President George Bush said yesterday. His announcement is intended to give fresh momentum to international talks which resume today in Geneva on a chemical weapons convention. The US move goes beyond a draft agreement signed at the US-Soviet summit in Washington last June to destroy all but 5,000 tonnes each of their chemical weapons stocks by 2002. In the first eight years after the signing of an international agreement, this would be reduced to 500 tonnes. For the US, this would have meant retaining about 2 per cent of its current total. The White House has been considering the worldwide chemical weapons initiative as part of a wider series of arms control moves specifically affecting the Middle East. In a statement intended to 'demonstrate the US commitment to banning chemical weapons', Mr Bush said the US was 'formally forswearing the use of chemical weapons for any reason, including retaliation, against any state, effective when the convention enters into force and will propose that all states follow suit'. He added that the US 'unconditionally commits itself to the destruction of all our stocks of chemical weapons within 10 years of entry into force of the convention'. Previously the US has retained the right to use chemical weapons in retaliation - and to keep the 5,000-tonne stockpile - until all nations with such weapons had agreed to eliminate them. The US originally wished to keep a residual stockpile as a deterrent against countries such as Iraq which might use chemical weapons in war but Washington has changed its view, partly as a result of the Gulf war. The US not only won through the use of conventional weapons but also had to consider, and reject, the possible use of its own chemical weapons as a retaliation against any Iraqi chemical attack - although none materialised. Under the terms of the United Nations ceasefire resolution, Iraq is required to hand over all its stocks of chemical weapons to a UN commission for destruction. At today's Geneva talks, the US is calling for the resolution of all important issues by the end of this year and a final treaty within 12 months. The US delegation will ask that the negotiating committee of the Conference on Disarmament stays in continuous session from now on. 
ID: 41
HEADLINE: FT  14 MAY 91 / The Lex Column: Stock lending 
TEXT: The Bank of England has always encouraged the development of stock lending in London, arguing that the activity brings valuable extra liquidity and market confidence. In Thursday's Quarterly Bulletin, the Bank will provide new evidence for its case. In gilts, for example, daily lending volume has nearly trebled since Big Bang - to around Pounds 6bn. But the really fast-growing market involves the lending of international securities, where there is a problem. If London is to maintain its lead as a centre for the trading of international securities and related lending and borrowing, a solution must be found for the tax treatment of overseas lenders. The faster the Inland Revenue agrees a fair mechanism, the better. Otherwise, London will have shot itself in the foot - again. 
ID: 42
HEADLINE: FT  14 MAY 91 / The Lex Column: British Airways 
TEXT: The market is inclined to think British Airways will hold its final dividend next week - and the market is probably right. BA's balance sheet can stand the strain; the Pounds 20m saved by halving the payout will be dwarfed by trading losses in the final quarter; the wrath of shareholders is hardly worth risking in the not unlikely event that cash flows prove insufficient to meet the group's ambitious capital spending plans. If the income question dominates the share price in the short term, though, the issue thereafter is how far BA can recover from the twin traumas of recession and the Gulf. The outlook at the moment is hazy, with forward bookings pointing to a 10 to 15 per cent volume downturn year-on-year over the crucial summer period. The bigger worry is the sharp drop in revenue yields as the passenger mix shifts towards cheap-fare travellers. To add to its woes, BA now faces a serious competitive threat on its transatlantic routes, with the lower cost Virgin certain to put further pressure on margins as the US carriers United and American go all out for market share. BA has probably responded as well as any international airline to the industry's crisis. In a post-Gulf world, however, the relentless growth of business travel can no longer be taken for granted; and the regulators have altered the rules. 
ID: 43
HEADLINE: FT  14 MAY 91 / The Lex Column: UK credit 
TEXT: Meanwhile, it is likely that something more than hairs are being split in policy discussions between Westminster and Threadneedle Street. The Bank remains publicly concerned with metaphysical riddles, such as: When is a crunch not a crunch? (some hours of the Treasury Committee's time went on this not long ago); and: What is the underlying underlying rate of inflation (answers on not less than 10 sides of paper). Ministers are increasingly worried about votes. The latest statistics suggest they are right to be anxious. The CBI small firms survey confirms that there is indeed a credit crunch - if you are too small to borrow outside the banking system. It is small companies who complain that credit is sometimes difficult, and always too expensive (1 1/2 per cent a month from one clearer). The Bank of England calls that a fall in credit demand; the victims call it a squeeze, and all too often a fatal one. That is no way to treat pillars of their local Conservative Associations. Yesterday's weak credit growth figures also look forbidding. The brief beat-the-tax-increase retail boom was financed with astonishingly little borrowing; at these real interest rates, credit demand is indeed price sensitive. But officials should take care before they cite this as proof that 'policies are working'. They are likely to be accused of what a former chancellor called sado-monetarism. Politically switched-on dealers are likely to pay less than their usual attention to market signals from the Bank. 
ID: 44
HEADLINE: FT  14 MAY 91 / The Lex Column: UK markets 
TEXT: Towards the bottom of the roller-coaster, the ride gets bumpy. If the UK is indeed reaching the trough of the recession, yesterday's bumps are easy to understand. The retailing and consumer credit figures, Wall Street, the outlook for UK interest rates - all have a stomach-jolting feel about them. More jolts ahead: the last two days of the week will bring grim economic figures (because they are backward-looking) and the Monmouth by-election result. The Fed, though, shows every sign of taking the US recession seriously; if that leads to a further easing after today's meeting, Wall Street's reaction could help London recover its poise, for a day or so at least. 
ID: 45
HEADLINE: FT  14 MAY 91 / The Lex Column: Severn Trent places a BET on waste 
TEXT: FT-SE Index: 2,486.6 (-37.7) The problem with BET's Pounds 212m agreed sale of Biffa to Severn Trent is its timing. BET not only has a chief executive so new he is unready to elaborate a corporate strategy following the sale; it is also in purdah ahead of its annual results, so the precise shape of its balance sheet can only be guessed at. The most one can say is that BET will now be in much better financial health: it could scarcely be worse. Assuming net debt of Pounds 240m, its gearing might be 40 per cent, against 86 per cent. Treating its AMPS (auction market preferred stock) as debt, gearing has dropped to around 150 per cent. BET has every reason to be satisfied with an exit multiple of 18, close to what it always said the assets should fetch. With a guaranteed 9p final dividend, its shares are already on a prospective yield of 6.7 per cent; add in the interim payment and the yield is just under 10 per cent. This seems about right until the group sets out its plans. Only a few weeks ago, after all, the shares were yielding more than half as much again. It is Severn Trent's shareholders who might have cause for concern, given that the price is well above rumoured sighting shots of nearer Pounds 170m and will probably mean dilution for a couple of years. The diversification into waste management is sensible enough, but Severn's record is hardly inspiring - remember Caird. The quality of Biffa's earnings is not so self-evident that Severn can claim a definite success. Any revaluation of Biffa's implied Pounds 85m of assets will make interesting reading. If it finally does buy Caird later this year, Severn will have a national spread in the management of waste. Shareholders must hope it does not become a waste of management. 
ID: 46
HEADLINE: FT  14 MAY 91 / Green profits 
TEXT: A Japanese delegation visited a new steelworks in the north of England. It was losing money. The visitors made money using the same machinery in Japan. Asked for advice, they came up with 57 nit-picking suggestions. For example, the British opened their furnace doors to provide an 18-inch gap through which to shoot finished rods; for the same process the Japanese opened their doors only six inches. The saving on heat loss was measurable, and contributed to the profits earned by the Japanese company. This story was told by Mr Michael Heseltine, the environment secretary, last week. His lecture is one of the most effective pieces of sales talk for a hard-headed environmental policy I have seen from any British minister - and I do not forget Mrs Margaret Thatcher's stirring words about how all we have of the earth is a life tenancy, with a full repairing lease. Mr Heseltine does not preach green virtue. There is a paucity of phrases about saving the planet. Instead there was a large dose of Heseltiniana ('what we need is . . . a green renaissance of Britain's economy'), spiced with juicy vistas of multibillions to be made from clean-ups and the production of greener goods. 'Where there's muck there's brass,' the secretary of state reminded his audience, quoting an estimate that Pounds 850bn will be spent in the European Community between now and 2000 on new capital equipment, environmentally-friendly products and associated services. The British share would be Pounds 140bn. In his characteristically self-effacing way he has posted copies of the speech to 1,000 chief executives and asked them to join a 'green club'. It is customary to question Mr Heseltine's motives. I do not think that in this address he was primarily concerned with chasing votes for the Conservative party. His belief is that public concern for the environment wanes during a recession, when unemployment and the like seem more pressing. His speech, with its touches about Europe and partnership with industry, contains an unspoken element of 'this is what you would have had if I had been prime minister instead of John Major', but only enough to assuage a modicum of vanity, nothing threatening or out of line. After all, he joined forces with his ideological opposite - the industry secretary, Mr Peter Lilley - to make Mr John Collins, Shell UK's chairman, head of a 23-member advisory committee on business and the environment. So let us take Mr Heseltine's words at face value. If they favour regulation, or the setting of standards, they do so on the basis of the argument that the country with the highest standards will be the one with the German cars emit the waste-gas equivalent of Chanel No. 5 most competitive manufacturers. We all know, or should, the story of how the Germans have made their cars exhaust the waste-gas equivalent of Chanel No. 5, with other car makers having to follow. Consumers, and regulators, demand it. This beady-eyed approach is to be found in a new book, Costing The Earth, by Frances Cairncross, environment editor of The Economist newspaper. Ms Cairncross provides a checklist of a dozen suggestions for company chairmen, starting with 'put the most senior person possible in charge of environmental policy'. Her arguments, which are those of a market economist, seek at each point to attempt some measure of the costs as well as the benefits of a particular green policy. Thus she says that it would make sense for African governments to form an ivory cartel, rather than ban the trade in tusks. That would eliminate middlemen, drive up prices - and ensure that the elephant survives to earn future revenue. She refers to botanists who develop non-timber products to demonstrate that rain forests standing can be worth more than rain forests destroyed. Among the many sources quoted is the Yale economist Professor William Nordhaus, who apparently accepts that the benefits of banning chlorofluorocarbons, responsible for the hole in the ozone layer may outweigh the costs. But the goal of stabilising carbon dioxide output in 2000 at 1990 levels is alleged to be more costly to achieve than would be the benefits of avoiding global warming. Ms Cairncross dutifully records some of the green challenges to the Nordhaus equation, but implies that even if his sums are wrong his methodology has to be addressed. The question is, should it be? 'Ultimately, it is easier to think of environmental issues in terms of ethics than of discount rates,' she writes. 'Most people feel comfortable with the idea that their descendants ought to enjoy the same natural inheritance as they have themselves received.' She manages, nevertheless, to fill 256 pages of recycled paper with merciless analyses of every green proposition. I would not, however, accuse her, or Mr Heseltine, of confusion. Just because you are convinced of the imminence of catastrophe is no reason not to do a few sums. Both the minister and the author accept the precautionary principle - that in case the worst predictions are right it pays to do something now. Both perceive that one practical response to the global upsurge of green sentiment, which Ms Cairncross chronicles, is to use the profit motive as the driving force for change. Freer than any minister, Ms Cairncross can argue forcefully for higher energy prices, even taxes on energy. In short the agenda is no longer controlled by the goodly folk who first brought it to our attention. It is part of everyday discourse, and subject to its rigours. I believe that when the economy picks up, and perhaps another discovery takes us a few notches higher up the curve of fear, the costs of not protecting the future will loom larger, and professor Nordhaus's flawed equations will have to be re-worked. Meanwhile, watch how you open those furnace doors. 
ID: 47
HEADLINE: FT  14 MAY 91 / Letter: Government cover for private export insurance 
TEXT: Sir, Mr Price rightly points out (Letters, May 9) that some other EC governments provide export credit insurance cover for the more risky importing countries though they may do this indirectly through private-sector companies. This is indeed the set-up which will apply in the UK following the privatisation of the Insurance Services Group of the Export Credits Guarantee Department. Mr Lilley - in the remarks to parliament to which Mr Price refers (May 2) - was making the point that the proposed changes to ECGD will bring it more into line with arrangements in other EC countries. As the minister for trade made clear at the report stage of the Export and Investment Guarantees Bill, the government, after privatisation of Insurance Services, will provide 100 per cent reinsurance through the continuing ECGD for business on a handful of importing countries which are not at present acceptable to the private reinsurance market. He stressed that the need for this will be kept under review but, subject to satisfactory financial performance within ECGD's trading account, it will continue for as long as the government considered it essential to meet exporters' reasonable needs. This support is likely to be a relatively minor ECGD facility, applying to only about Pounds 300m a year of exports - not because of government reluctance to provide a larger facility, but simply because of the successful progress in negotiating arrangements with the private reinsurance market which should ensure that the bulk of Insurance Services risks - both commercial and political - will be placed in the private market upon privatisation. It is, perhaps, in this latter respect that future UK arrangements may differ from those in some other EC countries. The government's aim has been to privatise the business of Insurance Services. This would not be achieved if a large element of that business continued to be reinsured by government, particularly when it could be placed in the private market. The government has, therefore, sought to maximise the scope of private market reinsurance in a way that some other EC governments may not yet have done and which is not damaging to UK exporters' interests. It is a difference of degree, rather than principle. The government believes that this approach is already being reflected in steps being taken in virtually every other EC country to increase private sector involvement in the provision of export credit insurance. Malcolm Stephens, chief executive, ECGD, Export House, 50 Ludgate Hill, EC4 
ID: 48
HEADLINE: FT  14 MAY 91 / Leading Article: A compromise path to Emu 
TEXT: AFTER THE informal meeting of European Community finance ministers over the weekend, plans for the EC's expedition to Economic and Monetary Union are becoming clearer. Those plans may not be to everyone's liking; indeed, they are probably to nobody's liking. Nevertheless, they represent a sensible compromise. Participants will not be allowed to prevent others from starting out towards Emu, merely because they are unwilling to depart themselves; nor may they insist on going in the vanguard, however unfit for that position they might be; and even though countries may move at different speeds, each will do so under supervision. The goal will not be reached much before the end of the decade, while a European Central Bank is unlikely to be constructed before its attainment. Finally, the move towards Emu may require a new budgetary deal for the EC. One point now seems clear. The British will have to change their plans radically. This is not surprising, because they were absurd. The UK not merely told the other 11 that it was unwilling to go where they wanted, but intimated that the UK might veto the others' plans. Meanwhile, Britain insisted that the others should not set out without it, because this would leave it in the slower group within a 'two-speed' Europe. Further to enhance the UK's reputation as a team player, it recommended that they should go somewhere altogether different, towards the 'hard ecu'. Poor chances Since the UK's 'hard ecu' plan involves creating a new monetary institution, which the Germans abhor, and does not introduce a single currency, which the French (and others) desire, its political chances are close to zero. The economic merits of the plan are greater than that, but this matters little. The plan will have to be abandoned. It was always inconceivable that the UK would veto a treaty on which the others were determined, any more than it could prevent others from moving to Emu. The best it could hope for was a degree of influence upon the pace and nature of the move towards Emu, while not being forced into it itself. The likely compromise cannot resolve all of the UK's political problems. Acceptance of a treaty implies a commitment. Once it exists, the UK will find itself confronted with a choice between participation, on the one hand, and consignment to the slow group in a 'two-speed' Europe, on the other. The treaty will certainly call for increased surveillance of economic policy. It may imply greater fiscal transfers within the EC as well. Shared interest The need for parliament to ratify such a treaty is a recipe for trouble. But since that trouble will arise within the two big parties as much as between them, they share an interest in making as little as possible of one of the most important decisions the country will ever take. All this assumes that the other 11 can agree on the path to Emu. They can do so, provided that they accept the terms of the one country that does have a veto. The Germans will not accept the creation of a European Central Bank before the new currency is introduced, are most unlikely to tolerate a central bank not at least as independent as the Bundesbank and will not consent to participation by countries that have not achieved a high degree of convergence on the German standard. These conditions are likely to be accepted (or at least appear to be accepted). Difficulties would still remain. Convergence of inflation is desirable, for example, but central control over the fiscal policies of member states is not. How, then, will the EC deal with the problems created, not by Greece and Portugal (which are economically insignificant), but by Italy's huge public debt? What the path to Emu will not involve is still clearer than what it will, just as who will not be in the vanguard is more obvious than who will. For all that, there is progress. The shape of the agreement is emerging. It is one that will impose discomfort upon many - upon the UK above all, but not only upon the UK. 
ID: 49
HEADLINE: FT  14 MAY 91 / Leading Article: A charter for consumers 
TEXT: THE prime minister has set himself the task of completing work on his citizens' charter this summer. If the charter is to form the centrepiece of the Conservative election manifesto, he would be wise to review his holiday plans - for while the aims are admirable, many important questions about the charter's implementation need to be answered if sceptical consumers are to be convinced of its merits. The charter is designed to raise the quality of public services which cannot immediately be privatised or exposed to competition through contracting out. Budgetary controls can force service providers to make more efficient use of limited resources, but there is often little that consumers can do to ensure that their preferences are satisfied. The citizens' charter - more appropriately a consumers' charter - would strengthen the consumer's voice with two innovations to mimic the relationship between buyer and seller in market transactions. The first would create a contract between the service provider and the consumer which specified the services to be provided. Thus BR might make the commuter a range of promises on matters such as punctuality, cleanliness and reliability of services. NHS patients could be guaranteed treatment within time limits which depended on the seriousness of the complaint. Council tenants would be entitled to repairs within a specified period. Direct redress This contract would be enforced by the consumer through the second innovation: simple and direct channels of redress. So there might be rebates or discounts when a train was repeatedly cancelled. More radically, a consumer whose NHS operation was cancelled could be entitled to reasonable reimbursement for the cost of private treatment (some local authorities already reimburse tenants for the cost of repairs in such circumstances). So far, so good, if a challenge to the imagination. But when it comes to the details of how the charter would operate, substantive proposals are lacking. For a start, which services will be covered? It is hard to see the charter having much to say about education, unless it offers to pick up the fees for Eton for parents let down by their local comprehensive. And what is to stop managers re-organising services to avoid penalties, simply by sharing the misery around more equally? Then there are the cost implications of compensating dissatisfied customers. Even if redress is only in the form of modest cash payments (as BT now offers when it fails to keep home appointments), the cost is born by other customers either in higher charges or worse service. The costs become much more substantial if they empower the customer to claim back the cost of private provision when the public service fails. For the NHS to make a similar offer could lead to a rapid explosion of costs unless the service targets were so modest as to be empty. Consumers' interests Consumer empowerment needs more than just redress systems. The evidence suggests that only a small minority of consumers ever use such systems - and those in most need are often least able to do so. The achievement of the regulators who oversee the newly-privatised utilities suggests a model for advancing the interests of consumers which could be extended to the public services, although a public service regulator could not use his private counterpart's most effective weapon - price restraint - in services which are free at the point of consumption. Questions such as these do not present insuperable problems, but finding answers requires a willingness to confront hard issues. Some public services are poor because they are badly managed: the citizens' charter could certainly encourage improvements. Others are underfunded, and a charter would only expose the low levels of service which have become the norm. To improve many of Britain's public services requires a combination of consumer power and extra investment. Charters alone will not guarantee the improvement in public services which all parties now seem committed to delivering in the 1990s. 
ID: 50
HEADLINE: FT  14 MAY 91 / Observer: Nobbled 
TEXT: Southampton fortune-teller Madam Fay is quitting her office after 37 years because burglars keep stealing her crystal ball. 
ID: 51
HEADLINE: FT  14 MAY 91 / Observer: Free wheeling 
TEXT: The only certain way of determining the real worth of a company car to employees - and despite Norman Lamont's best endeavours, they still seem to be a sight more attractive than a 'go-anywhere' London Underground ticket - is when the purring little perk is taken away from them. According to advertising agency Foote Cone &amp; Belding, which has just de-wheeled its staff, the answer is anywhere between Pounds 3,000 and Pounds 7,000 - the range of pay rises it has handed out by way of compensation. Other companies seem likely to follow suit, notwithstanding threats from Customs and Excise to levy VAT on those who, unlike some of their colleagues, decline the cash option and keep the wheels. FCB owned a fleet of 80 cars with a balance sheet worth of Pounds 1m and an annual cost - in terms of servicing, insurance and depreciation  - of Pounds 500,000 and decided enough was enough. Chris Whitworth, the agency's finance director, says that the costs of providing the company car simply became prohibitive. He reckons many of those whose cars were taken away have not even bothered to replace them. 
ID: 52
HEADLINE: FT  14 MAY 91 / Observer: Time out 
TEXT: One thing unlikely to change after the weekend elections in Nepal, land of timeless beauty, is the time. The Himalayan kingdom is thought to be the only country in the world which lives in its own, 15-minute time warp. Since 1985, it has set its clocks four hours and 45 minutes ahead of GMT - a quarter of an hour in advance of neighbouring India. Such demonstrations of independence carry great weight in a country trapped between the giants of India and China. But some Nepalis insist the difference is strictly scientific. Time is determined by the longitude of the centre of a country, which in India was set during the Raj at 82.5 degrees. That longitude goes nowhere near Nepal, let alone cuts it in half, according to Gopal Sharma, chief reporter at the country's government-owned newspaper, The Rising Nepal. Religion, it seems, also plays a part in setting the clocks. The longitude, which actually divides Nepal and provides the reference point for local time, cuts through a mountain called Gauri Shanker named after the wife of Lord Shiva, the Hindu god of destruction and rebirth. If the Congress party, the centrist group backed by India, emerges victorious, there could be pressure to realign Nepalese time. But as Shiva can bestow power upon those who please him, any sensible politician with an ounce of ambition may be best advised to leave well alone. 
ID: 53
HEADLINE: FT  14 MAY 91 / Observer: Idle Hans 
TEXT: Let us not be beastly to the Germans, but are they really the dedicated, horny-handed toilers they are made out to be? According to the German Economic Institute, they seem increasingly ready to bunk off work and head for the nearest beer hall. The institute reckons those employed in industry should be clocking up an average of just over 1,650 hours a year. But they are typically falling 145 hours short - for the most part, strange though it may seem, on Mondays and Fridays. By comparison the British, no longer the sick men and women of Europe, are expected to put in more than 1,750 hours - and record a 'no show' for only 119 of same. Both, however, look lazy alongside the Japanese who on average should be in the factory for more than 2,200 hours each year, and bow out for a mere 36 hours. The dedication of the Japanese could be something to do with the widespread belief that while you can be sick, it must be in your own time and at your own expense. The absence of the Germans, it appears, could be put down to the generous compensation available and to competition among doctors to hang on to patients by never knowingly refusing a sick note. 
ID: 54
HEADLINE: FT  14 MAY 91 / Observer: Off the record 
TEXT: It is hardly surprising that by the time Sir Bernard Ingham left 10 Downing Street, Maggie's craggy mouthpiece was not on good terms with Sir Geoffrey Howe, who helped to jemmy the iron lady out of power. The surprising thing is that relations between the two men did not suffer a good while earlier, given an incident in 1981. Oddly enough, it is not recalled in the much publicised memoirs in which Ingham, bulky and indispensable like the great lady's handbag, has given a compelling if not entirely unbiased account of his days and nights in Number 10. Puffed-up media lobby correspondents with mischievous motives, and ministers who wilfully spoke out of turn come in for considerable stick. What happened in 1981 was that Ingham himself quickly learned, at both his and Sir Geoffrey's expense, about the danger of making unguarded, albeit unattributable, remarks to the 'reptiles' - to borrow Denis Thatcher's epithet - of the parliamentary lobby. With Britain struggling to escape recession, Ingham found himself late at night in a Copenhagen hotel room with assorted lobby reporters topping up tumblers and bemoaning a boring EC summit meeting bogged down by quotas on Japanese car and video-recorder imports. Surely, they goaded the chief press secretary, Margaret Thatcher's free market philosophy could not embrace artificial restraints on trading? Ingham agreed, conceding that the only reason such measures were necessary at the time was to protect a British economy in a 'bloody awful' state. The tabloids sobered up and splashed their front pages with the quotation, attributed to a 'top Thatcher aide'. As if that would not have been bad enough in itself, Sir Geoffrey who was then chancellor had just stretched the nation's credibility by pronouncing 'we have come to the end of the recession'. Howe was highly unamused; Ingham a little bit wiser. 
ID: 55
HEADLINE: FT  14 MAY 91 / Uphill fight in the high street / Chart the continuing struggle of Britain's consumer services sector as it fights to survive recession 
TEXT: South Molton Street's designer clothes stores shut up shop for a few hours yesterday in a protest against a proposed rent rise. The threatened rent rise looked the last straw for the stores on one of London's most fashionable shopping streets. Like other retailers, travel companies and leisure groups that make up the consumer service sector, they are struggling against the worst recession most of them have known. Several companies have gone bust. The collapse of International Leisure Group (ILG) and Lewis's department stores alone cost nearly 4,000 jobs. Other companies can only hope that they can cling on until the autumn when economists expect the outlook to be brighter. Why has this sector, once seen as the key to Britain's economic resurgence, suffered so severely in this recession? Are its difficulties purely a product of short-term economic pressure, or are they related to longer-term changes in consumer markets? And what will the sector look like after the recession? Consumer services were relatively resilient in the last recession of 1980-81. This was because real interest rates were comparatively low - in that base rates were lower than inflation - and companies had been run cautiously after the oil shocks of the mid-1970s. There was relatively little expansion in leisure, entertainment and even in retailing. Video shops, theme parks, superstores and multiplex cinemas were all in their infancy in the early 1980s. This recession is different. Real interest rates are high and the consumer sector is far larger. The latest unemployment figures show that employment in the service sector (which includes commercial as well as consumer services) fell by 82,000 to 15.76m in the final quarter of 1990. Marks and Spencer, which is today expected to disclose static profits, recently announced 850 redundancies. Moreover, many consumer service companies are burdened by high borrowings after a decade of expansion. When interest rates rose and consumer spending declined, companies such as ILG and Lewis's could no longer afford to pay the interest on their debt. Brent Walker, the troubled leisure group which owns William Hill betting shops and Brighton Marina, is still struggling to restructure the Pounds 1.4bn debt amassed in its acquisitions of the 1980s. Certain areas of consumer services have emerged unscathed. This is mainly because some groups of consumers are better off thanks to high interest rates, notably the over-50s, with low mortgages and high savings, and the under-25s, who have few financial commitments. The companies that service these particular customers are still faring well. Blackpool Pleasure Beach is busy, partly thanks to its popularity with the over-50s. The beach has invested heavily in new attractions for them, such as the afternoon karaoke 'sing-alongs' in the Cabaret Rooms. So far this season, despite rain and recession, attendance levels are 14 per cent higher than last year. The cinema is flourishing too, partly because of its appeal for the under-25s. Cinemas enjoyed their best year for a decade in 1990 with average weekly admissions of 1.88m people. So far this year, they have fared even better with average admissions of 1.94m a week in the first quarter. But pleasure beaches and cinemas are the exceptions. The worst-affected companies are those catering for the 25 to 40-year-olds, the 'yuppies' of the 1980s, many of whom bought property near the peak of the housing market and are now saddled with hefty mortgage repayments and credit card debt. The 'designer' shopping centres that opened in the 1980s, such as Tobacco Dock in east London, are littered with boarded-up windows. Restaurants are suffering too. Mr Alistair Little, who runs the eponymous restaurant in London's Soho, first noticed the slowdown towards the end of last year. His regulars have since been eating out less often and spending less on their meals. Companies linked to the housing market have also suffered. Home furniture, one of the first areas to be affected, saw sales fall by 6 per cent in real terms to Pounds 4.7bn last year. This was devastating for Lowndes Queensway, one of the biggest furniture retailers which had just completed a Pounds 450m leveraged buy-out. Last summer, Lowndes called in the receiver. In general, the recession has accentuated the difference between the stronger and weaker players. In the pubs market, Mr Peter Jarvis, chief executive of Whitbread, one of the biggest brewers, has noted the difference between 'good pubs in large premises with decent facilities' which are still doing well and the 'bad pubs in run-down areas' which are 'finding life very difficult'. When the end of the recession comes into sight later this year, the critical question for the consumer service sector is what its long-term consequences will be. Some areas of consumer services are unlikely to return to their pre-recession buoyancy. The designer shops and expensive restaurants in the 'yuppie' market would probably have contracted even without the economic downturn. The self-indulgent young adults of the 1980s are now settling into the responsibilities of family life as they enter their 30s. Other areas will return to growth once the economy recovers. In furniture retailing, where rationalisation has been severe - the number of stores has fallen by 600 to about 14,000 in the past five years - there is sure to be scope for re-investment. The established companies, such as Magnet and MFI, are so burdened by debt that new investors may move into the market. Argos, the catalogue retailer, has been studying furniture retailing for several years and now plans to open four stores. Ikea, the Swedish group which already owns three UK furniture stores, plans to accelerate its expansion by opening up to 15 stores by the mid-1990s. In other markets such as pubs, where rationalisation has been less intense, the recession has tended to accelerate existing trends. The brewers have speeded up the process of closing down their smaller, scruffier pubs in favour of concentrating investment on more promising premises. Whitbread shut 350 of its 6,650 pubs last year and spent Pounds 250m on new pubs and restaurants such as Wayside Inns, its upmarket traditional country pubs. But all consumer service companies face the challenge of getting to grips with the long-term changes in the marketplace. One important issue is the change in demographics: the decline in the number of teenagers and the corresponding growth of the elderly population. This poses obvious problems for businesses like fashion shops and theme parks that depend on the teenage market. Burton, which owns the Top Shop teenage fashion chain, is in the middle of a strategic review of all its operations. Sears, which owns Miss Selfridge and Dolcis, is reshuffling its retail portfolio. The focus of its investment is now on 'family' concepts such as Adams children's wear shops and the Olympus sports chain. Alton Towers, the Staffordshire theme park owned by Pearson (which owns the Financial Times), is concentrating its investment on enhancing its appeal to families. In the past, it has relied on 'white knuckle' rides to attract the thrill-seeking under-25s (who represented two-thirds of its 2m visitors last year). It is now spending Pounds 6m on two new family rides - the Haunted House and Runaway Mine Train - in the hope of attracting more family groups to lessen the blow of the shrinking teenage market. Demographic changes will also intensify the financial pressure on the sector, notably on retailers and fast food chains, which have traditionally depended on a regular influx of teenage employees on low wages. These companies are already examining alternatives. McDonald's, the fast food group, is developing a programme for part-time managers so some employees, notably women with children, can return to work after career breaks. It is also recruiting older managers who have spent most of their careers in other industries. The shortage of teenage recruits will almost certainly force companies to offer higher pay, thereby increasing overheads at a time when they already face rising property costs due to rent and rate reviews, like those on South Molton Street. Demographic and financial pressures aside, the chief challenge for the service sector is to respond to the continuing demand from consumers for higher quality in terms of products and service. This was one of the main trends of the 1980s and has continued, despite the recession, as the pattern of trading in pubs suggests. In some markets, the drive towards higher quality means the successful companies will be those that continually invest in improving their products. The brewers will carry on upgrading their pubs. A recent study by the Brewer's Society suggested that as many as 8,000 of Britain's 80,000 pubs will close over the next decade so the brewers can concentrate resources on their larger, more modern pubs. Similarly, food retailers will continue the process of closing their old supermarkets to concentrate investment on new superstores, the giant stores selling everything from avocados to ankle socks. M and S, which already runs eight edge-of-town clothing and food stores, plans to open up to 25 over the next few years. Tesco has identified 200 prospective sites, many of which will be superstores. However, Sir Ian MacLaurin, Tesco's chairman, said it also plans to stay in the high street by developing 'high-quality neighbourhood stores'. In other markets, the quality trend could create opportunities for expansion. These will be the less 'mature' markets, such as restaurants and hotels, that have been constrained by the comparatively unsophisticated taste of British consumers. The British undoubtedly became more cosmopolitan during the 1980s but most Britons have never tasted pizza and still stay at home for their holidays. This means that companies like Forte, the hotel group, can expect to expand by 'converting' new consumers, in its case the people who do not usually stay in hotels. One of Forte's most successful concepts is the five year-old Travelodge budget chain. Travelodge, which offers a standard package of a double room for the fixed price of Pounds 29.95, is designed for the leisure travellers who cannot afford luxury hotels but are wary of the poor facilities in bed and breakfasts. There are now 81 Travelodges. Forte plans to open 40 a year at least until 1995. Forte may be right and the British will have become converts to hotel holidays - and pizza eating - by the end of the 1990s. But in the meantime, Forte, South Molton Street and the rest of the consumer service sector face at least another six months of financial pressure as they wait for the end of the recession. 
ID: 56
HEADLINE: FT  14 MAY 91 / Arts: Machinery of war / Review of exhibitions in London 
TEXT: 'My subject is War, and the pit of War' wrote Wilfred Owen in 1918, just before he was killed. David Smith's 'Medals for Dishonor' are about anger, as well as pity, anger against warmongers and the exploiters of the defenceless. Smith is best known in this country as a welder of large abstract sculptures in stainless steel. The Tate Gallery owns a fine 'Cubi' of 1964, now augmented, thanks to a generous loan by his daughters of two earlier, more figurative sculptures. Again, thanks to the family, we can now see the extraordinary series of fifteen bronze reliefs which he made between 1937 and 1940 at the Imperial War Museum, brilliantly displayed in glass cabinets. Unlike his contemporary American abstract expressionists, Smith travelled widely in Europe in 1935-36, ending up in Britain. He was a violent opponent of rising Fascism in Germany and Italy, and his awareness of the Spanish Civil War was strengthened by seeing Picasso's 'Guernica' when it was exhibited in New York. The specific impetus for the Medals was a visit to the British Museum in May, 1936, where he saw a display of First World War medals by German and French artists. He was especially drawn to the savage propaganda of the German medals, which he related to the disintegrating political situation in America. Smith's targets were politicians, diplomats, the press (in particular, William Randolph Hearst), the clergy and what he called 'War Exempt Sons of the Rich,' whose medallion has a Greek inscription translating as 'soft cookies' across the centre. The imagery is strongly influenced by European Surrealism, especially Dali, and he borrows Picasso's symbolic use of the bull to represent the 'disemboweller of the lie of Franco.' Smith also quotes from Goya's 'Disasters of War' and draws on the apocalyptic language of paintings by Bosch and Breughel. The medallions were made with extreme difficulty, using dentists' and jewellers' tools on hard dental stone. Smith's anger seems quite literally to bubble through the surface. The first (and only, as it turned out) edition was cast in bronze and exhibited in 1940 to a distinct lack of acclaim. Since none was sold, they have remained in the family and are now exhibited with related drawings. Taken together, the ferocious anti-war and anti-corruption statements which they make are as relevant today as they were then. (Until June 23). ***** Denis Masi is also concerned with the machinery of conflict, with man's never-ending desire for territorial expansion at the expense of the weak, with paraphernalia of domination which includes imprisonment and surveillance. Masi's concepts are based on issues and polemics, which until recently have been more appropriately displayed as installations in public places. With the new wall work, Masi has come off the street and into two galleries, Edward Totah and Anderson O'Day. Although he has moved away from installations, the work has lost none of its impact. Elegant and beautifully crafted, Masi's wall pieces lie in wait, crouched by sleek feline creatures, waiting to pounce on the imagination. The smoothly finished weld mesh and copper cladding of 'Border No. 3' does not conceal that it is about territory, both physical and psychological, whether it be Northern Ireland, Kuwait or Kurdistan. The searchlight, described as a found object, in 'Make It Known,' speaks volumes to the collective memory of watchtowers at Buchenwald or Long Kesh. Many of the pieces include a mirror, which gives the viewer back his own image and, inserted into oxydised copper, as a narrow, horizontal strip behind a weld mesh cage, must also be understood as an observation device. Either way, the viewer is drawn into complicity with the artist. 'Territorial Imperative,' incorporates corrugated steel, a flue and louvers. Uneasily, we wonder whether we are in a mortuary or a hospital, the flue perhaps an escape route for smoke from a crematorium. (Until May 25.) Far removed from politics and the sturm und drang of warring nations are Lucy Jones's rapturous paintings of her native city at the Flowers East gallery. Born and bred in London, she celebrates its buildings and monuments in dazzling colours. Not since Derain, in imitation of Monet, was sent here by his dealer in 1905 has London been recorded with such panache. Like Monet and Derain, Jones is magnetised by the river. Drawn to it repeatedly, she paints it in a variety of moods and colours; the dolphins on the lamp-posts along the embankment take on a vigorous life of their own, here green and red, there purple and brown. Buses and cars lollop round Trafalgar Square like Dinky toys or hurtle towards Big Ben and the Houses of Parliament. Jones's rainbow-hued London is the city of her mind, bearing little relation to the archetypal grey, wet Saturday afternoon. Her self-portraits are a new avenue down which she has raced full tilt, revelling in the permutations of colour contrast: Van Gogh sunflower yellow is the background for the violet-clad artist in the full-length portrait, 'All of Lucy Jones.' (To May 26.) ***** Laura Ford's paintings and sculptures at Benjamin Rhodes Gallery have a superficial look of innocence, which proves to be entirely false. Little girls, dressed in neat embroidered pinafores, stand atop full mountains of foam cushions. Their childish appearance is subverted by a menacing pair of pistols, whilst in place of a head there is a tangled mass of Gorgon locks or a bursting flower. Surrealism is disturbingly mixed up with nursery rhyme illustration, more Struwelpeter than Kate Greenaway. Far from being a Teddy Bears' Picnic, the painting 'Shagpile' looks more like a gang-bang or ritual slaughter. Ford's declared liking for the sinister cautionary tales of Patricia Highsmith is made visible in her frightening and unpleasant subtext. (To June 8.) 
ID: 57
HEADLINE: FT  14 MAY 91 / Arts: Same Old Moon - Globe Theatre 
TEXT: After having seen the first part of Same Old Moon at the re-opening of the Oxford Playhouse last month, one went to its arrival in London with the heart somewhere between the knees and the boots. Yet it is amazing what hard work and a better stage can bring. This is not another Dancing at Lughnasa, and not only because Geraldine Aron does not write as well as Brian Friel - it would be hard to do that. Ms Aron's piece also lacks the imagination and the ability to create a world on its own that are so conspicuous in Dancing. But, seen at the Globe, it is not a bad play. The Oxford theatre is cramped and box-like, perhaps fatally so. The Globe has space enough to illustrate the title. The moon shines on Dublin, Galway, London and such faraway places as Rhodesia (as Zimbabwe then was) and Australia. The question is whether it is always the same moon. One answer is given by the Irish barman who turns on the wireless and hears of the Japanese attack on Pearl Harbour. 'Always the same old news,' he says in disgust as he turns it off. In other words, it depends on the way you look at it. Brenda, now beautifully played by Gabrielle Reidy with a confidence that the same actress did not have in Oxford, is catholic, Irish, and wants to get away and write. She has a father who appears to dislike her. Almost on his deathbed he confesses it is because they are too similar. He admires her, however, because unlike him she does not think that it is always the same old moon. She goes off and does things. The play has some strong vignettes. A nun demonstrates to Brenda the act of procreation with a phallus-shaped biscuit and a doughnut. Brenda exchanges one of her first kisses in return for a ride on a bicycle: it is the bicycle that gets bent and broken. Best of all is the letter from the Vatican in response to Brenda's appeal to the Pope. It is signed by Monsignor Flaherty who adds in brackets 'formerly Martin Flaherty' of a road in Galway. There are also some cliches: too many attempted jokes about sex and catholicism. It is not particularly funny that Brenda's father (played by James Ellis and looking curiously like Sir Bernard Ingham) should adopt all the prejudices of an Alf Garnett when he arrives in London, complaining about Pakistanis running the hospital and Jews running the country. A longish sequence which is devoted to what happens to women when they start wearing a dressing gown must have been played at least a dozen times before, though I suppose it has a twist at the end: it is the fear of the same old dressing gown that spurs Brenda on again. For my taste it is too Irish, sentimental and maudlin, but others may well like it and Jenny Killick's direction has improved beyond measure since Oxford. 
ID: 58
HEADLINE: FT  14 MAY 91 / Arts: The Black Rider - Berlin Theatre Festival 
TEXT: To kill your wife in a shooting accident is one thing; to turn the episode into a musical would seem, gall aside, to invite theatrical fiasco in the worst of taste. Add lyrics that slide between German and English, a set that crosses von Sternberg with a western, rock music with fairground honky-tonk, and disaster looks assured. So it is with reluctant but moonstruck admiration that I report The Black Rider (text: William Burroughs) as the star of the Berlin Theatre Festival (to May 20) and one of the most delightful, inventive, profound and originally musical musicals composed; a fitting - self-consciously so - successor to those other mythical English-German concoctions, The Threepenny Opera and Cabaret. The Black Rider overlays the modern legend of Burroughs, the Beatnik junkie who shot his wife, with the old tale of the village clerk who has to pass muster as marksman before he can marry the gamekeeper's daughter. He makes a pact in 'silver bullets' with the devil but on his wedding day Satan betrays him and he shoots dead not the targetted white dove but his wife. This was the story, converted to a happy ending, of Weber's Der Freischutz. Now Burroughs, the Texan director and stage designer Robert Wilson, and rock composer Tom Waits, have reworked the original into a contemporary version. Other myths get woven in. Wilson's devil is a sleek Master of ceremonies in whiplash tails who croons the Cabaret welcome 'So come on in/it ain't no sin/take off your skin/and dance around in your bones'. He introduces the cast, his 'devil's band', as they step one by one out of a black felt sentry-box. For three hours of graceful, cold artifice, they look, act and sound like figures from the silent movies: movements abrupt, irregular, too fast, too slow, as if wound up by a shaky hand projector; chalk-white, bony faces, blackened eye sockets, lips thickened into permanent red pouts. Every image is ice-hard: hair pulled back crisp or standing up in spikes, clothes exaggerating bodies with jagged collars, razor pleats, square and rectangular dresses. The set continues the theme; Wilson turns children's drawings into three-dimensional monstrosities. Crooked chairs, two metres high, dangle at odd angles along with a huge frame whose broken glass juts into the flesh of its 'living' picture, the gamekeeper's ancestor (Heinz Fossbrink). Pine trees are scissor cut-outs which collapse and grow again like cartoons, illuminated sugar pink and lime green against a black forest. Large or small scale, Wilson is a master of spectacle: the clerk William and his Katchen floating above the stage for a duet as the great neon sign of a gun descends before them; the white stockinged leg in red stiletto that appears out of a slit in the black sentrybox, image of naivety, severity, brittle romance. Best of all, the whole, the sustained dramatic unity of the vision, is greater than the sum of its parts. Tom Waits' sarcastic ballads, full of folk and blues and rock, call back the scarred idealism and mock simplicity of Kurt Weill, while Burroughs' monosyllabic banality has here found the setting which makes it seem perfect. Nursery rhyme humour marries English with German, while Hollywood kitsch rolls into Teutonic romanticism. Wilson's cast bop and strut and beat out the mesmeric rhythms in husky tempting voices. The devil (Dominique Horwitz) has the best tunes, and mocks us for loving them. In 'Last Rose of Summer' he picks a flower from the floor, affects a tear, disappears into his box and, inside it, hovers up to the roof of the stage. Annette Paulmann and Stefan Kurt, as Katchen and William, screech like vultures and sing like angels. She plays an imaginary piano and draws patterns in the air as she sings the breathless lyric 'I'll shoot the moon right out of the sky for you, baby'; he dances a ballet of despair, shock and loss breaking through his wax face, before rallying with 'I'll be back on some lucky day'. This production returns to Hamburg's Thalia Theatre after Berlin, with a stop in Amsterdam on May 14-16. So far plans for a London visit have not materialised, but this is a show worth a plane ticket. 
ID: 59
HEADLINE: FT  14 MAY 91 / Technology: The icon gathers a loyal following - As Microsoft's Windows 3.0 approaches its first birthday, Della Bradshaw reflects on the software program that took the computer world by storm 
TEXT: Until a year ago, London-based chartered accountants Touche Ross had just two choices when it wanted to computerise the process of auditing its 1,500 clients. First Touche could write its own software from scratch - or employ a contractor to do it - which could prove costly and time-consuming. Alternatively, Touche could buy a standard software package and try to adjust the way the firm operated in order to make the auditors' practices fit the format of the software. Neither option proved attractive: there was a dearth of readily available audit support software and the firm was cautious about embarking on a big software applications drive. Because the bulk of audits are carried out between November and April - for companies which report their year-ends in December or March - Touche had to be sure that the software could be implemented in the slack summer period. 'If we missed that window we were another year away,' relates Mark Stephens, partner for information technology at Touche. 'Something that took 13 months to develop was really a two-year programme for us.' Advised of its imminent arrival, Stephens decided instead to wait for the Windows 3.0 software program, launched a year ago this month by Microsoft, the leading US personal computer software company. The initial success of Windows 3.0 - nearly 3m copies of the program have been sold worldwide - has been generated because it radically alters how IBM-compatible personal computers can be used, giving them the look and feel of an Apple Macintosh. But more sophisticated users of Windows 3.0, such as Touche, believe its long-term popularity will be rooted in the ability it gives software developers to customise their own packages more quickly. 'It takes a third to a quarter of the time to produce sophisticated software than before,' says Stephens. Windows 3.0 is a 'graphical user interface', a program that generates menu bars, icons and overlapping windows, which can be used with various applications programs such as word processing or spreadsheets. The interface enables users to point at symbols and click an electronic 'mouse' to select functions, instead of typing commands on a keyboard. What makes Windows 3.0 useful to software developers is that it provides a 'programming environment' which sits on top of the applications package and enables the procedures within the standard package to be adapted to the needs of the user organisation. Certain procedures can be ordered in a different way or eliminated if they are irrelevant. 'In the past we developed word processing packages on the basis of what we thought users wanted, but you couldn't change them to fit in with the work pattern that you had in the office,' says David Smith, systems marketing manager for Microsoft. 'In trying to be general, and develop a package for every single user in the world, you had to compromise along the way.' Stephens and his team decided to use Microsoft's Word word-processing package running under Windows 3.0 as the basis for their development programme. 'Auditing is a lot about writing but I didn't want to develop a new word processor. However we couldn't use a standard word processing package - we needed to tailor it to our specific application,' recalls Stephens. So they adapted the Word software, using Windows, to make it look like an auditing tool. 'From an underlying software standpoint about 95 per cent of the software is Microsoft. We've done about 5 per cent,' says Stephens. But he reports that from a user point of view about 80 per cent of software appears to be a specifically designed for auditing. The Touche software developers have achieved this by taking all the word-processing features available in the Word package and linking them differently. On top of that they have created headings and formats specifically for their auditors' needs. The progression on standard forms and layout, for example, mirrors the procedures an auditor would follow in the course of his job - whether auditing banks or grocery stores. Although the first software package, launched on 600 machines in August 1990, concentrated on the presentation of the software, this summer Stephens's department will be adding to the basic features and contributing to the content of the application. One thing the development team will be looking at is making the existing software easy to translate - Touche's Paris office has already shown an interest in going down the same development route. Because the development cycles are so short, Touche has even been able to create several prototype applications and, once appropriate software has been selected, the rest have been thrown away. Stephens points out that in spite of the moves towards these programmable applications packages, the basic applications tools are not completely ready. Of the five common applications that can be used by most organisations - word processing, spreadsheet, database, communications and graphics - Microsoft has developed only two to run under Windows 3.0 - Excel, the spreadsheet package, and Word. It has also adapted Project, for project management. But the success of Windows has persuaded all the large applications software houses to adapt their most popular packages which run under Dos - the widely used PC operating system - so that they can take full advantage of Windows. Lotus, for example, is in the final stages of developing a version of its popular 1-2-3 spreadsheet package which will fully exploit Windows 3.0, and is planning to have business graphics for the operating program later this year, says Robert Ingram, spreadsheet sales and marketing manager for the company. Borland International has three programming tools which work with Windows 3.0, and is also adapting its Paradox relational database package and its Quattro Pro spreadsheet program. Microsoft estimates that there are now more than 700 software developers writing new Windows-based applications, all hoping to take a bite of an ever-growing cherry. The Software Publishers Association in the US estimates that worldwide sales of Windows 3.0 applications are now second only to those of Dos applications packages. Market research consultant Dataquest underlines this optimism: it estimates that by 1992 systems sales of Windows will have overtaken those of Dos. The growth in the number of packages to run with Windows 3.0 has changed the buying patterns of Windows users, says Smith. 'For the first six or seven months there was an enormous growth in the sales of Windows operating software. But for the last five months we have seen applications sales shoot up - sales have quadrupled. Now 85 per cent of Windows users have a Windows application,' he says. Initially Windows 3.0 customers were running their existing Dos programs with the operating system - giving them the advantage of the icon-type presentation but without the power to move in and out of the applications provided by Windows 3.0. With Dos programs the user is forced to follow a series of commands in order to move through the program - like boring a hole, which you have to climb back out of before you can begin boring another hole. The Windows icons enable users to jump between different applications. So one advantage of combining a Windows application with the Windows 3.0 program, says Smith, is that the user can take text, graphics or numbers from one applications package and transfer them into another - figures from a spreadsheet program can be copied into a report being prepared in a word processing package, say. Perhaps the biggest advantage is that the two application packages need not even be provided by the same software companies. 
ID: 60
HEADLINE: FT  14 MAY 91 / Parliament and Politics: Delors overture fails to unite Conservatives - European Union 
TEXT: EUROPEAN Commission suggestions for compromise on economic and monetary union showed little sign yesterday of uniting the Conservatives on Europe - or of tapping undiscovered goodwill among Tory MPs to Mr Jacques Delors, the commission's president. Suggestions at the weekend that Britain be allowed to sign a treaty without agreeing on the final goals did nothing to alter the well-rehearsed convictions of Tories at Westminster. The anti-federalists, with the Bruges Group in the vanguard, remained opposed to any deal by which Britain would accept, even tacitly, a single currency. The most 'pro-Europe' Tories were anxious for Britain to react positively. Those in the middle remained sceptical of Mr Delors' vision for Europe and anxious to avoid being 'bounced' into a treaty the UK might regret. Not even an opportunity to defer awkward decisions beyond the election swayed firmly-entrenched views. Words of encouragement were qualified by warnings that the small print had to be examined carefully. The government's reaction was also cautious. If a decision was to be deferred for a future parliament, all options had to be kept open. The 'hard Ecu' remained on the table. But officials admitted the European Commission had at least show 'an appreciation of the UK's concerns'. For some MPs who strongly opposed a single European currency, Mr Delors' suggestion was acceptable only if it was clear Britain was defering the decision on whether to accept such a move - not just the timing. And there was no deadline for a decision. One right-wing minister said: 'If we can dither indefinitely, it's fine. If there is a cut-off point to the dithering, it's a fraud,' Mr Patrick Robertson, secretary of the Bruges Group, said: 'Any compromise which makes Britain accept a single European currency in principle would be completely unacceptable. At present there is not enough information anywhere to be clear exactly what the form of words would be.' Mr Teddy Taylor, secretary of the European Reform Group, went as far as saying: 'If the government could negotiate an arrangement 'without commitment' we feel that this would be a very major advance in the battle to preserve our freedom and to safeguard the nation against socialist control and bureaucracy.' But Mr William Cash, the prominent anti-Federal Europe MP for Stafford, said it was 'unrealistic' to expect what amounted to a two-tier Europe to work in practice. Among the middle ground of the party, there was anxiety, to be seen as pro-European, like Mr John Major. But there was suspicion about Mr Delors' blueprint for Emu. Mr Terence Higgins, chairman of the Commons' Treasury select committee, said Mr Delors, 'thinks he is losing the argument' and so was trying to get British agreement for allowing other EC members to proceed on a pre-determined timetable. For most on the pro-European wing, however, the plan was another opportunity the UK appeared set to rebuff. Mr Hugh Dykes, MP for Harrow East, said: 'How crazy it is that even when the commission president proposes a helpful compromise, meeting specific British hesitations, it is denounced by a small number of hysterical anti-marketeers.' Editorial comment, Page 18 
ID: 61
HEADLINE: FT  14 MAY 91 / Parliament and Politics: UN contribution 
TEXT: BRITAIN will contribute Pounds 15m to the United Nations Population Fund and the International Planned Parenthood Federation, Mrs Lynda Chalker, the overseas development minister, said yesterday. 
ID: 62
HEADLINE: FT  14 MAY 91 / Parliament and Politics: N Ireland assessor 
TEXT: THE Northern Ireland Office has announced the setting up of an independent assessor of the armed forces' complaints procedures in the province. Lord Belstead, minister at the NIO, hoped the change would help the security forces retain the confidence of both communities in Northern Ireland. 
ID: 63
HEADLINE: FT  14 MAY 91 / Parliament and Politics: British Coal profit 
TEXT: British Coal expects to show a 'modest bottom line profit' for the last financial year, Mr Colin Moynihan, the junior energy minister, told the Commons last night. 
ID: 64
HEADLINE: FT  14 MAY 91 / Parliament and Politics: Ingham as teaching aid rejected 
TEXT: A SUGGESTION that all new civil servants should be issued with a copy of Sir Bernard Ingham's memoirs to learn how to 'stitch up elected ministers at the request of the prime minister' was greeted with derision yesterday by Mr Tim Renton, the Civil Service minister. Mr Tony Banks, (Lab, Newham NW), had said Kill the Messenger, Sir Bernard's account of 11 years as Mrs Margaret Thatcher's press secretary, would make an effective teaching aid at the Civil Service College. Earlier Mr Renton rejected a call by Mr Max Madden (Lab Bradford West) for a new inquiry into the Westland affair. In his book Sir Bernard denies that he authorised a leak from the department of trade and industry of a letter from Sir Patrick Mayhew, the then Solicitor General, referring to Mr Michael Heseltine's conduct throughout the affair. Observer, Page 18 
ID: 65
HEADLINE: FT  14 MAY 91 / Parliament and Politics: Politicians play fast and loose with the numbers / Testing the validity of arguments in the current debate on taxes and public spending 
TEXT: WHEN politicians begin to argue about the relative merits of lower taxes or higher public spending it is time for the voters to beware. When the debate takes place in the approach to a general election and becomes enmeshed in the detail of supposedly incontrovertible arithmetic the most sensible course for the uncommitted is to suspend belief. The real political - and economic - arguments behind the relative stances of the Tories and Labour party in the past week have been drowned in a sea of irreconcilable and often spurious statistics. At one level there is no fundamental disagreement between the parties that if the economy grows and tax rates remain constant, the government will reap a 'growth dividend'. It can spend it in one of three ways, or in any combination of the three: to reduce borrowing, to increase spending, and to reduce tax rates. The Conservative policy is based on delivering a combination of all three. It says it will continue to provide real increases in resources for the public sector, will move towards a balanced budget, and will find room to cut the basic rate of income tax. Labour has said it will use the dividend to boost spending and it will definitely not cut tax rates. It has been silent on whether it would reduce borrowing or keep it at present levels. Its only costed spending commitments - to increase child benefit and raise state pensions - will be financed separately by abolishing the ceiling on employees National Insurance Contributions and by increasing the top rate of income tax to 50p from 40p. But if that sounds a relatively straightforward choice as between Labour and the Conservatives, a dispassionate observer of the claims and counterclaims flung across the party divide in recent days could draw only one conclusion: our political masters canp. There have been many examples, but one or two give some of the flavour. In the middle of last week Mr Neil Kinnock, the Labour leader, declared that on the basis of growth of 2.5 per cent a year his party could expect a 'dividend' of about Pounds 20bn to devote to public services over the lifetime of a parliament. The Conservatives seized on the figure as a 'gaff'. Their own spending plans already included provision for an extra Pounds 26bn in the next three years. If Labour was to spend Pounds 20bn more it would have to raise taxes. It was a credible, if contentious point but the Conservatives then spoilt the case with their own arithmetic. Their charge was that Labour would have to raise the basic rate of income tax by 2p each and every year for the lifetime of a parliament, pushing the basic rate of income tax to 35p. They omitted to mention that this would raise not Pounds 20bn but Pounds 60bn. The message yesterday was that Mr John Major, who first used the 10p figure, had made the 'reasonable' assumption that Mr Kinnock had been talking about Pounds 20bn a year in extra spending by the end of a parliament. Labour meanwhile has been busy making its own assumptions about the Conservatives' plans. The strategy behind its weekend charge that Mr Major had a hidden agenda to raise Value Added Tax from 17.5 per cent to 22 per cent in order to finance cuts in the basic rate of income tax was clear. The government has raised VAT twice since 1979 to finance reductions in income tax and, more recently, to reduce poll tax bills. Since its own figures showed there was no room in the next three years to reduce the basic rate of income tax, Labour felt able to claim that it was obvious VAT would rise again. Mr John Smith, the shadow chancellor, was careful, however, not to mention any of the caveats with which Mr Norman Lamont, the chancellor, has circumscribed the income tax commitment. A rise in VAT of 4.5 per cent would raise Pounds 8bn a year, enough to cut 4p off the basic rate of tax in the first budget of a new Conservative government. Mr Lamont has stressed, however, that he plans to move towards his target at an altogether more sedate pace. Even if the politicians did not misinterpret their opponents' intentions, the apparent precision of their figures bestows a spurious accuracy on economic forecasts stretching five years ahead. The Treasury has shown in the past few years that it is dangerous to trust predictions stretching just 12 months ahead. The debate of the last few days does tell the voter that taxes are likely to be lower under the Conservatives and public spending higher under Labour. Beyond that the forecasts are perhaps best regarded with the same confidence as the average horoscope. 
ID: 66
HEADLINE: FT  14 MAY 91 / Parliament and Politics: Plea for white collar jobless - Unemployment 
TEXT: AS speculation about the date of the general election continued in the Commons last night Sir Robert McCrindle, a senior Conservative backbencher, called on the government to pay closer attention to the growth in 'white collar' unemployment. He stressed that it was a 'phenomenon' of the current recession which was affecting voters in his Brentwood and Ongar constituency and others within commuting distance who looked to the City of London for employment . Labour MPs predicted that their party was poised to win the Monmouth by-election on Thursday and that, as a result, Mr John Major, the prime minister, would avoid calling a general election before October at the earliest. Mr John MacGregor, leader of the Commons, declined to comment on the timing of the general election but reaffirmed the government's determination to make Labour's spending commitments - and the implications for increased taxation - a key feature of the campaign. Sir Robert McCrindle accepted that priority had to be accorded to getting inflation down but urged the government to spread the coverage of its advertising campaign on unemployment to cover the services sector as well as manufacturing industry. While the 1980s had been characterised as the period of the 'yuppies' and, perhaps, 'the unacceptable face of the City of London' the latest downturn in the economy had changed the situation. Sir Robert estimated that about 40 per cent of the current rise in unemployment, and about half the company liquidations, were in the 'services dominated' south east of England. MPs approved a motion authoring the House to adjourn from May 23 to June 3 for the spring recess. 
ID: 67
HEADLINE: FT  14 MAY 91 / Parliament and Politics: Military shipments from Gulf will be audited - Defence 
TEXT: THE Ministry of Defence is organising a 'major audit effort' to prevent fraud in the shipping of military equipment back from the Gulf, the Commons Public Accounts Committee was told yesterday. Sir Michael Quinlan, permanent under-secretary at the Ministry, said the aim was to ensure it was returned 'in a properly accounted manner'. His assurance followed a five-fold rise to Pounds 1.2m. in the amount involved in alleged fraud at defence establishments in the last financial year, compared with a total of just over Pounds 2m in the previous six years. He admitted he was surprised at the low proportion of people who were dismissed or resigned as a result. 
ID: 68
HEADLINE: FT  14 MAY 91 / UK News (Employment): Unions seek advice on R-R jobs move 
TEXT: UNION LEADERS were yest-erday seeking legal advice over a decision by Rolls-Royce to terminate the contracts of its 34,000 aerospace workers in order to implement a pay freeze. The move - claimed by some unions to be mass sackings, if only on a temporary basis - is one of the most significant attempts by a company to change its employees' contracts during the recession. Rolls-Royce said the move was nothing more than a legal technicality, and that employees would be offered contracts on broadly similar terms. It added that it had no wish to see people dismiss themselves as a result of its decision. Mr Tim Webb, national officer of the MSF general technical union, said the company had 'imposed a six-month wage freeze without consultation or warning'. Rolls-Royce announced the pay freeze last week at the same time as unveiling plans to double job losses in the aerospace division this year to 6,000. In a subsequent letter to employees, sent at the end of last week, the company gave notice that contracts would be terminated at various stages, depending on length of service, from last Saturday. New conditions would be exactly the same as existing ones except that pay would be frozen. Mr Webb said unions were worried the company was planning other changes to working practices, including the introduction of individual contracts. Few other companies among the increasing numbers of employers announcing pay freezes have terminated existing contracts. However, Mr D'Arcy Payne, personnel director in Rolls-Royce's aerospace division, said that the company had taken careful legal advice before making its decision. Under the pay freeze, increments to reward length of service will be suspended. In addition, there will be no general pay rises for at least six months. Leaders of the manual workers' union will meet on Thursday to discuss the job losses and the pay freeze, and union officials are also asking for a meeting with the Rolls-Royce board. 
ID: 69
HEADLINE: FT  14 MAY 91 / UK News (Employment): Post Office staff vote for strike 
TEXT: COUNTER and clerical staff employed by the Post Office have voted to strike over a 6.8 per cent pay offer. The Union of Communication Workers, the main Post Office union, last night called for the urgent resumption of talks in an attempt to have the offer increased. The ballot result was announced yesterday at the UCW's conference in Blackpool. Mr Alan Tuffin, UCW general secretary, agreed last night that the result was some way from the overwhelming majority that union negotiators had sought. In a 67 per cent turnout for the ballot, 4,613 UCW members voted for industrial action, while 3,732 voted against. A total of 14,500 counter and clerical staff are employed by the Post Office Counters business, which is separate from mail sorting and delivery service. Mr Tuffin said that he would have liked more members to have taken part in the ballot. However, the result, which had come from what was traditionally a non-militant section of the union, indicated the strength of feeling among the membership. A number of options for action remained open, said Mr Tuffin. Workers in cities such as London, Glasgow, Liverpool and Manchester were likely to have voted most heavily for a strike, and it was possible there could be selective action. He added that Post Office Counters management had been asked to travel to Blackpool, where the union's conference continues for the rest of the week, so that talks could re-open without delay. Post Office Counters said last night that it was clear the union's executive did not have an overwhelming mandate for strike action and it hoped that the pay offer would now be quickly agreed. 
ID: 70
HEADLINE: FT  14 MAY 91 / UK News (Employment): Teachers strike 
TEXT: UP TO 1,000 teachers in Warwickshire are staging a one-day strike today in protest at proposed teacher redundancies and cuts in the county's education budget. 
ID: 71
HEADLINE: FT  14 MAY 91 / UK News (Employment): Co-operation on training urged 
TEXT: INDUSTRY training organisations, recognised by governments as the voice of training for particular industries, were yesterday urged to act with companies in their sectors to promote more effective training. Mr Robert Jackson, a junior employment minister, made the appeal in his endorsement of an action plan which was the result of a study of 10 ITOs by Manpower Research on behalf of the Department of Employment and the National Council of Industry Training Organisations. ITO Network Review; NCITO, 5 George Lane, Royston, Herts; Free. 
ID: 72
HEADLINE: FT  14 MAY 91 / UK News (Employment): Nalgo leaders set deadline on dispute 
TEXT: LEADERS of unions representing 740,000 local government workers said yesterday that an industrial dispute over pay was likely unless employers made an offer before the end of the month. Employers failed to make a pay offer yesterday, in spite of a claim of 12 per cent from unions led by the National and Local Government Officers Association. 
ID: 73
HEADLINE: FT  14 MAY 91 / UK News (Employment): Three men win ruling on equal pensions 
TEXT: AN industrial tribunal has ruled that three men who left a Wigan engineering company before the retirement age of 65 were entitled to the same pension as women of their age. The judgment reinforces others on equal pension ages. The Equal Opportunities Commission said the judgment in the case against Gullick Dobson showed again that sex discrimination in occupational pension schemes was illegal because pensions must be considered as part of pay. 
ID: 74
HEADLINE: FT  14 MAY 91 / UK News (Employment): Harrods to be asked to abandon pay freeze 
TEXT: USDAW, the shop workers union, will this week attempt to persuade Harrods, the London department store, to lift a six-month pay freeze for its 4,000 employees. The Knightsbridge store, which has been encountering difficult trading conditions because of a drop in tourist numbers after the Gulf war, has told staff it will review the pay freeze, which started on April 1, in the autumn. Harrods, owned by House of Fraser, had offered its non-managerial staff a 3 per cent increase from April 1 with a further 2 per cent in October. Usdaw, which will be meeting senior representatives of Harrods on Thursday to ask them to re-open pay negotiations, said the offer was withdrawn on Friday and a pay freeze announced. Last month Harrods told all its 600 managerial staff that their pay was being frozen. Pay freezes have been adopted by a significant number of employers this year but Laura Ashley Holdings, the fashion and household retailer, was so far believed to be the only high-street retailer among them. Pay awards in the retail sector have been averaging about 9 per cent to 10 per cent although members of the Multiple Shoe Retailers' Association restricted pay rises for 19-to-21-year-olds to 5 per cent. Earlier this year Harrods shed 200 staff. The redundancy programme was to have been larger, but was trimmed after staff protests. It was prompted by poor trading conditions in February. 
ID: 75
HEADLINE: FT  14 MAY 91 / UK News (Employment): TUC finds few deals on recognition at new plants 
TEXT: UNIONS appear to have found it increasingly difficult in the past three years to gain recognition agreements from inward investors and British companies setting up new plants, a senior TUC official said yesterday. Mr John Monks, TUC deputy general secretary, said only 10 deals had been notified to the TUC since October 1988 under a procedure to regulate inter-union conflict of the kind which led to the expulsion of the EETPU electricians' union. Under the prior-notification procedure, which was made permanent in June last year, unions should tell the TUC about any single-union deal they are about to sign. Mr Monks told a conference in London that the number of deals was 'very small' compared with the rush of agreements signed in the mid-1980s. He added that the TUC might support establishing the size of union membership in a company by a workforce ballot instead of a petition drawn up by a union, saying this method might be 'politically advisable' in order to gain public support for TUC proposals. 
ID: 76
HEADLINE: FT  14 MAY 91 / UK News (Employment): Non-managerial staff reject 5% Midland offer 
TEXT: MIDLAND BANK, the last of the big four clearing banks to enter pay negotiations this year, has offered its 35,000 non-managerial staff a rise of 5 per cent from June 1. The offer was rejected by union negotiators and both sides will meet again at the end of the week. Only a small improvement is expected on the offer, and it is likely that the final settlement will fall at the lower end of this year's likely 5-7 1/2 per cent range of pay increases for the clearers. Midland's poor financial performance led it to halve its dividend earlier this year. Pressure on Midland's management to increase the offer will be reduced to some extent by the June settlement date and what is expected to be a continuing drop in inflation before then. The other main clearing banks' pay increases take effect from February and April. Mr Ed Sweeney, deputy general secretary elect of the Banking, Insurance and Finance Union, said that Midland's negotiators had also drawn attention to an offer of 5 per cent by Lloyds Bank to its 46,000 non-managerial staff. Lloyds has said there is no further room for improvement on the offer, although more talks are due to take place today. Barclays' staff have already settled for a rise of more than 7 per cent and NatWest has implemented a 7.5 per cent rise as part of a deal that will allow the bank to require more flexible starting times from its employees. Unions and management at TSB are also due to meet again at the end of the week following an increase in the pay offer to staff from 6.75 per cent to 7 per cent. Bifu members are being balloted on industrial action at Lombard North Central. The National Union of Mineworkers has offered to back a recognition claim by the banking union Bifu at the North of England Building Society by urging NUM members to withdraw their savings from the society. Bifu has not taken up the offer 'for the moment', it said, because the move could threaten the livelihood of its members. 
ID: 77
HEADLINE: FT  14 MAY 91 / UK News (Employment): Redundancies at American Express 
TEXT: AMERICAN Express has made 135 people redundant in the UK out of a total workforce of 5,500. The company said the job cuts were necessary to manage costs in a highly competitive environment. 
ID: 78
HEADLINE: FT  14 MAY 91 / Hopes rise for the high street stock shop: NatWest's plans to gear up for the widening of share ownership 
TEXT: NATIONAL Westminster knows better than most that timing is everything. The bank has been pondering for sometime how to establish a new market for small companies. It decided to push its proposal forward only when Mr Norman Lamont, the chancellor, called for ideas on widening share ownership. The London Stock Exchange was always going to pour cold water on the concept of a rival market for small companies. Yesterday its chairman, Mr Andrew Hugh Smith, could not resist asking just how NatWest thought it could find buyers for shares in tiny businesses. As he sees it, it is one thing to buy shares from Mrs Brown in Newcastle but it is another to sell them to Mr Jones in Truro. Just who wants shares in penny-halfpenny companies? As far as the stock exchange is concerned, there is no way of answering the question, which is why there is no rival market. NatWest disagrees. It believes there are two possible solutions: it could establish a group of independent agents tied to NatWest, specialising in small companies and buying shares from individual investors; or it could link with a third party acting as a broker marketing shares acquired by NatWest. Since the demise of the Third Market at the end of last year, the bank's stockbrokers have been convinced that they could offer those companies a new home. It also believes it could pick up unlisted businesses, which typically have 1m shares at Pounds 1 each, as well as some of the smaller companies quoted on the Unlisted Securities Market. The USM was set up on November 10 1980 to provide a separately regulated and more flexible market for smaller companies. NatWest believes it could offer many of the smaller USM-quoted companies easier access to the public at an earlier stage of their development. NatWest established a share dealing service in December 1986, for the privatisation of British Gas and it has been thinking of ways of developing its service. In January 1988 it extended its touch-screen share-dealing operation throughout the country. In 278 of the bank's 2,900 branches, investors can buy or sell shares in 550 companies. In spite of the operation's initial success, the branches do an average of only 10 deals a day each. Mr Neil Stapley, managing director of NatWest Stockbrokers, assigned a project team to look at ways to extend that service. The team calculated that a market for small companies would be relatively cheap to establish. When the Treasury issued a press release in March asking for ideas to sell the shares it owns in BT, NatWest Stockbrokers seized on a supplementary question. The chancellor wanted to know how high-street share shops could develop throughout the country - he was not interested just in the BT sale but in widening share ownership generally. That was good enough for NatWest. It is relying on the Treasury to keep to its side of the deal and will come up with the ideas if Whitehall throws its weight behind them in the face of stock exchange hostility. To be fair to Mr Hugh Smith, he has made it clear that the bank is in an ideal situation to establish a market in small shares. If it decides to set up a rival market, Mr Hugh Smith does not think it should necessarily be judged as a challenge to the exchange. Others are not so sure. Mr Brian Winterflood, managing director of Winterflood Securities, which offers a share service in 830 small companies, said NatWest had 'state-of-the-art' technology to offer a first-rate market for small companies. 'It has the capability to challenge the stock exchange,' he said. 
ID: 79
HEADLINE: FT  14 MAY 91 / New truck sales down by 46% 
TEXT: NEW TRUCK sales plunged in April by 46 per cent, compared with the same month last year, to only 2,647, as the recession deepened further in leading sectors of the UK commercial vehicles market. The truck industry is suffering the steepest two-year slide into recession in the post-war period, with most UK truck makers operating at a loss. Truck registrations (above 3.5 tonnes gross vehicle weight) in the first four months - at 11,562 - were 39.7 per cent lower than a year ago, according to the Society of Motor Manufacturers and Traders. Sales have dropped by 54.9 per cent in the past two years from the 25,638 achieved in the first four months of 1989. The collapse in sales has been led by the heavy truck sector (above 15 tonnes), where sales in the first four months this year - at 5,452 - were 43.4 per cent lower than a year ago and 61.6 per cent lower than in the corresponding period of 1989. Overall, new commercial vehicle registrations in April fell by 27.6 per cent to 19,406, compared with the same month last year, while sales in the first four months were 31.6 per cent lower than a year ago, at 79,457. Sales of imported vehicles have been hardest hit in the recession, and their share in the first four months fell to 35.6 per cent from 39.5 per cent a year ago. In the truck market Leyland DAF, UK subsidiary of DAF of the Netherlands, established a narrow lead in the first four months ahead of Iveco Ford. Leyland DAF increased its share of the overall truck market (above 3.5 tonnes) to 24.5 per cent from 24 per cent a year ago, while Iveco Ford's share dropped to 24.2 per cent from 24.9 per cent in the corresponding period a year ago. 
ID: 80
HEADLINE: FT  14 MAY 91 / Cardiff hospitals may lose 200 jobs 
TEXT: SOME 200 jobs are likely to be lost in Cardiff hospitals as a result of the decision of South Glamorgan Health Authority to privatise its cleaning services, writes Anthony Moreton. The authority says the move will lead to a saving of 'just under Pounds 1m, which will be ploughed back into patient services'. The authority, which has responsibility for the University of Wales teaching hospital as well as the city's Royal Infirmary, has followed government policy by opening up cleaning services to the private sector. The service companies estimate they will need about 800 of the present 1,000 staff. 
ID: 81
HEADLINE: FT  14 MAY 91 / Food label proposals 
TEXT: COMPANIES making food for people with special dietary needs may have to back nutritional claims with scientific evidence, according to consultative regulations issued yesterday by the Ministry of Agriculture, Fisheries and Food. 
ID: 82
HEADLINE: FT  14 MAY 91 / AEA prosecution 
TEXT: THE UK Atomic Energy Authority will be prosecuted by the government next month under the Radioactive Substances Act for an unauthorised release of radioactive gas at Harwell, Oxfordshire, last July. The AEA has not decided whether to defend the action. 
ID: 83
HEADLINE: FT  14 MAY 91 / B&amp;Q appeal starts 
TEXT: THE House of Lords yesterday began hearing the case in which the DIY chain B&amp;Q is seeking to establish that the Sunday trading laws in England and Wales are no longer valid. B&amp;Q is appealing against a High Court ruling last July. It is arguing that the 1950 Shops Act, which restricts the goods that can be sold on Sundays, has been superseded by European free-trade laws. The hearing continues tomorrow. 
ID: 84
HEADLINE: FT  14 MAY 91 / Pollard to edit Sunday Express 
TEXT: MISS EVE POLLARD, editor of the Sunday Mirror, is to take on one of the most challenging jobs in British journalism - trying to halt the Sunday Express circulation decline. Miss Pollard takes over from today. The job became vacant following the departure of Mr Robin Morgan. Ms Bridget Rowe, editor of TV Times, will be the new editor of the Sunday Mirror. Mr Terry Pavey, deputy editor of TV Times, will become editor. 
ID: 85
HEADLINE: FT  14 MAY 91 / Brooke hopeful on reviving Irish talks 
TEXT: MR PETER BROOKE, North-ern Ireland secretary, last night appeared hopeful that he could resuscitate talks on the province's political future. But he admitted that time was not on his side. After a fourth day of talks in Belfast with Unionist and nationalist leaders about the venue for talks involving the Irish government, Mr Brooke suggested he was making some headway in reaching a compromise. 'Serious business is being done,' he said. However, Mr Brooke was careful not to raise hopes after what has proved an acrimonious debate over the location for talks on relations between north and south Ireland. 'I don't think time is on our side,' he admitted, adding: 'I don't want to get overexcited.' The row has dominated the first two weeks out of the 11 set aside for the talks. At this stage the participants were supposed to be discussing devolved government in the province. Mr Brooke will meet Unionist leaders and the nationalist Social Democratic and Labour party again today at Stormont parliament buildings outside Belfast. An incident yesterday which highlighted the cost of failure was the murder by the IRA of Mr Robert Orr, a businessman and member of the loyalist Orange Order. A bomb exploded under his car as he waited at lights in Armagh. Mr Brooke appears to have stopped short of issuing an ultimatum over a venue with the threat of ending the talks if agreement cannot be reached. He is understood to be working on variations of a proposal for holding talks with the Irish government first in London, then Belfast, then Dublin. Unionists insist they cannot hold talks with Dublin ministers anywhere in Ireland while the Republic's constitutional claim on Northern Ireland remains. The SDLP believes meetings should rotate between London, Dublin and Belfast. 
ID: 86
HEADLINE: FT  14 MAY 91 / The Blue Arrow Trial: Paper to NatWest board was rewritten, jury is told 
TEXT: A PAPER on County NatWest's handling of the parcels of Blue Arrow shares taken by advisers to the September 1987 rights issue was rewritten within the parent bank to make it 'softer and vaguer' before being presented to the NatWest board, the Blue Arrow trial heard yesterday. The purpose of the re-drafting was to put the paper into a form that could be considered by the board, which included non-executive directors, Mr Leslie Collett, former secretary to the County chairman's committee, agreed with Mr Alun Jones QC. Changes made while the paper was in the office of Mr Thomas Frost, the NatWest group chief executive, had the effect of making the problems facing County after the stock market crash seem much less urgent, Mr Jones, for Mr Stephen Clark, a County director, said. Mr Collett agreed with him that the changes had made the paper softer and vaguer, and made it appear that the discussions over the future of the holdings were not too far advanced. Although the paper finally presented to the NatWest board on December 8 was signed by Mr Jonathan Cohen, the former County chief executive, it had been very carefully rewritten 'at the behest' of people at NatWest, including Mr Frost and Mr Terence Green, the former NWB deputy chief executive, he agreed. Between November 23, when a number of County executives met to discuss the holding, and December 8 1987, a strategic planning department within the parent bank was involved in the redrafting of the paper, he said. Mr Collett also agreed that the legal advice given at the meeting on November 23 by Mr Alan Keat, a defendant, and Mr Nigel Campion-Smith, solicitors from Travers Smith Braithwaite, was that no immediate disclosure of the holdings was necessary. He was questioned later by Mr Anthony Hooper QC, for Mr David Reed, a former County director, over the legal advice given by Mr Campion-Smith at a meeting held on September 23, before the issue closed, at which County's possible buying of shares was discussed. 'Mr Campion-Smith didn't say 'Watch it, that is a conspiracy to defraud if you do what we have discussed'?' Mr Hooper asked. Mr Collett replied: 'I don't think he said anything akin to it at all.' County NatWest, NatWest Investment Bank, UBS Phillips &amp; Drew Securities and seven individuals, including Mr Clark, Mr Cohen, Mr Keat and Mr Reed, deny conspiring to mislead the markets over the outcome of the Pounds 837m issue. The trial continues today. 
ID: 87
HEADLINE: FT  14 MAY 91 / Gerry Adams calls a conference in London 
TEXT: Excluded: Gerry Adams, president of the IRA's political wing Sinn Fein, called a conference in London yesterday at which he attacked the decision not to include his organisation in talks on the future of Ulster as 'undemocratic' 
ID: 88
HEADLINE: FT  14 MAY 91 / City regulators angry over Taurus decision 
TEXT: THE government's decision to hand regulatory responsibility for Taurus, the stock market's planned settlement system, to the stock exchange was greeted with barely concealed anger in some City regulatory circles yesterday. Mr John Redwood, corporate affairs minister, has decided not to give the task to the existing investment watchdogs for fear of adding to the bureaucracy created by the Financial Services Act. Yet some investment regulators argue that giving the job to the exchange, with the Department of Trade and Industry retaining overall responsibility, will lead to conflicts between regulatory agencies, and will expose 'horrendous' conflicts of interest within the exchange. It will mean that both the exchange and the existing self-regulating organisations will be responsible for assessing whether an investment firm is 'fit and proper' to operate. Differences of opinion could cause problems, one senior regulator said privately yesterday. 'We all feel it won't work. It will fall down where there is a difference of opinion,' he said. A further difficulty, he said, was that the exchange would act as regulator and commercial operator of Taurus. This would create conflicts of interest, as it would be forced at times to discipline investment firms that were in fact among its biggest customers. Mr Redwood's decision, conveyed to regulators last Friday, is due to be announced formally on Thursday when the DTI publishes its long-awaited legal regulations paving the way for Taurus. At the same time, he will announce an annual ceiling for the Taurus compensation scheme of Pounds 100m - far less than the Pounds 1bn he had urged earlier, but more than the Pounds 50m originally proposed by the exchange. The launch of Taurus - probably in about a year - will create an important regulatory task. The many brokers, custodians, registrars and others linked electronically to the system will need to be assessed on their technical expertise and their fitness and properness, as well as their capital adequacy. Giving this job to the existing investment regulators would have brought registrars, custodians and nominees within the scope of the FSA - something that the DTI, already recoiling from the over-complexity of the existing regulatory structure, was not willing to do. 
ID: 89
HEADLINE: FT  14 MAY 91 / Nissan wins first round in fight with importer 
TEXT: NISSAN MOTOR of Japan won an initial victory yesterday in its High Court battle with Nissan UK, its privately-owned importer, by persuading the court to hear at least the first part of the action behind closed doors. Nissan Motor, Japan's second-largest car maker, is trying to avoid an embarrassing open confrontation in the English courts by having its dispute with Nissan UK referred to arbitration in Japan. It argues that under the terms of the original distribution agreement, which came into effect at the beginning of 1971, any disputes or legal proceedings were to be settled in Japan. Sir Nicolas Browne-Wilkinson, the vice-chancellor, agreed to Nissan Motor's request that the issue of jurisdiction over the dispute should be heard in chambers. He said his judgment would probably be given in open court, and the second part of the action - Nissan UK's attempt to win an injunction preventing Nissan Motor from selling vehicles to any other distributor - would be heard in open court. 
ID: 90
HEADLINE: FT  14 MAY 91 / Labour rules out drastic reform for accountancy 
TEXT: THE LABOUR party is unlikely to seek immediate and drastic reforms of the UK's accountancy profession if it wins the next election, the party's discussion paper on its plans for accountants and auditors made clear. In the paper, Ms Marjorie Mowlam, opposition City spokesman, states that the current regulatory regime, whereby auditors are to be monitored by the professional bodies under the Companies Act 1989, is unsatisfactory. But the remedies put forward in the document fall far short of those being expounded by Mr Austin Mitchell, Labour MP for Great Grimsby and a former frontbench spokesman, who has attacked the accounting status quo. Yesterday's document shows that Labour has no immediate plans to curtail the consultancy work done by firms of auditors for their audit clients, or to insist on the rotation of auditors after a fixed period. These are among the more radical reforms advocated by Mr Mitchell. The document welcomes the recent improvements to the way in which accounting standards are set and monitored. It suggests that similar improvements ought to be made to the regulation of auditors. 'There is no doubt that the current institutional arrangements are unsatisfactory,' the document says. 'There is a need for (more input from outside the profession) and generally greater transparency of proceedings and recommendations.' The Institute of Chartered Accountants in England &amp; Wales yesterday challenged the view of Sir Gordon Borrie, director-general of fair trading, that the proposed regulations restricting non-auditors to ownership or control of no more than 25 per cent of auditing firms are uncompetitive. The institute told Mr John Redwood, corporate affairs minister, that the restriction was essential to safeguard auditors' independence. 
ID: 91
HEADLINE: FT  14 MAY 91 / Small companies may lose in EC public deals race 
TEXT: SMALL AND medium-sized British companies are in danger of losing out to Continental competitors as the market for public procurement opens up in the next few years. This was the warning yesterday from Sir John Cuckney, chairman of a National Economic Development Council working party on open public procurement in the European Community. Sir John, chairman of 3i, the venture-capital investment group owned by the Bank of England and the clearing banks, said small and medium-sized companies were in danger of sticking their heads in the sand just as their public-sector markets were about to undergo a huge transition. He was speaking at the launch of a working party to examine the likely impact of open public procurement on British companies over the next 18 months. Under the single-market programme the EC is issuing a series of directives designed to eliminate barriers to cross-border trade in public services. Public procurement in the EC is worth about Pounds 430bn a year. The working party is the first NEDC body to include representatives from the Continent: Mr Bernado Cremades, a leading Spanish lawyer; Mr Bernard Gosselin, the secretary-general responsible for public purchasing at the French ministry of economy and finance; Mr Preben Jackobsen, director of the Danish directorate for state purchasing; and Peter Prince Wittgenstein a member of the executive board of German engineering group Mannesmann. The working group plans to examine the market for public-sector building and infrastructure projects including their design, local authority public purchasing, markets to supply health authorities in the EC, and the supply of services in general. Among other things, the working party will study whether there are unfair barriers to British companies bidding for contracts on the Continent. Sir John said the working party would be just as concerned with the outlook for large companies as for small ones, and added: 'It will take some time before groups either gain the economies of scale or the specialisation to move into exports outside the EC.' The working party plans to issue British companies with practical guidance on how to bid for public-sector contracts on the continent. 
ID: 92
HEADLINE: FT  14 MAY 91 / Fiscal studies institute backs local income tax 
TEXT: A LOCAL TAX based on property values is backed as the best short-term replacement for the poll tax in an independent report published yesterday. But the report, from the Institute for Fiscal Studies, advocates the introduction of a local income tax in the longer term to raise additional revenue. The report emphasises that what matters more than the method of raising finance is that whatever is chosen should be sustainable and able to survive changes in national government. The institute says that the economic case for a property tax, as now advocated by both the government and the Labour party, is strong because property enjoys substantial fiscal privileges in the UK and should bear its share of taxation. On valuation, Mr Michael Ridge and Mr Stephen Smith of the IFS, who wrote the report, prefer the use of capital values as favoured by the government rather than rental values. But they are unconvinced of the need for 'banding' categories of property by value. 'We see no great merit in rough and ready forms of valuation (numbers of rooms etc.) nor in banding,' they say. 'Both are likely to lead to more perceived inequity in the treatment of similar properties than with a conventional capital valuation; banding in particular seems unlikely to promise much saving in valuation and administration costs, since the tax implications of being placed in one band rather than another are likely to provoke taxpayers to contest the valuation in borderline cases.' The advantage of a local income tax, which is advocated by the Liberal Democrats, is that it could raise more revenue than is now raised from local taxation. That could be important, as funding a high proportion of local government from central grants has often been seen as a source of instability in council finances. There would be a problem of timing, however. A property tax could be introduced quickly - the government is aiming at April 1993 - whereas any form of local income tax would require a much longer timescale. 'In the longer term, however, if it is intended that local taxes should contribute more to the costs of local government, we see no alternative to the eventual introduction of a local income tax, either as a supplement to, or replacing, property taxation,' the authors state. Local Taxation: The Options and the Arguments. IFS, 7 Ridgemount Street, London WC1E 7AE. Pounds 10 (Pounds 5 to members). 
ID: 93
HEADLINE: FT  14 MAY 91 / Plans to aid low-cost housing 
TEXT: PLANNING arrangements are to be made more flexible to encourage builders to provide a greater number of low-cost homes. But planning minister Sir George Young, announcing the changes, said he had rejected the idea that local authorities should have the power to insist on a fixed quota of cheaper homes when they grant planning permission. This has disappointed conservationists, who would like to see councils given mandatory powers to make developers provide a proportion of cheaper houses and flats in new developments. 'It is a missed opportunity,' said Mr Tony Burton, planning officer for the Council for the Protection of Rural England. 'It has not given the local authorities the powers they need to be effective.' The scheme mainly applies to rural areas where the influx of well-paid house purchasers from urban areas has sent prices up beyond the reach of local people. Sir George is asking local authorities to negotiate with developers to include a proportion of low-cost housing. 
ID: 94
HEADLINE: FT  14 MAY 91 / Brokers find Scots power promising 
TEXT: THE TWO Scottish electricity companies are more attractive to investors than the privatised English generators and regional electricity companies, according to Credit Lyonnais Laing, the stockbroker. The Scottish companies are due to be floated on May 30. The comment came in the first brokers' circular to be produced since the government published the pathfinder prospectus for ScottishPower and Scottish Hydro-Electric last week. Laing believes the two Scottish companies have good prospects for profits growth in the generating side of their businesses, which accounts for 30 per cent of ScottishPower's profits and 55 per cent of those of Hydro-Electric. The companies will be able to increase their earnings from generation as the transmission interconnector, which links the Scottish grid to the national grid in England and Wales, is expanded by 1994. The analysts point out that the Scottish companies will have an 'enduring advantage' over other generators because the Miller field in the North Sea will start producing cheap gas next year, and the benefits will be shared by both companies. Hydro-Electric also have another advantage only partly shared with ScottishPower because of its low-cost hydro-electric capacity. A further advantage is that after 1994, when customers using between 1MW and 10MW may choose suppliers, tariffs in Scotland are set to move only gradually into line with pool prices rather than instantly, as in England. But the Laing analysts, Mr Robert Giles and Mr Arthur Hepher, point out that the Scottish companies can expect lower real earnings growth in distribution and transmission because the government has set them harsher X-factors. Those require them to increase their tariffs by less than the rise in the retail prices index. The regional electricity companies are allowed to exceed the rise. The analysts believe the market may prefer Hydro-Electric because of its vigorous management and success in winning new business. They believe the two Scottish companies should justify a lower yield than the current average of 5.2 per cent for the English generators. But they expect the government to float them on a 5.2 per cent yield in order to produce a 20p premium on the part-paid price of Pounds 1. With the premium they would yield 4.8 per cent after flotation. 
ID: 95
HEADLINE: FT  14 MAY 91 / Surveillance equipment to be installed at main railway stations 
TEXT: SURVEILLANCE equipment is to be installed at main railway stations as soon as possible to guard against terrorist bomb attacks, Mr Desmond O'Brien, chief constable of British Transport Police, said yesterday. Mr O'Brien was speaking at a London news conference at which the force's 1990-91 annual report was published. It showed a 3.6 per cent reduction in crime on Britain's railways. Violent crime on BR and the London Underground dropped 31.6 per cent compared with 1989; sex attacks were down by 15.1 per cent. 
ID: 96
HEADLINE: FT  14 MAY 91 / Brewers urge easing of pub age law 
TEXT: THE BREWERS' Society yesterday called on the government to allow pubs in England and Wales to employ 16-year-olds and 17-year-olds and to admit children under 14 for family meals. The proposals were part of a submission on the licensing laws sent to Mr Peter Lloyd, a junior Home Office minister. Such moves 'would allow the consumer greater choice and offer increased opportunities for the licensed trade over the next decade', the society said. It said the ban on employment of young people prevented the recruitment of good-quality employees and the development of career paths for new licensees. The society recognised that strict controls would be required. It suggested that young staff should be registered with local Training and Enterprise Councils and should be under the direct supervision of licensees. Pubs in England and Wales, like those in Scotland, should be able to apply to licensing justices for children's certificates allowing under-14s in bars until 8pm for meals with an accompanying adult, the society suggested. 
ID: 97
HEADLINE: FT  14 MAY 91 / BR given go-ahead for extra carriages 
TEXT: BRITISH RAIL has received government permission to order extra carriages worth Pounds 67.3m for the commuter trains shortly to start operating between London and north-west Kent. The decision will come as a relief to BR and its passengers because a heavy overshoot in the corporation's budget for the past financial year has placed many of its investment plans in jeopardy. The order approved yesterday is for 43 two-car Networker trains similar to the 100 four-car Networkers already ordered for the inner Kent suburban lines. The four-car trains being built by BREL, the former engineering arm of BR, and GEC Alsthom, the Anglo-French engineering group, will make up eight-car formations which will start replacing the 40-year-old slam-door trains on these routes in May next year. The trains being replaced are the same as that involved in London's Cannon Street rail crash in January, which killed two people and injured more than 250. When the two-car trains start being delivered in 1993, they will be added to the eight-car trains to make up 10-car formations. BR hopes eventually to convert these trains to 12-car formations to cope with continuing traffic growth. BR had earlier hoped to win approval for new trains for the longer-distance Kent Coast routes, but these had to be dropped from the investment programme because of the corporation's financial crisis. 
ID: 98
HEADLINE: FT  14 MAY 91 / World Trade News: Australia rejects Brussels claim on farm free trade 
TEXT: AUSTRALIA yesterday rejected EC claims that it would be forced to tone down its campaign in Gatt's Uruguay Round for free trade in agricultural products, Kevin Brown reports from Sydney. Mr Ray MacSharry, EC agriculture commissioner, had suggested Australia would be forced to soften its stance under pressure for subsidies from farmers hit by recession and falling world prices. Mr Neal Blewett, trade negotiations minister, said Mr MacSharry's remarks were 'discouraging and inaccurate', and claimed Australia was resisting pressure for subsidies. The EC should emulate Australia's 'political courage' by moving away from export subsidies to farmers, he told parliament. Australia chairs the Cairns Group of farm exporting nations, which has pushed strongly for extending trade liberalisation to food products. Australia's refusal to aid wheat growers, partly from fear of weakening its Gatt negotiating stance, has been attacked by its farming groups, which say planting for next year's crop could be cut 35 per cent. But Canberra has approved a ADollars 100m (Pounds 45m) rise in the Grains Council of Australia's borrowing limit, to allow advance payments to growers, and has expanded its Rural Adjustment Scheme, to help farmers cope. 
ID: 99
HEADLINE: FT  14 MAY 91 / Eduard Shevardnadze addresses graduates in US 
TEXT: Eduard Shevardnadze, former Soviet foreign minister, addresses graduates at the University of Boston during a US tour to raise funds for his research organisation 
ID: 100
HEADLINE: FT  14 MAY 91 / Wage discord in Argentine military fuels unrest fears 
TEXT: DISCONTENT in Argentina's armed forces over low pay and declining budgets has raised new fears of military unrest, five months after the government crushed the fourth mutiny since the restoration of democracy in 1983. The commanders of the army, air force and navy met yesterday to analyse each service's financial problems. The meetings are intended to put pressure on the government for immediate wage rises and a general increase in military spending. Last week the navy's second-in-command said Argentina was defenceless, while Mr Erman Gonzalez, defence minister, complained that General Martn Bonnet, army commander, earned only Dollars 1,500 (Pounds 872) a month compared with a congressman's salary of Dollars 3,500. However, Mr Gonzalez said the military's demands were 'logical, but politically difficult to digest. I have no doubt that military discipline will prevail. Coups d'etat are things of the past.' None the less, one leading military analyst warned that another mutiny later this year was inevitable unless the government increased wages. Mr Domingo Cavallo, the economy minister battling to contain government spending, firmly rejected the generals' demands. Argentina's military budget is about Dollars 2bn, or 2 per cent of its gross domestic product, with wages alone accounting for 80 per cent of spending. The generals' demand for a 30-40 per cent wage increase would add about Dollars 40m-Dollars 53m a month to government expenditure. President Carlos Menem's support for Mr Cavallo forced the commanders to cancel a joint meeting planned for today at which they and senior officers were to have resigned, triggering confrontation with the government. Argentina and South Africa are in negotiations to re-establish diplomatic relations and resume sporting links. If the talks are successful, Argentina will become the first country to lift the international sports boycott, with an August tour of Argentina by the Springboks rugby team. Diplomatic relations, which were broken off in 1986, should be resumed later this year. 
ID: 101
HEADLINE: FT  14 MAY 91 / No-boom Midwest survives without bust / A look at why the downturn has been less severely felt than in the rest of the US 
TEXT: VISITORS to Chicago from recession-racked cities such as New York and Boston are surprised - even envious - to find there is little sign of economic gloom in the Windy City. The American Midwest, of which Chicago is the financial and industrial capital, is weathering the current US recession relatively painlessly. The secret to the Midwest's success is not that it is enjoying a miraculous renaissance but that it did most of its hurtful shrinkage and belt-tightening in the early and mid-1980s. While regions such as New England were revelling in 1980s booms, the Midwest was becoming 'slimmer and grimmer', says Mr Haskell Benishay, professor of managerial economics at Northwestern University's Kellogg School of Management. Or as the refrain among Midwest economic analysts goes, 'No boom, no bust.' The US recession of 1981 prompted a significant cut in Midwestern productive capacity and a higher technology retooling. In addition, the farming sector has emerged from a mid-1980s agricultural slump competitively leaner and far less in debt. Several key factors are involved in allowing the Midwest to ease through the American economic downturn, including the relative health of the property market, a boost of exports helped by a lower valued dollar, and the attraction of investment to the region, in particular by the Japanese. While there is some weakness in the Midwest property market, it is doing better than other American regions. Midwestern housing did not appreciate in the 1980s; now there is an incipient housing pick-up. According to Commerce Department figures, Midwestern housing permits rose 14 per cent in March compared with December last year. February housing starts were up 77 per cent on January's levels. Regional home values actually rose last year and are even expected to outperform other parts of the country during the 1990s, according to Ms Diane Swonk, regional economist for the First National Bank of Chicago. The declining trend in the US dollar has buoyed Midwestern exports and foreign sales. US capital goods exports hit a record high in the fourth quarter of 1990 and much of America's capital goods production is concentrated in the Midwest, according to Mr John Silvia, chief economist for Kemper Financial Services. While there are no good statistics on regional exports, the state of Illinois said its exports increased last year by 24 per cent and state officials expect these to rise again this year by 12 per cent. Chicago area-based Illinois Tool Works saw foreign sales jump to 50 per cent of its total of Dollars 2.54bn (Pounds 1.47bn) last year. Although ITW produces much of what it sells overseas at its plants abroad, the 1990 portion of its foreign sales was double what it was five years ago, said Mr W. H. Farrell, ITW's executive vice-president. More noteworthy still, Mr Farrell said, the company recently halted plans to invest further in Germany, choosing instead to produce at home and export. He said the US was a better prospect than Europe regarding costs for building, fuel, and wage and benefits packages. While Midwest wages are regarded as high in comparison with those in other parts of the country, productivity is also higher. This is one of the reasons why 60 per cent of the American motor vehicle industry remains in the Midwest. But the industry is both the blessing and the curse of the region. It provides many well-paid manufacturing jobs; but its cyclical nature, with the concomitant problems of unemployment and drops in local consumer spending, is a big disadvantage. The large number of recent plant closures by Detroit's Big Three car-makers has hurt the Midwest in particular, and more pain is forecast because of continuing industry overcapacity. The Japanese transplants have, however, helped offset the regional job losses. And, even with a slack US car market, their plans to export Japanese cars to Europe promise to help keep them running at capacity. The best-laid export plans may, however, be spoiled if the dollar continues its recent upward path. But with respect to domestic-destined industrial production, the Midwest has been lucky never to have become heavily dependent, as have other areas, on defence spending. The pull-back in defence spending has hit other regions, such as New England and the west, far harder. The Midwest will, however, have to cope with some serious problems ahead: its infrastructure is ageing; its population is declining; its foreign trade could become uncompetitive as the dollar shifts and other regions re-tool with more advanced technology. The free trade agreement with Mexico could also further siphon off manufacturing, especially car industry, jobs. Midwest banks, reflecting the national picture, are also due for some shrinkage because of over-capacity. 'We're coming back from a very weak position. But now, we're going to have to fight for every inch,' said Mr Robert Schnorbus, business conditions economist at the Federal Reserve Bank of Chicago. 
ID: 102
HEADLINE: FT  14 MAY 91 / Ottawa plans referendum on Quebec deal 
TEXT: THE Canadian government will seek powers to hold a national referendum or set up a form of extra-parliamentary machinery to approve a new political deal with Quebec and other changes in the country's political structure, writes Bernard Simon in Toronto. The government said in a Throne Speech during the opening of parliament in Ottawa yesterday that it planned to reveal its proposals for a new constitution this September. A parliamentary commission will consult widely with the provinces and the public on proposals, and aim to report by February 1992. The initiatives seek to calm fears that forthcoming talks with Quebec and the other nine provinces will occur without full public participation. 
ID: 103
HEADLINE: FT  14 MAY 91 / World Trade News: NEI Reyrolle wins Pounds 100m Dubai power order 
TEXT: NEI REYROLLE, part of Rolls-Royce's industrial power group, has won the UK's largest Middle Eastern order since the end of the Gulf War with a turnkey contract worth more than Pounds 100m to supply three sub-stations to Dubai, Andrew Baxter reports. The closely-fought contract is the biggest export order for Reyrolle, which provides switchgear and sub-stations for transmitting and distributing electricity, and the largest transmission sub-station contract awarded to a UK company. Reyrolle is part of Northern Engineering Industries, which was bought by Rolls-Royce in 1989. The contract is NEI's biggest since 1982, when it won an order, then worth Pounds 230m, for the Rihand coal-fired power station project in India. NEI said yesterday that the Dubai order would provide extra job security over the next two years for 2,000 Reyrolle workers at Hebburn, Tyneside, and create 'a few extra jobs'. NEI Peebles at Edinburgh, which employs 500, will also benefit from the contract by supplying eight transformers. NEI has been relatively successful in the Middle East, with Reyrolle recently completing its third substation in Saudi Arabia since 1987 in a series of deals worth about Pounds 80m. NEI Power Projects has also completed work on converting five gas turbines at a Bahrain aluminium plant to the more efficient combined cycle operation. But NEI was hit badly by UN sanctions against Iraq after the invasion of Kuwait. This prevented the company from supplying four turbine generators, worth about Pounds 70m, for a power station at Al Shemal and caused 650 job losses at NEI Parsons in Newcastle. The Dubai contract is for three 400kV substations, and includes the supply of 28 circuits of 400kV gas-insulated switchgear. Work will start immediately, and construction and commissioning continue into early 1993. Reyrolle will subcontract the civil design and construction to SAE Sadelmi, the Italian electrical contractor, while Kennedy and Donkin of the UK will be the consulting engineers. Mr Graham Shepley, Reyrolle managing director, said the news reinforced Reyrolle's position 'as a world leader in sub-station design and construction'. James Buxton writes: Weir Westgarth, the subsidiary of the Glasgow-based Weir Group, has won a contract worth Pounds 70m for a desalination plant at Jebel Ali in Dubai. The plant is part of a project worth about Pounds 500m for a gas turbine and desalination plant which will provide 400MW of power and 60m imperial gallons of drinking water, with the waste heat from the turbines being used in the desalination plant. R-R jobs move, Page 10 
ID: 104
HEADLINE: FT  14 MAY 91 / Communists set for upset in Kathmandu poll 
TEXT: NEPALESE voters appear to have delivered an upset by voting communist in the capital, Kathmandu, in the nation's first multi-party parliamentary elections in 32 years. Preliminary results suggest the Communist party defeated the centrist Nepali Congress Party in all five Kathmandu constituencies, including the seat contested by Mr Krishna Prasad Bhattarai, leader of the Congress party. He has been prime minister of the coalition cabinet that has ruled Nepal since last year's revolt against the king. Mr Bhattarai ran against Mr Madhan Kumar Mandari, general secretary of the Communist party. Counting began for 29 of the country's 205 parliamentary constituencies yesterday. Twenty one out of the 205 constituencies will hold new elections today after charges of irregularities, ranging from stuffing ballot boxes to dumping ballots in the river. Final results of the election are expected later this week. Observer, Page 18 
ID: 105
HEADLINE: FT  14 MAY 91 / UK marines involved in Iraqi skirmish 
TEXT: BRITISH Royal Marines are believed to have wounded two Iraqi soldiers in an exchange of fire near one of President Saddam Hussein's palaces in northern Iraq. Allied forces sealed off the area, close to the town of Amadiyah, as the atmosphere remained tense. The incident reportedly began when Iraqi troops fired three rounds from the palace across the front of a marine position. The British forces did not return fire then. Almost two hours later, a high-velocity round was fired at the UK position from the same area and the marines replied with a single shot from the post at Ayn Shaykh, close to Amadiyah and inside the allies' safe haven. Five minutes later, two men emerged from a blockhouse on the palace wall and fired 'long bursts' with automatic weapons, a UK military spokesman said. 'Royal Marines returned fire and they believe two Iraqis were hit.' Shortly afterwards, two more shots were fired from the palace. Iraq later issued a statement denying it had been involved in an exchange of fire with marines. In Zhako, several hundred Kurds besieged 50 Iraqi police in the local police station before US troops persuaded the crowd to disperse. 
ID: 106
HEADLINE: FT  14 MAY 91 / Charity counts blessings amid aid fatigue / A look at Christian Aid as it launches its 35th annual appeal for funds 
TEXT: TO THE many crises that have hit the developing world this year, a new one has recently been added: aid fatigue. Christian Aid, however, which yesterday launched the 35th Christian Aid week, claims so far to be immune. Although the Charities Aid Foundation has estimated that average household donations in Britain dropped by a third in recent years, Christian Aid's income in the last financial year held up well. 'We don't seem to have been affected by aid fatigue. Our support seems to have been maintained, even during the last three months,' says Mr Paul Tyler, head of finance at Christian Aid. This may be because of Christian Aid's link with the churches. It is sponsored by 41 churches and benefits from church fund raising. Christian Aid week is Britain's biggest regular fund-raising event - and the longest-running. Last year it raised Pounds 6.7m and this year hopes for at least Pounds 8m, with 400,000 volunteers delivering 16m collecting envelopes throughout Britain. The charity has come a long way from its roots as Christian Reconstruction in Europe, when it was set up in 1944 to help rebuild church and family life across the war-torn continent. One grant from its first Pounds 1m - raised through Victory in Europe collections and church grants - went towards buying hundreds of bicycles to enable clergy on the continent to get around their ruined parishes. Another funded a caravan stocked by Sainsburys on the Austro-Hungarian border to feed Hungarian refugees. In later decades the charity, renamed Christian Aid, built on its experience of refugee relief and resettlement in Europe and now works in more than 70 countries. It differs from all the overseas aid agencies except Cafod, the Catholic Fund for Overseas Development, in that it does not have its own staff based overseas, but works through indigenous church and other organisations. It aims to be an 'enabler', providing the funds and the means for local people to carry out aid and development work. 'Setting up an expatriate operation abroad is very time-consuming and costly, and it's very difficult to shift from that to something sustainable,' says Mr Paul Spray, head of aid. 'If you start with an organisation that is already there and set up, the chances of sustaining it are much greater.' Although the charity received about a third of its Pounds 33m income last year from government sources, most of it from the Overseas Development Agency for disaster relief, most of the rest was spent not on disaster relief but on long-term development programmes such as providing medical assistance in India, installing solar-powered water pumps in Somalia, and leadership training and advising farmers in Chile. Christian Aid shares its funds almost equally among churches, other Christian organisations, and secular groups. Education and campaigning inevitably plays an important part in Christian Aid's work, accounting for up to 10 per cent of expenditure - and can be a source of criticism, although the charity has so far avoided any clashes with the Charity Commission, the British charities watchdog. The commission last week published a report instructing Oxfam, Britain's biggest overseas aid charity, to stop mixing politics with charitable work, which could have important implications for other organisations such as Christian Aid. 'There is an area of unclarity about what charities can do,' says Michael Taylor, Christian Aid's director. 'But you can't have charity without politics. If a charity has a real concern for the good of the poor, it must be prepared to encourage governments to adopt policies that help the situation and don't make it worse.' 
ID: 107
HEADLINE: FT  14 MAY 91 / Bill to free travel fails to pass 
TEXT: THE Soviet parliament last night again failed to guarantee its citizens the right of free travel abroad, after one of the Supreme Soviet's two houses refused to pass an emigration bill on grounds of expense, writes John Lloyd in Moscow. The bill has been two years in preparation, and received its first reading 18 months ago. It will probably come back to the Supreme Soviet on Thursday, when a commission set up to break the impasse is expected to produce a compromise. Mr Vladimir Petrovsky, a deputy foreign minister, said yesterday that discussion of the bill was confined to expense and technicalities, not to principles. However, many of those arguing against the bill were from the hardline Soyuz camp. The bill guarantees that Soviet citizens who apply to travel abroad will receive their passports within a month, while those who wish to emigrate will get them in three months. . No Soviet citizen will be denied entry, as many dissidents have in the past. 
ID: 108
HEADLINE: FT  14 MAY 91 / Impasse at HDTV talks 
TEXT: EUROPEAN broadcasters yesterday rejected compulsory phasing out of the widely-used Pal satellite broadcasting norm in favour of an intermediate high-definition television standard, as interest groups tried to thrash out common agreement on an EC strategy for HDTV, writes Andrew Hill in Brussels. Yesterday's discussions between satellite operators, broadcasters and electronics groups form a crucial part of the European Commission's two-pronged attempt to forge a 'memorandum of understanding' between industry representatives, and create a new HDTV directive, before the June 3 meeting of European telecommunications ministers. Bilateral talks between the Commission and individual interest groups will continue this week and another meeting of industry representatives has been convened for May 21. 
ID: 109
HEADLINE: FT  14 MAY 91 / Cossiga rebukes top judge in row over Mafia 
TEXT: ITALY'S President Francesco Cossiga has withdrawn his support for Mr Giovanni Galloni, the deputy president of the Consiglio Superiore della Magistratura (CSM), the ruling body for the judiciary, in a public row over increasing Mafia violence. In a step bound to trigger a new crisis between the presidency and the legal establishment, Mr Cossiga yesterday revoked Mr Galloni's powers to represent him as constitutional head of the CSM. Mr Cossiga, who as head of state is also head of the CSM, cannot sack Mr Galloni, as he is elected independently by judges and magistrates. The president's unprecedented step, which has come as a shock to judges and politicians alike, follows growing friction with Mr Galloni and the judiciary on the question of organised crime, notably in southern Italy. Gang warfare in the south, especially Calabria, has reached new heights in the past fortnight, with almost daily tit-for-tat murders. The latest clash between the president and the judiciary follows a call by Mr Cossiga last week for special measures to fight crime. Among other suggestions, he spoke out against sending inexperienced young magistrates to the south. 'It is unbelievable that, just because he has passed an exam in Roman law, a young man is able to conduct complex investigations into the Mafia and the drugs trade,' he said. That provoked a quick response from Mr Galloni in the name of judicial independence. 'The young people thrown into the most difficult regions should be thanked and cannot be - I won't say insulted - but repudiated in their functions,' he said. 
ID: 110
HEADLINE: FT  14 MAY 91 / Wreckage left by Soviet troops in east Germany 
TEXT: A man inspects the wreck of a Soviet military vehicle at a former barracks in Forst Zinna, a village near Juterborg in east Germany. In the background is scrap, also left by Soviet troops when they went home. Waste left elsewhere includes used oil and old ammunition. A Berlin official said yesterday that ecological damage left by Soviet troops in east Germany could take billions of marks to clean up although a reliable study had yet to be conducted. Following German unification, the Soviet Union has agreed to withdraw 380,000 soldiers and their 220,000 family members from eastern Germany by the end of 1994. Now, concerns about who pays for cleaning up the ecological damage left behind have increased. The weekly newsmagazine Der Spiegel claims wastes have been poured on to the ground or buried in military training areas controlled by the Soviets. 
ID: 111
HEADLINE: FT  14 MAY 91 / Ryzhkov is hardliners' choice to take on Yeltsin 
TEXT: MR NIKOLAI RYZHKOV, the former Soviet prime minister who stepped down last year following a heart attack, is emerging as the hardline challenger to Mr Boris Yeltsin for the Russian presidency. Candidates for the presidency must register before May 21. Each must secure either 100,000 supporting signatures, or the backing of at least a fifth of the deputies in the Russian parliament. The election will be held on June 12. Mr Yeltsin is considered a clear favourite, but Mr Ryzhkov will gather support from large numbers of people in the military, industry and the bureaucracy who are worried by the economic crisis and to whom he offers reassurance and order. At the same time, both he and Mr Yeltsin are careful not to stray too far away from the centre, as the centripetal forces of the first ever popular election make themselves felt. Mr Yeltsin, who together with Mr Gorbachev met leaders of the autonomous republics within Russia last Sunday, is doing all he can to project the image of a man concerned for the future of the country and working for stability in harness with the Soviet president. Mr Ryzhkov, for his part, told the armed forces newspaper Krasnaya Zvezda that he supported a 'moderately radical way' which would allow Russia to 'live better' and would revive it 'without breaking up the union . . . in a peaceful, calm way with all positions duly taken into account'. Mr Yeltsin's organisational base is in the Democratic Russia movement and the independent unions, while Mr Ryzhkov has attracted the support of the hardline Soyuz group of deputies and the Russian Communist party. Both men will face other contenders. Mr Vadim Bakatin, a member of Mr Mikhail Gorbachev's presidential council and a former interior minister, is still hesitating over entering the lists, but is presenting himself as a centrist candidate avoiding the 'extremes' of Mr Yeltsin and Mr Ryzhkov. From the hard left, Mr Alexei Sergeev, an economist, has been nominated by the United Workers Front, some of whose representatives carried pictures of Stalin in Red Square during the May Day rally earlier this month. On the radical side, Mr Aman Tuleev, chairman of Kemerovo regional soviet in the heart of the radical miners' country, will stand on the ticket that Mr Yeltsin has betrayed the radical cause by signing an agreement with Mr Gorbachev to support the anti-crisis plan. The first application for the post of presidency, however, has been filed by Mr Vladimir Zhirinovsky, leader of the Liberal Democratic party, a group which has proclaimed itself as centrist and has until recently had a close relationship both with the Communist party and the security forces. 
ID: 112
HEADLINE: FT  14 MAY 91 / Gorbachev targets key sectors of Soviet economy 
TEXT: PRESIDENT Mikhail Gorbachev yesterday signed a decree establishing a 'special regime' in key economic sectors. It was presented as offering incentives to workers who raise their output, although Mr Valentin Pavlov, the Soviet prime minister, last week described the plan in harsher terms. He said it would allow the government to arrest and bring to trial those who went on, or called for, a strike. The independent news agency Interfax reported that the decree allowed increased autonomy in such basic industries as mining, steel and chemical production, transport and energy extraction. It would permit companies to retain 10 per cent of income earned on domestic or foreign markets. The decree appears to be modelled on the agreement with the mineworkers, both in tying extra wages to extra production and in allowing enterprises to distribute profits among the workforce. At the same time, Mr Gorbachev's office has announced a clutch of new, part-time presidential advisers of a moderately liberal (reformist Communist) bent. They include Dr Leonid Abalkin, the economist, who was deputy prime minister and head of economic reform until late last year. The other advisers are Mr Vladimir Kudryavtsev, director of the Institute of State and Law and a key shaper of legislation under Mr Gorbachev; Mr Vladen Martynov, director of the Institute of World Economy and International Relations, now a fairly radical think tank; Mr Yuri Osipian, a leading physicist, vice president of the Academy of Science and already on the presidential council; and Mr Boris Oleinik, a deputy chairman of the Soviet of Nationalities in the Supreme Soviet and a poet. 
ID: 113
HEADLINE: FT  14 MAY 91 / Italian banks lower their interest rates 
TEXT: ITALY'S big banks have responded quickly to Sunday's one percentage point cut in the discount rate to 11.5 per cent by lowering their rates to borrowers and lenders. The move, which has been warmly welcomed by business, should help mitigate some of the inflationary consequences of the indirect tax increases agreed in Saturday's mini-budget. It will also play an important part in lowering the financing costs on Italy's huge government debt, and may help improve the lira's competitiveness following complaints that it is overvalued. The lira fell to L741.95 against the D-Mark yesterday, against Friday's L739.87. Saturday's budget package, which imposed a L30,000 (Pounds 13.70) tax on credit cards and a swingeing increase in the licence on four-wheel drive vehicles, has been condemned as discriminatory by credit card companies and some motor manufacturers. World stock markets, Page 37 
ID: 114
HEADLINE: FT  14 MAY 91 / Finnish government to cut industry costs 
TEXT: Finland's new centre-right government is planning to lower social security and pension costs in a move to inject some FM7bn (about Pounds 1bn) into industry in the next financial year which runs from October, writes Enrique Tessieri in Helsinki. The announcement comes shortly after Prime Minister Esko Aho's government announced that it aimed to save FM4bn in next year's budget as part of a general stabilisation package for the country. 
ID: 115
HEADLINE: FT  14 MAY 91 / Launch of Croat daily blocked 
TEXT: A BRITISH-FINANCED independent and liberal newspaper which was due to appear today in the Yugoslav republic of Croatia was blocked from publication yesterday when Vejsnik, the republic's largest newspaper group, prevented its contracted printers from having any dealings with the new daily. The move appears to confirm suspicions by foreign investors that the republic remains reluctant to allow genuine competition, despite its rhetoric about wanting to introduce privatisation and the market economy. But the printing ban on Zapad ('West') could also hold wider political implications for Yugoslavia's second largest republic. A Croatian journalist, unconnected with either paper, said Zapad would have broken the Croatian government's overbearing influence over the media 'by telling the truth and by giving its readers a choice'. Another commented: 'The move to block the paper's printing has political overtones. I do not like to say this, but Mr Franjo Tudjman (the president of Croatia) is waging a propaganda war against Serbia. His right-wing government has little patience for any journalists who do not toe the party's political line.' Zapad, intended to have a circulation of more than 100,000, and modelled on Spain's El Pais, is financed by Tricapital, a UK company which has international interests in oil, property and energy, and Zapad Media, a private company based in Zagreb, the capital of Croatia. Mr Strock, the director of Zapad Media, retains the majority share, Tricapital has a large minority share, and the remaining 10 per cent is held by the 40 or so journalists. Mr Strock, who was born in Croatia, has lived in the UK for the past 14 years. 
ID: 116
HEADLINE: FT  14 MAY 91 / Community and Efta reach broad agreement 
TEXT: THE EUROPEAN Community early today reached broad agreement on most of the outstanding issues in extending its single market to the seven countries of the European Free Trade Association (Efta). Switzerland brought 12 hours of talks to the point of collapse by demanding an individual right to opt out of future legislation governing the 19-nation European Economic Area (EEA). But it eventually bowed to its Efta partners and the EC in agreeing that any future exemptions would have to be negotiated. Efta countries won their key demand for their judges to sit alongside those of the European Community's Court of Justice to interpret disputes under EEA law. The other main sticking point - Spain's demand for access to Icelandic fishing waters in return for improved access for Efta fish products to the EC - was finessed. Mr Jacques Poos, Luxembourg's foreign minister presiding over the EC side, claimed 'a method' had been agreed for negotiators to bridge the gap between Spain's demand for 90,000 tonnes a year of mainly Icelandic fish and Iceland's refusal to make any concession at all. The highly charged issue of free trade in fish has so far been one of the biggest obstacles to agreement between the EC and Efta countries. If the 18-month long negotiation between the two groupings is successfully concluded as planned next month - and the EEA treaty ratified by all Efta parliaments - Efta countries will start putting on their statute books some 1,400 pages of EC internal market legislation developed over the past 30 years. Mr Frans Andriessen, EC external affairs commissioner, described the negotiations as far more complex than individual Efta states joining the Community outright. The EEA required special institutional arrangements, allowing Efta states a say, but not a vote, in the shaping of EC law and its interpretation, without compromising the EC's formal decision-making machinery. But inserted into the final communique was Switzerland's insistence that it could only accept a final EEA treaty if it was 'global and balanced'. The seven nations of Efta are Sweden, Norway, Finland, Iceland, Austria, Switzerland and associate member Liechtenstein. A full accord with the EC would create a 19-nation market of 380m consumers. 
ID: 117
HEADLINE: FT  14 MAY 91 / World News in Brief: Senior loyalist murdered 
TEXT: Leading businessman and senior member of the loyalist Orange Order Robert Orr was murdered by a booby trap bomb which had been placed under his car in Armagh. The IRA claimed responsibility for the attack. Brooke tries to resuscitate talks, Page 8 
ID: 118
HEADLINE: FT  14 MAY 91 / Share prices fall steeply on fears that base rate cut may be delayed 
TEXT: SHARES IN London were hit yesterday by fears that the government may keep interest rates at their current levels this week, in spite of growing concern about the seriousness of the recession. Many companies feel that cuts in base rates, now at 12 per cent, will be required if the UK economy is to recover later this year in line with government expectations. Treasury efforts yesterday to cool hopes of an imminent cut in rates preceded a downturn in the FT-SE 100 index, which closed 37.7 lower at 2,486.6. Trading was also affected by weakness on Wall Street - although the Dow Jones Industrial Average finished in positive terrority, closing 4.25 up at 2,924.42 after a weak start - and disquiet among investors at the election fever gripping both the main political parties. In spite of government caution on interest rates, there is a growing belief in the City that monetary policy will be eased soon after the weekend, if there is no rate this week. However, Mr Norman Lamont remains worried by lack of evidence that underlying inflation, particularly related to wages, is coming down. Data from the Central Statistical Office yesterday showed that consumer credit demand remained subdued in the first three months of the year, while the volume of retail sales fell 0.6 per cent compared with the equivalent period last year. On the foreign exchanges, sterling remained firm. In London it rose 1.3 cents to Dollars 1.7320, and improved to DM2.9675 from DM2.9650, gaining further in New York, to Dollars 1.734 and DM2.97295. London money markets continued to discount a rate cut, with the three-month sterling interbank rate quoted at 11 9/16 -11 1/2 per cent, against 11 9/16 11 7/16 on Friday. Lex, Page 20 Consumer credit, Page 20 London stocks, Page 40 
ID: 119
HEADLINE: FT  14 MAY 91 / World News In Brief: Serbs vote to remain 
TEXT: The Serbian minority in the Yugoslav republic of Croatia voted overwhelmingly in favour of uniting a large chunk of the republic with Serbia, Tanjug agency said. Yugoslavs' new leader might seek UN help, page 2. 
ID: 120
HEADLINE: FT  14 MAY 91 / World News In Brief: Belgian police on alert 
TEXT: Belgian police were on maximum alert after a weekend of race riots and pitched battles in Brussels. 
ID: 121
HEADLINE: FT  14 MAY 91 / World News In Brief: Albania may renew links 
TEXT: Britain and Albania may be on the verge of resuming diplomatic relations after more than 50 years. Albanian foreign minister Muhamet Kapllani offered in London to renew ties if talks on outstanding issues took place immediately afterwards. 
ID: 122
HEADLINE: FT  14 MAY 91 / World News In Brief: PM backs Antarctic plan 
TEXT: Prime minister John Major declared his support for a 50-year mining ban in Antarctica, proposed at a conference in Madrid last month. 
ID: 123
HEADLINE: FT  14 MAY 91 / World News In Brief: Lambeth Labour council 
TEXT: The Labour group in Lambeth agreed to obey the party's ruling National Executive Committee by ending support for 13 councillors suspended in March and electing a new leadership. 
ID: 124
HEADLINE: FT  14 MAY 91 / World News In Brief: Bangladesh hit by floods 
TEXT: Floods in Bangladesh killed 52 more people in the north-eastern town of Sylhet and the Moulvi Bazar area as a US task force arrived to join efforts to help millions still fighting for survival after last month's cyclone. Charity counts blessings, Page 4 
ID: 125
HEADLINE: FT  14 MAY 91 / Poll points to big Labour victory in Monmouth 
TEXT: LABOUR IS heading for a sweeping victory in Thursday's by-election in Monmouth, according to an opinion poll which gives the party an 8 percentage point lead. The poll will intensify pressure from Conservative MPs for another cut in interest rates to ease the impact of the recession on the government's supporters in the southern half of England. In spite of the public reservations of the Treasury and the Bank of England, some ministers expect a  1/2 percentage point reduction in base rates this week. Mr John Major, the prime minister, is said to share their concern to see an across-the-board reduction in mortgage rates. On Friday figures are likely to show a sharp drop in the inflation rate last month to about 6 per cent. That could provide an appropriate backdrop for lower base rates. Some senior Conservatives, however, would like an earlier announcement in the hope of winning back wavering supporters in Monmouth, where the Tories are defending a majority of 9,350. Although Mr Major has now set his sights on autumn as the earliest possible date for a general election, ministers believe it is vital the voters feel the benefit of lower interest rates as quickly as possible. With unemployment set to rise sharply over the next few months, the government is basing its hopes of a strong electoral recovery on the expectation that lower inflation and interest rates will boost the incomes of those in work. However, colleagues of Mr Norman Lamont, the chancellor, acknowledge that he would risk destabilising sterling's strong position on the European exchange rate mechanism if he were seen by financial markets to be seeking to drive down borrowing costs too quickly. The Treasury yesterday sought to damp hopes of an imminent cut. Mr David Mellor, chief secretary to the Treasury, told BBC radio that the government would ease borrowing conditions only when prudent. The poll in Monmouth, carried out by NOP for HTV Wales and The Independent newspaper, gives Labour candidate Mr Huw Edwards 41 per cent, Tory candidate Mr Roger Evans 33 per cent and Mrs Frances David, for the Liberal Democrats, 24 per cent. Mr Mel Witherden, the joint Green/Plaid Cymru candidate, polled 1 per cent. Both Labour and the Tories were yesterday targeting Liberal Democrat voters for the last few days of the campaign, and emphasising that the contest was a straight fight between the two main parties. 'The situation remains as we have said all along,' said Tory campaigners. 'The choice for the people of Monmouth is clear: if they don't wish to be represented by a socialist in parliament they must back Roger Evans on Thursday.' Mr Edwards called the figures 'very encouraging'. He issued an appeal to Liberal Democrat supporters not to split the anti-Tory vote. Mr Paddy Ashdown, Liberal Democrat leader, said the by-election remained 'wide open', while arguing that the survey showed the Tories could not win. 'The choice for this constituency, and especially for traditional Conservative voters, is now whether they want a Labour member of parliament or a Liberal Democrat MP born and bred in Monmouth,' he said. The party publishes its canvass returns this morning. NOP interviewed 1,106 people across the constituency between last Thursday and Sunday. Parliament, Page 11 
ID: 126
HEADLINE: FT  14 MAY 91 / NatWest proposes market in small company shares 
TEXT: NATIONAL Westminster Bank is considering setting up a market in small company shares to rival the London stock exchange. Its proposal is in response to the government's call for innovative ideas to extend share ownership. Mr Norman Lamont, the chancellor, has invited suggestions from the private sector on how to provide a cheap way for people to use high street outlets to buy and sell shares. In response to the Treasury's invitation, a project team from NatWest Stockbrokers is developing ideas on how the bank could best offer an 'over-the-counter' market for shares in small companies. The bank already provides instant share dealing in 550 companies through its touch-screen service in 278 branches. Those screens could be equipped to quote the prices of small companies at relatively little expense to the bank, which could offer access to its market to the public as well as to its own customers. Ministers believe the scheme could lead to a wider share ownership. There are currently more than 11m individual shareholders, compared with about 3m in 1979. Mr Neil Stapley, managing director of NatWest Stockbrokers, said: 'We are looking at setting up a separate market for small companies. I have been looking at various ways of extending share ownership.' Senior NatWest directors believe the proposal could be implemented by the end of the summer, although it still has to be approved by the bank's board. They believe a number of small companies, which are either unlisted or have failed to find a home since the demise of the Third Market last year, would welcome the opportunity of being quoted in a market run by the bank. The directors see no need to get approval for their scheme from the stock exchange because the bank is already regulated by The Securities and Futures Authority (formerly The Securities Association). The stock exchange, which has already set up a committee to look at the general illiquidity in small companies, is unlikely to be keen on an independent NatWest market. Mr Andrew Hugh Smith, the stock exchange chairman, said: 'The banks are in a position to offer a cheaper service than brokers. But I hope we would provide sufficient value for them to do it in our market.' NatWest directors are confident that ministers, anxious to widen share ownership among individuals before the next election, would help push through the proposal in the face of any stock exchange opposition. The Treasury has made it clear than any proposal aimed at spreading share ownership more widely, particularly through retail outlets, would be welcomed. High street stock shop, Page 8 
ID: 127
HEADLINE: FT  14 MAY 91 / Winnie Mandela found guilty of kidnapping 
TEXT: MRS Winnie Mandela, wife of Mr Nelson Mandela, deputy president of the African National Congress (ANC), was convicted yesterday by a South African court of kidnapping and being an accessory after the fact to four assaults. Looking pale and stunned, 72-year-old Mr Mandela listened from the public gallery as Mr Justice Michael Stegmann told the Rand Supreme Court in Johannesburg that Mrs Mandela had 'showed herself on a number of occasions to be a calm, composed, deliberate and unblushing liar'. Mr Mandela was serving a life sentence for conspiring to overthrow the state when the crimes took place. Under South African law kidnapping is a capital offence, although Mrs Mandela is certain to face a lesser punishment. Sentence will be announced later today, after evidence in mitigation from the defence. Legal experts familiar with the case said it seemed likely she would face a period in jail. Mr Justice Stegmann said he accepted Mrs Mandela's alibi, that she was on her way to the town of Brandfort, over 180 miles away, when the kidnapping and assaults took place. But he found that she and a co-accused, Mrs Xoliswa Falati, had conspired to kidnap the four activists, including a 14-year-old boy, Stompie Seipei, who was later found with his throat slit in a Soweto ditch. Mrs Mandela, he said, was one of the 'moving spirits' behind the kidnapping. To imagine that it had taken place without her prior knowledge was like imagining 'Hamlet without the Prince', he said. He further found Mrs Mandela guilty of accessory after the fact to the crime of assault with intent to commit grievous bodily harm against the four boys. This is a less serious crime that than of the assault itself for which she was originally charged. The four were seriously assaulted in an outside room at her Soweto home on December 29 1988, leaving the walls of the room spattered with blood. She was absent at the time, but on her return two days later, he found that she must have known of or suspected the assaults and thus had 'assisted' and 'associated herself' with the attackers. A radiantly smiling Mrs Mandela said outside the court: 'You can see how delighted I am'. Clipping her words short, and only barely suppressing her rage, she said: 'As long as you all now know that I did not assault any child, that's all that matters to me. The rest I leave to my lawyers.' Her reaction was in marked contrast to that of her husband, who stood by her side looking grey with shock, his normally erect shoulders bowed beneath his tightly belted overcoat. Mr Mandela's posture and deeply pained facial expression raised fears about his health and ability to withstand the distress of seeing his wife go to jail. Mrs Mandela's conviction could further strain relations between the ANC, of which she is a senior leader, and the government at a time when the two sides are involved in tough negotiations over measures to end township violence. The ANC has threatened to pull out of talks on the country's political future unless Pretoria agrees to ban spears from public gatherings by Thursday. 
ID: 128
HEADLINE: FT  14 MAY 91 / Stock &amp; Currency Markets 
TEXT: ----------------------------------------------- STERLING ----------------------------------------------- New York: Dollars 1.734 (1.7245) London: Dollars 1.732 (1.719) DM 2.9675 (2.965) FFr 10.055 (10.04) SFr 2.5 (2.5075) Y 241.5 (238.5) Pound index 91.8 (91.6) ----------------------------------------------- GOLD ----------------------------------------------- New York: Comex Jun Dollars 359.8 (358.3) London: Dollars 357.25 (357) ----------------------------------------------- N SEA OIL (Argus) ----------------------------------------------- Brent Jun Dollars 19.37 (19.575) ----------------------------------------------- DOLLAR ----------------------------------------------- Tokyo open: Y139.22 New York DM 1.7135 (1.7225) FFr 5.803 (5.8225) SFr 1.443 (1.4545) Y 139.45 (138.65) London: DM 1.714 (1.7255) FFr 5.805 (5.84) SFr 1.443 (1.458) Y 139.4 (138.75) Dollars index 66.2 (66.4) ----------------------------------------------- US CLOSING RATES ----------------------------------------------- Fed Funds 5 3/4% (5 1/2) 3-mo Treasury Bills: yield: 5.604% (5.59) Long Bond: 98 7/16 (97 31/32) yield: 8.261% (8.30) ----------------------------------------------- STOCK INDICES ----------------------------------------------- FT-SE 100: 2,486.6 (-37.7) FT Ordinary: 1,942.6 (-31.9) FT-A All-Share: 1,203.31 (-1.3) FT-A World Index: 143.45 (-0.3%) New York DJ Ind. Av. 2,924.42 (+4.25) S&amp;P Comp 376.76 (+1.02) Tokyo: Nikkei 26,093.2 (-181.09) ----------------------------------------------- LONDON MONEY ----------------------------------------------- 3-month interbank: closing 11 17/32% (11 1/2) Liffe long gilt future: Jun 91 9/32 (91 3/4) ----------------------------------------------- 
ID: 129
HEADLINE: FT  14 MAY 91 / Survey of Computers in Manufacturing (11): Search for new applications - Robotics, still on the fringe of the industrial sector 
TEXT: FOR all the hype over the past 20 years about how robots would transform manufacturing industry, they still remain on the fringes of the industrial scene - with the notable exception of manufacturing in Japan. According to the United Nations Economic Commission for Europe, the world industrial robot population stood at 388,000 units at the end of 1989, of which 220,000 were in Japan, 56,000 in western Europe, 37,000 in the US and -very roughly - 75,000 elsewhere. There are a number of interconnected reasons for this situation. In the past, there has been considerable hostility from trade unions to their introduction and managements have taken a lot of convincing about the cost benefits. Dr Kevin Clarke, manager of manufacturing engineering at PA Consulting Group, says that, in many instances, robots have not delivered the cost effectiveness they have promised. Robot manufacturers, he says, have not developed their products technologically as fast as they might have. 'There's very little innovation, because the market isn't there,' he says. However, the evidence of the past two years suggests that things may be changing. Those 388,000 units represented an increase of 20 per cent from the end of 1988, and in 1990 US-based robotics companies won record new orders of Dollars 517.4m. The robotics industry was in deep gloom during 1986 and 1987, and especially in the US where it had become far too dependent on the motor industry - which took about 40 to 50 per cent of sales. Mr Donald Vincent, executive vice-president of the US Robotic Industries Association, recalls that 'when the automotive industry quit buying in 1986 and 1987, it sent robotics into a deep spin.' This decline had two results. First, it encouraged a much-needed concentration among robot producers. In the middle of the 1980s there were some 300, according to the International Federation of Robotics (IFR). Now, it says, there are probably fewer than 100 true producers, led by ABB Robotics, part of the Swiss-Swedish Asea Brown Boveri, GMF Robotics, a joint venture between Fanuc of Japan and General Motors of the US, and Yaskawa of Japan. Secondly, the downturn prompted an urgent search for new applications for robots away from the motor industry and its inherent cyclicality. Dr Clarke singles out 'clean room' applications for robots in health care and precision engineering, while Mr Vincent is hopeful of new applications in the food industry, materials handling and packaging. The wellspring for this diversification into new markets, which has already begun, is computer power. In mechanical terms, robots are relatively simple beasts, and robotic technology has always been based on the use of computers to overcome mechanical limitations. Mr Kenneth Waldron, a robotics expert at Ohio State University, says 'the major theme which will direct commercial applications of new research in robotics will be that of taking advantage of the huge increases in computing power which have become available as a result of the development of advanced microprocessors.' Mr Waldron notes that most current industrial robot systems offer only incremental improvements over what was possible with the first generation of microcomputer controllers. Current research is looking at areas such as greater use of sensing - of the robot's environment and internal state - more sophisticated control techniques offering greater speed and accuracy, robotic mobility and improved control of the interface between the robot and the workpiece. Given these trends, there has inevitably been considerable interest in industrial vision systems for robots, which could radically change many applications, particularly in assembly where robots have so far failed to make their mark. Previous forecasts for the population of vision-equipped robots have not been realised, but it is reasonable to predict, as the IFR has, that the continuous reduction in prices of computers and sensors, and their greater speed and reliability, will gradually remove the technological and economic barriers. Many of the business trends in robotics over the past few years are illustrated by developments at ABB Robotics, which claims to be the world's biggest supplier - a title which the Japanese manufacturers might dispute. ABB's purchase last year of Cincinnati Milacron's robotics business was an important step in the consolidation of the industry around leading European and Japanese suppliers. Mr Stelio Demark, head of ABB Robotics, says the Cincinnati business brought with it a tremendous US customer base and undoubted expertise in spot-welding robotics. The nature of ABB's customer base has also been changing, and over the past five years it has reduced its dependence on the automotive industry from 70-75 per cent of sales to 50 per cent. ABB is attracting new business from small and medium-sized companies which had previously not bought robots. 'We may be supplying ones and twos, but it's growing very quickly,' says Mr Demark. New markets include glass making, different kinds of process applications, and palletising. This effort is backed up by spending on research and development - 10 per cent of revenues - that is almost on a par with that of the pharmaceutical industry. Meanwhile the falling cost of electronics is allowing ABB to build more capability and flexibility into its robots. ABB's latest product, the IRB 6000, was officially launched last month with claims of much greater flexibility and capability than rival products. Because of these developments, Mr Demark is optimistic about future growth prospects for ABB and the industry. The view is shared by independent observers. In a report about to be published by Frost &amp; Sullivan, the international market research publishers, total world robot sales are forecast to rise from Dollars 2.15bn in 1990 to Dollars 3.41bn in 1996. The relatively small size of the industry at the end of the 1980s is a reflection of many of the factors mentioned above. F &amp; S sees the Japanese market's share of world robot sales falling from 65 per cent last year to 45 per cent in 1996, while Europe's share will rise from 15 to 20 per cent, the US will mark time at about 6 per cent and the rest of the world will jump from 14 per cent to just under 30 per cent. The biggest growth area is Asia, which is good news for the Japanese producers, but Europe, says Mr Demark, is also 'very interesting,' and the company's home base. F &amp; S sees the European market rising from Dollars 330m in 1990 to Dollars 687m in 1996, with Germany leading the way. Looking specifically at the European market, F &amp; S comments that the 'supplier capable of marketing a complete package including sensors, user-friendly software and simple training and installation will achieve the best sales penetration.' ABB is probably justified in claiming that it offers more service and support to European buyers than the more product-based approach of the Japanese, but Dr Clarke wonders whether this will still be true in two years' time. On the other hand Europe, he says, is probably not one of the Japanese producers' priorities, given the better growth prospects in the Asia Pacific region. As for the balance of power in the industry, both ABB and the Japanese are growing stronger, the big producers are getting bigger, and the smaller robotics companies, particularly in the US and UK, are concentrating on niches and ancillary services. If the big producers can keep up with development in computing, the 1990s could well bring the rewards that proved so elusive for much fo the 1980s. 
ID: 130
HEADLINE: FT  14 MAY 91 / Survey of Computers in Manufacturing (12): Two for the price of one - Simultaneous Engineering 
TEXT: THE time taken to design and manufacture a new product could be reduced substantially if both operations were carried out together, instead of one after the other as was the almost unavoidable practice in traditional engineering before the widespread use of computer power. Working out how to make a product in a mass production process at the same time as the product is designed is the essence of simultaneous, concurrent or integrated engineering, the various descriptions given to an emerging approach to engineering where everything is done at once. This may seem impossible. Yet computers have made it possible for work to proceed on the design of a product at the same time as on the ways of making the product. With simultaneous engineering, the design of a new product takes account of how it will be made, so that the easiest, most economic way to make the product is chosen and is feasible. Traditionally, if a design made it difficult for a company to manufacture and mass produce the product as designed, then the design was modified until the manufacturing difficulty was overcome. The essence of simultaneous, or concurrent engineering is that account is taken of the manufacturing process as the design proceeds, so avoiding redesign at a late stage in the development of a product and its manufacturing process. An illustration of the importance of simultaneous engineering is the way new products are designed using new materials, such as the advanced ceramic materials that are being developed for jet engines. These materials have distinct advantages over the metals traditionally used for these applications, but in order for manufacturers to exploit these advantages to the utmost, they have to take account of how these materials will behave when they are used in production processes. In other words, the production process has to be developed hand in hand with the design of the product. The only way to do this is through simultaneous engineering. Mr James Angus, the team leader at the Rolls-Royce Advanced Ceramics Centre at Warwick University, where integrated engineering techniques are being developed for future jet engine components, says the integration of design engineering, materials science and manufacturing technology is essential for the new ceramic materials because, for the first time with any material, the designer has the opportunity to design the material to suit exactly the properties needed in a component. This unusual way of designing a product or component has to take account of the way the product will be manufactured and mass produced and vice versa, otherwise the carefully tailored material properties of the component could be lost. Ms Sue Lyons, the director of manufacturing engineering at Rolls-Royce, says 'we are moving towards completely integrated or concurrent engineering across the company.' The integrated programme is being finalised and all technology groups, such as stress and mechanical engineers and manufacturing specialists will come together at the conceptual design stage of a new product. Ms Lyons says 'the division between design and manufacturing could disappear altogether.' The change to integrated engineering is crucial because of the high proportion of a product's cost that is set at the design stage. In the case of a jet engine as much as 80 per cent of the cost of a new product for the engine is fixed at the design stage. The aim is to reduce this fixed cost element in a product by designing it so that it is easy to manufacture. It is possible to influence significantly the final cost of a product, including its manufacturing cost, by the addition of only very little extra cost at the design stage. Mr Robin Blake, of Rolls-Royce says that 'concurrent engineering is not an alternative for consideration, it is an absolute necessity. The demands to reduce lead time and cost can only be met by teamwork in a concurrent engineering environment.' Computer systems available to handle concurrent engineering include systems from Intergraph, one of the world's largest companies developing and manufacturing interactive computer graphics for computer aided engineering. Intergraph won an order last year, potentially worth Dollars 40m, from the US Sandia National Laboratories for systems with a concurrent engineering capability. The agreement called on Intergraph to supply hardware and software for the Nirvana project, the code name for the Sandia National Laboratories/US Department of Energy programme to implement a computer aided design and manufacturing system with a concurrent engineering capability. Nirvana was designed to help Sandia, which is the US Department of Energy prime contractor for nuclear research, and its sub-contractors to move from using multi-vendor, non-integrated solutions to particular problems to a more efficient integrated approach. In the first year of the agreement, Intergraph will supply a range of engineering design software tools and about 140 of its Risc-based UNIX workstations. The hardware and software will be used to integrate and improve the design, manufacture and assembly of complex electronics-based products. These tools will operate under a common user framework. Product design information will flow from initial system design, through sub-system design, the design of printed circuit boards, hybrid and integrated circuit design through mechanical design and on to manufacturing, including document publishing. Additional data is to be added to the design definition at each step and design data from preceding steps will not need to be re-entered. Mr Dick Fox, the UK marketing director of Intergraph says the result will be high quality products designed and manufactured in a shorter period of time than would otherwise be possible, one of the objects of concurrent engineering. 
ID: 131
HEADLINE: FT  14 MAY 91 / Survey of Computers in Manufacturing (9): Breakthrough in the factories - Shop-Floor Systems, demand continues to grow 
TEXT: ALMOST every type of computer hardware that exists in a commercial data processing department can be found somewhere in a manufacturing environment. The basic electronics of manufacturing technology is the same as in the rest of the business world; it is the fine-tuning which is different. Large manufacturers typically depend on a mainframe for their central corporate functions and this is likely to continue. Though most want to make more information available to users by introducing distributed systems and client/server architectures, the need for the biggest companies to consolidate and store large volumes of data will probably persist. Only a mainframe can cope with that load. Moreover, the spread of ED1 (electronic data interchange, or paperless trading) could slow or even reverse the erosion of the role of the mainframe. However, as mainframes are no longer cheaper to run than smaller boxes, manufacturing applications such as MRP systems have been steadily moving, through a process of downsizing, from mainframes to mid-range machines or even networks of personal computers. The general change of management strategy in manufacturing, from central control to local responsibility - the so-called cellular concept - favours the spread of mid-range machines or PCs rather than mainframes. In the past decade computing has brought great changes to the management of manufacturing through MRP systems, but it has only just begun to make an impact on the shop-floor. Most shop-floors receive an action list as output from the MRP system and that is as far as the computer stretches. The advent of the just-in-time manufacturing philosophy has persuaded many companies that the computer has to be introduced on the shop-floor to support the production process. Shop-floor data collection is usually handled by a mid-range machine, although PCs are replacing mid-range machines in some sites. Mid-range open systems hardware based on the UNIX operating system is beginning to be used in factories where the ability to integrate systems from different manufacturers is essential. Personal computers have changed the life of factories, if rather slower than that of offices. As factories get cleaner, standard PCs can be used in more and more places. It is now often quite appropriate for an ordinary PC to be in a foreman's office. Tens of thousands of PCs, mainly IBM or clones, are scattered around British factories. On the design side, workstations from companies such as Sun Microsystems and Hewlett-Packard are the standard tools of the trade. Where life is too rough for the standard PC, ruggedised machines are used. In some cases robust terminals can be put on the shop-floor with the main computing facility kept in a back office or, for that matter, in another town or country. Local computing power is usually needed for many applications that involve graphics or diagrams. For these the machine has to be on site because the telecommunications system cannot transmit high volumes of data over any great distance. Specially adapted equipment or protective packaging may be needed in the factory for many reasons, as Mr Graham Crocker, a manufacturing specialist at IBM, points out. It may be dirty, the temperature may vary from very hot to very cold, there may be vibration or disruption of the electricity supply. There may be risk of fire or liquid being spilled or worker's hands may be greasy. There may be electromagnetic interference from other machines, requiring computers to be kept in steel cases. Shop-floor workers may be less familiar with computer systems than office workers; special keyboards with function keys may be preferable to the conventional Qwerty layout. On the shop-floor small ruggedised hand-held computers from companies such as Coventry-based Husky are being adopted by some large companies both for data collection and for quality control. At the Royal Doulton china factories, for example, Huskys are used to keep track of the 40,000 types of product. Hand-held and laptop machines have grown in popularity as they have got lighter and their screens have become easier to read. At the same time they have been enhanced by being able to store more data and to run longer before the battery needs changing. The principal requirement of the manufacturer which differs from that of the commercial user is a high degree of hardware availability. Reliability is one aspect of availability. Mr Richard Ridler, manufacturing industry marketing manager for ICL, points out that whereas some office systems can go down for 10 or 20 minutes occasionally without causing anything worse than annoyance, in a factory this could be disastrous. Mr Graham McKenzie, manufacturing systems manager with Digital, identifies three levels of resilience. Digital VAXes can be clustered so that if a disk drive fails on one recovery can be achieved within a few minutes. Two machines can be connected within a single cabinet so that if one goes down the other will pick up the task within a few seconds. Or three machines can be tightly coupled so that if one of them fails the process will carry on uninterrupted and unnoticed by the user; this is normally called fault-tolerance. Response time is another aspect of availability. Industrial users expect subsecond response times for many functions, where office users could be asked to be more patient. A third factor is the working regime. Office systems are typically shut down to users overnight and at weekends, whereas factory systems may have to work a 24-hour day and about 360 days a year. It is therefore important for the manufacturer to decide what level of availability is needed for his systems before investing in hardware. Continuous uptime can be achieved, but the price goes up as availability is increased. Prospects for systems suppliers to manufacturers in the longer term must be rated as good. The negative signs are that, as in the office market, users are expecting to pay less for more all the time and the market for MRP systems shows some signs of saturation. Only the smaller factories do not have these systems and they may either have no pressing need or no money to invest. On the positive side the pressure of competition is making manufacturers concentrate more on the need for automation, especially on the shop-floor. Large manufacturers are getting stricter with their suppliers on quality, forcing those companies to invest more in technology. Finally, the technology itself is clearly becoming ever more capable of delivering real benefits. 
ID: 132
HEADLINE: FT  14 MAY 91 / Survey of Computers in Manufacturing (10): Useful systems for the well-connected - Manufacturing Software, the complexity of the applications requires careful co-ordination 
TEXT: SOFTWARE to control manufacturing is among the most complex of commercial applications. In its most sophisticated form it entails connections between customers, suppliers, accounting, warehousing and the shop-floor. Its implementation must therefore be carefully co-ordinated. In the 1960s, IBM, among others, recognising that manufactured products could be progressively 'exploded' into a bill of materials, realised how useful a computer could be in estimating the raw material quantities required to make up finished goods. These databases, originally held on punched cards, evolved rapidly. The data handling needs of Bill of Materials Processing (Bomp), led software designers to create hierarchical databases, from which products such as IBM's IMS Early systems provided data for Materials Requirements Planning (MRP). Take a manufactured item, reduce it into sub assemblies, then explode those progressively until you have raw materials, multiply the numbers by the overall quantity of finished goods needed, and you have an estimate of overall requirements. Ally that to a manufacturing schedule - showing which parts are needed when -and you have a planning system from which you can order goods. Such systems were very useful for manufacturing goods made up of discrete parts. However, for process applications - production of paint, foods or other products - the process is not so simple. The number of a certain type of switch or body panel needed to make a car does not vary. You may have some wastage in small items such as nuts and bolts, but the quantities used are still discrete. In continuous process manufacturing you must rely more on statistics than precise figures. You are not producing one product at a time, but a continuous stream of the product. The principles may seem similar, but the practice is more complex. A consideration common to both discrete and continuous process manufacturing can be batch control. You may need to track a batch of finished goods from its components, through to its eventual customers. When a batch of yoghurt was found to contain botulism the manufacturers had to be able to say precisely where the tainted goods had gone, and then go back and identify the raw material responsible to find out which other goods might be similarly affected. As a result, they were able to focus their warnings on a particular set of hazelnut flavour products. Inability to track products in this way would lead to the wholesale withdrawal of a product line, with disastrous consequences for the manufacturer's profits. The production planning process involves ensuring that enough goods are produced to meet forward orders for a period, without running out or becoming overstocked. The effect of this flows back to the beginning of the process. You must take delivery of enough raw materials to ensure that your production lines do not stop for the want of a component, but that your parts inventory does not overwhelm your storage and financial resources. Moreover, your suppliers must be able to schedule their production processes to ensure that you are supplied with goods at the right time and in the right quantity. The first MRP systems did not cater for this requirement. They were able to extrapolate need based on orders and schedules. Purchasing managers had to ensure that the correct quantities were ordered at the correct time. With MRP II systems, the interface between the outside world - suppliers and customers - and the manufacturing system is automated. The system is driven by sales order processing. Customers' future ordering requirements are entered into the system. These are exploded into component parts, and a schedule of raw materials is built up. At this time the system may be dealing with estimates in the form of future ordering requirements from component suppliers. From these will be generated similar forecasts all the way back to the suppliers of the basic raw products. Once the sales order becomes firm, the manufacturer can call off goods from his suppliers, based on the schedule - with whatever variations might be needed to suit actual needs. If the MRP system is sufficiently advanced, all this can be automated. Sales orders, once input, can automatically drive the whole process. Using electronic document interchange (EDI) no further human intervention should be needed after the input of a customer order. All intermediate documentation right down the chain of suppliers can be automatically produced. The need for standards for data interchange is obvious, and there are a number in use. In the motor industry there is Odette, other standards include ANSI X12 and Edufact. These define the form and contents of documents and electronic packages. Some suppliers of manufacturing software, such as Istel, a subsidiary of A T &amp; T, point to the importance of the open systems movement. However, according to Mr Alan Topliss, of Price Waterhouse, their robustness, security and ability to handle the very large amounts of data needed, are still not considered sufficient by many users. The most advanced use of MRP, mainly for companies producing in relatively low numbers is Just In Time (Jit) manufacturing. The idea is to produce goods only when they are needed - rather than stockpiling them. The ramifications flow right back down the chain. You must be able to call off ordered parts from your suppliers in the same fashion. A motor manufacturer, for example, may only keep a small stock of wheels - perhaps two hours' supply. In these circumstances, you need not only to forecast your numbers, but also how long it will take to deliver them. It is logical to drive shop floor control systems from MRP. However, as Mr Tony Baggot of EDS points out, you need a competent 'systems integrator' who understands how to link together all the disparate components. 'It's not just a matter of connecting machines up, they must share the same protocols' he stresses. The automation of manufacturing is an area in which not only machines, but also the operations of companies become interlinked. The benefits are obvious, but the complexity calls for careful adherence to standards. 
ID: 133
HEADLINE: FT  14 MAY 91 / Survey of Computers in Manufacturing (7): Academia and industry forge tighter links - Research &amp; Development 
TEXT: BILL Hillier joined the Science and Engineering Research Council (Serc) six years ago 'to see if I could help to get academia to work with industry'. He moved from industry, Racal Redac, where he worked on computer-aided design, to become the co-ordinator of the Acme research programme at the Serc's headquarters in Swindon. Acme stands for Applications of Computers in Manufacturing. Serc invests about Pounds 7m a year through Acme in projects in universities and polytechnics in Britain. These projects cover the whole range of computing in manufacturing, from work on the control of robots, for example, through computer-aided design to production management. Mr Hillier says 'Acme activities emphasise research at universities into real problems that are industrially relevant.' The R &amp; D is not, though, day-to-day trouble shooting. Industry does not expect academia researchers to provide immediate answers to short-term problems. Mr Hillier says that Acme hopes to support research that will deliver useful results within two to five years. In all, Acme supports something like 135 projects. These range from small grants for visiting fellowship to large clubs with industry. The largest grants are for about Pounds 350,000 for three years. Serc launched the Acme programme six years ago. Since then it has awarded grants worth a total that is approaching Pounds 40m. The work, on about 400 projects, is in four main areas; advanced production machines, computer-aided engineering, manufacturing processes, and planning and management. In each Acme project, the Serc expects academic institutions to work closely with industrial partners. Industry may contribute financially to a project - it adds an average 15 per cent to the Serc's contribution - but in many cases, industry's contribution is not so much financial as in time and other resources. For example, companies sometimes provide materials for processing in university projects. Acme's projects cover a wide range of industries. For example, the Control and Robotics Group, part of the Department of Electronic Engineering at the university of Hull, is involved in several projects with the shoe and garment industries. The aim of this research is to develop automated manufacturing processes. In one research project at Hull, the group is developing a robotic work cell to assemble complete garments, in this case underpants. Each cell would have seven or eight machines performing a particular task on a garment before passing it on to the next stage. In the cell, robot vision system would recognise the parts and tell the machines what to do with them. A big problem with textiles is that the parts are flexible. This makes it difficult for an optical system to recognise the shape. 'Pick up a dishcloth and it doesn't look like a rectangle at all,' says Dr Gaynor Taylor, a researcher in the group. The industrial collaborator is Corah, a garment manufacturer that supplies Marks and Spencer. The ultimate aim of this work is to develop a production cell that can receive cut parts at one end and deliver finished garments from the other. In their research, the Hull group analyses the production process a step at a time. Another series of projects brings together researchers from the universities of Durham and Hull. Their industrial collaborator is British United Shoe Machinery (BUSM). Here the step-by-step approach is even more important because companies making shoes are not accustomed to investing large amounts in machinery. So the projects set out to automate individual steps of shoe production, with a particular emphasis on preparing the parts and sewing them together before they go on the final manufacturing stages. The aim of the project is not to develop prototype machines, says Mr Taylor. It is up to the machinery makers to develop commercial equipment. The research at Durham and Hull has concentrated on the use of electronic vision and image recognition equipment and other technologies to develop manufacturing and handling processes that do not have to be altered every time a company changes the style of the shoes that it is making. Mr David Reedman is on the receiving end of this research. He is manager of research for BUSM. 'Universities and polytechnics are very good at research but not at product development,' he says. Mr Reedman believes that projects with academic researchers can tell a manufacturer if a particular piece of technology will work in its industry. 'I ask 'Can I use this technology in Shoe making?'' he says. 'A research project which establishes quickly and efficiently that a new technology is unsuitable is just as successful, if not as acceptable, as one with a more positive outcome.' 'What you get out of the university research is usually a model that demonstrates some principle,' says Mr Reedman. It is then down to development engineers to turn the idea into commercial products. Earlier this month at a trade show in Germany, BUSM showed a prototype shoe stitching machine based on its work with the university research teams. Over the past five years, BUSM has benefited from grants totalling almost Pounds 450,000 for work at the two universities. 'I don't see how we can survive without the research,' says Mr Reedman. Acme supports a range of projects in the general area of computer aided design. Dr Bob Cripps at the university of Birmingham, works on the computer modelling of surfaces and how they behave in various manufacturing processes. One such project involved collaboration with Austin Rover on a phenomenon know as springback. When a piece of flat steel is pressed into a complex shape, a car bonnet for example, it takes up the exact shape of the press. But remove the pressure and the shape changes slightly. In the past, getting the right shape was more a black art than a science, according to Dr Bob Cripps who worked on the project. The Birmingham team computerised the whole process of design manufacture of complex components in an attempt to understand the phenomenon of springback. The idea was to be able to predict exactly how much of a change in shape a component would experience as it came out of a press. The work at Birmingham achieved its goal, the researchers could predict the amount of springback that would occur. However, in the process of computerising the manufacturing process, the problem of springback lessened. Another task facing manufacturers is to move products around in factories. In another Acme project, Professor Mike Brady of Oxford University has developed an automatic sensing system that can guide an unmanned vehicle around a factory. This Pounds 250,000 project, with four industrial collaborators including GEC and Thorn-EMI, has resulted in the development of a vehicle equipped with a laser-rangefinder and ultrasonic position detection. Sensors feed information into an on-board computer that can then pick a route around unexpected obstacles. Computerised hardware is an essential part of any manufacturing system. There are, however, other issues facing the manufacturer who wants to introduce new technology. This too is an area for academic research. Mr Mike Gregory is pioneering a new area of research - for academia at least. There is nothing new about research on the technology of manufacturing, engineering departments have been doing it since their beginnings. Researchers have also studied the social impacts of new manufacturing technology on the workplace, but they have yet to look seriously at the management of manufacturing. Mr Gregory believes that before a company can develop a manufacturing strategy, it needs to undertake a manufacturing audit. Companies need to design manufacturing systems that meet their business requirements. To achieve this, he says, 'We need more research into the interface between organisations and technology'. More research is only of value if the results reach industry. Mr Gregory's work has led to a booklet called Competitive Manufacturing, that is published by the Department of Trade and Industry. There are, though, gaps in the flow of information from R &amp; D on computers in manufacturing. The government's Advisory Council on Science and Technology (Acost) highlighted these gaps in its recent report called Advanced Manufacturing Technology. The report drew attention to the lack of co-ordination in the various activities in advanced manufacturing technology (AMT). 'The aggregation of the dispersed knowledge of AMT in the UK, both industrial and academic, together with the acquisition of international experience, can offer individual companies a valuable new resource,' says the report. Professor Lionel Maunder of the university of Newcastle, chairman of Acost's Engineering Technologies Committee, hopes that this report will lead to the creation of local centres where industry can seek information on advanced manufacturing technologies. It has prompted the DTI to enter into discussion with the Science and Engineering Research Council on the issue. Unfortunately, the Acme programme has been hit by the shortage of funds facing the Serc. The programme has to find savings of some 15 per cent. This will inevitably put pressure on the DTI's own R &amp; D programmes. 
ID: 134
HEADLINE: FT  14 MAY 91 / Survey of Computers in Manufacturing (8): Paperless trading offers single market opportunities - EDI, the switch gathers pace 
TEXT: MANUFACTURING companies have identified EDI (electronic data interchange, or paperless trading) as potentially one of their most effective weapons in the battle for survival. Hundreds of British manufacturing companies are beginning to feel the benefits of cutting out bureaucracy and dealing via computer to place orders, send invoices and make payments. Some British manufacturers believe that they could derive significant advantages from EDI when the single European market is fully operational. The UK is well advanced in EDI compared to other European countries because of the development of standards by the Article Number Association and the Simpler Trading Procedures Board and because of value-added network services created in the wake of telecommunications deregulation. The ANA developed Tradacoms, the UK standard for trading communications, in 1982. This gave birth to services such as Tradanet offered by International Network Services (INS), the EDI supplier co-owned by ICL and General Electric Information Services of the US. About 1,500 UK manufacturers do business via Tradanet. As companies search for ways of improving their business operations, they have realised that many changes will be dependent on direct computer-to-computer links with their suppliers and customers. In particular, Jit (just in time manufacturing, a manufacturing philosophy which has spread from Japan across the world in the past 10 years) can only work properly on an EDI infrastructure. This represents a considerable change of attitude from the early days of EDI, when it was seen simply as a cost-cutting technique. Now the emphasis has moved from saving money to providing a better service to customers through swifter response to demand and more competitive prices. Supply chain management is the centre of attention. Members of the supply chain comprise what has been called a virtual organisation. This involves a new way of thinking about the whole production process. For example, in a virtual organisation it is possible to cut out duplication of quality assurance. Components which have been rigorously tested by the maker to his customer's standards are not re-tested on arrival at the customer but go directly into stock or, better still, straight into production. When component makers receive their orders and confirm delivery electronically, production scheduling can be more tightly controlled. The result can be shrinking lead times and stock is sharply reduced or eliminated. Not surprisingly, the vanguard of EDI users is to be found in sectors which are technologically-oriented. The electronics business began the switch in 1987. Leaders in that field, such as ICL, have progressed in the last three years to using EDI on an international scale to deal with component suppliers in the US and continental Europe. NCR uses EDI to exchange forecast demands regularly with its trading partners in a Jit environment. Texas Instruments makes a point of its EDI capability in its marketing slogan which insists it is 'better to do business with'. Telecommunications manufacturers are becoming keen EDI adherents. Mitel, the Canadian private branch exchange (PBX) maker which is 51 per cent owned by British Telecom, is in the process of converting. It expects to have over 30 of its suppliers communicating via computer by the end of the year for purchase orders. This will be followed by accepting invoices from suppliers electronically and then by paying them through the BACS banking network. Mr Jeremy Arnold, Mitel's EDI co-ordinator says that although cost-saving is important the main aim is to establish better long-term partnerships and cut lead times in production. The automotive sector is another which is taking up EDI rapidly, led by leading manufacturers including Rover, Peugeot-Talbot, Citroen and Renault. This sector, like others, has its own EDI user support group, called Odette, which is active in eight European countries and is run in the UK by the Society of Motor Manufacturers and Traders. According to Ms Kerry Shipley, its project manager, there are over 400 EDI user companies in the automotive business in the UK. This represents a high proportion of the leading companies but she notes that their use of EDI is still restricted to a few functions such as invoicing and delivery instructions. She expects to see a steady expansion in the number of types of message sent between members in the next five years. At the same time there may be a second wave of recruits to Odette as many smaller companies will be compelled by their larger customers to take up EDI. The big companies are not officially making EDI mandatory for their trading partners, but they are stressing that an EDI capability is one of the criteria for becoming a preferred supplier. Other EDI user groups serving specific sectors include Cefic for chemical companies and Edifice for electronics companies. Aerospace is another area in which large manufacturers are driving EDI down to small suppliers. British Aerospace, for example, keen to adopt a Jit approach, has begun using EDI not just with its production partners but with suppliers of other goods and services too. The laggard in EDI is still government. Manufacturers which supply ministries and local authorities are still generally unable to communicate with them electronically. However, even in this area there are signs of movement; the number of suppliers dealing electronically with the National Health Service has risen to over 250. Mr Patrick Tonks, marketing manager for INS, says that large companies have been putting a lot of effort into winning over their trading partners to the EDI method. Rather than simply imposing a rule that all business with them must be done electronically in future, they are holding seminars to persuade them of the benefits of the new systems. In the long term there is little doubt that any large or medium-sized company in manufacturing must go over to EDI. How long it will take is uncertain, but the trend is certainly accelerating; and it is one of the bright spots of the computer industry which must give it hope in its present time of crisis. 
ID: 135
HEADLINE: FT  14 MAY 91 / Survey of Computers in Manufacturing (6): Fuzzy logic and robots spell technological advantage - Japan, modifying production philosophies as emphasis shifts back to the human workforce 
TEXT: IT seemed laughable at the time: a couple years ago a Japanese manufacturer replaced some factory line workers with automation machinery, then set up full-sized cardboard human dummies to keep the remaining workers from getting lonely. The completely workerless factory is a decade away, but there are a few showcase examples including Fanuc, the machine tool manufacturer's factory near Mount Fuji, where robots make robots. But until no-human factories are realised on a broad scale, factory automation system makers will focus their research on bridging the awkward interaction between humans and the ever increasing number of machines working by their side. In past years manufacturers put the emphasis on installing labour-saving machines to raise production. They focused on maximising the use of people, money, time and materials, and humans had to find a way to fit in with the complex machinery beginning to surround them. 'Until now humans have had to adapt to use machines, so the man-machine interface was not well matched,' says Mr Hiroshi Matsuyama, a manager at Omron the programmable controller maker in Tokyo. 'Japanese industry is now modifying its philosophy. The centre of production has shifted to human workers, and computers should be matched with humans,' he says. That means designing new software that allows production machinery to be more easily used and changed quickly for different jobs. For example, welding or insertion and using artificial intelligence techniques such as fuzzy logic to help robots and computers make better decisions, such as finding an operational failure, through inferences, as humans do. The escalating skilled labour shortage, brought about by a declining birth rate and a more affluent and highly educated society, makes robots an important component of factory automation, a do-or-die decision for some companies. Strong competition in industries such as shipping has resulted in waves of investment in labour-saving technology such as steel and aluminium cutting tools, processing machines and welding robots. The rise in the labour force is expected to be 0.8 per cent a year until 1993, then it is likely to fall off by half to 0.4 per cent until 2000, according to Japanese government statistics. During that time Japan expects to keep about a 4 per cent annual economic growth rate. 'To achieve this it is necessary to introduce automation technology,' says Mr Kanji Yonemoto, vice-chairman of the Japan Industrial Robot Association (Jira) in Tokyo. An even more remarkable shift in Japan's economy is the switch from a manufacturing to a service economy. Jobs in services pay better. Mr Yonemoto says there will be 1.5m fewer blue-collar workers in manufacturing by 2000 than in 1989, when there was a shortage of 715,800 people. Today's young people are a different breed of worker from those who laboured long hours for little pay to build Japan's industrial miracle. They want to avoid so-called '3K' work: 'kiken' (dangerous), 'kitanai' (dirty) and 'kitsui' (hard). 'Older men were very patient and had the Bushido (warrior) morale, but it is hard to find these people today,' says Mr Matsuyama. Replacing them with machinery takes time and money. Omron, which produces programmable controllers and other electronics products, sees the improvements that can be made in factory automation as almost limitless and including diagnosing system failures and other management tasks. The improvements span a broad factory automation market valued at almost Y2,000bn and covering every aspect of making a product from design through production and inspection. The important components of automating a factory are numerical controllers, the largest chunk of the market, as well as computer-aided design and manufacturing software and equipment, industrial robots, programmable controllers, automated warehouses, computers and automatic guided vehicles that transport products throughout a plant site. Japan leads the world in both producing and using these production components. It has replaced Germany as the biggest exporter of machine tools, an important indicator of industrial development and economic power. Japan has an estimated 23 per cent of the world market compared to the 16 per cent held by Germany. Five Japanese companies are making machine tools in Europe. Mazak Yamazaki, for example, has a Dollars 50m factory in Worcester, in the UK which produces some 100 computer-controlled machines a month, according to industry estimates. Japan's worldwide share of the fast-growing robot market is even more impressive: it has 57.5 per cent of the robot installations worldwide, with western Europe having 14.5 per cent and the US 9.5 per cent. Japan's main advantages are that workers in automotive, electronics and other factories are accustomed to and readily accept automation technology, product demand is still strong in the home market, and Japanese manufacturers make most of the machines they use for automation, so there is little competition from imports. The electronics industry is the biggest user of automation technology. At its Ome design and manufacturing works west of Tokyo, Toshiba uses its own laptop computers for design, development and assembly of new Toshiba laptops. The laptops are used to compute how easily a new computer model can be assembled by a line of 12 workers, who can slap together one notebook-size Dynabook computer in a few minutes. That's important, because the company is making about 1m laptops a year at Ome, and the life span of each new product is getting increasingly shorter amid hot competition. 'Often it's the case with some products that the effective life span is already over by the time it goes to the market place,' says Mr Masao Suga, who heads the personal computer research and development department at Ome. However, the shortening product life spans, which run from six months for a Japanese word processor to about three years for laptops, made it increasingly difficult for Toshiba to continue using robots. Toshiba replicates about 70 per cent of design work from current models in new ones. While it took Toshiba three years to develop the T3100 and J3100 laptops from scratch, it took only nine months to design the smaller-size Dynabook. Though its factory is about 70-80 per cent automated, visitors to the company often comment about the number of people still present on the manufacturing lines, but Mr Suga says that with the fast-paced product life cycles, humans are needed. 'There are problems with automated systems. They can't catch up with new technology, so humans are acting as universal super robots,' he adds. Fuzzy logic may help close the gap. Mr Yonemoto of Jira says fuzzy logic, software that can help make a decision from unclear information, will help increase the versatility of robots in the future by affording better control of their movements. Omron, a leader in using fuzzy technology, has developed a test robot that can grasp soft or fragile items, such as tofu (bean curd). In a New Year's address to employees, Mr Yoshio Tateisi, company president, identified fuzzy logic as an important research area for the 1990s. By 1994, more than 20 per cent of Omron's product line will include some type of fuzzy logic. According to Mr Matsuyama, fuzzy logic has many benefits. As part of a computer-integrated manufacturing (Cim) system it can be used in production and in managing the company. 'Another merit of fuzzy technology is to replace a person where computers are hard to use, for example, controlling a nuclear power generation plant's circulation control system to clean water and to make decisions. Perhaps the Chernobyl or Mihama plant accidents could have been avoided with these systems,' he says. Fuzzy logic, along with more flexible robots and other components, spell another technological advantage for Japan in the future: being able to change small-scale production quickly, so that multiple products can be produced on the same factory line in one day. Mr Matsuyama predicts Japanese manufacturers will become very good at this small-scale production, which is a difficult technology demanding ultimate flexibility. Computerisation would be all the more necessary in production in the sense that market information should be more effectively connected with the production process or with the factory itself. But large-scale flexible production without man will take 8-10 years says Matsushita Electric in Osaka. The company believes fuzzy logic, along with neurocomputing technology which more closely mimics the human brain, will be the main technologies once they are refined. 
ID: 136
HEADLINE: FT  14 MAY 91 / Survey of Computers in Manufacturing (5): Group offers a lesson to its suppliers - Profile of Case Communications 
TEXT: AT the end of last month Case Communications, the Dowty subsidiary that makes modems, multiplexors and other data communications products, called together 80 of its leading suppliers. It was less than happy about the quality of some of the components it was receiving and their late arrival. Having spent three years radically and sometimes painfully overhauling its own manufacturing facilities, Case would now like its suppliers to do the same. The company has not issued an ultimatum. With a turnover of just under Pounds 100m a year it is not big enough to insist on improvements from its suppliers. Nor would Case's ingrained corporate culture of co-operation and team-working allow it to contemplate such a move. The fact remains, however, that Case will reduce the number of suppliers it uses in the coming years. The company is no longer willing to spend money testing goods it has purchased to make sure they perform to specification. Similarly, it does not want to have to stock large amounts of goods because only 60 per cent are delivered on time. Mr Alex Kachellek, the company's manufacturing director, says that Case delivers 95 per cent of its products on time. Three years ago the figure was 55 per cent. Four years ago the company's performance was not measured. It was sufficient to know that monthly revenue targets were being met and that the company was making a profit. Under these comfortable conditions, the sweeping changes that Mr Kachellek proposed in 1988 were met with many raised eyebrows. Even the six-person team he set up to implement the changes had at least one dissenter at the outset. Apart from improving delivery, Mr Kachellek wanted to make-to-order (rather than to forecast) and in the shortest time possible. The first step, he declared, would be to reduce lead times from six weeks or more to 15 days. As a youngish electronics manufacturer, Case had a solid foundation for the structural changes Mr Kachellek sought. The company understood computers and communication products. They were its business. All 1,200 people employed at its Watford headquarters could use and had access to computer terminals. The terminals were networked so that information generated on its manufacturing resources planning system flowed electronically from sales via manufacturing to despatch. From the start Case fostered flexibility among its people. Divisive practices were shunned in favour of free-for-all parking, a single canteen and monthly pay cheques. Team working and team problem-solving were encouraged. Against all this was the threat posed by competitors in the quickly-changing electronics industry in the Asia Pacific region. Case brings out about one new product every month and the life cycle of these products is only 10 months to two years. Margins are thin. Case had the advantage of a reputation for product quality but knew it had to offer its customers speedy and reliable delivery or they would go elsewhere. Mr Kachellek is convinced that without the changes he started, Case would be sub-contracting much of its manufacture to Asia Pacific. Only a small amount has been sub-contracted and, as manufacturing has improved, some of that is likely to brought back to the UK. Case's products are turned out in nine days. Work in progress on the factory floor is worth about Pounds 300,000 compared with 10 times that amount three years ago. In other words, the factory is much easier to control. Mr Kachellek insists that his managers and staff in the factory solved most of Case's manufacturing problems. Like many manufacturers these days, he downplays the role of technology. There have been no large additions to its manufacturing management system in the past three years, nor has there been large scale automation of the shop-floor. Case's biggest single investment in this period of change was the Pounds 22,000 it spent on a machine to insert integrated circuits into a printed circuit board. 'You don't have to spend lots of money on information technology,' says Mr Kachellek. 'It is easy to take the technology too far and we've done that in the past. Manufacturing should be simple and we all need to be reminded of that.' Since 1988 Case has switched from a centrally run and organised factory to a distributed one. Again it is becoming the fashionable thing to do in manufacturing and it is supported by a similar move from central to distributed computing. Case has separate areas for making printed circuit boards, cables, final products and technical documentation. Each has its own stores. Office-bound production planners no longer tell the factory floor what to make and when. Supervisors decide their own schedule to meet the delivery dates given by the planners. This way of working has reduced lead times and late deliveries but, stresses Mr Kachellek, more was needed to reduce manufacturing costs. Just over 70 people were made redundant three years ago. Since then a further 150 people in manufacturing have left Case and not been replaced. Only 150 people remain in manufacturing. In the year to the end of March, Case reckons that its revenues have increased by about 15 per cent and that it is one of the few profitable companies in the data communications business. Mr Kachellek makes no claims about manufacturing's part in this performance. He is not sure if Case's customers are satisfied but he knows he is not. Manufacturing improvements will continue at Case and, Mr Kachellek hopes, at its suppliers. 
ID: 137
HEADLINE: FT  14 MAY 91 / Survey of Computers in Manufacturing (4): A happy band of users is most important - Justifying the investment, hardware mistakes prompt need for greater prudence 
TEXT: MANUFACTURING industry, in particular in the UK, has made large errors in buying computer hardware and software. It is not alone. Other sectors, such as retailing and finance, have also made their fair share of mistakes. However, with hindsight, manufacturing should to be able to invest more prudently. There are signs that this is happening. The biggest breakthrough for medium-sized and large manufacturers has been recognising what is needed for a successful computer system. It matters little how rigorously the investment is justified or which manufacturing system is chosen. What is important, and obviously so, is having a happy group of users in sales, purchasing, on the shop-floor and throughout the rest of the organisation. Users are likely to be more satisfied if they are allowed to decide what they want from a system and are then involved in its selection and, finally, are trained in its use. The steps are simple. They always have been but, until recently, they have been by-passed. The reasons are complex but boil down to money and power. The justification for spending large sums on computer systems was much easier than it is today. In the past, computers were mainly labour-saving devices and the cost benefits could be calculated quickly. Now manufacturers want computer systems that are integrated and intelligent. They want the vast amount of information that they have collected on their mainframe machines to be accessible to management to give an up-to-date picture of the company's performance that can be viewed in any amount of detail. 'These are big projects where many of the benefits are intangible and it is very hard to put numbers on them,' says Mr Roderick Roy, a partner with Coopers &amp; Lybrand Deloitte's manufacturing consulting group. 'Companies have to weigh up the risk of not doing it,' he adds. For very complex projects some large manufacturers are turning to financial modelling to determine the impact of their investment on the business. This is a lengthy process but there are PC-based computer programs to help and, if these fail, the decision-makers have access to another well-used method of investment justification. The method is described delicately as business acumen or, more coarsely, as gut-feel. Whether the project is small or large, the most common failing in manufacturing is to underestimate the cost of implementation. Typically, manufacturing systems for controlling inventory or production take a year or two before they are fully up and running. During that time the project has to be managed and people trained. Often neither happens to a great enough extent. Investment in information technology should be equalled by the investment in implementation, insists Mr Alan Toplis, a partner with Price Waterhouse. 'If anyone tells you it is less, don't believe them. I've seen companies driven to the brink of bankruptcy because they couldn't implement their systems,' he says. Power or the corporate pecking order has also stopped users getting what they want. Data processing departments, historically, have been closer to the financial director than production and, therefore, have had considerable influence on a company's computer strategy. Much of the time they have dictated what hardware was needed and what software they would develop. When they were only responsible for jobs such as payroll, pensions and sales order processing, it was of minor concern to people running the factory. All that changed when the processing departments started developing manufacturing resources planning packages for their mainframe computers. They were convinced that these packages could cut the cost of manufacture by reducing, among other things, inventory, work-in-progress and lead times. Some of these systems have been successful. However, many have not. Mr Brian Entwistle, general manager of British Aerospace's software development arm, BAeCam, blames the processing department's liking for mainframes which could not (and still cannot) process information fast enough for it to reflect the realities on the shop-floor. A parallel argument is that the department should not have been trying to computerise the complexities of the shop-floor. Rather that manufacturing should have simplified its operations first. So the divide between the processing department and manufacturing has been created. It has been maintained by the large computer suppliers which have the ears of important people in the processing department and a vested interest in expanding the centralised mainframe strategy. It has also been supported by top management which operated, like the computer systems, in an hierarchical manner. Bridging the gulf has been a lengthy job. It required people to admit they had made mistakes and management to take back the control of its computer systems' investments which it had relinquished to the processing department. Some manufacturers have quietly done this. However, the numbers that are clinging to the old way are sufficiently large for disaster stories to abound. Most of the tales of woe have a common theme: in-house software development. The issue is rarely whether or not the spending was justified and benefits enumerated. Almost always it is the processing department's insistence that manufacturing's requirements can only be met by bespoke software. For most commercial and basic manufacturing applications there is now 'very little justification for developing your own software', says Mr Toplis. Generic packages typically match about 80 per cent of a company's requirements. The most up-to-date packages can then be tailored (in consultation with the users) to deliver much or all of the rest. 'They work,' says Mr Roy. 'They also strip years off the implementation process which pulls all the benefits forward.' If manufacturing is to get any satisfaction from its computer investments the relationship between the board, the processing department and users, especially in the factory, must change. It is fashionable to knock the company's information technology people (sometimes rightly so) for their dictatorial attitude. But, equally, the people running the factory have been silent in their suffering. The processing department should offer a service to the users and 'provide a framework in which they can operate', says Mr Roy. Users should be prepared to be more vocal about what they want and their working procedures. Management should minimise the fear of change and of admitting mistakes among its staff. 'More than ever it is important for manufacturers to learn from the past, says Mr Roy. Formal audits after a computer system has been running for a couple of years will pinpoint what has and has not been achieved (from the users' perspective). They have not been favoured in the past, again because people were reluctant to reveal the reality of their decisions. But, as the rate of change of computer technology quickens, manufacturers can guarantee that they will be going through another systems buying cycle in a few years. Armed with this type of information and a multi-disciplined working group with access to the board, selecting the right system for the users will not be easy but it will have a better chance of success. ----------------------------------------------------------------------- Trends in expenditure on manufacturing management applications by sector (UK Pounds m) ----------------------------------------------------------------------- Industry                   Last 12 months     Next 12 months ----------------------------------------------------------------------- Mechanical Engineering           98.3            102.9 Instrument Engineering           85.7             27.3 Elec./ Elec. Engineering         138.4            162.4 Shipbuilding                      1.9              3.1 Automotive                       32.2             37.5 Aerospace                        10.7             12.5 Locomotive                        0.1              0.1 Other metal goods                34.9             23.4 Total                           402.3            371.3 ----------------------------------------------------------------------- Source: ICL ----------------------------------------------------------------------- 
ID: 138
HEADLINE: FT  14 MAY 91 / Survey of Computers in Manufacturing (3): Cadcam market is expected to rise to Dollars 26.2bn by 1995 - Computer-Aided Design, slower growth but healthy 
TEXT: computer-aided design and manufacturing equipment - may be slowing down, but many users in manufacturing industry would give their eye teeth to match the growth rates projected for suppliers over the next few years. After the phenomenal growth of the early 1980s, the industry is expanding at rates of a mere 10-14 per cent a year, depending on the sector. According to Dataquest, the US market research company, the total Cadcam market was worth Dollars 13.9bn last year, but this is forecast to rise to Dollars 26.2bn by 1995. Most big Western manufacturing companies have Cadcam systems, although the level of maturity and sophistication varies from one country or industrial sector to another. While this means that some markets will see only incremental growth, there is little doubt that customers with successful installations are keen to come back and buy more. Much of the growth in the next few years, therefore, will come from a combination of new products and new applications to tempt long-standing users, and new customers. In the latter category some UK machine tool companies, for example, are only now replacing their draughtsman's tables with Cad systems, partly because the cost of the hardware is falling but also because their clients demand it. As with robotics, the use of Cadcam is spreading to smaller manufacturing companies, and particularly the subcontractors in the automotive and aerospace industries. Mr Roger Smedley, chairman of the UK engineering design company Ricardo International, remarks that 10 years ago it was hard to spend more than Pounds 1,000 per head in capital on each employee's drawing board, desk and chair. Now, with some computer screens costing up to Pounds 60,000 including software, capital expenditure per head has rocketed, but an enormous number of design companies have gone out of business because they could not finance a switch to computers or make it work, says Mr Smedley. Ricardo is spending Pounds 1.5m a year on computers, while one of its rivals, Worthing-based International Automotive Design, has just ordered an Pounds 800,000 CADDS 4X system from Computervision, enhancing its ability to provide design, build and prototyping services to big automotive manufacturers. IAD has been a customer of Computervision, one of the world's leading Cadcam suppliers, for six years. Mr Mark Holmes, a UK marketing consultant for Computervision, notes that manufacturers such as Rover and Ford are asking their supplier companies to ensure their Cadcam systems are compliant - a trend that is being driven by the desire for concurrent engineering (design for manufacturing.) Computervision, part of Prime Computer, is one of a handful of big players in an industry which continues to see new niche products and companies emerging, and thus boasts dozens of companies with revenues so small that they hardly register at all. Most of these are US companies, followed by European groups, with Japan back in third place. Industry observers see a continuing role for the smaller companies, even if sometimes it is only for their technology to be obtained by the larger players, through an OEM arrangement or acquisition. An example of the latter was the acquisition by Computervision of Massachusetts-based Premise, whose technology extends Cadcam back to the sketching, or back-of-an-envelope stage in the creation of a design. This process, known as conceptual engineering, is generating widespread interest among manufacturers. There have been takeovers of a different kind. The squeeze on margins in the late 1980s, caused by the rush into the market in the hope of fat profits, has left several companies by the wayside. The electronic design automation (EDA) sector in particular experienced particular turmoil during this period: Daisy Systems bought Cadnetics in 1988 to form Dazix, but a heavy burden of debt led to its bankruptcy filing in August. In January, the much stronger US company Intergraph snapped up Dazix for Dollars 14m. If the established companies play their cards right, they ought to be able to avoid Dazix's fate. There are significant opportunities in many geographic and product markets, and the big suppliers with marketing muscle are best placed to exploit them. Mr Jim Tully, Dataquest's UK Cadcam analyst, sees Europe maintaining its 35 per cent share of the world market through to 1995. Germany is already the biggest market, but still offers the best growth potential because of reunification. Reconstruction, refitting of factories and a modernised power network all offer scope for Cadcam sales. Dataquest predicts the more mature US market will see its share slip from 35 per cent in 1990 to 33 per cent in 1995, while Asia will maintain its 28 per cent share. In product sectors, Mr Tully sees the fastest growth in the geographic information systems (GIS) sector, where Intergraph is the undisputed leader. 'There's a great deal of interest in getting maps on to computer systems,' he says. The mechanical sector, which is by far the largest, is growing very slowly, but even here there are opportunities. In particular, users in this sector are interested in so-called knowledge-based applications of Cadcam. An example is a system developed by the small US supplier Rasna, which will design products such as car bumpers virtually automatically, minimising weight and performing stress analysis on the basis of a few parameters and criteria. Two other trends look like becoming increasingly significant for the industry. Until recently, most Cadcam systems have been mutually incompatible, and end-users wishing to change their system have faced a difficult and costly process. This, says Mr Tully, is changing, because of 'frameworks,' a set of software facilities that allows third-party Cadcam to be integrated into a user's existing system, or a supplier's product line. 'The whole issue of opening the systems up is the key to a lift to growth,' he says. Mr Holmes at Computervision sees another market place opening up - engineering data management. Cadcam, he says, was a reasonably controlled environment in the early 1980s with the host mainframes looking after files. But as engineering companies have been forced to move more quickly, it has become more important to find where information resides in a company. Changing technology has meant that Cadcam is more likely to be based on a workstation, leading to a proliferation of files, and the need for EDM to control data more closely. There is probably no better way of assessing the industry's prospects than to examine new uses for Cadcam. At Boeing, the introduction of a new generation of Cad tools is aimed at eliminating the risk of design mistakes. The lynch-pin is Catia, a three-dimensional Cad programme supplied by Dassault Systems of France, which incorporates a new stress analysis system. Linked to a network of IBM workstations and mainframes, Catia will enable Boeing's new 777 commercial jet to be the first designed completely on computer. 
ID: 139
HEADLINE: FT  14 MAY 91 / Survey of Computers in Manufacturing (2):  Confusion over the levels of integration and flexibility - Intelligent Machine Tools, a different approach 
TEXT: IN the beginning there were machine tools, the workhorses of every mechanical engineering workshop in the world, which are used for cutting, grinding and shaping lumps of metal to form components for all sorts of industrial products or machinery. Then, over the past 25 years, came numerical control and computer numerical control (CNC), in the form of user-friendly units attached to the machine tool which can be part-programmed on line by the operator or off-line in the production engineering office. Hand-in-hand with the CNC units, whose software can control almost any type of machine tool, new designs of machine produced the higher precision, stiffness and stability to take advantage of the greater accuracy that CNC offers. CNC, when applied to single machine tools, is well-established, and more than 80 per cent of Japanese machine tools are numerically-controlled. The units are powerful enough to control 'machining centres', which can often do the work of eight or more standard machine tools, and may contain more than 100 different cutting tools. As the cost of computing power has come down, the economics of computer memory storage have been transformed, and CNC units can store and recall hundreds of different instructions for a great variety of workpieces. From the mid-1980s, further developments in CNC technology have produced the concept of a 'flexible manufacturing system' (FMS), two or more machining centres linked and coupled under the control of a host computer. The important word is 'flexible,' according to the UK Machine Tool Technologies Association: 'The combined power of the machine and host computer, and their storage memories, is enough to manufacture all prescribed varieties of work, in any order.' FMS is now being being linked to computer-aided design and production control to produce manufacturing industry's Holy Grail, Computer Integrated Manufacturing (Cim). The aim is to link 'islands of automation' on the factory floor with all the other computerised functions of the manufacturing process, such as purchasing, ordering, stock control and is proving to be a tougher challenge than many in the computer industry had predicted only three years ago. Put at its simplest, there appears to be considerable confusion among manufacturers about how integrated their approach to Cim should be, or how flexible their use of FMS. The situation is not helped by a proliferation of computer suppliers, all keen to sell their product but varying in their commitment to service and support. Dr Norman Schofield, director of engineering and systems at PA Consulting Group, says there are very good technical reasons why Cim has been difficult for many companies to achieve. Companies had believed that, to stay competitive, they needed to buy the best available computers for each of the many different disciplines in the manufacturing process - packaging, software, documentation, electronics and mechanical engineering. This, in turn, increased the size and complexity of the 'data package' describing the product, and spread the data over many systems. In one recent assignment, PA found 41 different applications used in a company's design/engineering process alone, on six different computer platforms, on 10 sites in three countries. The problem for the manufacturer, says Dr Schofield, is whether it is going to get independent advice from any of its computer suppliers if it wishes to integrate its systems. PA has attempted to help clients through the maze by building its own Cim centre using four computers and 12 software applications from nine different suppliers. The aim is to illustrate the many elements involved in applying Cim to the relatively simple task of putting parts on to printed circuit boards. Dr Schofield believes that open systems will be the key to developing progress towards Cim, and says most computer vendors are prepared to accept the inevitability of an open environment. 'Manufacturers are getting a lot more help from suppliers, which is all leading to easier integration.' However, he says manufacturers can help solve their integration problems themselves in two ways. The first goes back to the machine tool itself: manufacturers, if they have the clout, can insist that all their machine tool suppliers install the same controller. Secondly, manufacturers have to accept that integrated systems can be too heirarchical. 'Where you can have autonomy (in a flexible manufacturing system, for example) you should let it happen. Some failed systems have tried to make things too rigid.' Indeed studies of the influence of FMS in the US since the mid-1980s have shown that it is often a misnomer, since the system may be inflexible in its design and the way in which it is used. Also several reports have claimed that systems installed in the US lack the flexibility of those in Japan. A recent report on the US FMS market by Frost &amp; Sullivan, the market research publishers, says worldwide competition is forcing adoption of flexible manufacturing in a variety of industries, but is becoming increasingly important to batch-oriented manufacturers as product life-cycles shorten and product changes become more frequent. F &amp; S forecasts that sales of FMS equipment will rise from Dollars 266m in 1990 to Dollars 559m in 1995 (in constant 1990 dollars). The biggest obstacle to installing equipment is price, and more companies will be starting with the more limited flexible manufacturing cells (FMCs). In the UK, British Aerospace has taken a novel approach to Cim by developing its own manufacturing control system, Cimitar, which provides a sophisticated computerised link between management information systems and shop-floor controllers. BAe began the Cimitar programme in 1983 after discovering that computer companies could not satisfy its large-scale requirement for shop-floor control systems. A separate company, BAeCAM, was set up in 1988 to develop and market Cimitar worldwide, but Mr Brian Entwhistle, general manager, says it was decided from the start to develop a generic product that could be sold on the open market. Cimitar, which uses DEC's Vax hardware, is in use throughout BAe but BAeCAM recently signed up Caterpillar, the US construction equipment group, as a user. Mr Entwhistle hopes this will provide a reference for further US sales. BAeCAM has also installed part of Cimitar on to an IBM PC that runs a machine tool at BAe, elevating it from the normal download of data and selection of tools and satisfying the need for complex communications between the tools and the host computer. As companies continue to grapple with the challenges of Cim, and consultants to explain them, its ascendancy is being challenged by another acronym, Pim, product information management, alternatively known as EDM, engineering data management. Dr Charles Clarke of London-based Random Computing says that, just as Cim was the catalyst for integrating manufacture, so Pim forces the user to understand the existing process before being able to manage it or use it. The characteristics of Pim/EDM, which has also been described as a short cut to Cim via Cadcam, include data management and control and data navigation mechanisms, but the aim is enterprise-wide control of information. This, says Dr Charles Clarke, liberates the user and allows true concurrent engineering - designing a product and allowing its manufacture simultaneously - for the first time. 'It links the islands of automation that yesterday's manufacturing industry nurtured and constrains the 'paper flow' monster with its attendant road-blocks and bottle-necks,' he says with an enthusiasm for metaphor rarely found in studies of computers in manufacturing. 
ID: 140
HEADLINE: FT  14 MAY 91 / Survey of Computers in Manufacturing (1): Japanese still set the pace - The importance of the human element in the production process permeates Japanese methods. Now Western companies are beginning to appreciate that there is a limit to what the computer can do to help the manufacturers 
TEXT: MANUFACTURING methods have changed profoundly in the US and Europe over the past few years. The adoption of total quality control and just-in-time techniques have proven necessary to compete with Japanese manufacturers, whose fundamentally different approach has set standards of efficiency and quality Western manufacturers are still striving to emulate. A comparative study of motor car manufacture in the US and Japan published recently by the Massachusetts Institute of Technology makes the point powerfully. General Motors' plant in Framingham in the US takes 31 hours to assemble a car. There are 135 defects in every 100 cars and a two week inventory of parts. Toyota's Takaoka plant in Japan produces a car every 16 hours with on 45 faults per 100 cars. Its inventory is sufficient to sustain production for a mere two hours. The West's struggle to compete with Japan's growing manufacturing superiority has been marked by false starts and expensive excursions up technological blind alleys. Western companies failed initially to understand the nature of the difference in manufacturing philosophies, believing that low labour costs and heavy use of technology were the answer. In fact, with the appreciation of the yen, Japan's labour costs are not all that different from its Western competitors. Japanese manufacturers certainly use computers but sparingly, preferring to design their products to suit them for manufacture, rather than the other way about. They build quality into their products rather than inspect later for faults. Responsibility for quality control is entrusted to the production worker rather than the Western-style quality control department. Increasingly, the trend is to parallelism or concurrent engineering, where customer requirements, product design, manufacturing technology and cost accountancy proceed in parallel and information is continuously fed back to modify the manufacturing processes. These ideas of design for manufacture and respect for the contribution individuals can make to manufacturing quality permeate Japanese manufacturing methods. They are now diffusing to the West and are the essential backcloth against which the growing use of computers in manufacturing must be seen. Computer systems for manufacturers are supplied by computer makers rather than traditional machine tool companies. Hardware comes from companies such as IBM, ICL, Digital Equipment, Hewlett Packard, and Bull Software is supplied by companies such as Istel Automation, Kewill Systems and Prime Computers among a host of others. All agree that with most Western economies exhibiting weakness, if not actual recession, business is tough: 'but not as bad as it's made out to be' according to Mr Peter Willis of IBM. Mr Graham McKenzie, technical unit manager for Digital Equipment in the UK says that buyers are focusing on the business benefits of installing computer systems. The industry is not helped by the continuing difficulty the accountancy profession has found in cost justifying investment in modern computer equipment. A detailed study of the US valve industry by Dr Peter Weill called Do Computers Pay Off?, (ICIT Press, 1990) concluded that the relationship between computer investment and manufacturing was circular: 'It was not possible to identify the unique contribution of any particular year of IT investment. It is not clear that this can ever be achieved statistically'. The advent of the microprocessor, by making available virtually unlimited computer power at low cost, has given manufacturers a wide range of powerful, computer-based technologies which can be deployed on the factory floor as well as the back office. There is computer aided design (Cad), pioneered by aerospace and computer manufacturers, which provides not only an electronic drawing board, but also product design information. Computer aided engineering (CAE) automates the design process making it possible to test the validity of a design before moving to the prototype stage. Computer aided manufacturing (Cam) involves a range of intelligent shop-floor machinery including robots, numerically controlled machine tools, flexible manufacturing centres and automated handling systems. Much of this is taken for granted. Mr Brian Small, managing director of Ingersoll Engineers, a UK manufacturing consultancy, says that manufacturing computers today look like and are bought like conventional machine tools. Convenience and simplicity of purchase does not guarantee success in operation however and there are serious dangers in assuming that manufacturing problems yield to an injection of technology. The Strathclyde Institute, an independent manufacturing consultancy warns in a recent report: 'Many people equate improved competitiveness in manufacture with the application of state-of-the-art technology such as powerful computer systems, MRP, Cad and robotics. While it may be advantageous or necessary for a company to apply these and other enabling technologies in pursuit of excellence, this should only be as part of an overall company strategy.'* 'If such technologies are applied to a company without cognisance of the needs or effects on other areas, at present or in the future, then it may be difficult if not impossible to integrate the patchwork of systems across the company.' Integration is the important word in manufacturing automation. The goal for forward looking companies is computer integrated manufacture (Cim), an overused piece of jargon with many definitions. One comprehensive definition from the Strathclyde Institute is: 'an amalgam of computer aided engineering and drafting, computer aided manufacturing, flexible manufacturing systems, tooling and quality support systems, in-process gauging and automated final inspection, automated storage and materials handling, and operations control within a business information system.' Mr Willis of IBM warns, however, that too often the 'i' in Cim stands for interconnection rather than integration. There has to be, he explains, an underlying Cim architecture: 'To complete a 1,000-piece jigsaw, you have to have all the pieces and a picture on the box.' There is probably not a single true Cim operation anywhere in the world. Cell manufacture is emerging as one of the biggest steps towards integrated manufacture. A survey by Ingersoll Engineers** suggests that over half of the UK's engineering companies have implemented cell manufacture in some part of their business. Cells are self-contained manufacturing units with the machines, controls, people and support needed to make a finished product complete with payment schemes, incentives, performance measurements and accountability. 'Well over 90 per cent of manufacturers who have implemented cells have seen an improvement in performance and 40 per cent describe the improvement as significant. Fewer than 2 per cent have abandoned the approach,' says Ingersoll. Computer technology has a part to play in the flow of information necessary to support and underpin these developments. Successful manufacturers in the 1990s, however, will emphasise the human dimension: 'What do you need to do the job?' will replace the order 'Look after that machine]' *Computer Integrated Manufacture for the Engineering Industry, The Strathclyde Institute 1990, Financial Times Business Information, 071-799 2002. **Competitive Manufacturing - the quiet revolution, Ingersoll Engineers, 1990, 0926 427088. 
ID: 141
HEADLINE: FT  14 MAY 91 / London Stock Exchange: Asda under pressure 
TEXT: SUPERMARKET group Asda retreated in busy trading as the market continued to worry about current trading. The shares finished 6 lower at 115p after 8.5m had changed hands. The decline was triggered by a weekend press report which identified Asda as the food retailer most likely to suffer as competition in retailing intensified. Talk that a broker had changed its investment advice to a hold from a buy added to the pressure. Suggestions that Goldman Sachs, which has been positive towards Asda in the past, had changed its stance was denied. Mr Philip Dorgan of Goldman said that with higher profits likely next year Asda was cheap at current levels. BET disposal The stability of BET shares in a generally weak equity market reflected relief that the business services group's high level of debt had been further reduced by the sale for Pounds 212m of Biffa, its waste disposal business. The price disappointed some optimists who had been hoping for nearer Pounds 250m, and BET shares slipped before rallying to close little changed on balance at 178p. The deal enables purchaser Severn Trent Water to achieve a key objective in the specialist waste area. It also puts a question mark over Severn's near 30 per cent stake in Caird Group, another waste company. Severn withdrew a 100p cash per share offer last year and is free to bid again in October. Chief executive Mr Roderick Paul said yesterday the board was 'reviewing the options'. Severn Trent fell to 272p but recovered on good buying to 277p for a net loss of only 3. Analyst Mr Andrew Stone of Hoare Govett said the short-term reaction was always likely to be down. 'But in the long term the acquisition buys market share and gets Severn into an area where there is good potential for development.' He advised clients to buy Severn stock. SmithKline Beecham proved one of only three firm spots in the FT-SE 100 index. The shares, after recent weakness, ended up a penny at 790p awaiting today's annual meeting. Rothmans International also bucked the trend, rising 2 to 875p on reports that it was considering buying the outstanding equity of subsidiary Dunhill Holdings. Reuters slipped 13 to 802p after bearish analysis from Nomura Research. The latter maintained its sell stance on Reuters and shaved its profits estimates for this year and next. Analyst Mr Martin Mabbutt said the stock would be helped by a strengthening dollar but it still had not bottomed out. BOC receded 13 to 545p on nervousness ahead of its half-year results due on Thursday. Allied-Lyons and Grand Metropolitan lost ground as buyers held off ahead of trading reports scheduled for this week. Allied slipped 11 to 550p and GrandMet lost 20 to 800p. Oil shares failed to escape the general decline in spite of their generally perceived strong defensive qualities. Specialists said there had been no fundamental reasons to dump stock in the sector but pointed out that crude oil prices had once more dipped below the Dollars 20 a barrel mark. Shell ran back 12 to 511p but volume was a thin 1.8m ahead of Thursday's first-quarter figures, expected to reveal net income of around Pounds 600m, compared with Pounds 816m in the same period last year. Ultramar, a penny harder at 314p, provided one of only three positive performances in the FT-SE 100 stocks as the market braced itself for tomorrow's first-quarter numbers. Worries remain that the oil group may post a loss of up to Pounds 10m for the period, but general consensus is for the company to manage a modest overall profit. The threat of further litigation leading to even heavier losses on its disastrous oil rig conversion contract upset Davy Corporation shares, which dipped 8 to 120p. Smith New Court advice to 'top-slice' holdings, meaning take profits, before the annual results on May 22 brought Courtaulds back 8 to 390p. More negative assessments from broking houses unsettled Trafalgar House and the stock lost 4 more to 253p. Hoare Govett maintains that 'back in November, the huge 15 per cent yield and plausible recovery hopes added to an attractive story, but with the shares since rising by over 75 per cent as performance has weakened, Trafalgar is now well ahead of events.' BT (formerly British Telecom) held up resolutely against a sharply weakening market, closing only 3 off at 370p after County NatWest upgraded its profits forecast and reiterated its buy recommendation. Mr Patrick Wellington at County raised his profits and dividend estimates on the back of anticipated lower tax charges. Mr Wellington said BT offers 'very strong earnings and dividend growth, excellent medium-term potential through cost reduction, fading political and regulatory risk, and a strong technical position' ahead of the sale of the government's remaining stock. Hoare Govett took a much more cautious view of the stock, however, recommending that clients move to 'underweight' in the shares. Butler Cox jumped 99 to 230p after the agreed Pounds 14.3m bid from US group Computer Sciences. A number of bank shares were unsettled by stories concerning Brent Walker, the troubled leisure group. Standard Chartered bore the brunt of the selling pressure prompted by the Brent Walker story, closing another 9 off at 370p; turnover was a low 238,000. TSB was also affected and dipped 2 1/2 to 149p but Lloyds performed well, holding at 350p. The heaviest turnover in the sector was in NatWest, which eased 5 to 324p on 1.9m. Cadbury-Schweppes declined 8 to 366p as speculation about a bond or equity issue continued to depress the shares. Dealings resumed yesterday in Sutcliffe Speakman, the activated carbon company, which was rescued from the brink of receivership by a complex refinancing plan involving the issue of 150m 10p shares. Sutcliffe shares touched 12p before making steady upward progress to close at the day's highest of 16 1/2 p, compared with last October's suspension price of 45p. Profit-taking pulled Scottish Television back 20 to 697p. The company is believed to be the only independent broadcaster able to make an uncontested bid for its franchise when the bidding opens tomorrow. It has outperformed the sector recently. TVS Entertainment held firm in spite of poor results, losing only a penny to 64p. Mr Terry Connor of Smith New Court said the stead-iness showed that 'the market has chosen to concentrate on the franchises rather than results'. WPP, the world's largest marketing services group, dropped 14 to 190p after broker James Capel cut its profits forecast for the company by Pounds 13m to 50m. Brent Walker, the leisure group, slipped sharply to close 16 down at 40p following reports that it was expected to announce a Pounds 1bn write-down of assets. The shares were also depressed by the announcement that 'although the group produced profits at the operating level, it sustained a substantial loss for the year . . . and its balance sheet at 31 December 1990 will show a major reduction in shareholders' funds'. A significant shift in the balance of forecasts of corporate profits by City analysts during April should not be over-emphasised, warns Barclays de Zoete Wedd. Analysts have tended to underestimate the depth of the UK recession and more downgrades may come in the summer. NEW HIGHS AND LOWS FOR 1991 NEW HIGHS (74). BRITISH FUNDS (4) Treas. 3pc 1992, Treas. 2pc IL 1992, Treas. 2pc IL 1994, Treas. 2pc IL 1996, AMERICANS (2) General Host, Greyhound Dial, CANADIANS (1) Central Cap. A, BREWERS (1) Morland, BUILDINGS (1) Gleeson (MJ), CHEMICALS (1) Hickson, STORES (5) Amber Day, Brown (J), Hartstone, Jacques Vert, Owen &amp; Robinson, ELECTRICALS (6) Admiral, Butler Cox, Forward Tech., Kewill Sys., Macro 4, Volex, ENGINEERING (1) Fairey, FOODS (7) Geest, Iceland Frozen, JLI, Kwik Save, M &amp; W, Nichols (Vimto), Shoprite, INDUSTRIALS (15) Betterware Consmr. Prods., Bodycote, Cathay Pac. Airlines, Hafslund Nycomed A, Do. B, Harris (Ph), Hutch Whmp., Intercare, Jardine Strgic., Nobo, Quotient, Sec. Archives, Swire Pac. A, Titon, Utd. Uniform Servs., LEISURE (4) Border TV, Euro Disney, Ulster TV, Yorkshire TV, MOTORS (1) Evans Halshaw, NEWSPAPERS (1) Johnston Press, PAPERS (2) Birkdale, CIA, SOUTH AFRICANS (3) Anglo Am. Inds., Gold Fields Prp., New Klein Prps., TRANSPORT (1) Bergesen d-y A, TRUSTS (14) Cons. Venture, Dartmoor, Derby Inc., F &amp; C Smaller., Fleming. Fledg., Leveraged Oppty., Mexico, Murray Smllr. Mkts., Personal Assets, Rights &amp; Issues Inc., River Plate Zero Prf., Scottish &amp; Merc., Do. A, Scottish Cities, OILS (2) NZ Oil &amp; Gas, Total-Cie Francaise B, MINES (2) Lydenburg, Vogels. NEW LOWS (23). BREWERS (1) Merrydown Wine, BUILDINGS (1) Turriff, CHEMICALS (1) Astra, STORES (2) Gent (SR), Wilding Office Eqpt., ELECTRICALS (2) Alphameric, Holmes Protn., ENGINEERING (2) Manganese Bronze, UMECO, INDUSTRIALS (5) Brompton, Chillington, Clearmark, Dyson (J &amp; J), Tamaris, LEISURE (2) Brent Walker, Do. 6pc Prf., PAPERS (1) Unit, PROPERTY (1) Greycoat, TRUSTS (2) Aberdeen Tst., Nth. Am. Gas Wrrnts., OILS (1) Alliance Res., MINES (2) Free State Devl., Cluff Res. Other market statistics, including the FT Actuaries Shares Indices and London Traded Options, page 29 
ID: 142
HEADLINE: FT  14 MAY 91 / Appointments: Fleming makes changes 
TEXT: FLEMING INVESTMENT TRUST MANAGEMENT has promoted Mr David Smith, marketing manager, to marketing director with responsibility for marketing new products and developing sales in the intermediary market. Mr David Paterson, a director of Fleming Investment Management, becomes investment director responsible for liaison between FITM and Fleming Investment Management, fund management division of Flemings. ***** Mr Christopher Marsden, a director and general manager of the company's central division, has been appointed to the board of BALFOUR BEATTY BUILDING. Mr Peter Williams is made director and general manager of its newly-formed management and specialist activities division. ***** Mr James L. May, managing director of specialist steel foundry Holbrook Precision, isjoining PBM COMPONENTS in Birmingham as managing director on June 1. ***** Mr G. Harris, finance director, has been appointed managing director of EUROPE ENERGY GROUP, succeeding Mr J. Davies who has resigned to pursue other business interests. Mr A. Bevan, group accountant of Graig Shipping, joins the board as executive finance director. ***** Mr Michael Biggs (pictured) has been appointed an assistant general manager at NORWICH UNION, and becomes group financial controller. He held a similar post at Morgan Grenfell Group. 
ID: 143
HEADLINE: FT  14 MAY 91 / Appointments: Managing director of DataCard 
TEXT: DATACARD, Havant, which produces 70m cards annually for both financial and non-financial markets, has appointed Mr Adrian Smith (pictured) as managing director. He has held senior posts with Procter and Gamble in the UK, Ecolab Canada, and Ecolab Inc, US. ***** PALOMAR PARTNERS, new institutional investment subsidiary of Mellon Bank, has made the following appointments: Mr Anthony Foley to the research and development team, from Salomon Brothers (London); Mr Charles Edward Frith to the currency and derivatives team, from Midland Montagu's dealing department -Ms Carolyn Blight also joins this team, from Chase Manhattan Bank's derivative products sales and marketing desk. Third member of this team is Mr Mark Morris Klein, who was a fund manager's assistant at County NatWest. ***** Mr Forbes Macpherson, a non-executive director of TSB Group and chairman of TSB Bank Scotland, has been appointed a director and a deputy chairman of HILL SAMUEL BANK. ***** CHARTERHOUSE TILNEY's institutional division has promoted Mr John Goldschmidt and Mr Jeremy McKeown to director, and Mr Christopher Hall and Mr Kevin Lapwood to assistant director. In the investment management division Mr Simon Ashworth and Mr Jeremy Newman are promoted to assistant director. ***** AGB UNITED KINGDOM has appointed Mr Nick Hackman as operations director. He was previously with American Express as datacentre operations manager servicing Europe, Africa and the Middle East. ***** Mr Sandy Smart has been appointed as a director of PRUDENTIAL VENTURE MANAGERS, the company in the Prudential Corporation which invests in unquoted companies. He was previously a director with Citicorp Venture Capital and will specialise in financing management buyouts and development capital in the UK and Europe. ***** Ms Janis Anderson, of Grosvenor Venture Managers, has been appointed a non-executive director of ELVINGTON, trading as The Club, the newly relaunched Club 18-30. ***** Mr Stanley DL Ross, formerly managing director of Deutsche Bank Capital Markets, has joined the board of security industry specialists BWW ASSOCIATES as a non-executive director. 
ID: 144
HEADLINE: FT  14 MAY 91 / World Stock Markets (Asia Pacific): Weak yen and slide in New York push Nikkei lower 
TEXT: SHARE prices declined in low volume yesterday, as sentiment was depressed by Friday's drop on Wall Street and the yen's weakness against the dollar, writes Emiko Terazono in Tokyo. The Nikkei average ended 181.09 lower at 26,093.20 after a day's high of 26,338.49 and a low of 26,092.22. Volume shrank to 230m shares from Friday's 340m. Activity has remained under 400m shares for 15 consecutive sessions, while the Nikkei has traded around 26,000 for 35 trading days in a row. Falls outnumbered rises by 658 to 279, with 177 issues unchanged. The Topix index of all first section stocks shed 13.37 to 1,977.78, but in London the ISE/Nikkei 50 index edged up 2.62 to 1,474.57. Rumours that the Ministry of Finance had warned a leading Japanese brokerage concern that it was trading too heavily in the over-the-counter market depressed sentiment on the smaller sections. The second section index lost 23.32 to 3,400.13 and the OTC index fell 106.12 to 3,126.13. Traders said institutions were likely to remain on the sidelines as long as the Nikkei stayed around 26,000, and ahead of some company results to be announced in the next few weeks. The electrical sector weakened on reports that Pioneer Electronic had revised its earnings projections downward and now expected a 21 per cent profits fall. Pioneer dropped Y630 to Y4,370, Sony Y180 to Y6,080 and TDK Y140 to Y5,520. The real estate sector fell 0.8 per cent on news of weak condominium sales announced over the weekend. Mitsubishi Estate shed Y20 to Y1,500. Contractors were also weak, Taisei slipping Y24 to Y975 and Haseko Y14 to Y906. Daifuku, an industrial machinery maker, rose initially on recommendations by Japanese brokerages based on strong sales of the company's automated warehouses and storage systems. The issue touched a 1991 high, but later receded on profit-taking to end a net Y10 off at Y2,850. Investment trusts sold drug issues. Yamanouchi Pharmaceutical, which expects its pre-tax profits to rise only 2 per cent, retreated Y60 to Y2,730. Tosoh, a chemical group, rose Y27 to Y646. The company expects pre-tax profits to rise 57 per cent to Y11bn thanks to strong earnings at Shin-Daikyowa Petrochemical, which Tosoh acquired last October. In Osaka, the OSE average dipped 167.54 to 29,062.87 on volume of 23.2m shares. Osaka Sanso Kogyo, an industrial gas maker, declined Y10 to Y665 on weak earnings for the current year due to rising labour and distribution costs. Yamato International, a fashion wear wholesaler, rose Y20 to Y1,200. Strong earnings are expected this year. Roundup ALTHOUGH Hong Kong rose on domestic considerations, most markets in the region fell in sympathy with the Wall Street slide last Friday. AUSTRALIA in addition showed nervousness ahead of tomorrow's inflation report for the March quarter, and results from Westpac and National Australia Bank due on Thursday. The All Ordinaries index weakened 25.2 to 1,523.1 but turnover expanded from ADollars 231m to ADollars 270m. BHP, Australia's biggest company, went ex a 21-cent dividend and fell a net 29 cents to ADollars 12.15 in heavy volume. CRA closed 25 cents lower at ADollars 12.90 after lifting its takeover offer for Coal and Allied Industries from ADollars 7.85 to ADollars 8.50 a share. The latter put on 4 cents to ADollars 8.60. NEW ZEALAND broke its winning streak as the Barclays index relinquished 35.53 or 2.3 per cent to 1,538.21 as turnover climbed from NZDollars 19.1m to NZDollars 27.7m. Fletcher Challenge fell 24 cents to NZDollars 3.90 on 1.5m shares traded, in line with the issue price for 50m shares placed over the weekend with international institutions. A further 25m new shares might be issued, to raise a total of NZDollars 292.5m. BNZ went against the trend, firming a cent to 76 cents after Mr Jim Bolger, New Zealand's prime minister, rejected repeated speculation that the government is planning to sell its 58.2 per cent stake in the bank. Fay, Richwhite, which owns 26.2 per cent of BNZ, closed steady at 72 cents. SINGAPORE lost almost 1 per cent, the Straits Times Industrial index closing 14.93 off at 1,517.39 in thin trade. TAIWAN's weighted index fell 106.39 or 1.7 per cent to 6,102.09 on news that Fuh Hwa Securities Finance was tightening its margin lending to stock market players. Traders said some 30 per cent of daily turnover came from Fuh Hwa's margin lending. BANGKOK complained of lack of drive, and money being drawn out of the market to subscribe for planned new issues. The SET index finished 17.72 or 2.1 per cent lower at 828.16 after thin turnover worth 2.85bn baht. The four new highly priced issues which made their debut last Friday were heavily sold for a second day. Siam Chemicals fell 14 baht to 134 baht and Eastern Wire, a construction wire producer, declined 11 to 106 baht. HONG KONG rose on weekend news that Sino-British talks on the large-scale local airport project will resume this weekend. The Hang Seng index put on 17.43 to 3,767.63, although turnover fell from HKDollars 1.31bn to HKDollars 1.06bn. 
ID: 145
HEADLINE: FT  14 MAY 91 / World Stock Markets (Europe): Italy welcomes larger-than-expected interest rate cut 
TEXT: ITALY WAS encouraged yesterday by the weekend's interest rate cut, but Wall Street's sharp fall on Friday subdued most bourses from the outset, writes Our Markets Staff. MILAN was lifted by Sunday's full percentage point cut in the Bank of Italy's official discount rate to 11.5 per cent. The market had expected a reduction of only half a point, so the larger-than-expected cut was viewed as boding well for the June trading account, which starts on Thursday. The Comit index rose 4.08 to 581.24 in volume estimated at L150bn after Friday's thin L115bn, bloated yesterday by activity related to the expiry of monthly options. Italcementi jumped L670 or 3.2 per cent to L21,500 on better-than-expected 1990 consolidated net profits of L206bn, up from L170.3bn, although analysts suspected that the rise was helped by extraordinary items. The share was also boosted by news of a L60bn share buy-back programme over the next 18 months which came as a surprise. FRANKFURT was depressed by rumours that Mr Karl Otto Pohl, Bundesbank president, would resign, by the drop in popularity of the ruling CDU, and by a leaked McKinsey report which was said to be negative on German economic prospects. Volume slid again, from DM3.4bn to DM3bn, as the FAZ index lost 5.09 to 680.67 and the DAX closed 9.73 lower at 1,610.90. It was a day for dealers rather than investors, said Mr James Cornish at County NatWest, who added that Frankfurt was recognising that its outperformance in April had not made sense, in terms of share price valuation or economic prospects. There were individual windows to east German recovery prospects, he noted. Siemens Nixdorf, up DM13 last Friday, rose another DM7 to DM259, turnover in the stock growing from DM18m to DM49m as attention focused on April orders for data processing equipment. West German civil servants are being paid 'head money' to go east, and equipment is being bought for their new east German locations. Elsewhere, turnover in Continental fell from DM50m to DM25m as the shares lost DM6 to DM197 on profit-taking. PARIS drifted lower in quiet trading worth about FFr1.6bn, with the CAC 40 index falling 15.82 or 0.9 per cent to 1,834.45. Among weaker blue chips, Alcatel Alsthom fell FFr12 to FFr588 on 229,510 shares. Schneider, the electrical equipment group, closed FFr10 higher at FFr762, after reaching FFr767 earlier, on volume of 110,375 shares. Investors were relieved at the removal of uncertainty, following the acceptance of Schneider's bid for Square D of the US. Among the big movers, Canal Plus, the television company, gained FFr35 or 3.4 per cent to FFr1,070 on 31,450 shares. Its rival, TF1, was suspended briefly owing to an order imbalance, before closing FFr10.50 down at FFr285.50. Suez eased FFr2.20 to FFr349. The news that the financial holding company could open up the capital of Banque Indosuez was fairly well received, said one analyst, amid speculation that Suez could be considering an acquisition to improve its European merchant banking network. MADRID's general index edged higher before today's inflation news, rising 0.51 to 285.22. Turnover was moderate, but fell to about Pta15bn from Friday's heavy Pta28.9bn. Focsa, which is due to merge with another construction company, dropped Pta260 to Pta14,140. AMSTERDAM fell at the opening, and failed to recover for the rest of the session. The CBS tendency index closed down 0.5 at 94.4 in quiet trading worth Fl 480.8m. Royal Dutch led the losers, shedding Fl 3 to Fl 160.70 after setting an all-time high of Fl 165.10 on Friday. The oil company reports its first-quarter results on Thursday. Unilever, which reports its quarterly results on Friday, fell 80 cents to Fl 158.40. OSLO recouped an early loss to close at its third consecutive year's high. The all-share index gained 2.76 to 521.46. STOCKHOLM was depressed by weak overseas markets and profit-taking in Astra, the pharmaceutical company. The Affarsvarlden General index lost 6.4 to 1,037.5 in turnover of SKr315m, down from SKr325m. Astra free B shares fell SKr9 to SKr575 before the company's first-quarter profits announcement, which came after the bourse closed and were better than expected. ZURICH fell in low volume, the Credit Suisse index slipping 3.8 to 541.7. Slightly lower interest rates gave some support. In a relatively firm engineering sector, Schindler registered shares rose SFr60 to SFr1,095 before today's annual news conference. BRUSSELS, after its holidays last Thursday and Friday, was dominated by Petrofina, the oil company, which rose BFr200 or 1.7 per cent to BFr11,800 with 25,420 shares changing hands, or nearly 30 per cent of the BFr939m market turnover. The Bel 20 index closed 4.68 higher at 1,179.39. After hours, Groupe Bruxelles Lambert repeated that it would probably increase its 21 per cent Petrofina stake. ----------------------------------------------------------------------- FT-SE EUROTRACK 100 - MAY 13 Hourly changes ----------------------------------------------------------------------- Open     10 am    11 am    Noon     1 pm     2 pm     3 pm     Close 1121.90  1122.43  1123.87  1124.60  1125.18  1126.05  1125.99  1125.32 Day's High   1128.20      Day's Low   1121.90 May 10     May 9         May 8       May 7      May 3 1130.52    1125.62*      1119.87     1125.75    1129.77 ----------------------------------------------------------------------- Base value 1000 (26/10/90) * Indicative. ----------------------------------------------------------------------- 
ID: 146
HEADLINE: FT  14 MAY 91 / World Stock Markets: Oslo joins small band of outperformers 
TEXT: A DECLINE in the US, which was at the mercy of the bond market during the quarterly refunding, left the world's stock markets 0.6 per cent lower in local currency terms last week, according to the FT-Actuaries World Indices. Most markets, however, were little changed. The main exceptions were the now familiar outperformers of Mexico and New Zealand, joined last week by Norway. The Norwegian market, which has lagged behind most European bourses this year, jumped 8.5 per cent in local currency terms. Daily turnover grew from a level of NKr302m at the start of the week to NKr820m on Friday. Mr Per Jacobsen of Baring Securities says the triggers for this renewed interest included rising optimism about the economy and company results, falling interest rates, the market's relative cheapness, and decreasing pessimism over the tax reforms. Good first-quarter figures in early May, particularly from Saga Petroleum and Hafslund Nycomed, the pharmaceutical group, have banished investors' earlier doubts. Baring now expects weighted earnings growth of 11 per cent this year, after a fall of 28 per cent in 1990. The proposed tax reforms have also become less of a concern. 'People have had time to consider the reforms and are less alarmed by them, and there are indications that they are being watered down,' says Mr Jacobsen. He even believes the proposed tax changes could have some positive effects. From 1992, capital gains on shares held for more than three years will no longer be tax free. However, the cost price of these shares will be set by taking the average share price between November 1 and December 31 this year, which means that shareholders will want to see high prices during that period, and so reduce their capital gains and the tax payable. 'If the rules come through in their present form, a year-end rally seems likely,' he predicts. ----------------------------------------------------------------------- MARKETS IN PERSPECTIVE ----------------------------------------------------------------------- % change  % change % change in local currency **           sterling **   in US Dollars ** 1 Week   4 Weeks     1 Year   Start of   Start of  Start of 1991       1991      1991 ----------------------------------------------------------------------- Austria     -2.28      -1.06     -18.74     +16.90     +13.31     +0.93 Belgium      0.00      -1.35      -5.76     +18.08     +15.26     +2.66 Denmark     +0.68      -0.24      +0.40     +16.65     +14.39     +1.89 Finland     +1.84      -4.94     -11.17     +23.81     +24.64    +11.01 France      +0.94      +1.33     -13.01     +21.00     +18.35     +5.41 Germany     -0.93      +1.91     -14.59     +13.98     +10.89     -1.24 Ireland     -1.76      -1.16      -7.49     +21.85     +19.40     +6.36 Italy       -1.69      -3.64     -21.09     +11.25     +10.29     -1.76 Netherlands +0.28      +3.02      +7.48     +21.96     +18.72     +5.75 Norway      +8.51      +8.37      -9.27     +15.50     +13.26     +0.88 Spain       +2.62      +1.80      +2.65     +27.17     +27.56    +13.61 Sweden      -0.14      -4.11      -8.98     +21.86     +24.48    +10.87 Switzerland -0.19      -1.44      -3.02     +19.60     +17.43     +4.60 Sweden      -0.14      -4.11      -8.98     +21.86     +24.48    +10.87 Switzerland -0.19      -1.44      -3.02     +19.60     +17.43     +4.60 UK          +0.01      -0.32     +15.90     +17.98     +17.98     +5.09 EUROPE      +0.02      +0.18      -0.15     +18.05     +16.76     +3.99 Australia   +2.14      +7.65      +8.48     +22.67     +39.83    +24.55 Hong Kong   +0.45      +0.70     +24.22     +26.25     +41.87    +26.36 Japan       -0.50      -0.47     -13.58     +14.41     +25.59    +11.85 Malaysia    -0.48      -0.48      +8.26     +10.97     +21.97     +8.63 New Zealand +4.72     +13.71     -13.91     +25.02     +40.85    +25.41 Singapore   -0.35      +4.03      -1.37     +28.93     +42.18    +26.64 Canada      -0.14      -0.06      +0.47      +5.42     +19.23     +6.20 USA         -1.34      -1.32      +9.50     +14.15     +28.15    +14.15 Mexico      +7.60     +13.89    +134.96     +68.36     +86.56    +66.16 South Africa      -1.30      +0.13     -11.26      +8.57     +27.08    +13.19 WORLD INDEX -0.60      -0.44      -1.42     +15.37     +24.52    +10.91 ----------------------------------------------------------------------- ** Based on May 10th 1991. Copyright, The Financial Times Limited, Goldman, Sachs &amp; Co., and County NatWest Securities Ltd ----------------------------------------------------------------------- 
ID: 147
HEADLINE: FT  14 MAY 91 / World Stock Markets: South Africa 
TEXT: JOHANNESBURG eased in quiet trading yesterday. Violence in the black townships was blamed for the absence of foreign investors, although a fall in the financial rand gave some support. The all-share index slipped 14 to 2,972. 
ID: 148
HEADLINE: FT  14 MAY 91 / Money Markets: London rates steady 
TEXT: RATES WERE little changed on the London money market yesterday, with three-month sterling interbank continuing to discount a cut of  1/2 point in bank base rates, despite last Friday's strong warning from the Bank of England against an early move. The authorities reinforced this view yesterday by not supplying enough assistance to take out the full underlying shortage on the money market, leaving overnight funds tight at around 12 1/2 per cent. Three-month interbank was quoted at 11 9/16 -11 1/2 per cent, compared with 11 9/16 -11 7/16 previously, and 12-month money was unchanged at 11 1/8 -11 per cent. Short sterling futures traded in a narrow range of 88.81 to 88.87 for June delivery on Liffe. The contract opened lower at 88.85 and closed at the day's low of 88.81, compared with 88.88 on Friday. Day-to-day credit was in more comfortable supply than of late on the cash market. The Bank of England initially forecast a shortage of Pounds 500m, but revised this to Pounds 450m at noon, and to Pounds 400m in the afternoon. Total help of Pounds 201m was provided. The authorities did not operate in the market before lunch, but in the afternoon bought Pounds 121m bills outright, by way of Pounds 1m Treasury bills in band 1 at 11 7/8 per cent and Pounds 120m bank bills in band 1 at 11 7/8 per cent. Late assistance of around Pounds 80m was also provided. Bills maturing in official hands, repayment of late assistance and a take-up of Treasury bills drained Pounds 849m, with the unwinding of repurchase agreements on bills absorbing Pounds 322m, and bank balances below target Pounds 5m. These outweighed exchequer transactions adding Pounds 50m to liquidity and a fall in the note circulation of Pounds 650m. In Madrid the Bank of Spain left its money market rate unchanged at 13.5 per cent at yesterday's thrice-monthly repurchase tender for central bank certificates. This is the main instrument of Spanish credit policy and was last changed on March 15. In Brussels the Belgian National Bank left its seven day advances rate, the main instrument of monetary policy, unchanged at 8.75 per cent at a tender for credits against government paper and commercial bills. In Frankfurt call money rose to 8.85 from 8.80 per cent as payments for a government bond drained about DM7bn from the money market. 
ID: 149
HEADLINE: FT  14 MAY 91 / World Commodities Prices: Tea 
TEXT: TEA Demand was fair but selective, reports the Tea Brokers' Association. Bright liquoring teas and many of the better mediums were 3-5p easier. Central Africans met good competition at firm to dearer rates. Plain descriptions were generally neglected and 1-3p lower where sold. Ceylons were well supported with brighter teas dearer and the balance tending easier. Offshore teas sold readily but prices for the brightest kinds were lower. Quotations: quality 210p (240p) medium 110p (114p), low medium 72p (74p). 
ID: 150
HEADLINE: FT  14 MAY 91 / Commodities and Agriculture: Brazilian groups to mine Peruvian zinc 
TEXT: TWO BRAZILIAN mineral groups have just clinched a deal to mine an estimated 720,000 tonnes of zinc and 180,000 tonnes of lead in a mine near Lima, Peru. Companhia Paraibuna Met-ais, the second largest zinc producer in Brazil, has entered in-to a joint venture with Brazilian-based Construtora Norberto Odebrecht, Peruvian-based Mineracao Barra Ventura, and Minero Peru, the state-owned mineral group of Peru. The groups will have shares in the project of 45 per cent, 15 per cent, 15 per cent, and 25 per cent respectively. Mr Ronaldo Salerno, president of Paraibuna, said the company signed the deal to guarantee a zinc supply for its Brazilian refineries. 'Control over the mine will also guarantee quality,' added Mr Salerno. Brazil has few known zinc reserves. Salerno also announced that the group was exploring reserves in Bolivia, with an eye to opening up zinc mines in that country. The Peruvian joint venture will require a Dollars 50m investment over the next four years. By 1996, Mr Salerno expects the mine to be in full production. Mr Salerno cautioned that, although the joint venture has been agreed, the group will not put any money into the project until it has confirmed Peru's estimates of zinc deposits in the area. 
ID: 151
HEADLINE: FT  14 MAY 91 / International Bonds: Euromarket awash after post-holiday issues rush 
TEXT: THE INTERNATIONAL bond market was awash with new issues yesterday as borrowers launched deals delayed last week by public holidays in Europe and the Treasury refunding operations in the US. Against the background of Citicorp's global asset-backed deal, the sterling sector of the mortgage-backed market was tested by a Pounds 200m twin-tranche issue from Mortgage Funding Corporation No. 4, a special-purpose vehicle of Eagle Star. Lead-managed by Credit Suisse First Boston, the deal offers paper with an average life of 1.5 and five years. Every deal in the sector this year has pushed back the limits of terms which are acceptable to investors. For example, the longer-dated tranche of yesterday's issue pays a discounted margin of 62.5 basis points over the three-month London interbank offered rate. This is identical to the discounted margin offered on the tranche of the recent issue by CMS No 9, which had an average life of 3.6 years. Recent deals have abandoned the earlier practice of offering investors a step-up in margin from next year if banks are forced by the regulators to put aside more capital against holdings of mortgage-backed paper. As sentiment has improved, non-bank investors have started to buy mortgage-backed bonds again, making the market less vulnerable to the proposed regulatory change. The UK government bond market was weak throughout the day, but this did not prevent Tokyo Electric Power from becoming the latest Japanese borrower to issue sterling-denominated bonds. The borrower issued Pounds 150m of 10-year bonds priced to yield 52 basis points over the 10 per cent gilt maturing 2001. The yield spread is wider than on other recent deals by Japanese names. For example, Nippon Telegraph and Telephone launched its Pounds 100m deal at a spread of 50 basis points over gilts and has now tightened to 45 basis points. However, Tokyo Electric Power is less well known in the international bond market. Despite negative sentiment in the market, lead manager Credit Suisse First Boston opted to press ahead with the deal. Having been reoffered to investors at a fixed price of 99.70, the bonds traded down to 99.40 as gilts weakened. However, the yield spread remained at around 52 basis points. Credit Lyonnais became the first bank to issue longer-dated Eurodollar bonds for some months, launching a Dollars 300m seven-year deal. The deal, increased from Dollars 250m, offers paper priced at a yield spread of 74 basis points over US government bonds. Participants said the yield spread was generous enough to tempt investors looking to lengthen the duration of their portfolio exposure to the US currency. The lead manager, Credit Lyonnais, reported strong buying from continental European investors. The paper traded at around the fixed re-offer price of 99.40. The Republic of Ireland yesterday raised Pta10bn with an issue of seven-year bonds in the Spanish market. The deal maintained international interest in peseta-denominated bonds, which was given further impetus by the cut in Italian interest rates over the weekend. 
ID: 152
HEADLINE: FT  14 MAY 91 / International Capital Markets: Mexican oil group in Pounds 180m trade facility 
TEXT: PETROLEOS Mexicanos, Mexico's state-owned oil company, has established a Pounds 180m two-year trade finance facility in the London market. The facility, arranged by Baring Brothers and NM Rothschild, will make funds available to Pemex through either bankers' acceptances or advances, writes Stephen Fidler. The financing, which complements a Dollars 2.5bn bankers' acceptance arrangement earlier this year, will partly refinance a 1987 facility arranged by the same two banks. The size of the facility will be cut over the next two years as part of Pemex's plan to repay external debt incurred during the 1980s. 
ID: 153
HEADLINE: FT  14 MAY 91 / International Capital Markets: Broking by banks under review 
TEXT: JAPANESE securities companies, under pressure to allow banks into their industry, have reaffirmed their opposition to banks entering stockbroking, the most lucrative part of their business. However, they are prepared to see banks compete in the underwriting market, according to a draft report to the Ministry of Finance made public over the weekend. The concessions are unlikely to satisfy banks or end a prolonged debate over the reform of Article 65 of the Securities and Exchange Law - Japan's version of the Glass-Steagall Act in the US. The draft report, prepared by a study panel of the Securities and Exchange Council, an advisory body to the ministry, recommends allowing banks to lead-manage publicly-placed bonds through subsidiaries, and to issue privately-placed bonds. However, it says banks should, 'for the time being,' be banned from broking, the backbone of the securities companies' profits. The Securities and Exchange Council, organised by the Finance Ministry's securities bureau, represents the views of the securities industry. A parallel report, representing the views of banks, is expected to be published soon. It will probably call for banks to be granted more comprehensive access to the securities market, including early entry into broking. The reports are part of a review of the barriers separating banks and securities companies under Article 65. The ministry wants to implement reforms by 1993. Officials are having to balance the demands of banks for change with calls from the securities industry, particularly small and medium-sized companies, for preserving the status quo. A ministry official said the final reports of the securities and the banking industries are expected to be presented to the ministry at the end of May, or some time in June. 
ID: 154
HEADLINE: FT  14 MAY 91 / International Capital Markets: Shielding investors from predators - The role of contingent value rights in a bull market 
TEXT: Any revival of mergers and acquisitions activity in the US could renew interest in a family of financial instruments headed by CVRs - contingent value rights - which offer investors protection against a poorly performing stock price. While just a handful of contingent financial instruments were issued in the bull market of the late 1980s, interest could be stronger this time around the economic cycle. The company issuing the CVR targets a future share price and promises to pay the holder the difference between the target price and the actual share price at the exercise date, subject to an upper limit. Hence the company may face a substantial liability if its shares do not reach the target price. Alternatively, if the shares perform well, the CVRs expire worthless. In the US, CVRs were originally issued following the mergers which formed the pharmaceutical groups Rhone-Poulenc Rorer and Marion Merrell Dow in 1989. For example, Dow Chemical will pay the holders of its CVRs the difference between Dollars 45.77 and the price of Marion Merrell Dow shares in September this year - up to a maximum payment of Dollars 15.77 or Dollars 1.5bn in total. Last week Marion Merrell Dow shares were trading at Dollars 34 per share, implying a Dollars 11-per-CVR, or Dollars 1bn, liability. However, Dow Chemical has the option of extending the deadline by one year, in which case the target share price rises to Dollars 50.23 and the maximum payment Dollars 20.23. The acquiring companies view the CVR liability as something akin to a deferred consideration, which is revealed in a note to the annual report and accounts. 'From the predators' perspective, these are instruments which offer a kind of earn-out to stockholders in the company which is being taken over,' said Mr Ben Krause, head of the capital markets group at the American Stock Exchange in New York, on which both the Dow and Rhone-Poulenc CVRs are listed. This type of profits participation role was even more obvious in an earlier issue of contingent payment rights for Eli Lilly. These instruments gave holders the right to profits participation following the Dollars 350m acquisition of Hybritech in 1986. In part, CVR issues were driven by an accounting loophole, which allowed the dominant partners in the merger - Rhone-Poulenc and Dow Chemical - to keep goodwill resulting from the transaction off the merged entities' balance sheet. This is particularly important in the pharmaceutical industry, where valuations of companies are well in excess of asset value, reflecting the future value of drugs still in the research and development phase. The amortisation of goodwill arising from mergers would severely depress the profits of the merged entity. The US accounting loophole has now been closed, but CVRs have not disappeared from the corporate finance scene. Contingent participation rights - whether based on profits performance or share price performance - could be used as a defence against takeover by guaranteeing holders a minimum return on investment. NCR, the US computer manufacturer, reportedly considered issuing CVRs as a defence against AT&amp;T's hostile bid. Consolidated Goldfields also considered making a CVR issue as a defence against Minorco. There certainly seems to be an appetite among international investors for instruments which offer some form of protection against a poorly performing share price. For example, Roche, the Swiss pharmaceuticals group, decided to issue unusual 'bull spread' warrants rather than ordinary equity warrants in a Dollars 1bn issue in April. Just like CVRs, the 'bull spread' warrant structure offers protection against a collapse in the share price over the next three years - but at the cost of limiting annual returns. The warrants were issued when Roche shares were trading at around SFr7,500. On the exercise date in May 1994, holders of the warrants can either take one Roche share, a cash payment of SFr7,000, or, at the companies discretion, a cash payment of SFr10,000. There certainly seems to be a future for contingent financial instruments in one form or other. However, the permutations are many and the risks to the issuing company could be significant. Corporate financiers make two points: The promise to compensate for poor share price growth, and therefore presumably for poor earnings growth, is only credible if the issuer is a strong company. Roche, Dow Chemical, Rhone-Poulenc and Eli Lilley are all solid blue-chip stocks. However, the roster of potential issuers is limited to larger corporations able to weather a downturn in performance. Only a brave company would target its share price in the current uncertain economic climate. The experience of convertible bonds incorporating a put option - which allows the holder to cash in the bonds early - may have been chastening. 
ID: 155
HEADLINE: FT  14 MAY 91 / International Company News: SA Brewing in US expansion 
TEXT: SA BREWING Holdings, the diversified Adelaide-based brewing and manufacturing group, yesterday said it had more than doubled its share of the US water heater market through the USDollars 31.65m acquisition of Mor-Flo Industries. SA Brewing said the acquisition would give it 30 per cent of the US market for mains pressure water heaters, which accounts for around 7.6m units a year. The group entered the US water heaters market in 1989 thorough the purchase of Bradford-White Corporation of Michigan, which claimed around 12 per cent of the market. Mr Ross Wilson, SA Brewing managing director, said the acquisition of Mor-Flo, which has annual sales of around USDollars 200m, was in line with the group's long-term strategy of increasing its US presence. Mr Wilson said SA Brewing would rationalise the manufacturing operations of Mor-Flo and Bradford-White. The deal, which is subject to US regulatory approval, is expected to be concluded in August. 
ID: 156
HEADLINE: FT  14 MAY 91 / International Company News: Laurentian Group profits up 
TEXT: Laurentian Group, the Canadian financial services conglomerate, posted first quarter profit of CDollars 10.1m, or 18 cents a share, up 20 per cent from a year earlier, writes Robert Gibbens in Montreal. But the latest figure included a special gain of CDollars 2.5m, or 5 cents a share, on the sale of its interest in Laurwood, a British investment management firm. Excluding the special item, consolidated profit dipped 3 cents a share, due mainly to a weak quarter in the UK life insurance business. 
ID: 157
HEADLINE: FT  14 MAY 91 / International Company News: Memotec takes up attack against BCE 
TEXT: MEMOTEC Data of Montreal says a proxy fight to remove three of its directors is a thinly-disguised effort by telecommunications conglomerate BCE to gain control over Canada's overseas telephone monopoly. Mr William McKenzie, Memotec's chief executive, took full-page advertisements in Canadian newspapers yesterday, accusing BCE of seeking to undermine the 'independent direction' of its wholly-owned telephone subsidiary, Teleglobe Canada. 'This is not an issue about Memotec management,' Mr McKenzie said. 'The issue is control of Teleglobe.' Memotec announced yesterday that it earned CDollars 1.1m (USDollars 950,000m) in the first quarter, compared with a CDollars 4.1m loss a year earlier. Revenues rose by 9 per cent to CDollars 99.9m. The company ascribed the improvement mainly to better operating results from its telecommunications businesses and the restructuring of computer subsidiaries. BCE controls Bell Canada, the country's biggest domestic telephone company, and is also the controlling shareholder of telephone equipment maker Northern Telecom. BCE has a 31 per cent stake in Memotec, and has expressed its displeasure in the past over the company's management. However, the proxy fight was launched last week by Gordon Capital, a Toronto securities firm. BCE will have to abstain in the proxy vote, which is due to be taken at the annual meeting in Montreal this Thursday. BCE has an agreement with Memotec to vote only for its own nominees to the Memotec board. Gordon said last week that it owns no shares in Memotec. If its proxy fight is successful, however, its three nominees plus four directors representing BCE could outvote the rest of the board. Memotec's other large shareholders have not yet said how they will vote. They include the Caisse de Depot, the Quebec public-sector pension plan, and the Ontario municipal employees' pension fund. In its proxy solicitation, Gordon criticised Memotec for expanding into high-technology businesses by using cash mainly from Teleglobe. Mr McKenzie called Gordon's move an 'ambush' which gives inadequate time for shareholders or management to consider their positions. Memotec has hinted it might seek to postpone Thursday's meeting as part of its defensive tactics. 
ID: 158
HEADLINE: FT  14 MAY 91 / International Company News: MGM-Pathe reaches settlement 
TEXT: MGM-PATHE, the embattled Hollywood studio acquired by Mr Giancarlo Parretti's Pathe Communications for Dollars 1.3bn last year, has won a brief respite in its fight for survival. The company has reached an out-of-court settlement with a group of creditors who had filed a suit to force the studio into involuntary Chapter 7 liquidation. The studio has agreed to pay Dollars 15m of claims in full, and the creditors will join in a motion to dismiss the case. A hearing has been scheduled in a federal bankruptcy court for Thursday. The settlement with creditors was crucial to MGM-Pathe's survival. Credit Lyonnais, the French bank, had made a Dollars 145m loan contingent on the suit's dismissal. Credit Lyonnais, an important backer in several of Mr Parretti's acquisitions, has already provided at least Dollars 250m in loans to MGM-Pathe. The promised Dollars 145m loan should be sufficient to allow MGM-Pathe to release several films which have been delayed because of the studio's severe cash-flow problems. MGM-Pathe's future, however, is far from certain. About Dollars 70m of the Dollars 145m loan is already spoken for in undisputed claims which the company said it would pay as soon as the creditor petition is dismissed. And the company, which has sold its valuable film library, is in desperate need of a large hit film. Credit Lyonnais, which has been facing growing criticism at home over its dealings with Mr Parretti, has become more aggressively active in the studio's management. Pressure from the bank is believed to be behind the ousting of Mr Parretti from the helm of Pathe Communications last month. In addition, MGM-Pathe must reduce its obligations to Credit Lyonnais to Dollars 125m by the end of November or the bank will gain voting control of Pathe and will be allowed to sell 51 per cent of MGM-Pathe or Pathe Communications. As part of its plan to repay Credit Lyonnais, a 40 per cent stake in MGM-Pathe has been essentially put on the block. 
ID: 159
HEADLINE: FT  14 MAY 91 / International Company News: Moore Court battered by recession 
TEXT: Moore Court, North America's biggest business forms maker, was battered by the recession in the first quarter, writes Robert Gibbens in Montreal. Sales dipped 12 per cent to to USDollars 660m and earnings by 44 per cent to Dollars 29.2m, or 30 cents a share. 
ID: 160
HEADLINE: FT  14 MAY 91 / International Company News: Canada oil group to be privatised 
TEXT: THE CANADIAN government expects to proceed in mid-June with the first phase of privatising Petro-Canada, the country's biggest domestically-owned oil company. The PetroCan privatisation is the biggest so far in the programme started seven years ago by the government of Mr Brian Mulroney. Based on a preliminary prospectus filed late last week, analysts predict that the public offering of a 15 per cent stake in PetroCan will raise close to CDollars 500m (USDollars 434m). Foreigners can subscribe for up to 25 per cent of the issue, but no shareholder will be permitted to own more than a 10 per cent stake. Investors will be required to buy at least 50 shares. Small investors who apply before June 14 for between 50 and 250 shares will be given priority. RBC Dominion Securities is the lead underwriter. Analysts expect that, if only for political reasons, the issue will be priced attractively, about CDollars 15 a share, well below the company's net asset value. The preliminary prospectus was accompanied by an announcement that PetroCan suffered a CDollars 52m first-quarter loss, compared with profits of CDollars 40m a year earlier. The loss was blamed mainly on low refining margins and a CDollars 14m restructuring charge. PetroCan was created in 1975 to give Ottawa a window on the energy industry. Much of its growth came from the acquisition of Canadian assets from foreign oil companies, including Atlantic Richfield, Petrofina and BP. Assets were CDollars 7.3bn at the end of last year. 
ID: 161
HEADLINE: FT  14 MAY 91 / International Company News: Bankers Trust sheds 200 jobs in restructuring move 
TEXT: THE slump in corporate finance activity in the US claimed more victims yesterday when Bankers Trust, the New York banking group, announced the restructuring of its corporate finance department at the cost of 200 jobs. The job losses are a result of Bankers Trust's decision to merge the three units which covered worldwide lending and financing activities into a single Global Corporate Finance department which will provide commercial and investment banking services to the group's US and international clients. Although the redundancies will be spread throughout the group's offices across the world, the bulk will come from Bankers Trust's New York headquarters. The costs of compensating the 200 dismissed staff has already been accounted for by the severance pay expense reported in the first quarter. So far this year, the group has shed 600 of its 13,000 staff, and more redundancies are expected as part of a general cost-cutting programme. The lay-offs at Bankers Trust are a result of the worldwide downturn in corporate finance business, primarily caused by the slowdown in economic growth worldwide and the credit crunch in the US and Japan. Lower interest rates in the US have so far failed to spur any significant increases in bank lending to companies. Moreover, big mergers and acquisitions are still a rarity, and junk-bond financing remains in the doldrums. The result has been a sharp drop in income from corporate finance activity, an area of traditional strength for Bankers Trust. Although it has avoided some of the other problems afflicting US banks (it is considerably less burdened by bad real estate loans), Bankers Trust has not been immune to the corporate finance slump. Fees earned by the group from corporate finance business fell 23 per cent in the first quarter of this year, and in the whole of 1990 corporate finance fees were down by 27 per cent. As part of the restructuring, Bankers Trust has set up several new units, including those to cover the real estate and energy business. An integrated European merchant banking unit based in London that will tackle eastern European corporate finance has also been established. Mr Ralph McDonald, formerly head of corporate finance for North American and Europe, and Mr George Vojta, who was in charge of financing in emerging markets in less-developed countries, will be joint heads of the new global finance department, which will also handle lease and project finance and asset-backed lending. 
ID: 162
HEADLINE: FT  14 MAY 91 / International Company News: Hugo Boss holds payout as profits fall sharply 
TEXT: HUGO BOSS, the German men's fashion group controlled from Japan, yesterday reported a steep decline in profits for 1990 but said it would maintain the dividend. On sales slightly higher at DM922m (Dollars 534m) against DM884m, the company suffered a fall in net profits to DM28m last year from DM35.9m in 1989. Operating profits were DM67.7m, against DM90.9m. Earnings per share fell from DM62 to DM51. The company is holding its dividend at DM20 per share and DM21.50 per preference share. Hugo Boss said its earnings potential remained strong this year, but it was too early in the year to make a profit forecast because of the uncertain outlook for the German economy and the dollar. Mr Gunther Strothe, management board member for finance, said Hugo Boss's profit had fallen, largely due to DM30m in extraordinary depreciation on US activities. 'Disregarding the effect from the extraordinary depreciation on the parent company, its operating profit would have been DM88.9m - just under 14 per cent of sales - or DM7.8m more than the previous year,' Mr Strothe said. In the first four months of this year, parent company sales had risen by more than 10 per cent, he said, adding the company did not expect to take any extraordinary depreciations this year. Majority control of Hugo Boss was sold in December 1989 to Leyton House, a privately-owned Japanese group specialising in sports and leisure wear. Leyton is controlled by Mr Akira Akagi. Hugo Boss floated 20 per cent of its equity capital on the German market in March 1989. The shares were sold by the company's two founding brothers, Uwe and Holy Boss. 
ID: 163
HEADLINE: FT  14 MAY 91 / International Company News: Astra jumps 45% before tax 
TEXT: ASTRA, the Swedish pharma-ceutical company, yesterday exceeded market expectations by posting a 45 per cent jump in pre-tax profits to SKr757m (Dollars 122.4m) for the first quarter of 1991 as sales of its stomach ulcer drug Losec doubled. Analysts had predicted a 35 per cent growth in earnings for Astra, which was the best performer on the Stockholm bourse last year. The company, headed by Mr Hakan Mogren, had revised upward its forecast for the year, saying profits would climb by 30 per cent to SKr3.3bn. Its previous forecast had estimated growth at 25 per cent. Operating profits increased by 22 per cent to SKr598m. Improved net interest income from Astra's large cash reserves, which totalled SKr5bn at the end of March, and favourable exchange rates for income from its foreign subsidiaries contributed to the buoyant pre-tax earnings. Sales during the period increased by 27 per cent to SKr2.74bn, with turnover from Losec, Astra's largest-selling product, increasing to SKr577m from SKr284m a year ago. Marketing of Losec by licensees, primarily Merck in the US, raised the drug's total sales to SKr880m from SKr360m. Losec suffered a setback in the US in January when the US Food and Drug Administration (FDA) refused to approve the drug for first-line treatment of all ulcers. Astra said yesterday that it is holding talks with the FDA on widening its approval of Losec usage and it predicted that the FDA will make a decision in the near future. Losec was also introduced last month in Japan, potentially the biggest national market for the drug after the US. Drugs for the treatment of gastrointestinal diseases, dominated by Losec, had total sales of SKr626m, a 88 per cent increase. Drugs for respiratory diseases, however, remain Astra's largest product group, with sales climbing to SKr643m, a 26 per cent rise. The Turbohaler, an inhaler which delivers medication for asthma patients, has boosted sales for two asthma drugs. Sales of the new asthma agent Pulmicort increased by 57 per cent to SKr264m, while sales for the older bronchial drug Bricanyl rose by 19 per cent to SKr182m. 
ID: 164
HEADLINE: FT  14 MAY 91 / International Company News: Two NZ-based companies express interest in New Zealand Light Leathers 
TEXT: Two New Zealand-based companies have expressed interest in buying the 82 per cent stake in New Zealand Light Leathers put on the market by the UK company Strong and Fisher (Holdings) last week, writes Terry Hall in Wellington. Strong and Fisher said it was selling its shares in New Zealand Light Leathers because it wanted to focus on its UK operations. The remaining 18 per cent is still listed on the New Zealand Stock Exchange. The shares were bought by Strong and Fisher in 1988 and have a market value of about NZDollars 6.8m based on the last traded price of NZDollars 1.40. In 1988, the shares were selling at about 70 cents. 
ID: 165
HEADLINE: FT  14 MAY 91 / International Company News: CRA increases offer for Cail to ADollars 8.50 a share 
TEXT: CRA, the Australian mining group, yesterday attempted a knockout blow in its hostile takeover bid for Coal and Allied Industries (Cail) by raising its offer from ADollars 7.85 to ADollars 8.50 a share, valuing the company at ADollars 472m (USDollars 370m). CRA, a 49 per cent subsidiary of RTZ of the UK, holds around 13 per cent of Cail. The acquisition would probably allow it to overtake the Broken Hill Proprietary Company as Australia's biggest coal exporter by the middle of the decade. The group also declared its bid unconditional, and said it was confident of receiving acceptances for more than 50 per cent of Cail shares before the offer closes on Monday. However, Mr Neil Currie, Cail chairman, told shareholders in a letter that they should continue to reject the offer, which is pitched 10 cents below last night's closing price of ADollars 8.60 on the Australian Stock Exchange. The revised offer is also substantially lower than a valuation of between ADollars 10.70 and ADollars 11.20 put on Cail last week by Grant Samuel and Associates in a report commissioned by Cail. The report said the CRA offer failed to reflect the strategic value of the low-cost mines operated by Cail, Australia's second largest coal producer. CRA said the revised offer represented a premium of 33 per cent on the average market price for Cail during the current year, and warned it would not be increased. Analysts said it was unclear whether the offer would tempt sufficient shareholders to give CRA victory. However, National Mutual and BT Funds Management, which each hold around 7 per cent of Cail, said they would consider the offer. CRA has been cautious in its pursuit of Cail because of losses on its ADollars 300m purchase of most of British Petroleum's Australian coal assets in 1989, for which analysts say it paid too much. In a separate development yesterday, CRA said Novacoal, a 60 per cent subsidiary, had sacked 278 employees following a walkout at its Howick coal mine in the Hunter Valley, the premier coal-producing region of New South Wales. The walkout followed the sacking of three employees for refusing to comply with changes in work practices implemented to reduce losses running at ADollars 9.5m a year. The dispute is expected to go before an arbitration commission tomorrow but CRA said it would not continue to operate the mine at a loss. The mine, 40 per cent owned by Mitsubishi of Japan, produced 3m tonnes of steaming and coking coal last year. 
ID: 166
HEADLINE: FT  14 MAY 91 / UK Company News: Sun Alliance in South Korean link 
TEXT: SUN ALLIANCE, the UK's biggest insurer, has announced a co-operation agreement with the Lucky Insurance Company of South Korea, a part of the industrial and commercial conglomerate, Lucky Goldstar. Lucky is one of the largest non-life companies in Korea with total assets of over Pounds 290m. Sun Alliance will establish a representative office in Seoul, reinsure a portion of Lucky's local business and insure some of its overseas subsidiaries. The two companies will also exchange technical and market information. Sun Alliance is interested in the long-term prospects of sales in the rapidly growing South Korean life insurance market. Contact with Lucky was made via Wm McGee, a US underwriting agency, owned by Sun Alliance, which handles Lucky's US business. The deal is the third announced by Sun Alliance in the Far east in the last six months. Last December it established a new general insurance subsidiary in Indonesia in association with leading local business interests. In January it increased its share of the New Zealand market by buying a local subsidiary of the Guardian Royal Exchange. Sun Alliance also has a co-operation agreement with the Japanese company, Taisho. 
ID: 167
HEADLINE: FT  14 MAY 91 / UK Company News: Lancs &amp; London urges bid rejection 
TEXT: Lancashire &amp; London Investment Trust is urging shareholders to reject an Pounds 8.4m takeover offer from Anglo Scandinavian Investment Trust. Anglo Scandinavian, which owns 27.5 per cent of the trust, launched its bid on April 24 following its failure to obtain management changes at the end of last year. 
ID: 168
HEADLINE: FT  14 MAY 91 / UK Company News: Wm Cook buys MS offshoot 
TEXT: MS International, the diver-sified engineering group, is to sell Mech Cast, its steel alloy foundry business, to William Cook for Pounds 4.2m in cash. Mr Michael Bell, MS chairman, said that the disposal would transform the MS balance sheet and leave the group without borrowings. In the year to April 28, 1990 Mech Cast incurred a loss before tax of Pounds 57,528 from sales of Pounds 4.83m. However, indications are that in the year 1990/91, Mech Cast made operating profits of about Pounds 250,000. 
ID: 169
HEADLINE: FT  14 MAY 91 / UK Company News: The hidden timebomb in the convertible package / Explore issuing companies' varying approaches to dealing with the put option problem 
TEXT: IT SEEMED a good idea at the time. In the bull market of 1987 a number of companies issued convertible Eurobonds. They took advantage of rising share prices to set conversion prices at well above their then share prices. Further, they shaved the interest payments on the bonds by offering investors the right to redeem them, usually after five years, at a premium to the issue price. This would guarantee the bondholders a return roughly in line with interest rates at the time. But, the issuers thought, these put options were never going to be exercised. By the time they were due, the share price would have risen, the bonds would have been converted. The companies would have issued equity, and they hoped, the holders of the new shares would have been drawn from the pool of international investors who buy Eurobonds, thus widening the shareholder base. Now it is all too obvious that there was a flaw in this logic. The stockmarket crash of October 1987 meant that the share prices of many companies fell well below the conversion prices. Suddenly the put option, which had seemed unimportant, loomed as a potential liability. As 1992 approached, the year when many of these options become payable, companies realised they had problems. Unfortunately many of them also fell on difficult times. The prospect of a large liability worsened the outlook for companies already facing poor trading conditions, or reaping the whirlwinds of ill-judged expansions. Certainly it was not the instrument itself which was at fault, but the mistakes of the issuers. The existence of a convertible with a put option became enough, in some cases, to trigger a bear raid on the company's shares. In the case of Saatchi &amp; Saatchi, the advertising group, with its Pounds 176.5m convertible Europreference shares due to be redeemed for Pounds 211m in July 1993, the liability would have been sufficient to put the company into receivership. Now most of issuers have found an answer, if not a solution, to the problem. These answers range from conversion as planned, to a complete refinancing of the company. The essence of any such answer is to give the issuer the ability to meet any likely redemption without straining its balance sheet. THE WHAT PROBLEM SOLUTION Last year Tesco, the food retailer, was able to force its convertible holders to convert to shares because the group's share price had risen well above the conversion price. This is the ideal answer, since it was the outcome intended when the bonds were first issued. The company has in effect borrowed cheaply for three years - Tesco's convertible paid interest at 4 per cent - and has increased its share capital at a price higher than it was at the time of issue. THE GRIN AND BEAR IT ANSWER Many issuers have decided there is nothing for it but to pay up if or when the put is exercised. Most are providing for the extra interest which would be due, adding to their interest charges, with the provision usually accumulating in creditors in the balance sheet. Thus, if a put option is exercised, there should not be a sudden charge to profits, although the cash will have to be found and the bond refinanced. Providing is not an answer on its own, issuers must also find the cash for redemption. One side effect of making the provision is that, as Tesco discovered, having set supplemental interest against its profits, it could only bring the provision back into reserves, not profits, in its latest balance sheet. THE BUY-BACK With many of the convertible bonds trading well below their issue prices, companies have been able to buy some of them back, cutting their liability on exercise of the put. Storehouse and Next, the retailers, have both tried this route. Not surprisingly, bonds which have been languishing suddenly spring to life when a company announces a buy-back programme, so issuers cannot always retrieve much of the issue. Storehouse was able to buy Pounds 40.5m of its Pounds 69m convertible issue last autumn. It even made a Pounds 400,000 profit on the transaction. That leaves only Pounds 28.5m of the issue outstanding, which will cost the company Pounds 36.8m in April 1992 if the put is exercised, much less than the original liability of Pounds 89m. Next has two issues outstanding, and has bought some of each, with purchases of its larger 5 3/4 per cent bond made recently. It now has Pounds 78.6m of that issue outstanding, and Pounds 43.3m of its 6 3/4 per cent issue. That would present liabilities of Pounds 57.8m in January 1992 and Pounds 104.8m in October 1992. THE SALE OF ASSETS WAY OUT Companies which could not put off the liability, could at least prepare for it by raising cash. Storehouse has reformed its balance sheet through asset sales, and should have minimal net debt when its March 31 accounts are published. It should not have a problem in meeting the put in April 1992. Next's sale of Grattan, its mail-order subsidiary, for Pounds 168m will give it net cash until the October 1992 payment is made, and it now has agreed facilities from its banks. THE ROLLING PUT WHEEZE Corporate financiers who had helped companies get into a mess by issuing the bonds originally, tried to help them out by inventing the 'rolling put'. This idea was to put off the evil day by offering bondholders an attractive incentive to stay with their investments. When the first put date arrived, they would be offered another put perhaps five years later at a new interest rate. At first this seemed to excuse companies from providing for extra interest, since it once again reduced the likelihood of the put being exercised. But now many expect the first puts to be exercised. Burton, Hillsdown and Asda each have rolling puts, but of these only Asda is now not providing supplemental interest. Each expects to have no financial difficulty meeting the redemption. THE RIGHTS ISSUE REPLACEMENT If the bond is not to turn into shares, then a rights issue is another answer. That was London International Group's idea when it launched a Pounds 61.6m rights in January. That not only provides the cash to repay its Pounds 50m convertible in March 1992, it also increases the group's equity. Meanwhile LIG is providing for the extra interest. THE TOTAL REFINANCING DESPERATION MEASURE Saatchi's problems were so severe that the only way out was to refinance the group. Its Europreference shareholders were offered ordinary shares instead. Such was the bargaining power of these holders that they now have 64 per cent of the enlarged share capital. It is all too easy to blame the bonds themselves or the corporate financiers who dreamed them up for the problems which have arisen. But it is not their fault if the money raised was used to finance dubious expansion, or if the recession has shown up weaknesses in balance sheets. Companies in stable sectors, such as food retailers, were better able to cope with the possible liability than those in more cyclical businesses. Nor should it be forgotten that even those issuers which are forced by investors to redeem at a premium, have tapped a cheap source of funds meanwhile. Many of the redemption yields were set at between 8 1/2 and 10 per cent  - and the cost of money has generally exceeded those levels throughout the last five years. 
ID: 170
HEADLINE: FT  14 MAY 91 / UK Company News: Rebel EFG holders defeated over chief 
TEXT: ATTEMPTS BY several shareholders of EFG, which has interests in forestry and home and leisure products, to remove Mr Alan Joynes as chief executive was defeated for the second time at an EGM last week, writes Michiyo Nakamoto. Management and certain shareholders of EFG have been locked in a battle over the company's future since directors announced their intention to dispose of the core forestry business and concentrate instead on garden leisure products. EFG also warned that difficult trading conditions and high interest costs, together with exceptional and extraordinary charges and provisions, were expected to result in a loss of some Pounds 2.2m for the first half. It added, however, that a reduction in borrowings and costs had placed it in a better financial position to withstand the recession. In the year to September 30, EFG reported pre-tax losses of Pounds 84,000, compared with a profit of Pounds 2.01m previously, as high interest charges on borrowings of over Pounds 9m took their toll. The final dividend was passed. A second resolution seeking to declare the payment of a dividend was, by consensus, not put to the meeting. 
ID: 171
HEADLINE: FT  14 MAY 91 / UK Company News: Butler Cox recommends Pounds 14m bid from US group 
TEXT: BUTLER COX, the London-based management consulting company specialising in information technology, is to be sold to Computer Sciences Corporation of the US in a cash deal worth Pounds 14.3m. CSC, a large computer systems integration company with an international reputation for large industrial and government projects, said yesterday that it had agreed to pay 245p per share for the entire share capital of Butler Cox. Following the statement shares in Butler Cox virtually doubled from 131p to 230p. The company was floated on the London stock market in May 1989 at 175p. Butler Cox directors, who between them hold 36.7 per cent of the capital, are unanimously recommending acceptance of the offer. Mr George Cox, managing director, said yesterday that 'the price reflects the potential of the business.' He said the downturn in the UK economy had hit both the level of profitability and the share price which had made it impossible for Butler Cox to make acquisitions using its own paper. However, he pointed out that the company remained profitable, had grown in cash and had avoided compulsory redundancies. In its last financial Butler Cox experienced a 42 per cent fall in taxable profits to Pounds 760,425 (Pounds 1.32m) on turnover up nearly 15 per cent to Pounds 10.73m. CSC, with headquarters in Los Angeles, had net income last year of Dollars 65m (Pounds 38m) on turnover of Dollars 1.7bn. The two companies said that Butler Cox's presence in Europe would complement CSC's strength in North America. Butler Cox is unique in its sector in that its conventional consultancy activities are underpinned by a syndicated research foundation. Members of the Butler Cox Foundation include many of the most prestigious companies in the UK and mainland Europe, brought together by a common concern to make the best use of information technology. Last year Butler Cox added an education arm through the purchase of Cranfield Information Technology Institute. CSC announced two years ago that it intended to grow the commercial side of its business through acquisition and had set aside a war chest of Dollars 500m for purchases world-wide. It already owns Index, a consultancy with offices in Boston, Los Angeles, New York and London with strong links to Harvard and to Massachusetts Institute of Technology. The US company said its intention was to bring together Butler Cox and Index to form a global consulting group. The two companies have a total of some 800 companies worldwide subscribing to their research programmes. 
ID: 172
HEADLINE: FT  14 MAY 91 / UK Company News: Discontinued activities behind loss at Cronite 
TEXT: LOSSES arising from discontinued businesses, two of which were placed into administrative receivership, resulted in Cronite Group, the Birmingham-based industrial holding company, plunging into loss at the interim stage. For the six months to March 31, the group posted a loss before tax of Pounds 2.21m compared with a previous profit of Pounds 781,000. The deficit stemmed from a trading loss of Pounds 1.88m at four businesses which the group has discontinued. Cronite Alloys, which recycles stainless steel, and Abtex, which makes fire extinguishers, were placed into administrative receivership at the request of the company. The move came after it emerged that Alloys had a shortfall in expected income of about Pounds 400,000 while the value of certain of its stocks had been overstated in management accounts. The group also decided that Abtex, where it discovered thefts approaching Pounds 1m, could not be returned to profitability without greater financial resources than it had envisaged. Mr Jim Butler, chairman, said efforts were being concentrated on a capital reconstruction programme for which the group hoped to come up with proposals by the year end. The other businesses being discontinued were Hy Tech Machining and North American Cronite. Trading profits of the businesses being continued, which include Cronite Castings and Atkinson, a manufacturer of fabrications, fell to Pounds 327,000 (Pounds 1.48m) with the group being hit by difficult conditions in the UK and the high value of sterling which hindered exports. Turnover amounting to Pounds 22.57m comprised Pounds 11.94m from continued businesses and Pounds 10.64m from discontinued operations. 
ID: 173
HEADLINE: FT  14 MAY 91 / UK Company News: Offshoot's receivership threatens West - Svenska's action puts capital reorganisation in doubt 
TEXT: THE APPOINTMENT of receivers at a subsidiary of West Industries, the heavily indebted engineering and construction group, not only threatens the group's attempt to return to financial health, it also jeopardises its ability to survive as an independent entity. Svenska Handelsbanken, the Swedish bank, appointed administrative receivers at Audit &amp; General, after it failed to clear a Pounds 5.8m overdraft. West acquired A&amp;G, an engineering, nursing homes and property group, and five subsidiary businesses in March. The move by Svenska was a blow to West, which was in the final stages of negotiations with its principal bankers, with a view to converting approximately Pounds 3m of debt into redeemable preference shares. This swap would have allowed a rights issue to raise about Pounds 3m to proceed. More seriously, several other of West's businesses were used as collateral against the Svenska debt. Unless West's banks agree to take on this debt, calling in the outstanding collateral could have a domino effect on the other businesses. The decision by Svenska, which had been privy to West's refinancing discussions, has prompted West to file a complaint with the Bank of England. Mr Chris Charlton, chairman of West, said: 'We are highly displeased with the actions of the bank, which were inappropriate and precipitous. It breaches the clearing rules recently laid down by the Bank of England recommending that banks give due time to any company with restructuring or refinancing plans to allow those plans to go ahead.' Had Svenska been willing to wait a week or even a day, the situation could have been cleared, he added. Instead Svenska, which is fully secured against its loans, chose to lay its claims on A&amp;G's assets. Svenska's relationship with A&amp;G had been rocky for some time. Part of the debt was to be repaid through the disposal of the nursing home businesses. The sale was, however, blocked by Svenska, presumably on the grounds that the net assets were worth more than the Pounds 3.9m being paid. For its part, A&amp;G had not always been helpful in providing the bank with financial information and interest payments had been late from time to time. The demise of its subsidiary is the latest in a series of upsets that has befallen West in recent years. Since it was bought in 1987 in a reverse takeover by Celtic Haven, an engineer and building contractor, its history has involved numerous twists and turns. It began as a pest control and machinery testing business but was transformed after major management changes in 1988, into an assortment of businesses with a growing leaning towards leisure. Throughout 1989-1990, the company embarked on a less-than-successful acquisition spree, buying into restaurants in London and the US in its attempt to build up its leisure side. However, by the time it acquired A&amp;G, the group was already reviewing its leisure operations. The purchase was part of a restructuring programme aimed at bringing the group's focus back to light engineering. During this time its share price plunged from a high of 79 1/2 p on March 27 1987, just after it was floated, to 2p at yesterday's close. In the year to June 30, the group incurred a pre-tax loss of Pounds 1.79m, against profits of Pounds 1.32m. Group borrowings of approximately Pounds 18.5m compare with net assets of about Pounds 9m. A&amp;G's history is no less colourful. It was bought by Humberside Electronic Controls in 1988 in a reverse takeover, and embarked on a buying binge throughout 1989 which left it with several engineering companies, nursing homes and properties. A&amp;G's last reported results showed a pre-tax loss of Pounds 646,000 in the year to the end of June. Borrowings totalled Pounds 7.74m at the year-end, against net assets of Pounds 5.56m. Nevertheless, there are some grounds for hope at West. Mr Charlton emphasised that the group's other banks were fully supportive. The receivership relieved the company of considerable debt owed by A&amp;G, and 'there are precedents for rescue operations that actually achieved better results for a company in this kind of situation,' said Mr Piers Harford at Albert E Sharp, West's financial advisers. There was a possibility, for example, that West could re-acquire two of the businesses from the receivers, for no increase in its gearing, he said. Mr Piers admitted that there had not been many successful examples of such 'Texas cavalry rescues' and there was no knowing whether West and its financial advisers could achieve success in the present banking environment. 'Even in 1974 there was nothing like this mass walking away of banks,' he said. 
ID: 174
HEADLINE: FT  14 MAY 91 / UK Company News: County NatWest in Pounds 25.7m hotels buy-in 
TEXT: County NatWest, the merchant banking arm of National Westminster Bank, has completed a Pounds 25.7m management buy-in of a group of eight hotels. The company is to be known as Lyric Hotels and the transaction involved the simultaneous acquisition of the hotels from four vendors. Lyric has been formed by Mr Alan Goodenough, who will be managing director, and Mr Norman Jones, finance director. Both worked in the Character Hotels division of Pleasurama, subsequently taken over by Mecca Leisure. Mr Nat Solomon, a former chairman of Pleasurama, will join the Lyric board as non-executive chairman. Equity of Pounds 11.1m was arranged by County NatWest Ventures and was invested in the form of ordinary shares, subordinated loan notes and deep discount loan stock. 
ID: 175
HEADLINE: FT  14 MAY 91 / UK Company News: Sanderson Electronics dips 
TEXT: SANDERSON Electronics, the computing services group which graduated from the USM to a full listing in January, experienced a profits fall of Pounds 280,000 to Pounds 1.5m pre-tax for the half year ended March 31. The associates' contribution fell to Pounds 337,000 (Pounds 649,000) while interest charges accounted for Pounds 118,000 more at Pounds 264,000. The 16 per cent profits downturn was struck from a turnover Pounds 4.16m higher at Pounds 10.61m. Earnings per share declined by 3p to 11p. The company now pays two interim dividends and a second payment of 3.3p makes an 8.7p total for the 1990-91 year. For the 1989-90 year an interim of 3p was paid but there was no final. However, the first interim for the period under review was paid on the day the final would have been paid. Mr Paul Thompson, chairman, said that comparing the amounts paid in the calendar years, 8.7p is being paid in 1991 against 8.4p in 1990. Looking ahead, Mr Thompson said immediate progress in the UK continued to depend on the effects of the recession. He pointed out, however, that the group was well positioned with its associates to continue to expand its activities on an international basis as opportunities arose. The shares closed 13p higher at 138p. 
ID: 176
HEADLINE: FT  14 MAY 91 / UK Company News: Doctus to sell marketing arm 
TEXT: DOCTUS, the management and personnel consultancy, is negotiating the sale of Wallace Group, its marketing subsidiary. Discussions are at an early stage, but if the deal comes off, it could more than wipe out Doctus' Pounds 25m debt, writes Jane Fuller. Wallace came into Doctus in June 1989 through the Pounds 26m merger with Prospective, formerly the Pineapple Group. The all-share deal brought in a considerable amount of debt. Prospective had acquired Wallace, a US-based group, in 1988 and the merger with Doctus had saved it paying up to Pounds 43.75m in shares as a deferred consideration. Mr Brian Blake, chairman of Doctus, said at the time of the Prospective deal that he wanted to build up a diversified business services group. Marketing accounted for 60 per cent of operating profit last year. Last month Doctus issued a profit warning for the six months to March 31 and announced that it had decided to focus on management consultancy and 'human resources', a technical staff agency, career counselling and training - hence the question-mark over the marketing side. A shake-up of management also saw Mr Blake shed the chief executive's role. Doctus' share price has fallen from 138p to 33p since last May. It gained 1p yesterday. 
ID: 177
HEADLINE: FT  14 MAY 91 / UK Company News: IMI warns of profit fall in 1991 first half 
TEXT: IMI, the international engineering group, yesterday warned shareholders that pre-tax profits for the first half would be lower than in 1990, and that full year results were unlikely to match those of last year. The shares closed 3p lower at 233p, following a 6p fall on Friday Sir Eric Pountain, the chairman, told the annual meeting in Birmingham that it was difficult to predict the results with any degree of precision. Much would depend on the timing of an upturn in the US and UK economies. 'Personally I do not expect to see any recovery in IMI's trading before the final quarter at the very earliest,' he said. His gloomy view of the immediate trading prospects echoed those made last week by Mr David Lees, chairman of GKN, who noted the falling away of demand in the first quarter of 1991, continuing the trend of the latter months of 1990. Since then, Mr Lees said, there had been few signs of improvement, and first half results would be down on the second half of 1990. These two views emphasised the gulf between engineering industry leaders and the UK Government on the state of the economy. Government predictions of an upturn in the middle of the year were not seen as having a strong foundation basis by those active in the marketplace. Both GKN and IMI had been engaged in cost reduction exercises. Mr Gary Allen, chief executive at IMI, said this year the group would spend Pounds 50m on new equipment to increase productivity. Both, too, have cut the size of their payrolls. Mr Lees announced that in the first four months of this year GKN had cut 1,100 jobs. This reduced the number employees worldwide to 31,200 from the end-1990 total, and followed a reduction of 3,600 jobs in 1990. Of the 1,100 jobs, 850 were in the UK. IMI, with a total payroll of nearly 20,000, had announced or was planning job losses of 1,000 this year. In 1990, IMI made pre-tax profits of Pounds 115.1m and GKN produced Pounds 172m. 
ID: 178
HEADLINE: FT  14 MAY 91 / UK Company News: RMC strengthens stake in German housing market 
TEXT: RMC GROUP is strengthening its position in the growing German aerated concrete market. Its 63.6 per cent owned German subsidiary, Readymix Aktiengesellschaft fur Beteiligungen (RMA), is paying Pounds 33.7m and merging its Durox aerated concrete company with Ytong AG, one of Europe's biggest aerated concrete products groups. This lifts RMA's stake in Ytong from 29.8 per cent to 82 per cent. In a separate move an RMC associate, Readymix Berlin, has paid about DM25m (Pounds 8.4m) for Laussig, which operates a factory in Leipzig in eastern Germany producing about 300,000 cubic metres of aerated concrete annually. Ytong, which will help manage the Leipzig plant, produced 1.85m cubic metres of concrete last year from seven plants in Germany and one each in Austria, France and Portugal. Durox operates three factories in Holland and one in Belgium producing about 700,000 cubic metres of aerated concrete, which is used to produce lightweight blocks used widely in housebuilding. Germany is one of the few European housing markets expected to grow during the next 12 months with residential development forecast to rise by about 6 per cent this year. An important factor behind the increased demand has been the flow of immigrants into the western part of the country from the former East Germany. In 1990 Ytong made pre-tax profits of DM31.3m (Pounds 10.5m) on sales of DM450m (Pounds 152m). Mr Derek Jenkins, finance director of RMC, said the purchase of an increased stake in Ytong would make a positive contribution to the group's earnings this year. 
ID: 179
HEADLINE: FT  14 MAY 91 / UK Company News: W Scaffolding loss and rights issue 
TEXT: Difficult trading, almost doubled interest charges and provisions for bad debts and reorganisation costs have pushed USM-quoted Westminster Scaffolding into a loss of Pounds 82,000 for the year ended October 31 1990, against a profit previously of Pounds 1.47m. With losses per share of 1p (earnings 9.4p) the final dividend is omitted, leaving the year's payment at 2p (3p). Because of the situation in the property market the directors have decided to sell certain properties for Pounds 5.87m, of which Pounds 2.83m in cash is payable immediately, and to strengthen the capital base by raising Pounds 3.54m net through a 3-for-2 rights issue at 25p each. Mr Tom Greenham, chairman, has undertaken to subscribe for 3.2m shares - 21 per cent of the issue. The shares closed 5p down at 33p. 
ID: 180
HEADLINE: FT  14 MAY 91 / UK Company News: Tilbury builds up European links 
TEXT: TILBURY GROUP, the construction and property combine, is selling two large developments to a new joint venture, Tilbury Phoenix, to be owned with Philipp Holzmann, the German contractor, and Girozentrale Bank of Vienna. Holzmann already owns 29 per cent of Tilbury. Advanta, a German investment group, holds a further 14 per cent. Holzmann and Girozentrale will take a 33 per cent stake in the venture. The sale price of the two adjacent properties, The Phoenix Development and St James' Business Park in Glasgow, is understood to be about Pounds 27m. The sites comprise 300 acres for which planning permission has been granted for a mixture of business, retail and industrial parks as well as for fast food and hotel facilities. Tilbury will retain a 67 per cent interest in the venture which will be included as a subsidiary in its group accounts. Mr Michael Bottjer, chief executive of Tilbury, said: 'The joint venture strengthens our partnership with Holzmann. As well as being our largest shareholder, Holzmann has indicated their support in a number of projects we are considering - including the Novosur property joint venture in Madrid.' 
ID: 181
HEADLINE: FT  14 MAY 91 / UK Company News: Holmes shares fall as sale collapses 
TEXT: Holmes Protection, the financ-ially stretched New York security and alarm company quoted in London, has failed to secure the sale of its New Jersey businesses. The shares fell 1p to 1 1/2 p. Alert, the buyer, told Holmes it could not proceed with the purchase as it had not been able to secure the necessary financing. Holmes, which had extended the closing date for the deal by 90 days for Alert to find financing, hoped to realise Dollars 17.5m-Dollars 18.5m from the sale. The group had planned to use the proceeds to repay part of its Dollars 61m of debt, of which Dollars 24.6m was due in January and March. Last month the group's accounts were qualified by its auditors subject to the company's ability to continue as a going concern. 
ID: 182
HEADLINE: FT  14 MAY 91 / UK Company News: GKN plans French joint venture in AFV market 
TEXT: RATIONALISATION of the European armoured fighting vehicles market accelerated yesterday as GKN Defence, the UK-based defence subsidiary of GKN, and Giat Industries of France announced a possible joint-venture in the medium armoured vehicle market. The two companies have signed a memorandum of understanding to study the feasibility of common solutions for the French and British markets. The agreement, if successful, could secure GKN's future as a manufacturer of armoured fighting vehicles (AFVs). 'With manufacturers as diverse as GKN, VSEL, USH's Alvis, Royal Ordnance and Vickers, the British AFV market is grossly oversupplied,' explains Mr Sash Tusa, a defence analyst at Robert Fleming. 'But in the long term, this deal could open up the continental market to GKN and provide economies of scale for joint Franco-British manufacture.' The move follows encouragement from Mr Alan Clark, the defence procurement minister, for increased co-operation in acquiring defence equipment between France and the UK. The two countries have similar requirements for equipment which can be used outside the Nato area and which is suitable for export. The policy's aim is to reduce procurement costs. Giat's decision to forge links with GKN follows a nine-month flurry of alliances and expansion since it was made an independent group by the French government last year. In recent months, the group has reshaped the French AFV sector by signing joint development and manufacturing accords with the other French AFV companies, Creusot-Loire - an engineering subsidiary of Usinor-Sacilor, the steelmaker - and Renault Vehicules Industriels, the truck-making unit of Renault. Mr Pierre Chiquet, Giat's chairman, said yesterday that the accord was in keeping with the 'pattern of Europeanising armament land programmes and companies'. 
ID: 183
HEADLINE: FT  14 MAY 91 / UK Company News: Deadline for Chelsea FC draws closer 
TEXT: THE DEADLINE for Chelsea Football Club to decide whether to buy its Stamford Bridge ground or leave it came closer to definition yesterday with the appointment of an independent valuer. The 11.7-acre site in Fulham Road is owned by Cabra Estates, which has been in dispute with Chelsea's chairman Mr Ken Bates virtually since it acquired the ground from Marler Estates in April 1989. Mr William Wells, a partner in Chesterton, the London firm of surveyors, has the job of determining the value of the ground in August 1988, when Chelsea exercised an option giving it the right to buy at a price adjudicated by a surveyor. Mr Wells is expected to take four to six weeks to produce the valuation, which is supposed to be binding on both parties. In March 1988 Savills, another London firm, placed a figure of Pounds 40,000 on it, taking into account Chelsea's tenancy (which expired in August 1989) and planning consent for predominantly residential redevelopment. It has since been revalued at Pounds 30m. After Mr Wells has reached a decision, Chelsea will be given a reasonable period - which Cabra reckons to be three months - to come up with the money. This could, however, take the process into the next football season and Mr John Duggan, chairman of Cabra, has indicated that he probably would not evict the club in mid-season. He said yesterday that he hoped the valuation would 'quickly resolve the uncertainty that has hung over the site.' Mr Bates was unavailable for comment. 
ID: 184
HEADLINE: FT  14 MAY 91 / UK Company News: Greenall Whitley edges up to Pounds 24.1m - Change of name is intended to reflect change of identity 
TEXT: GREENALL WHITLEY, which intends to change its name to Greenalls Group to reflect its switch from regional brewer to national pubs and hotels operator, yesterday reported interim pre-tax profits marginally higher at Pounds 24.14m, against Pounds 23.74m. Trading profit for the six months ended March 29 1991 increased by 10 per cent to Pounds 21.25m (Pounds 19.32m) on turnover down by 7.4 per cent to Pounds 225.5m (Pounds 243.46m). Fully diluted earnings per share were unchanged at 12.6p but the interim dividend is raised to 4.4p (4p). With full provision made in last year's accounts for the brewery closures, operating profits on pubs and brewing of Pounds 19.2m were not strictly comparable with last year's Pounds 16.42m. Mr Christopher Hatton, chairman, said he expected benefits from the closures to result in a 'modest increase' over the full year. 'Trading performance in our pubs has been sustained despite the most difficult economic conditions we have experienced in recent years,' he added. Talks were being held with both national and regional brewers with a view to extending and upgrading the pub estate, which was offering a wider choice of beers to customers. Mr Andrew Thomas, managing director, said yesterday that Pounds 25m-Pounds 30m was earmarked for this upgrading. Operating profit on catering inns and restaurants of Pounds 2.18m (Pounds 1.9m) was adversely affected by a reduced level of activity in the accommodation market; but the group's off-licences weathered the economic difficulties well, raising their profit contribution to Pounds 1.45m (Pounds 1.29m). The Gulf War and recession depressed the group's hotel trade in both the UK and US. Operating profits were down from Pounds 8.35m in last year's buoyant first half to Pounds 5.88m. A 5 per cent increase in room rates helped compensate for a 6 per cent fall in occupancy. Profit at the pre-tax level was hit by a fall in the level of property disposals from Pounds 4.42m to Pounds 2.89m, but it benefited from a Pounds 1m reduction in interest charges on lower borrowings. COMMENT The trading performance of Greenall's pub estate over the half year is flattered by the treatment of the costs of closing its breweries; but the group appears to be getting off to a fair start on its chosen path as a pubs and hotels operator. Management is focused on upgrading the pub estate. Customers are already getting wider choice and margins are improving. Despite continuing economic difficulties, improvement is also expected on the hotels side from a combination of cost controls and sustained marketing. Analysts do not seem inclined to quarrel with the group's claims to have established a firm base for further progress. Full year pre-tax profits are expected to be slightly above last year's Pounds 62.23m, with earnings per share marginally down from 34.8p to 33.5p, putting the company on a prospective p/e of 10.2. 
ID: 185
HEADLINE: FT  14 MAY 91 / UK Company News: Sutcliffe Speakman listing restored 
TEXT: Sutcliffe Speakman, the environmental services company which has been rescued from the brink of receivership, had its stock market listing restored yesterday after six months' suspension. The share price closed at 16 1/2 p, which compares with the suspension price of 45p and 10p for the 150m new ordinary shares issued as part of the refinancing package proposals which were announced last month. Sutcliffe estimated that it had made a loss of Pounds 15.2m in the year to March 31, after exceptional and extraordinary items and tax. 
ID: 186
HEADLINE: FT  14 MAY 91 / Waiting for the eagle to strike again: Anheuser casts a cautious eye on growth 
TEXT: For more than a decade, Anheuser-Busch of the US, the world's biggest brewer, has been expected to impose its bulky presence on the international beer market. Its intentions have been a constant source of speculation - most recently as a possible bidder for Allied-Lyons, the UK food and drinks group. Yet, although the St Louis-based brewer produces more than 100m hectolitres of Budweiser, Busch, and Michelob beers a year - 40m hls more than the entire UK beer production - it exports only 3 per cent of its output. 'Our current strategy is more cautious than bold,' Mr August Busch, the chairman, admitted in the company's recent annual report. But he added: 'Longer term, the international beer mar-ket will become a more important source of volume and profits.' For the next few years, however, Anheuser will concentrate on the US domestic beer market where its potential growth is still huge. It has led the US beer industry since 1957. Last year, it increased its share of the total US market by two points to 43.7 per cent, with net sales worth Dollars 7.3bn (Pounds 4bn). Anheuser now sells twice as much beer as its nearest rival, Miller Brewing, owned by Philip Morris, the US foods and tobacco group. The concentration of the US industry is continuing. Anheuser, Miller, and third-ranked Adolph Coors, account for 75 per cent of the market. In the next five years, the three groups will control 85 per cent, Mr Jerry Ritter, Anheuser's chief financial and administrative officer, confidently predicts. 'Anheuser is well on track to achieve its goal of a 50 per cent market share by the mid-1990s,' he says. Its progress towards that priority target appears relentless. First-quarter sales this year suggest that Anheuser has taken a doubling of excise tax on beer in its stride, just as it coped with last year's price discounting by competitors. Its interests in theme parks, food products, can manufacturing and baseball -the company owns the St Louis Cardinals - do not distract from its commitment to brewing. Its brand marketing is aggressive, sustained and richly funded. Last year, it spent Dollars 613m on advertising. It has a dedicated nationwide distribution system. Budweiser brands account for one in every three beers sold in the US. More than half the country's 80m beer drinkers aged between 21 and 27 years are Bud consumers. Anheuser has also not been afraid to innovate. Bud Dry Draft, a beer with less sugar and no aftertaste was launched nationally last year and sold 3m barrels. The beer was judged one of the most successful new product introductions in the industry's history, even though some of its sales were gained from other Budweiser brands. This year, Anheuser is test marketing two new Michelob brands. 'We are developing new products to meet new tastes and segmenting the market further,' says Mr Ritter. With US brewers such as Stroh and Heileman losing share and the beer market still growing, if slowly, Mr Ritter calculates that there will be up to 5m barrels a year of new business to be won up to the middle of the decade. Against that background, he says: 'There is no great sense of urgency about plunging into high-risk areas overseas.' For the moment, at least, there is no inclination to change tactics by striking boldly to capture a brewer such as Allied-Lyons. 'We are quite willing to make investments in brewing assets abroad,' says Mr Ritter, 'so long as we can maintain our pattern of seeking a fair return on capital for shareholders.' The 'outrageous' prices paid over recent years for UK and European breweries would make that impossible. 'There will be opportunities later to buy assets, if necessary, at reasonable prices,' he suggests. Anheuser's international progress so far has been made mainly through licensing agreements with national brewers. These include Suntory in Japan, its largest export market, GrandMet in the UK, Guinness in Ireland, Labatt in Canada, Carlsberg in Denmark, and Oriental Brewing in South Korea. Such agreements have generally worked well. Budweiser is the leading international brand in Japan with 60 per cent of the category. In Canada, it has captured 4 per cent of the beer market. Sales in Ireland grew 52 per cent last year; and in the UK, which accounts for 80 per cent of its European sales of 657,000 hls annually, Budweiser is one of the fastest growing premium lagers. The licensed brewers take a large share of the profits, however, and the uncertainties of such agreements was illustrated by the acquisition of Grand Metropolitan's breweries this year by Courage, the UK's second-largest brewer. Mr Ritter confesses that this deal, which put Anheuser's Budweiser in the same portfolio as its US rival's Miller Lite, has caused 'very great concern'. Anheuser is discussing the situation with Courage and seems to have decided that, because of Miller's different positioning as a standard lager, it may be able to live with the arrangement. Courage, however, will have to provide some guarantees. 'The key factor,' says Mr Ritter, 'is the amount of attention that our brand will get. We have to ensure that it does not come to be seen as just one in a herd of premium lagers.' Anheuser sees 'great opportunities' for the future in the UK and continental Europe as the brewing industry restructures, trade barriers come down, and former communist states move to market-based economies. It is optimistic about resolving its long-standing trademark dispute with Czechoslovakia's Budweiser brewery and perhaps developing some form of joint venture. To strengthen its position in Europe generally, Anheuser established its own sales, distribution, and marketing organisation covering 17 countries last year. European sales volumes promptly rose 20 per cent. Budweiser is now listed by all the UK's leading brewers, and the foundations for future growth have been reinforced by its introduction into Greece, Sweden and Belgium. 'By moving slowly, we have gained knowledge of, and experience in, foreign markets without tying up significant capital,' says Mr Ritter. 'We feel confident that we now know the market inside out,' he adds. Bullish words, perhaps, but competitors may well detect an ominous note. 
ID: 187
HEADLINE: FT  14 MAY 91 / Schneider wins Square D battle 
TEXT: SCHNEIDER, the French electrical equipment group, has won a battle lasting almost three months to take over its US competitor, Square D, following a 12.5 per cent improvement to Dollars 2.23bn (Pounds 1.29bn) in the value of its bid. The French company said yesterday that it had reached agreement with Square D on an offer of Dollars 88 a share. This compares with Schneider's initial offer of Dollars 78 a share, and represents an increase of Dollars 250m in the overall value of the deal. Square D's management has fought bitterly against the Schneider bid since it was launched in February, but it was forced to negotiate after the US Department of Justice announced last Friday that it had no anti-trust objections to the deal. The government's decision was believed to be an indication that Square D would lose its legal battle against the merger. It was pressing an anti-trust lawsuit in a US District Court in New York, which has now been withdrawn. Mr Didier Pineau-Valencienne, Schneider's chairman, immediately flew to New York with his bankers, Lazard Freres, to meet Mr Jerre Stead, chairman of Square D, and his advisers, Goldman Sachs. Square D will now drop its lawsuits against Schneider, which will withdraw the list of candidates it had put up against the current board. Mr Pineau-Valencienne said yesterday that the deal would create one of the world's leading groups in the production of low- and medium-tension electrical distribution equipment, and would also considerably strengthen his group's position in the field of industrial robots. He said that the additional Dollars 10 a share was justified by the successful conclusion of a friendly agreement, as well as by the improvement in economic conditions in the US. 'At Dollars 88, the price works out at 19.2 times 1990 earnings per share, where the market values the sector at an average of 18.9 times. On book value, we are paying 2.8 times book, compared with a sector average of 2.6. In other words, we are buying the company in dollars at the market price, without a control premium,' he said. The cost of the takeover will be funded half from money provided by Schneider and by its subsidiaries Merlin Gerin and Telemecanique, and half by a bank loan provided by Societe Generale and Paribas. 
ID: 188
HEADLINE: FT  14 MAY 91 / Berlin's back against the wall: The struggle to create a European aviation centre and an east-west gateway 
TEXT: Pigeons still fly and nest in the large aircraft hangar at the run-down airport of Schoenefeld in what used to be East Berlin. Although Lufthansa has spent DM20m (Pounds 6.7m) modernising the old hangar to turn it into a maintenance base for Boeing 737 jets, the airline has so far failed to remove all the pigeons. The investment reflects both the ambitions and difficulties of Lufthansa, which, in the words of its chairman Mr Heinz Ruhnau, wants to transform Berlin into 'a new centre of European aviation and a gateway between east and west', following the unification of the two Germanys. Lufthansa returned to Berlin last October after a 45-year absence. It was an emotional moment. The airline was founded in Berlin in 1926. After the second world war, it was shut out from its home base with only the allied airlines, including British Airways, Air France and Pan American, allowed to use the three air corridors between Berlin and what was West Germany. The German flag carrier has wasted little time in re-establishing itself in Berlin. 'From zero, we now operate 286 weekly flights into Berlin,' said Mr Ruhnau, whose successor as Lufthansa chairman is expected to be announced tomorrow. But the euphoria has been tempered by the practical difficulties of the reunification process and, in the case of Lufthansa, of recreating a base in the city. Schoenefeld is just one example. 'The hangar was in a dreadful state,' said Mr Karl-Friedrich Rausch, Lufthansa's manager for aircraft maintenance in Berlin. He was walking around the maintenance plant which, until this year, was used by Interflug, the former East German airline which has just stopped its scheduled flights. 'We called in the Rentokil people but there are still some pigeons left,' he added. But the pigeons are the least of Lufthansa's worries in trying to expand its operations. The airline was planning to use Schoenefeld to launch new international services from Berlin because there was no room for expansion at the congested airport of Tegel in the former western part of the city. 'We started a service to New York this year but were forced to drop it. No one wanted to fly from Schoenefeld because of the state of the airport,' explained a Lufthansa official. Plans to improve and modernise Schoenefeld are in limbo. Mr Ruhnau is now campaigning for the construction of an airport 30 miles south of Berlin on the site of the present Soviet military air base of Sperenberg. This would provide the necessary infrastructure to meet the expected growth in air travel demand in the Berlin area. Even if he succeeds in persuading the authorities, it will take years to build the airport. Berlin's problem is acute. At present Tegel handles nearly 7m passengers a year, while Schoenefeld serves about 3m passengers largely with flights operated by east European carriers. 'By the year 2005, we expect demand in Berlin to rise to about 30m,' Mr Ruhnau said. 'Tegel could be enlarged but because it is in the middle of the city it cannot be expanded to handle more than 7m passengers a year. Schoenefeld could be expanded to serve 12m to 13m passengers a year but faces big problems. Berlin basically needs a new airport.' But it is not only the lack of adequate new airport capacity which risks clipping Lufthansa's ambitions. The current state of disarray of the Soviet and east European economies is expected to delay the development of east-west air travel. As the national flag carrier, Lufthansa faces the additional political pressure of helping to provide employment and new economic opportunities for former East Germans. 'The wall has come down but a new economic poverty wall has been erected between the rich west and the poor eastern side,' said a member of the Berlin Senate. Mr Ruhnau originally proposed to acquire a 26 per cent stake in Interflug and to absorb it gradually into the Lufthansa family. But the Treuhand, the body charged with selling or closing east German companies, as well as the German cartel office were opposed to the deal because they feared it would give Lufthansa a monopoly in Berlin. British Airways also showed an interest in buying a large stake in Interflug to help preserve its position in the Berlin market after unification. But BA was never able to see the Interflug accounts to help it decide whether to make such an investment. Instead BA, now facing intense competition from Lufthansa on internal German airline services, plans to form a new German-based airline with German banks and other financial institutions. Lufthansa was not prepared to wait for the Treuhand to change its mind and allow it to buy a stake in Interflug. It decided to develop its new Berlin hub alone. It bought for Dollars 150m the internal German services of Pan Am, the US carrier desperate for cash; negotiated a new agreement with Air France to take over the management of the joint Euro-Berlin airline subsidiary set up three years ago under French control to offer flights out of Berlin; and launched a series of services to Germany and other international destinations. The airline has hired almost 1,000 former Interflug employees, including 450 at its Schoenefeld maintenance facility, to staff its Berlin operations. 'I'm not responsible for Interflug but we have always tried to help the people of Interflug,' Mr Ruhnau said. But with the demise of the former East German airline, Lufthansa is being pressed to hire more Interflug employees. Interflug was heavily over-staffed like other East German enterprises. ' All East German companies had two chains of employment. One was the management, the other the party,' said Mr Ruhnau. 'At Interflug there were four chains: a secret service chain and an army chain as well.' More than 6,000 people were employed by Interflug. There are still about 2,800 who have yet to find new jobs. This includes 215 pilots. 'I don't know how it will be possible to retrain these pilots to fly western aircraft,' Mr Ruhnau said. However, Lufthansa has just set up a company to help retrain Interflug employees with the backing and funding of Germany's national employment organisation. 'The company will make an offer to all employees still with Interflug to get new qualifications to give them a better chance of finding a job in the airline or service-related industries. If air traffic in Berlin picks up and we have a demand for additional people, newly qualified Interflug employees will get priority,' Mr Ruhnau explained. Despite the enormous economic uncertainties facing the fledgling eastern democracies, and the current turmoil in the airline industry, Mr Ruhnau is convinced Lufthansa's strategy of expanding in both east and west Europe will ultimately pay off. He expects the east-west European airline market to show higher than average growth over the next 20 years, of 10.4 per cent a year, compared with about 5-6 per cent for the industry as a whole. 'We are already the market leader and we will strengthen our position because all these countries are our neighbours and Germany already offers the majority of airline seats to east Europe,' he said. Lufthansa is now discussing close co-operation with LOT, the Polish airline, and an agreement is expected this summer. Mr Ruhnau has a long-term vision. 'The old expression of eastern and western Europe will disappear in a few years,' he said. 'Before the war we had a continental Europe or rather a middle Europe which was a source of great wealth. This will appear again and Berlin will be in the middle of it.' 'Look,' he added, 'Czechoslovakia once had the highest living standard in Europe. This will come again. History and tradition are much more important than some short-term thinking. All this opens new opportunities for Lufthansa.' Most of his own senior managers are more cautious. At present, 90 per cent of Berlin traffic is domestic German traffic, explained Mr Klaus Nittinger, the head of Lufthansa's passenger services. The international network out of Berlin remains weak. 'The growth of this network will be gradual. The west Berlin population is only 2m and cannot generate enough traffic to create a big market. The surrounding market is still pretty weak because the money is not there,' he added. But Mr Ruhnau believes he will confound the sceptics once more. At his company's annual meeting in Berlin in 1984, he was ridiculed for saying: 'The day will come when Lufthansa will again fly to an undivided Berlin.' Even if his latest prediction proves correct, Mr Ruhnau, who will be retiring next year, will leave a formidable task for his successor. 
ID: 189
HEADLINE: FT  14 MAY 91 / Letter: The enterprise culture in Paraguay 
TEXT: Sir, It is so seldom that Paraguay gets press coverage in Britain, that it is disappointing that your correspondent Christina Lamb gives your readers a rather distorted view of my country in her article, 'Paraguay finds old habits die hard', (May 9). Street vendors do hawk French perfumes and Japanese electronics, but should one presume they are contraband? Smuggling had been endemic during the Stroessner regime, and one of the first measures of the new government of president Rodriguez was to cut the tariffs on these and most other consumer luxuries to 7 per cent - removing the incentive to smuggle, and practically ending the illegal import of these goods. The high tariff barriers of our neighbours do, naturally, make shopping in Paraguay very attractive, generating an important regional tourist trade. This has helped to sustain our growth rate in spite of the major adjustments that have had to be made as state subsidies and other forms of government intervention are removed from the economy. In fact, the World Bank estimates our gross domestic product growth for 1990 at 5.1 per cent, not the zero growth stated in your article. Of course the after-effects of 35 years of autocratic rule cannot be wished away, and the struggle to perfect our democratic institutions, our human rights record and the liberal-isation of the economy continues. Gigantic strides in this direction have already been made, and we shall persist. My government remains as committed as ever to supporting the creative forces of free enterprise in a truly democratic environment. Antonio Espinoza, ambassador, Embassy of Paraguay, Braemar Lodge, Cornwall Gardens, SW7 
ID: 190
HEADLINE: FT  14 MAY 91 / Letter: No car, but a better pension 
TEXT: Sir, The Coopers &amp; Lybrand Deloitte analysis of the alternative ways of funding cars for employees (Management, May 10) appears to have overlooked one significant cost in the case of an increased salary. This salary would almost certainly be pensionable and so would require contributions in the order of 15 per cent. If the pension scheme were contributory, some cost would fall on the employee, for which tax relief would be available. However, the bulk of the cost, upwards of 10 per cent of salary, would fall on the employer, considerably reducing the alleged net gain to the employer as shown. To the employee, the substitution of a car by a salary increase must be an added attraction if it also enhances the pension. B F Berry, financial controller, The Assay Office, PO Box 151, Newhall Street, Birmingham 
ID: 191
HEADLINE: FT  14 MAY 91 / Letter: Life up north 
TEXT: Sir, With reference to Observer's comments about the government decision to move the Department of Employment's key policy unit for small firms to Sheffield ('Faraway Faceless', May 3), his obvious bias against the north does him no credit. The decision to move any government department out of the over-crowded and over-rated south is to be welcomed. Here in the north-west, our only regret is that the decision did not involve Stockport or Preston or Chester or Blackburn. Despite emotive words such as 'exile' the lifestyle north of Watford can only be described as excellent. On his implied concern about the potential communication difficulties between government departments and ministers, distance has never struck me as a problem. The 'Sir Humphrey' syndrome seems more apposite and that happens whatever the distance. Bruce Scott, managing director, Buckleys, Bredbury, Stockport, Cheshire 
ID: 192
HEADLINE: FT  14 MAY 91 / Letter: Stabilisation in new democracies 
TEXT: Sir, Martin Wolf's article, 'Poland's struggle for stability', (May 9) raises many interesting issues for stabilisation policy. But his claim that the success of stabilisation and authoritarian regimes are causally linked is highly dubious. It runs counter not only to the views of the World Bank and the ESRD, but also to the results of academic social science. Haggard and Kauffman at Harvard found established democracies to be no less prudent in macro-management than authoritarian regimes. One of us has just participated in a nine-country study which rejected authoritarianism as a necessary condition for good structural adjustment (Aid and Power, Routledge, 1991). A good example of a new democracy managing stabilisation well is Chile. The Aylwin government's inflation forecast for 1991 of 15 per cent seems to us realistic - and it is well below the 25 per cent prevailing during the last years of the Pinochet government. Martin Wolf's economic analysis is good enough to need no support from half-baked political science. Stephany Griffith-Jones, John Toye, Institute of Development Studies, University of Sussex, Brighton 
ID: 193
HEADLINE: FT  14 MAY 91 / Arts: Sacred Symphony - Sadler's Wells 
TEXT: Oliver Hindle is the newest choreographer to emerge from the Royal Ballet. A young dancer with the Birmingham troupe, he has made some workshop essays, and on Friday night we saw the premiere of his first professional work, Sacred Symphony. His musical text is Andrzej Panufnik's Sinfonia sacra, a score whose clear musical voice hymns the millennium of Polish Christianity and statehood. Hindle's concern seems with the survival of faith in prayer, set against imagery expressive of national identity forged through suffering. He begins well, with four male soloists whose leaps echo the trumpet fanfares of Panufnik's first movement, and then brings on a group of grieving and contemplative women. So far, so brave in vision. The language is serious, classically direct, somewhat reminiscent of Massine's symphonic style. Jan Blake's restrained design of two pendant banners, with the dancers in autumnal, earthy colours, is handsome. But the score, and the rather static inspiration behind the ballet, do not allow much further choreographic development, and the later sections of the piece rely too much on those ecstatic lifts and communings which MacMillan uses so powerfully (because so intimately allied to the language of the Mass) in Requiem. Yet Mr Hindle, speaks with his own voice, and poetically, and I want to see his next works. He is well served by his cast. The other novelty of the evening was Paul Taylor's Airs. It is good to our national ballet essaying mainstream American dance, and Airs, with its springy steps and evident delight in its Handel score, is an apt choice. On Friday it was rather reverentially done - with Taylor's troupe it looks so fresh as to be almost improvisatory - but let BRB's interpreters relax their attitudes to it (and their torsos) and it will gain that sense of joyous spontaneity that makes it such a delight. Marion Tait, in her solos, has the right physical grace and happily natural air. And to close this programme - well worth seeing - Ashton's Valses nobles and Facade. I suppose Valses nobles should really only be given by dancers in their late 'teens, the bloom of innocence quite as necessary to it as the bloom of Ashton style. It is a tiny, quiet marvel, and I love watching it, and the current cast is adept at suggesting the sudden joys (and the evanescent shadows) of this party where the moment is very sweet. Facade looked a bit boisterous on Friday: it needs to be treated with more dead-pan humour and driest wit. And for the Dago, someone as wickedly funny as Robert Helpmann must be found, to destroy the audience with a raised eye-brow and too many diamond rings. 
ID: 194
HEADLINE: FT  14 MAY 91 / Arts: The Greek Passion - Opera Du Rhin 
TEXT: Mulhouse, a quiet town in southern Alsace where the Opera du Rhin has just been presenting Martinu's The Greek Passion, is far from the madding cry of international opera. The theatre, a perfectly-scaled building tucked down a little street off the town centre, was built in 1887 and lovingly restored for its centenary. The town has its own part-time orchestra, and performances tend to be as unpretentious as the audiences. But over the years in this same small theatre, I've heard Alain Vainzo as a stylish Werther, a noble Fidelio with Klaus Konig as Florestan, and the only modern production of Massenet's Griselidis. The fact that Martinu can be successfully played in this French provincial backwater says something not just about local taste and the way it has been educated by the Strasbourg-based Opera du Rhin, but also about the impact of last year's Martinu centenary: surely no composer in the past 15 or 20 years has benefited so much from anniversary exposure. The Greek Passion does not exactly play itself onto the stage, but it has the simple advantage of sincerity and conviction, qualities amply reflected in this staging. It also has just about the most bizarre stylistic mix of any modern opera - bitonality and polyphony, warm lyrical colours juxtaposed with harsh-toned declamation, and a rambling, tumultuous palette of instrumental and choral voices, unpredictably interspersed with solo accordion, piano and church bells. Judging by reactions to last year's concert performance at the Edinburgh Festival, the work needs the stage to make dramatic sense of these incongruities. Rene Terrasson's touring production, conducted with a sure, confident touch by Robert Satanowski, was built on a versatile platform of sun-blenched steps and rocks, designed by Isabel Echarri and Diego Etcheverry. The costumes evoked a contemporary Greek atmosphere, while the ragged appearance of the refugee intruders could not help but bring to mind the current plight of the Kurds and the moral dilemmas they have provoked. And that is surely one of Martinu's prime purposes in this village drama-cum-Easter oratorio: to ask timeless, universal questions about public and personal morality, probing the gap between our earthly and spiritual selves. Tibere Raffalli, as the shepherd Manolios who pays for his goodness with his life, sang with dignity and a warm Mediterranean timbre. Jean-Marie Fremeau, a commanding figure with an equally commanding bass-baritone voice, made a convincing Grigoris, the hypocritical village priest. Chantal Dubarry was a wholly sympathetic Katerina, and Remy Corazza acted the part of the pedlar Yannakos with appealing simplicity. The chorus sounded unexpectedly well-schooled, and Michel Ancey's French translation sang easily. The only quirk of the evening was a brief spoken introduction and epilogue on tape, which - far from detracting from Martinu's original - further illuminated its meaning. 
ID: 195
HEADLINE: FT  14 MAY 91 / Arts: Today's Television 
TEXT: That bugbear of mankind, religious doctrine, is rearing its ugly head again in India, a country where competing fantasies about the supernatural have proved just as murderously dangerous as in Ireland or the Middle East. Voting in the Indian elections begins next week and the anti-Moslem BJP is expected to make the biggest gains. It wants to turn India into a Hindu rather than a secular state and the country's 160 million Moslems are alarmed. Brian Barron reports for Assignment (7.45 BBC2). As with postage stamps and the industrial revolution, England led the rest of Europe when it came to replacing the divine right of kings with socialist ideals: the Diggers and Levellers of the mid 17th century would have had little to learn from Lenin or the French egalitarians. The fourth of C4's Civil War series concentrates on the radical ideas of the period. A new six part drama series with Brenda Blethyn is a pleasant thought. In All Good Things (9.30) she plays a mother with two teenage sons whose life changes with the arrival of an unplanned baby. That is followed (10.20) by a profile of the Romanian dictator, Ceausescu - Behind The Myth, from journalist Edward Behr. 
ID: 196
HEADLINE: FT  14 MAY 91 / Arts: The Black Rider - Berlin Theatre Festival 
TEXT: To kill your wife in a shooting accident is one thing; to turn the episode into a musical would seem, gall aside, to invite theatrical fiasco in the worst of taste. Add lyrics that slide between German and English, a set that crosses von Sternberg with a western, rock music with fairground honky-tonk, and disaster looks assured. So it is with reluctant but moonstruck admiration that I report The Black Rider (text: William Burroughs) as the star of the Berlin Theatre Festival (to May 20) and one of the most delightful, inventive, profound and originally musical musicals composed; a fitting - self-consciously so - successor to those other mythical English-German concoctions, The Threepenny Opera and Cabaret. The Black Rider overlays the modern legend of Burroughs, the Beatnik junkie who shot his wife, with the old tale of the village clerk who has to pass muster as marksman before he can marry the gamekeeper's daughter. He makes a pact in 'silver bullets' with the devil but on his wedding day Satan betrays him and he shoots dead not the targetted white dove but his wife. This was the story, converted to a happy ending, of Weber's Der Freischutz. Now Burroughs, the Texan director and stage designer Robert Wilson, and rock composer Tom Waits, have reworked the original into a contemporary version. Other myths get woven in. Wilson's devil is a sleek Master of ceremonies in whiplash tails who croons the Cabaret welcome 'So come on in/it ain't no sin/take off your skin/and dance around in your bones'. He introduces the cast, his 'devil's band', as they step one by one out of a black felt sentry-box. For three hours of graceful, cold artifice, they look, act and sound like figures from the silent movies: movements abrupt, irregular, too fast, too slow, as if wound up by a shaky hand projector; chalk-white, bony faces, blackened eye sockets, lips thickened into permanent red pouts. Every image is ice-hard: hair pulled back crisp or standing up in spikes, clothes exagerating bodies with jagged collars, razor pleats, square and rectangular dresses. The set continues the theme; Wilson turns children's drawings into three-dimensional monstrosities. Crooked chairs, two metres high, dangle at odd angles along with a huge frame whose broken glass juts into the flesh of its 'living' picture, the gamekeeper's ancestor (Heinz Fossbrink). Pine trees are scissor cut-outs which collapse and grow again like cartoons, illuminated sugar pink and lime green against a black forest. Large or small scale, Wilson is a master of spectacle: the clerk William and his Katchen floating above the stage for a duet as the great neon sign of a gun descends before them; the white stockinged leg in red stiletto that appears out of a slit in the black sentrybox, image of naivety, severity, brittle romance. Best of all, the whole, the sustained dramatic unity of the vision, is greater than the sum of its parts. Tom Waits' sarcastic ballads, full of folk and blues and rock, call back the scarred idealism and mock simplicity of Kurt Weill, while Burroughs' monosyllabic banality has here found the setting which makes it seem perfect. Nursery rhyme humour marries English with German, while Hollywood kitsch rolls into Teutonic romanticism. Wilson's cast bop and strut and beat out the mesmeric rhythms in husky tempting voices. The devil (Dominique Horwitz) has the best tunes, and mocks us for loving them. In 'Last Rose of Summer' he picks a flower from the floor, affects a tear, disappears into his box and, inside it, hovers up to the roof of the stage. Annette Paulmann and Stefan Kurt, as Katchen and William, screech like vultures and sing like angels. She plays an imaginary piano and draws patterns in the air as she sings the breathless lyric 'I'll shoot the moon right out of the sky for you, baby'; he dances a ballet of despair, shock and loss breaking through his wax face, before rallying with 'I'll be back on some lucky day'. This production returns to Hamburg's Thalia Theatre after Berlin, with a stop in Amsterdam on May 14-16. So far plans for a London visit have not materialised, but this is a show worth a plane ticket. Scene from The Black Rider, unexpected hit of the Berlin Theatre Festival 
ID: 197
HEADLINE: FT  14 MAY 91 / Management: In brief 
TEXT: The wrong price on an invoice is the most common cause of delayed payments, according to a survey of 400 companies carried out by Resource Evaluation (REL), a specialist consultancy. Incorrect pricing accounted for 30 per cent of delayed payments by value. The other main reasons for delayed payments - some of which are used deliberately by customers to conserve their own cash flow - were requests for copies of documents (16 per cent by value); administrative errors (15 per cent); requests for proof of delivery (14 per cent) and shortages of the items required (6 per cent). Companies make insufficient use of measurement techniques to assess how good they are at collecting their money, REL says. At least one company surveyed produced one credit note for every seven invoices, a figure which indicated that it had to replace or rework a significant amount of goods supplied and that it was probably already in serious trouble. REL surveyed companies with outstanding sales ledger balances of between Pounds 2m and Pounds 302m. The average outstanding sum owed to the companies surveyed was Pounds 14.6m, of which on average 35 per cent was subject to dispute. The cost to the supplier of providing this amount of unauthorised credit would be about Pounds 2,000 a day. This does not include the cost of investigating and correcting errors. The administrative cost of issuing a credit note is at least Pounds 25. REL, Park Gate, 21 Tothill Street, London SW1H 9LL. Tel 071-222 1212. Fifty five small business units have been created in a newly built development, the Brockley Cross Business Centre, in Brockley, south-east London. Units range in size from 110 sq ft to 1,300 sq ft and will be let on three-year contracts with a tenant's option to break at three months' notice. Rents are from Pounds 9 to Pounds 14 per sq ft. The development is a joint venture of London Industrial and English Estates. Contact London Industrial, Magenta House, 85 Whitechapel Road, London E1 1DU. Tel 071-247 7614. Small businesses involved in injection moulding might benefit from the latest industry review published by Manchester Business School. The review, one in a series concentrating on narrow market sectors, looks at key performance measures and at data useful for operating and business development strategies in businesses employing up to 250 people. The reviews are intended to help managers assess performance and plan improvements. Small Business Review. From George Weir, Business Development Centre, Manchester Business School, Booth Street West, Manchester M15 6PB. Tel 061-275 6537. Pounds 150. Enterprising small firms in Northern Ireland stand to win up to Pounds 23,500 in prize money under the Sixth Gallaher Business Challenge. Four awards will be made to an overall winner, a business less than three years old, an innovative business and one which has made use of a local enterprise centre. Entry forms are available from the Co-ordinator, Gallaher Business Challenge, Freepost BE1727, Belfast BT15 1BR. Tel 0232 328000. The closing date for entries is May 31. Does your business need public relations? What is PR and how do you plan a PR programme? These are some of the issues tackled in a 33-minute introductory training video, Actions Speak Louder Than Words, aimed at, among others, the small business owner. The public's increasing demand for information, greater media interest and more sophisticated pressure groups all mean there is a greater need for PR, the producers say. Available from PRTV, The Studio, 2 Belsize Avenue, London W13 9TF. Tel 0800 181 269. Pounds 145 plus VAT. See also this page March 5 1991. A one-day conference on funds available for business from the European Community will be held in London on May 29. One focus of the conference will be the money estimated at Pounds 2bn available under programmes to help the former East Germany. The conference, entitled EC Structural Funds To 1993, aims to explain the workings of community support for economically backward regions which is expected to rise to Pounds 10bn by 1993. Contact Business Briefings, 565 Fulham Road, London SW6 1ES. Tel 071 381 1284. Pounds 235 including VAT. 
ID: 198
HEADLINE: FT  14 MAY 91 / Management: Self-help takes off from the flat-lands - The application of community bonds in Saskatchewan 
TEXT: Any effort to lure new industry to rural Saskatchewan runs the risk of ending up as more of a repellent than a magnet. Far away from North America's main markets, the farming towns which dot the Canadian prairies are best known for their pancake-flat scenery and numbing winters. But in their quest for diversification, these remote communities have hit on a novel way to tempt small and mid-sized businesses into setting up or expanding on their doorstep. Their bargaining chip is a scheme of government-sponsored 'community bonds'. Launched last year, the bonds are designed to mobilise equity for local enterprises, using the sizeable amounts of money which frugal prairie townsfolk and farmers have up to now squirrelled away in low-risk bank deposits and blue-chip shares. Several businesses have already taken the bait. Trinitral International, a small maker of telephone sets, expects to open a 17-person assembly and packaging facility next month in the south-east Saskatchewan town of Melville (population 5,000). Melville's Community Bond Corporation raised CDollars 250,000 from local residents late last year, giving it a 25 per cent stake in Trinitral. Other shareholders are a provincial government agency, the company's managers and Dorart Industries, a Singapore company which will supply kits and know-how to Trinitral. In the town of Kindersley, near the Saskatchewan-Alberta border, a newly formed community bond corporation hopes to rake in CDollars 500,000 over the next month or two. The money will be invested in Rotary Airforce, which is developing a slow-moving type of helicopter suitable for crowd control and pipeline inspections. Rotary's existing R&amp;D operation is currently occupying aircraft hangars near Edmonton, in neighbouring Alberta. The infusion of equity from community bonds has led the company to set up its manufacturing facility in Kindersley. Over 60 towns have registered community bond corporations in the past year. Three financings have been completed, while ten other bond offerings are currently under way. Other project companies include a maker of combine harvester attachments and a pea-chip processing plant. Some communities plan to use the corporations like mutual funds, first raising money and then searching for one or more businesses which they would like to have in town. The key to the scheme is a guarantee provided by the provincial government on the principal amount of the bonds. In other words, local investors stand to lose no more than the interest, dividends or capital gains which might have accrued elsewhere. Even with this safeguard, however, the community bond scheme is fraught with risks. At least some of the businesses will almost certainly fail, which could leave the government with sizeable financial obligations, and local communities with the political and economic scars of a serious misadventure. Some community bond corporations, designed as vehicles for 'people's capitalism', may have difficulty functioning as sophisticated shareholders. Many of the directors are neophytes in economic development. The 12-member Kindersley corporation, for instance, includes a local dentist and a farmer. Each board must also appoint a 'youth director' under the age of 18. There is a nagging suspicion in some quarters that the provincial government, facing an election later this year, has launched the scheme with an eye on popular appeal rather than sound commercial practice. One observer notes that 'there is quite a lot of nervousness among those close to the process, compared with the euphoria of the politicians who are touting it'. Despite these potential stumbling blocks, Dale Botting, regional manager for the Canadian Federation of Independent Business, thinks the scheme is worth a try. He expects that the government's total liability to holders of community bonds will turn out to be far lower than the millions of dollars which it has poured into extravagant projects over the years. 'The real value of this may be to shore up the equity of businesses already in the community and to encourage an entrepreneurial culture,' Botting says. For instance, Trinitral was able to get sufficient bank financing for its telephone set business only after it came up with the extra equity provided by community bonds. Among other spin-offs, residents who volunteer to sell community bonds receive a short training course in the basics of investing in a small business. Students at the Saskatch-ewan College of Commerce can obtain course credits by helping with administrative work in the corporations. Rick Dillabaugh, Kindersley's economic development officer, acknowledges that many of the bond-financed ventures will fail. But he contends that 'if you don't go out and try, you won't get the good ones either. This puts the destiny of the community into its own hands. They can choose what direction they want to take.' The proceeds of bond sales are normally invested in a company's preferred shares, convertible into common stock after three to five years. In that way, holders can benefit from increased dividends and capital gains, if there are any. Bond corporations have a right to nominate directors to the boards of project companies proportionate to their equity stakes. The province is well aware of the risk that the scheme could degenerate into a gravy train for dubious ventures. Community bond corporations are encouraged to hire a reputable accountant or lawyer to help them sift through project proposals. Every investment must also be approved by a six-member provincial review committee, comprising two business lawyers, a former head of the provincial finance department, and three economic development experts. Graham Parsons, a government economist who claims credit for devising the scheme and is now in charge of implementing it, reckons that the best safeguard is the board of directors of the bond corporations themselves. 'These people will be in the community for the next 10-20 years,' Parsons says. 'They have a significant responsibility to be fair and reasonable to others in the community.' 
ID: 199
HEADLINE: FT  14 MAY 91 / Management: Controversy over Canada's loans policy 
TEXT: Canada is searching for ways to breathe vigour into a popular federal loan-guarantee programme for budding entrepreneurs which makes use of the extensive resources of the country's financial institutions. Over CDollars 7.7bn has been disbursed to about 285,000 businesses since the inception of the Small Business Loans Act (SBLA) programme 30 years ago. In the year to March 1990, 13,800 loans were made with a value of CDollars 539m. (The British government, meanwhile, has commissioned a review of the UK's equivalent Loan Guarantee Scheme. This programme, which provides a 70 per cent guarantee, has backed 27,900 loans worth Pounds 890m since 1981.) The SBLA's greatest strength, but one which is also turning out to be a serious weakness, is the role of financial institutions in administering the scheme. The loans are advanced by banks, trust companies and credit unions - institutions that have branch networks and credit assessment skills which the government could not hope to match. Ottawa's role is to provide a guarantee on up to 85 per cent of the loan, with the financial institution taking the risk on the remaining 15 per cent. All loans must be secured, either by business or personal assets. The loans can be used to finance up to 90 per cent of land and premises costs, and 80 per cent of equipment costs, up to a CDollars 100,000 limit. Only companies with annual sales of less than CDollars 2m are eligible. Banks are obliged to charge an interest rate equal to one percentage point over bank prime rate, currently at 10 per cent in Canada. This compares with a typical rate for commercial loans of two or three points above prime. The scheme appears to have made a sizeable contribution in spawning new enterprises. Almost 40 per cent of the SBLA loans made last year were for start-ups, while 60 per cent were for businesses less than three years old. A study commissioned by the Canadian Bankers Association says that about 15 per cent of small-business loans are covered by an SBLA guarantee. But the volume of loans has slowed markedly in the past few years. Last year's total number of 13,800 was 22 per cent down on 1989. One reason is the recession. But the banks, more concerned than ever with their lending margins, also object to being forced to make loans at the set rate of prime plus 1 per cent. The banks have come to see SBLA loans as something of a loss leader; they consider the chief benefit to be the other business they may generate from the borrowing company, its owners or its employees. Michael Hanly, director of small business loans in the Department of Industry, Science and Technology, says that banks are increasingly taking loans onto their own books which might in the past have been channelled through the SBLA. 'We've got to make it more attractive for the banks,' he says. Among the changes now under consideration are a more flexible interest-rate structure (including perhaps, a service fee for the banks), and a higher loan ceiling. The 88,000-member Canadian Federation for Independent Business is pressing for other adjustments, too. It suggests that the guarantee and interest-rate formula could be tailored for specific groups of entrepreneurs, such as women or disadvantaged minority groups. In return for market-related interest charges, the CFIB wants the banks to cut back their personal security requirements. 'Our experience is that, even on conventional loans, the banks over-demand on collateral,' says Brian Gray, the CFIB's senior vice-president. The chances of the banks agreeing to that however, are small. 
ID: 200
HEADLINE: FT  14 MAY 91 / FT Law Report: Japanese formulae do not disclose patent method 
TEXT: RE ASAHI KASEI KOGYO KABUSHIKI KAISHA House of Lords (Lord Keith of Kinkel, Lord Brandon of Oakbrook, Lord Ackner, Lord Oliver of Aylmerton and Lord Jauncey of Tullichettle): May 9 1991 A GENETIC engineering patent claim is not deprived of novelty at its priority date by an earlier application on another patent published before or after that date disclosing the formulae by which the relevant chemical compounds are created, if the earlier application makes no enabling disclosure in that it fails to disclose the method by which the formulae are to be applied in producing the compounds. The House of Lords so held when allowing an appeal by Asahi Kasei Kogyo Kabushiki Kaisha, from a Court of Appeal decision upholding a determination of the comptroller of patents that a patent application by Asahi lacked novelty at its priority date. Section 2 of the Patents Act 1977 provides: '(1) An invention shall be taken to be new if it does not form part of the state of the art. (2) The state of the art in the case of an invention shall be taken to comprise all matter . . . which has at any time before the priority date of that invention been made available to the public. (3) The state of the art in the case of an invention . . . shall be taken also to comprise matter contained in an application for another patent which was published on or after the priority date of that invention, if . . . (a) that matter was contained in the application for that other patent . . . and (b) the priority date of that matter is earlier than that of the invention'. LORD OLIVER said that the appeal arose from competing applications for patents for chemical inventions in the field of genetic engineering. A Japanese company, Dainippon, filed application JP 617 in Japan on March 6 1984. On April 6 1984 Asahi filed an application in the US. On February 26 1985 Dainippon filed application EP 549 in the European Patents Office claiming priority from JP 617. Asahi filed UK 864 on April 4 1985 claiming priority from the US application of April 6 1984. For the purposes of the appeal it was assumed that the subject matter of claims 2 and 3 of UK 864 was matter disclosed in EP 549, and that EP 549 adequately described a method of preparing the products of those claims. It was also assumed that the earliest EP 549 priority document (ie, JP 617) disclosed the products of claims 2 and 3 of UK 864, but did not describe any preparation methods. The question, on those assumptions, was whether, having regard to the JP 617 disclosure, the subject matter of claims 2 and 3 of UK 864 formed part of the state of the art under section 2 of the Patents Act 1977 at the UK 864 priority date, so as to deprive those claims of novelty. The question arose between Asahi and the comptroller of patents on examination of the application in suit, the UK 864 application. On February 16 1988 the superintending examiner determined that EP 549 formed part of the state of the art at the UK 864 priority date and thus anticipated claims 2 and 3. EP 549 was not published until September 1985, after the UK 864 priority date, so the examiner's decision was based on section 2(3) of the act and JP 617 priority. Asahi argued that for disclosure in an application to form part of the state of the art under section 2(3), it had to disclose the method of working the invention, ie, it had to be an 'enabling disclosure'. It said mere disclosure of a formula for a compound claimed was not sufficient. That argument was rejected by the superintending examiner. Mr Justice Falconer dismissed Asahi's appeal. The Court of Appeal upheld that dismissal. Asahi now appealed. The first question was, what material in EP 549 was entitled to the priority date of JP 617? The second question was whether that material anticipated the claims of the application in suit, having regard to the provisions of section 2. Section 5(2)(a) of the act provided that if an invention to which an application related was 'supported by matter disclosed' in an earlier application, the invention priority date should be the date of filing the earlier application. By section 5(2)(b) the priority date of 'any matter contained in the application in suit' was to be the date of filing the earlier application in which 'that matter was disclosed'. The act did not contain any definition of 'supported', but some assistance could be obtained from section 14(5) which required the claim in an application to be 'supported' by the description. That must involve the conclusion that if the specification description did not enable the claim to be established, it could not be said to 'support' it, for the act could hardly have contemplated a complete application for a patent lacking some of the material necessary to sustain the claims made. It followed that a description in an earlier application which contained no enabling disclosure would not 'support' the invention so as to enable it to claim priority from the date of that application under section 5(2)(a), although the description would be entitled to a priority as 'matter contained' in the application in suit under section 5(2)(b). What was claimed was a chemical compound formula produced in accordance with, and identified by reference to, the formula disclosed. The invention was not the formula itself but the thing identified and described in terms of chemical building blocks by reference to the formula of its compositions. There might of course be cases where the means of producing the thing would be self-evident to the man skilled in the art from the mere recital of the formula or its composition, but it was not suggested that this was such a case. It had, therefore, to be assumed for present purposes that the man skilled in the art, if he was to produce the invention claimed, would need to know, not simply the formula, but a method by which it could be produced in accordance with that formula. The invention, as a patentable concept, involved the combination of formula and means. It followed, Asahi argued, that EP 549 could not claim under section 5(2)(a) priority from JP 617 for the totality of the invention claimed, but it could claim priority from that application under section 5(2)(b) for the formulae disclosed. So far as the means of making the invention was concerned, it could claim priority only from the date of its own filing under section 5(1). The logic of that argument seemed unassailable. None of the relevant material had at priority date been published. The critical provision was section 2(3). In Genentech (1989) RPC 613 Mr Justice Falconer concluded that to constitute anticipation to a claim to a new chemical compound, disclosure in a prior document must be an enabling disclosure. In reaching that conclusion he necessarily disapproved a contrary decision in GKI (1958) RPC 51. For an anticipation under section 2(2) Genentech was to be preferred to GKI. Asahi contended that the test was the same for section 2(3). Section 2(3) deemed to be part of the state of the art nothing more than matter entitled to priority under section 5. Thus, the formula disclosed in JP 617 was deemed to be part of the state of the art, but it did not follow that the invention claimed in that application, ie, the compound produced by application of the formula, was part of the state of the art so as to anticipate the claims made in UK 864. The only 'matter' disclosed was the bare claim that a compound could be prepared of the specified composition. The appeal was allowed. The application was remitted to the Patent Office. Their lordships agreed. Lord Jauncey gave a concurring judgment. For Asahi: Simon Thorley QC and Guy Burkhill (Taylor Joynson Garrett For the comptroller: Nicholas Pumphrey QC (Treasury solicitor) 
ID: 201
HEADLINE: FT  14 MAY 91 / Technology (Technically Speaking):  Gallium arsenide comes of age 
TEXT: The soul of Convex Computer's new family of supercomputers is made of gallium arsenide (GaAs), a semiconductor compound touted as a successor to silicon as the building material for future generations of computer chips. Since the late 1960s semiconductor experts have debated the merits of gallium arsenide. In theory, the material offers inherent speed and power advantages. GaAs transistors are faster and consume less power than silicon transistors. Making GaAs chips has, however, proven to be far more difficult and expensive than expected. Only a handful of the two dozen or so start-up chip companies created in the early 1980s to exploit GaAs technology have survived. Just last week, three of the most promising US GaAs chip makers agreed to merge. For Gazelle Microcircuits, Gigabit Logic and Triquint Semiconductor, the merger represents an opportunity to form an economically viable unit combining the best of three attempts to exploit GaAs chip technology. Currently, GaAs devices are used primarily in military applications, where their high speed and tolerance of high temperatures is valuable, as well as in high-frequency communications systems. In the far bigger market for computer chips, however, silicon reigns supreme. The worldwide market for GaAs chips was about Dollars 260m last year, up from Dollars 200m in 1989, according to Integrated Circuit Engineering, a US market research firm. Nevertheless, Convex's adoption of GaAs has provided proponents with new hope that the technology will become pervasive. Also spurring new interest is the need for high-speed peripheral chips to keep up with ever-faster silicon microprocessors that are used to power PCs and workstations. ICE projects that the GaAs chip market will grow at an annual rate of 36 per cent to reach Dollars 1.2bn by 1995. Today, military, aerospace and telecommunications applications account for almost 80 per cent of GaAs chip sales, but by the middle of the decade computer applications will be close to half of the GaAs chip market, the market researchers predict. If GaAs does become a commercial success then it will be in part due to the dogged support provided by the US Defence Department. The Pentagon has been a major source of funding for GaAs semiconductor research and development over the past few years. Three years ago the Defence Advance Research Projects Agency (Darpa) began funding a research programme called Mimic (Microwave and Millimetre Wave Monolithic Integrated Circuits) to spur development of GaAs devices for military uses. In a controversial move, Darpa last year provided Dollars 4m in research and development funds to Gazelle Microcircuits, to stave off sale of the company's technology to a foreign investor. Established semiconductor companies, several of which participated in the Mimic programme, are now expanding their production of GaAs devices in anticipation of a broader market. Motorola recently announced plans to build a Dollars 100m GaAs chip plant in Arizona, scheduled to begin production next year of chips for commercial and military applications. The prospects for GaAs microprocessors and memory chips remain uncertain and the chances are that silicon will remain the pervasive semiconductor material for these devices. None the less, Convex's decision to 'go GaAs' marks the entry of this technology into the 'mainstream' of the chip market. After decades of promises, GaAs looks like a technology whose time has finally come. 
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HEADLINE: FT  14 MAY 91 / Technology: Kodak's digital double 
TEXT: A photocopier used to be just a photocopier: but not for much longer. The industry's largest manufacturers are about to reveal machines which act as computer printers, scanners and even facsimile machines, as well as perform the traditional role of copying sheets of text. The move is based on the concept that whether you print, scan or photocopy, you are simply replicating a series of little black squiggles between paper and computer. Leading the field are US-parented companies such as Xerox and Kodak. Today Kodak, which specialises in large photocopiers, will launch a copier which replicates images digitally, rather than optically. This, the company believes, will form the base technology around which a variety of office applications can be built. 'At the moment we are using the machine just to copy,' says Mike Mansell, manager of commercial and information marketing for Kodak and head of its copy products division. 'But the interesting thing is what we do in the future.' Because the machine scans the document and digitises the information before printing out the text and pictures, that digital information could, in future, be sent over the phone. This could lead, Mansell believes, to large photocopiers being used for an even wider variety of tasks. While most of the bigger machines are used today for large print runs, in future they could handle a mixture of jobs. Further ahead they could be used in conjunction with personal computers for manipulating text and images within a document - a computer graphic, a photo and a piece of text could be incorporated in the same document. Eventually Mansell envisages a situation where the Kodak machine launched today, called the 1570, forms the hub of a company's reprographics facilities. From there it could instruct local printer/copier units, in different places around the country, or the world, to print documents. 
ID: 203
HEADLINE: FT  14 MAY 91 / Parliament and Politics: Brittan urges dropping of 'hard Ecu' proposals 
TEXT: SIR LEON Brittan, the senior UK commissioner, yesterday urged the UK government to drop its proposal for a 'hard Ecu' in favour of improving the existing Ecu basket unit. He did not link this with the overture by Mr Jacques Delors that Britain be offered a let-out in the emu treaty. The hard Ecu had proved 'politically valuable', Sir Leon said, showing that the UK government was taking part in the Emu debate constructively. But, for economic reasons, it had drawn little support from UK partners. Sir Leon derided Britons who regarded the let-out on Emu as a trap or a form of blackmail. There was no underhand deceit in the proposal, nor could be it be considered blackmail for Britain's partners to try to make Emu such a success that the UK would feel impelled to join. 
ID: 204
HEADLINE: FT  14 MAY 91 / Parliament and Politics: Contribution to UN fund 
TEXT: Britain will contribute Pounds 15m to The United Nations Population Fund and the International Planned Parenthood Federation, Mrs Lynda Chalker, the overseas development minister said yesterday. The World Health Organisation's Special Programme of Research, Development and Research Training in Human Reproduction will receive Pounds 2.55m. The amounts represent a Pounds 250,000 increase for each organisation. 
ID: 205
HEADLINE: FT  14 MAY 91 / UK News (Employment): NUM offers to back bank staff 
TEXT: THE National Union of Mineworkers has offered to back a recognition claim by the banking union Bifu at the North of England Building Society by urging NUM members to withdraw their savings from the society. Miners and ex-miners have substantial sums of redundancy money invested. Bifu has not taken up the offer 'for the moment', it said, because the move could threaten the livelihood of its members. 
ID: 206
HEADLINE: FT  14 MAY 91 / UK News (Employment): Co-operation on training recommended by minister 
TEXT: INDUSTRY training organ-isations (ITOs), recognised by governments as the voice of training for particular industries, were yesterday urged to act with companies in their sectors to promote more effective training. Mr Robert Jackson, a junior employment minister, made the appeal in his endorsement of an action plan which was the result of a study of 10 ITOs by Manpower Research on behalf of the Department of Employment and the National Council of Industry Training Organisations. The study showed how ITOs could improve their effectiveness, particularly through links with employers. It also said ITOs should set out their roles; identify their sectors' changing skill needs; and demonstrate that 'training pays'. The study was part of a wider review of ITOs, the results of which will be available in mid-1991. There are more than 100 ITOs, varying in size, resources, membership and activity. ITO Network Review from NCITO, 5 George Lane, Royston, Herts. Free. 
ID: 207
HEADLINE: FT  14 MAY 91 / UK News (Employment): TGWU drives for equal pay 
TEXT: IT TOOK 18 years and two strikes for a group of female sewing machinists at Ford to win what they saw as a battle for equal pay with male workers. A further seven years of battling by other female workers has failed to eradicate what unions see as widespread sex discrimination on pay in the motor industry. Yesterday the TGWU general workers' union, the biggest union in car manufacturing, launched an equal-pay drive which it said could lead to rises of up to Pounds 1,000 for some of its 4,000 female workers in the motor industry. The union is backing equal-value claims for 380 women sewing machinists at Jaguar, Vauxhall and Aston Martin. Ms Margaret Prosser, TGWU national women's officer, said the union was actively seeking out equal-value claims on behalf of other groups of undervalued women car workers. She added that the average weekly pay of women in the motor industry was Pounds 207, about 78 per cent of the rate for men. Wherever possible, the union would try to win rises for women through job evaluation and grade-structure reorganisations. The dispute at Ford began in 1966 when a job evaluation scheme left sewing machinists, mainly female, on less pay than pattern cutters, most of whom were men. A strike that year and subsequent tribunal decisions failed to win them higher pay. The women finally won rises in 1985 after another strike and the setting up of an independent tribunal. Ford, however, saw it as a grading dispute, rather than one over equal pay. Earlier this year an independent expert was asked by a tribunal to investigate the case of sewing machinists at Vauxhall. The claimants are being backed by the AEU engineering union. 
ID: 208
HEADLINE: FT  14 MAY 91 / UK News (Employment): Few union deals at new plants 
TEXT: UNIONS appear to have found it increasingly difficult in the past three years to gain recognition agreements from inward investors and British companies setting up new plants, a senior TUC official said yesterday. Mr John Monks, TUC deputy general secretary, said only 10 deals had been notified to the TUC since October 1988 under a procedure to regulate inter-union conflict of the kind which led to the expulsion of the EETPU electricians' union. Under the prior-notification procedure, which was made permanent in June last year after an extended trial period, unions should tell the TUC about any single-union deal they are about to sign. Mr Monks told a conference in London that the number of deals was 'very small' compared with the rush of agreements signed in the mid-1980s. This led to conflict when unions competed in 'beauty contests' for recognition. He said that was one reason why TUC unions supported the idea of a statutory recognition procedure under a Labour government. That would allow a 'step-by-step' approach to rights depending on union membership. Mr Monks said the TUC might switch support to establishing the size of union membership in a company by a workforce ballot rather than by a petition drawn up by a union. He said that it might be 'politically advisable' to assess membership size through a ballot in order to gain public support for the TUC's proposals. Mr Monks said the prior-notification procedure had worked well. The final proposals are to be approved by the TUC general council in June. 
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HEADLINE: FT  14 MAY 91 / World Trade News: Cash squeeze hits Polish aircraft plant 
TEXT: A CASH squeeze at WSK Mielec, one of Poland's biggest aircraft factories, and one of 200 Polish plants dependent on sales to the Soviet Union, means 14,500 workers may not be paid their April wages due today, Christopher Bobinski reports from Warsaw. Polish officials were in Moscow yesterday for talks on finding ways of securing payments. Poland meanwhile is paying for its purchases of Soviet oil and gas. The factory has in effect ceased to pay for deliveries of components from domestic producers since Comecon countries switched to hard currency pricing on January 1. Management has said it will no longer take delivery of them. WSK Mielec makes AN 28 and AN 2 aircraft for the Soviet market. Last year, it laid off 4,800 workers. 
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HEADLINE: FT  14 MAY 91 / World Trade News: Congressmen seek block on 'harmful' investment 
TEXT: LEGISLATION introduced in the US House of Representatives yesterday would require an executive block on foreign investment if it threatens to harm the US economy. US law partly requires the administration to block investment only if it imperils the US national security interest. Forces in Congress are insisting on expanding the definition of national security to include economic, not just military, interests. The bill sponsored by Mr Mel Levine, a California Democrat, and Mr Frank Wolf, a Virginia Republican, reflects concern about US high-technology companies being sold to foreign interests. It would force the administration to include new factors before approving sales. These involve the concentration of foreign direct investment in the industry in question, the effect on critical technologies, and whether the firm to be acquired has received US government funds. The Congressmen released a report criticising the Committee on Foreign Investment in the US (CFIUS), the inter-agency committee which vets foreign investments. The study, by the Economic Strategy Institute, says CFIUS reviewed only 12 of 400 critical foreign acquisitions in the past two-and-a-half years, including 95 computer companies, 35 semiconductor groups, 30 semiconductor equipment-makers, and 15 aerospace companies. The legislation's backers hope to use experiences in the Gulf war to attract support. One of the Congressmen said: 'In the Gulf conflict, without Japanese parts for their radars, our F-16 pilots couldn't find their targets. Imports of Japanese machine-tools have become so crucial that the M1 Abrams Tank could not be built without them'. The proposed legislation would transfer control of CFIUS from the US Treasury to the commerce department. The Congressmen claimed a conflict of interests in the Treasury's dual mission of encouraging foreign purchases of Treasury bills and filtering out acquisitions that could harm US national security. 
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HEADLINE: FT  14 MAY 91 / World Trade News: Jamaican economy grows 3.8% 
TEXT: JAMAICA'S economy grew 3.8 per cent last year, lifted by expansion in agriculture, mining and manufacturing, writes Canute James in Kingston. Mr Percival Patterson, finance minister, said the growth was achieved despite 'adverse external shocks'. The island's economy grew 4.6 per cent in 1989. He said the agriculture sector expanded by 11.8 per cent in 1990, with mining up 17.6 per cent and manufacturing up 4.1 per cent. The island's trading position improved; the Dollars 724m (Pounds 420) merchandise trade deficit was Dollars 98m less than the year-earlier shortfall. Imports grew 1.7 per cent and exports 14.2 per cent. Mr Patterson said public debt was Dollars 4.15bn at the end of 1990, Dollars 114m less than a year earlier. 
ID: 212
HEADLINE: FT  14 MAY 91 / World Trade News: Davy awarded Pounds 12m Dutch order 
TEXT: HOOGOVENS, THE Netherlands metals group, has awarded a Pounds 12m contract to Davy McKee (Poole), part of the Davy Corporation of the UK, to modernise a hot rolling line at its Sidal aluminium subsidiary at Duffel in Belgium, writes Kenneth Gooding, Mining Correspondent. Among other items, the project involves a reversing breakdown mill and a three-stand tandem mill. Hoogovens says the modernisation will significantly improve the quality of the semi-fabricated aluminium products Sidal produces. Work will be completed by the middle of next year. 
ID: 213
HEADLINE: FT  14 MAY 91 / World Trade News: ECGD pressed to boost export cover for Iran 
TEXT: BRITAIN's Export Credits Guarantee Department (ECGD) is facing mounting pressure from industry to restore medium-term cover on export credits to Iran, following the liberation of Kuwait and the release of Mr Roger Cooper, the businessman held hostage in Tehran for more than five years. Businessmen say they are concerned that without fresh cover, the UK could lose market share in Iran to other industrial countries such as France, Germany and Italy whose exports have been growing much faster than those of the UK as Tehran opened up to the west. Italy has, for example, agreed to provide Iran with Dollars 1bn (Pounds 592m) in credits for building two power stations and other industrial projects, the Iranian News Agency IRNA reported last week. Even Japan, which made large losses on loans to Iraq originally extended during the boom years of the 1970s, is now considering resuming the issue of medium-term credit guarantees. The trading house Nissho Iwai has applied for cover from Tokyo's Ministry of International Trade and Industry for its share in a Dollars 450m petrochemical plant ordered earlier this year from a consortium led by Technip of France. ECGD, which has been under fire for its restrictive attitude on developing-country risk, would say yesterday only that the question of cover for Iran was 'under review'. An official could not say how long the review would take. Businessmen think the UK is reluctant to offer fresh cover for Iran until British citizens held hostage in Lebanon are freed. Despite the UK embassy re-opening in Tehran, this problem is thought to have delayed exchange of ambassadors. On a separate issue, ECGD yesterday denied reports it was insisting all short-term credit insurance to Kuwait be backed by irrevocable letters of credit. It said it had done some business on open account since liberation. This did not involve irrevocable letters of credit, but overall volume of business remains small, with sales treated case-by-case. Businessmen said it would be normal for ECGD to require irrevocable letters of credit on most business where the Kuwaiti importer was a private-sector company. It was to be expected some importers would find it hard to establish letters of credit, as the records of local bankers might have been lost during the Iraqi occupation. 
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HEADLINE: FT  14 MAY 91 / World Trade News: Estonia tightens rules for Moscow trade / Examine the new bureaucratic problems of Baltic commerce 
TEXT: BACK IN the centrally planned days when Moscow had enough muscle and merchandise, it dictated all terms of trade with its compliant Soviet republics. Local companies got their orders from their ministries, which in turn received strict guidelines from Gosplan, the state planning ministry, on where, how much and the value of the merchandise they were going to trade. But now some republics, such as Estonia, are trying to break out from under the constraining wings of Moscow. Estonia is attempting to exercise its own control through the use of a licensing bureau monitoring which, and at what level, exports can leave its economic border. Other republics and smaller-scale districts are following the same pattern, such that one Bank of Estonia official described the USSR as being engulfed internally by a vast and complex amount of trade barriers: 'The USSR is becoming a country made up of many Albanias.' Estonia's year-old Licence Department, backed by the muscle of its customs officials, is an attempt to eliminate the danger of chronic shortages of commodities, as well as an expression of its desire to mark out greater political and economic autonomy from Moscow. Shortages of basic goods in Estonia have arisen, thanks to extreme differences in relative prices between the different republics of the Soviet Union. Thus it has become a profitable trade to buy in bulk from one republic at a relatively cheap price, and sell dear in a neighbouring republic. Items in greatest demand from Estonia include meat, sweets and other foodstuffs. In Latvia it is electronic equipment and vans, while in Lithuania it is refrigerators and television sets, according to Mr Rein Voog, an official with the Bank of Estonia. 'A person can become rich very fast if he trades in the USSR. For example, if you can buy meat in Estonia and take it to Leningrad you can make a lot of money since meat in Leningrad is twice as expensive. This is why (Estonia) must keep a certain degree of control over what leaves the country,' said Mr Voog. To make sure no-one empties a market at the - by western and black-market standards - ridiculously low regulated prices, republics like Estonia have issued their inhabitants with a purchasing card. A Latvian cannot, for example, buy meat at an Estonian market. Mr Voog admits that trade with the west is much easier than within the Soviet Union, since the rules are clear and simple to follow. Estimpex, which has lost its monopoly as the sole Estonian export organisation, still functions. The Bank of Estonia official felt that for some companies it may be easier to do business with Estimpex, which is known in some business circles in the west. It may also be easier to get an export licence through Estimpex. Since Gosplan has been undermined by the unstable economic situation in the USSR and by inefficient price controls, Soviet republics such as Estonia have established barter committees, state-run bodies, to carry out trade with other republics. The export quotas of the Estonian barter committee are regulated by the Licence Department. Mr Mati Jurgens, general-director of the Estonian Licence Department, says it granted 1,700 export licences last year, and will double that in 1991. Most of the licences are for furniture and building materials. About 60 per cent went to Russia, the rest to the Ukraine, Latvia and Lithuania. Each barter deal between the Estonian and other Soviet republic barter committees is done on a case-by-case basis. There are no standard ratios or values which the Estonian barter committee uses or agreements on which value a certain commodity will have. These factors are determined by forces of 'demand' and 'what is in great shortage', according to Mr Jurgens. If a company's export papers are in order, getting an export licence should take no longer than 15 days. 'A recent barter deal we approved with Russia involved an Estonian furniture company, which purchased the steel to build the chairs. These chairs were sold back to Russia for 70 roubles a piece,' explained Mr Jurgens. Other examples of trade can involve cash roubles. An Estonian state, collective or co-operative farm may need to buy a tractor. According to Mr Jurgens, the seller of the tractor may ask as much as 30,000 roubles for such a vehicle or two tons of meat in payment. Arguing over the price of the meat, they may agree on 10 roubles a kilo, which would add up to 20,000 roubles' worth of meat. The remaining 10,000 roubles could be paid in cash. Mr Jurgens says there are still staffing problems in effectively controlling Estonia's economic borders. A great deal of merchandise is getting out without official permission; the Estonian-Latvian customs checkpoint at the small town of Moisakula has one local policeman on patrol, who has permission to use a revolver. One can cross the Estonian-Latvian border on the smaller roads without being stopped by any customs officials. 
ID: 215
HEADLINE: FT  14 MAY 91 / Labour group attacks Venezuela pay decree 
TEXT: VENEZUELA'S most important organised labour group, the Confederation of Venezuelan Workers (CTV), has attacked a government decree ordering a 15 per cent wage rise. It warned of 'grave consequences' if the decree was implemented. In a public letter to President Carlos Andres Perez at the weekend, the CTV expressed its 'deep disgust and rejection' of the administration's decree. Earlier this year the group demanded a 45 per cent nationwide wage increase, which was rejected by the government as inflationary. But last week the administration decreed a 15 per cent wage rise for private-sector employees not covered by collective labour contracts, and ordered a 50 per cent rise in the urban minimum wage, to Dollars 109 (Pounds 63) a month. The CTV has strongly opposed most of the government's economic reform programme since it was announced in early 1989. Ironically, its leadership is dominated by members of Democratic Action, Mr Perez's own political party. The group's head, Mr Antonio Rios, and other officials are currently under investigation for alleged corruption. In some sectors, labour's militant demands for wage increases are seen as an attempt to divert attention from the allegations. At the same time the government has warned that if 'price speculation' continued on basic items it would reinstate limited price controls. 
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HEADLINE: FT  14 MAY 91 / Recession-hit US states consider tax increases: Spending cuts target education and health programmes 
TEXT: MORE US states are being forced to consider tax increases, across-the-board spending cuts and staff redundancies and lay-offs as a result of shortfalls in tax receipts caused by the recession. The Centre for the Study of the States, a think-tank based in Albany, New York, has calculated that tax receipts in the 50 states during the first three months of this year averaged just 0.9 per cent higher than a year earlier. Had many states not imposed tax increases, revenue would have declined 1.3 per cent. In real, inflation-adjusted, terms receipts dropped 6 per cent. In California revenue dropped 5.7 per cent in the period as a result of lower personal, corporate and sales taxes. There were also declines in Virginia, Ohio, Michigan, Connecticut, Pennsylvania and Tennessee. Only states which have enacted tax increases - such as New Jersey, Oklahoma, Kentucky and Arizona - saw revenue rise appreciably. Individual states, rather than the federal government, have to fund a wider range of social and community services than local authorities do in Britain and much of Europe. For instance, the federal government finances only 6 per cent of education spending, with the rest coming from state or local city and county taxes. States are particularly vulnerable as they rely heavily on sales taxes, which have been affected by sluggish consumer spending. Costs of programmes such as health care for the poor and elderly, prisons and law and order are rising rapidly, in some instances outstripping inflation. The cost of Medicaid, half of which is borne by the states, rose 25 per cent last year. Moreover, most states are legally required to balance their budgets and cannot run deficits on their current spending. During the 1980s, thanks to inflation and rapid growth, many states built up cash surpluses, but their balances are down to Dollars 5.9bn (Pounds 3.4bn), or 2 per cent of total expenditures, the lowest level since 1983. Consequently, according to the National Governors Association, 29 states have cut a total of more than Dollars 8bn from their budgets and 26 states are raising taxes by a record Dollars 10.3bn for the current 1991 fiscal year, with Dollars 6.7bn already planned for the next fiscal year. This presents considerable political problems, in view of voters' resistance to tax increases; their aversion was largely responsible for the defeat of several incumbent governors in last November's elections and there are fears that current problems could spark further taxpayer revolts. The main spending cuts have been in mental health programmes, higher education and, in some cases, aid to local schools. State employees have been laid off or given days off without pay as state governments shut down on selected days. 
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HEADLINE: FT  14 MAY 91 / Australian inflation rate expected to start falling 
TEXT: AUSTRALIA'S Labor government is likely to get a much needed boost this week from Consumer Price Index (CPI) figures showing inflation has moved onto a downward path. Analysts are forecasting a rise of around 0.4 per cent in the March-quarter CPI, due on Thursday, which would reduce the annual rate of inflation from 6.9 per cent to 5.5 per cent. This would represent a significant improvement over the 2.7 per cent increase in the December quarter, and would put Australia on course for annualised inflation of less than 5 per cent by the end of the year. It would also allow Mr Paul Keating, the treasurer (finance minister), to claim a measure of success in controlling inflation, which has been the government's top priority since the economy slipped into recession last year. However, critics say the March figures will be heavily influenced by one-off factors, including a 15.6 per cent reduction in petrol prices and lower mortgage interest rates. The improved longer-term outlook is largely a result of the weakness of the economy, which grew by only 0.6 per cent in the December quarter, following six months of negative growth, and is expected to contract again in the March quarter. The government is facing political problems caused by a continuing increase in unemployment, which reached 9.9 per cent in April and is likely to exceed the 10.3 per cent recorded in the trough of the last recession in 1983. The high level of unemployment has increased pressure for an early cut in official interest rates to stimulate growth, but economists say the government may delay until next month, unless the inflation figures are unexpectedly good. 
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HEADLINE: FT  14 MAY 91 / Indian Elections: Hindu party's rise unsettles Moslem north -There is a tangible sense of fear in the towns of Uttar Pradesh 
TEXT: Around the white-washed village mosques of northern India and in the densely populated Moslem areas of the main towns, there is a tangible sense of fear as this election campaign enters its final phase. Maulana Mannan Raza Khan, a Moslem cleric in Bareilly, a market town in central Uttar Pradesh where 25 per cent of the population is Moslem, says Moslems are beginning to ask themselves whether they should stay in the area or leave for the duration of the election. What seemed scarcely conceivable a few weeks ago has now become a distinct possibility. The Hindu revivalist Bharatiya Janata Party (BJP), campaigning on a platform of establishing a Hindu state, has generated such a wave of support that it could emerge as the single largest party in next week's polls. In Uttar Pradesh, the largest state of the union and the traditional barometer of electoral swings, Mr Rajiv's Gandhi's Congress party seems everywhere on the defensive. By contrast, local BJP officials are triumphantly self- confident. 'There is a wave sweeping in our favour,' says a party worker at Bara Banki, near Lucknow, a constituency with no previous record of returning the Hindu revivalist party. A BJP-led government is still the less likely outcome to this election. But the pace of the party's advance has caught Moslems off balance and for the first time faced them with the prospect of a party coming to power on a platform that they feel threatens their religious and cultural identity. Moslems account for 12 per cent of India's population or more than 100m people. 'If the BJP comes to power and implements the policies in its manifesto', says Dr Kalbe Sadiq, the leader of the Shia community in Lucknow and a senior Moslem known for his moderation, 'then we will have to protect our identity and the basic fundamentals of Islam.' A central plank of the manifesto is the BJP's pledge to push ahead with the construction of a Hindu temple at Ayodhya on the site of a former mosque. The building of the temple has become a symbol of confrontation with Islam. Another commitment is the introduction of a uniform civil code which would replace Islamic personal law. Other Moslem clerics are far more belligerent. 'Moslems cannot live in a Hindu rashtra (state),' says Maulana Raza Khan. 'We would have to fight - to issue a fatwa (decree) for a crusade.' This election is witnessing a greater polarisation between Hindus and Moslems than any previous campaign. As Hindu votes in the north gravitate towards the BJP, Moslem votes are swinging to what seems the party best placed in any one constituency to defeat it. The Congress party had hoped to benefit from a consolidation of the Moslem vote against the BJP. But in many constituencies the Janata Dal or the Communists are the main challengers. The Moslem vote is thus divided - with the BJP reaping the benefit. Moslems hope that if the BJP did come to power, reason would prevail, and that a repetition of the Hindu-Moslem violence that has cost more than 2,000 lives in the past year can be avoided. 'We feel no hate for Hindus,' say Moslem villagers at Bhojpuri, near Bareilly. They point to the Brahmin families in the village who in the past have protected them at times of communal tension. Many orthodox, middle-class Hindus, who for the first time are backing the BJP because of their disillusionment with the other parties, have also convinced themselves that the BJP in power would not implement the controversial parts of its programme. Nonetheless this campaign is sowing seeds of religious hatred that will be difficult to remove. In the shade of a mango orchard on the edge of Bhojpuri, a local leader of the Hindu extremist RSS movement - the parent organisation of the BJP - blames Moslems for the secessionist movements in Kashmir, Assam and Punjab. 'Why is it,' he asks his audience, 'that wherever there are Moslems there is a demand for a separate state?' Some Moslems concede that the Moslem community itself must bear much of the blame for Hindu resentment and anger. Hindus feel that Moslems are dragging down the country's economic growth by higher rates of illiteracy and population growth. Dr Kalbe says that Islamic doctrine permits certain types of family planning. But most Moslem clerics in India are adamantly opposed to it. Even if the BJP emerges with the most seats, Moslems hope that other parties will ally to prevent it coming to power. But they feel a reprieve may be only temporary. 
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HEADLINE: FT  14 MAY 91 / Israel to seek EC law on Arab boycott of companies 
TEXT: ISRAEL is expected today to ask Brussels to extend the anti-Arab-boycott legislation that already exists in two EC states to Community level. The expected request by Mr David Levy, the Israeli foreign minister, to a formal EC-Israel meeting here coincides with growing interest in the Community, as well as the US, in at least an easing of the Arab boycott of companies trading with Israel as a confidence-building measure to boost Middle East peace efforts. On Saturday, several EC foreign ministers urged the six Gulf Co-operation Council members to use their influence within the Arab League for an easing of the boycott. The latter said this was only conceivable in the context of an Arab-Israeli peace deal. France and the Netherlands have national laws forbidding their companies to give the Arab Boycott Office formal undertakings they will not trade with Israel. The Israeli government wants such legislation adopted by the EC as a whole, arguing, among other points, that general Arab incitement creates commercial distortion. Germany and Denmark now sympathise with the Israeli view, but most other EC states want to wait and see how Israel responds to peace overtures and prefer to exert quiet political pressure on the Arabs. 
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HEADLINE: FT  14 MAY 91 / Saudis to take up Dollars 4.5bn loan: First fund-raising from banks for at least 20 years 
TEXT: SAUDI ARABIA is close to calling upon a Dollars 4.5bn (Pounds 2.66bn) loan from international banks, having negotiated an increase in the loan's size and a reduction in the interest margin charged, bankers said yesterday. They said a loan agreement had been signed by the Saudi government and 20 international banks this month in Paris. The loan, arranged by JP Morgan of New York, should be drawn down shortly. The financing, the first fund-raising by the government from international banks for at least 20 years, was first negotiated in February, before the ground assault on Kuwait had been launched by the US-led coalition. Then, the three-year loan was for Dollars 3.5bn and the interest margin over London interbank offered rates, the floating benchmark used in the international loans market, set at  1/2 percentage point. Bankers said at the time that the loan carried a war risk premium. The Saudis used the swift ending of the war to negotiate a reduction in the interest margin to  3/8 point over Libor. Morgan also brought in new banks to increase the size of the transaction. Difficulties over the loan documentation apparently delayed the signing. The purpose of the loan is general, although it is possible that at least some of it will be used to pay the Saudi contribution to the coalition war effort. It pledged Dollars 13.5bn to the US. The Saudi government has tried to to keep the fund-raising quiet, as it is seen as a source of embarrassment inside the country because of the Islamic proscription against usury. However, there are expectations that it will have to raise more soon. Although benefiting from higher oil prices and increased oil production resulting from the Gulf crisis, the Saudis insist they have lost out because of the cost of the war. 
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HEADLINE: FT  14 MAY 91 / Bank of Japan urges review on foreign workers 
TEXT: THE Bank of Japan has called for an immediate review of Japan's virtual ban on the employment of foreign workers, in a rare public comment on a highly-sensitive political problem. In a report on the country's labour shortage published this month, the central bank says that 'the employment of foreign workers is an urgent issue which requires examination from every angle'. The fear that labour shortages increase the risk of inflation has played a central part in the bank's decision to push up interest rates over the past two years. It will remain a key factor in future management of the economy, says the report. 'It is a grave concern that a growing scarcity in labour supply, particularly in the younger age brackets, might cause serious labour shortages in future.' The recent shortages have been caused not only by a cyclical surge in economic growth but also by long-term changes in the economy, including a shift to greater demand for labour-intensive services. At the same time, with the ageing of society, the growth of the workforce has slowed, says the report. The central bank says that in 1996 the working population will start to decline. The decline is being alleviated by increases in the employment of women, investment in labour-saving equipment, growth in the import of labour-intensive manufactured goods and the transfer of factories overseas. 'In order to achieve non-inflationary economic growth under limited supply of labour, these changes in the economy must continue steadily.' Japan also has to carry out measures which will allow for the employment of more women and more older people, says the central bank. It also has to press on with deregulation and rationalisation in the distribution system to release more labour. Companies need to adjust management plans. Meanwhile, as for macro-economic policy, priorities should be 'maintaining price stability and avoiding a vicious spiral of wages and price increases'. 
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HEADLINE: FT  14 MAY 91 / Carey's 'assault on poverty' 
TEXT: DR GEORGE CAREY, who was enthroned as Archbishop of Canterbury and head of the international Anglican communion last month, yesterday made a 'fresh assault on poverty' a priority of his time in office, Alan Pike, Social Affairs Correspondent, writes. 'When I travel abroad, beginning with my trip to Papua New Guinea this summer, I shall make it my business to visit poor communities and learn how best we can be alongside them in their struggles,' he said. All Britons, said Dr Carey, should use the opportunities of democracy to 'encourage the government of the day as it plays its part in the fight against world poverty'. While welcoming recent pledges by the UK government - including a commitment to increase the aid budget to the United Nations target of 0.7 per cent of gross domestic product as soon as possible - he made it clear that he believes international aid must receive a higher priority. He said UK government efforts to ease third world debt burdens should be encouraged. 'We in the richer countries received in debt repayments last year the equivalent of Pounds 17 for each man, woman and child in countries most affected by poverty.' 
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HEADLINE: FT  14 MAY 91 / Baker puts on brave face as Mideast mission wavers 
TEXT: MR James Baker, the US secretary of state, takes his Middle East peace mission to Jordan and Israel today with little sign of any tangible progress in his efforts to convene a regional peace conference. After talks yesterday in Cairo with his Soviet counterpart, Mr Alexander Bessmertnykh, Mr Baker told reporters that there were 'significant differences' between Israel and Syria on a UN role at a proposed conference, and on the exact nature of the gathering. Damascus is pressing for a comprehensive settlement of the Middle East dispute on the basis of Security Council Resolutions 242 and 338, which require Israel to withdraw from land occupied in the 1967 war, including Syria's Golan Heights. But Israeli leaders discount UN participation, saying the world body is biased. Israel is also against a regional conference that has any status beyond that of a ceremonial 'opening' to direct talks with its neighbours. Syria wants a regional gathering to have a role in overseeing peace moves. With the Baker mission hung up on these procedural issues, other knotty questions are tending to be overlooked at this stage, such as the perennial problem of who might represent the Palestinians. Mr Baker is pressing for a joint Jordanian-Palestinian delegation to overcome Israel's objection to sitting down with representatives of the Palestine Liberation Organisation, which it describes as a 'terrorist gang'. Officials close to Mr Baker have warned that if by the end of the week there is little sign of progress, the US secretary of state will abandon his latest round of peace-making and return to Washington. Mr Baker is seeking to put the best public face on a very unpromising situation, but in private US officials have sounded pessimistic. A rash of statements from Mr Yitzhak Shamir, Israel's premier, in the past few days insisting that there would be no territorial compromise have cast a deepening shadow over the Baker mission. Mr Bessmertnykh tried to sound a faint note of optimism after his meeting with Mr Baker, telling reporters that 'our talks on the Middle East have reached a large plateau.' Problems were fewer than before which gave 'ground for hope', he added. Mr Bessmertnykh was due to meet Mr Yassir Arafat, the PLO leader, in Geneva today. 'They are meeting here on Tuesday but that's all I can say at this stage,' said a PLO official in Geneva. 
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HEADLINE: FT  14 MAY 91 / Iran to sell state company shares 
TEXT: IRAN pressed ahead with its commitment to the private sector by announcing yesterday the sell-off of IR100bn worth of shares in state-owned companies this year. The sale is equivalent to about Pounds 44m at the floating exchange rate. Mr Mohammed Reza Nematzadeh, industry minister, made the announcement in Tehran. Around 70 per cent of industry is in government hands. President Hashemi Rafsanjani's government is committed to the sale of state-owned assets, many nationalised after the 1979 revolution. Strategic heavy industries will remain in the public sector. Transfer of most mines to private sector and co-operatives has been approved. 
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HEADLINE: FT  14 MAY 91 / German parties' bickering may stall Poland pact 
TEXT: CONTINUED bickering between Chancellor Helmut Kohl's Christian Democrat party and its sister party, the Bavarian Christian Social Union (CSU), could delay the signing of an important friendship treaty between Germany and Poland. The conservative CSU's routine complaint about lack of influence in the Bonn coalition has reached a new pitch since the Christian Democrat defeat in the Rhineland-Palatinate state election. Despite Mr Kohl's initially disdainful response to CSU attacks, he has now decided to concede to the Bavarians a round of consultation on the Poland treaty, to take place today. The treaty, which was to be initialled today and is due to be signed formally on June 17, spells out the minority rights for ethnic Germans in Poland. Polish President Lech Walesa is expected to visit Germany after it is ratified. Although it has been welcomed by most German politicians, including many in the CSU, the treaty was negotiated almost single-handed by the Free Democrat foreign minister, Mr Hans-Dietrich Genscher, whom conservatives accuse of monopolising German foreign policy. This is particularly irritating for the CSU, which considers itself, along with conservative Christian Democrats, the champion of ethnic Germans throughout eastern Europe. At today's meeting the CSU is likely to call for closer monitoring of the treaty rights for ethnic Germans and clarification over the issue of dual citizenship. The centre-right coalition also faces a further dispute over the need to merge east Germany's liberal abortion laws with the more restrictive laws in west Germany. The Free Democrats support an extension to west Germany of the old east German law allowing abortion on demand in the first three months of pregnancy to be qualified only by compulsory counselling. This has been attacked by the CSU and many Christian Democrats as too liberal. Mr Heinrich Franke, president of Germany's Federal Labour Office, said yesterday that between 10,000 and 20,000 east Germans were still moving to west Germany every month. 
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HEADLINE: FT  14 MAY 91 / Hungary takes the lead on foreign investment / A look at who is really getting down to business after the post-communist euphoria 
TEXT: FOREIGN investment in eastern Europe is beginning cautiously to take off after a false start during the brief post-communist euphoria. It has gone farthest in Hungary, traditional testbed for the region's economic experiments, where liberal foreign investment laws appeared first more than two years ago. Central Budapest has lost some of the bustle of a year ago, when the flurry of visiting western businessmen gave the impression of a town in the middle of a gold rush. The Forum Hotel is no longer booked for months ahead and consultants complain less of 'corporate tourists' besieging them. But, shorn of the early grandiose hopes and the disappointment which dashed them, investment in Hungary has quietly become substantial. Half of all foreign investment in east Europe (excluding Germany) went to Hungary in 1990, says Mr Bela Kadar, minister of international economic relations. True, that reflects how little has flowed to the rest of the region as much as it does Hungary's own success. Foreign direct investment in the country last year amounted to something between Dollars 750m and Dollars 1bn - either figure is but a fraction of that enjoyed by the south European or south-east Asian countries which compete with east Europe for investment. Accumulated investment is also only 3.5 - 4 per cent of the Hungarian company sector, so there is a long way to go to reach the government's 25 per cent medium-term target. Nevertheless, it is early yet and the trend is sharply upwards. Companies' financial reports showed Ft93.2bn (Dollars 1.53bn) of accumulated foreign investment at the end of 1990, compared with Ft29.3bn a year earlier. Officials expect another Dollars 1bn this year. In newspapers and sugar-refining, foreign ownership has penetrated deep. Foreign media companies now have dominant stakes in all Hungary's main national daily newspapers. Even more dramatically, the number of joint ventures registered jumped from 900 at the end of 1989 to about 7,500 at the end of March, according to Central Statistical Office estimates. In addition, there are another 1,200 companies with foreign stakes. Officials and economists caution that many Hungarian businesses have set up joint ventures simply to avoid tax or customs. A better - albeit indirect - indication of a surge in interest is the breakneck pace of expansion of western accountancy and law firms in the past 18 months. Even so, consultants are finding it difficult to keep up with a quickening rhythm of large acquisitions and new investments. The conclusions of deals worth more than Dollars 40m are running at more than one a month so far this year. Moreover, many more transactions are in the offing as Hungary's flagship First Privatisation Programme begins to take off. Investors are attracted particularly to Hungary because of the official welcome it gives to foreign capital. Western lawyers praise the foreign investment and company acts for their western quality. Officials boast that the country has the most liberal investment regime in the world, citing the right to set up in the service sector, acquire majority control without special permission and fully repatriate profits. The company law mimics the German. Better, the laws have improved with use in the two years they have been in effect. So much for the principle. The practice has been frustrating, which makes the growth in foreign investment all the more impressive. The first problem, especially for deals involving real estate, is to find someone with the authority to sell a property. Central and local authorities and current occupiers and former owners make rival claims. A recent act compensating the last group should help but it leaves questions unanswered. Nor is approval from the State Property Agency, the central privatisation authority, easily obtained. It sometimes treats well-known international companies 'shabbily', says one senior consultant. The agency promises a decision on whether to give the go-ahead to a serious proposal and then delays it, again and again, without explanation. Negotiations themselves are an endurance test. Foreign buyers, state company managers, SPA officials, the enterprise council representing the workforce, and various accountants, valuators and legal counsels - all participate. Turnout at these unwieldy meetings in smoke-filled rooms can easily reach 25 and the whole group goes through agreements word by word, says Mr Theodore Boone, a lawyer at Baker &amp; McKenzie. 'Hungarian managers are willing to bring up issues again which everybody thought the book had been closed on.' Price can be a particular stumbling block because valuations vary wildly. 'A company's past record is meaningless and everything around it is in flux,' says Mr Istvan Denes, managing director of the First Hungary Fund, an investment fund. That can lead to big gaps between negotiating positions. Even once the negotiations are over, the formalities of setting up a new joint venture can hold things up. One of the tightest bottle-necks is the company registration court whose 15 overworked judges can take three months to handle an application. Patience has been one of a potential investor's most valuable qualities. One investment fund which has made it a particular virtue is John Govett's Hungarian Investment Company. 'HIC avoided the mistakes others did by diligence and investing a lot of time,' says Mr Adam Batthany, a prime ministerial adviser who doubles as a board member. Patience is also needed more generally. It takes time to implement essential laws and rules; even longer for them to be worn in and for business culture to change. Hungary is at least showing that the delay, while frustrating, is not fatal for investment in east Europe. Investment is taking off, and, says Mr Denes: 'It's getting easier by the day to get things done.' 
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HEADLINE: FT  14 MAY 91 / Paper backs defence minister 
TEXT: BORBA, Yugoslavia's pro-government daily newspaper yesterday threw its weight behind General Vejko Kadijevic, the defence minister who last week said that a civil war had started in the country, writes Laura Silber. Described by Borba as 'a soldier for a time of crisis', he is a member of Mr Ante Markovic's federal government. But until recently he supported the Communist Party - Movement for Yugoslavia, a revived party formed by retired army officers and hardline Communists. However, he has exercised a moderating influence on the army's leadership following the outbreak of ethnic violence between Serbs and Croats two weeks ago. 
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HEADLINE: FT  14 MAY 91 / World News in Brief: Proposal for carbon tax 
TEXT: A new system of carbon taxes and credits could help to win the battle against global warming, says a report commissioned by the Scottish Forestry Trust and the Forestry Commission. 
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HEADLINE: FT  14 MAY 91 / World News in Brief: Aircraft shot down 
TEXT: Sudanese rebels said they killed a foreign mercenary pilot and seven government soldiers when they shot down a light aircraft over rebel-held territory in southern Sudan. 
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HEADLINE: FT  14 MAY 91 / World News in Brief: Uganda rebels killed 
TEXT: More than 180 rebels were killed in a battle in northern Uganda and up to 1,600 people arrested in counter-insurgency operations, the minister of state for defence said. 
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HEADLINE: FT  14 MAY 91 / World News in Brief: Seoul police fire tear gas 
TEXT: Police fired tear gas to drive thousands of anti-government protesters from the streets of Seoul and other cities as South Korea's political turmoil entered a third week. 
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HEADLINE: FT  14 MAY 91 / World News in Brief: Belgian police on alert 
TEXT: Belgian police were on maximum alert for another night of violence after a weekend of race riots and pitched battles in Brussels which saw the arrest of almost 200 North African immigrants. 
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HEADLINE: FT  13 MAY 91 / World News in Brief: Khamenei surgery 
TEXT: Iran's supreme leader, Ayatollah Ali Khamenei, underwent successful surgery on his gall bladder on Saturday. 
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HEADLINE: FT  13 MAY 91 / World News in Brief: SS-20s destroyed 
TEXT: The Soviet Union destroyed its last SS-20 medium-range nuclear missile, ending a three-year process set in motion by an arms reduction pact with the United States. 
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HEADLINE: FT  13 MAY 91 / World News in Brief: Sri Lankan poll 
TEXT: Sri Lanka's ruling United National Party (UNP) swept to a landslide victory at local council elections. 
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HEADLINE: FT  13 MAY 91 / World News in Brief: Green party splits 
TEXT: About 200 members of Germany's radical Green party voted to set up a splinter group, the Ecological Left/Alternative List. 
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HEADLINE: FT  13 MAY 91 / World News in Brief: Guerrillas released 
TEXT: Maoist guerrillas in India won the freedom of four jailed colleagues after kidnapping a politician in the southern state of Andhra Pradesh. 
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HEADLINE: FT  13 MAY 91 / World News in Brief: Marchers detained 
TEXT: Police detained about 130 right-wing royalists in Paris when they defied a ban on an annual march honouring French national heroine Joan of Arc. 
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HEADLINE: FT  13 MAY 91 / World News in Brief: Palestinians shot 
TEXT: Jewish settlers shot and wounded two Palestinian girls aged four and five near Jerusalem as Israelis celebrated the 24th anniversary of the capture of the Arab half of the city. 
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HEADLINE: FT  13 MAY 91 / World News in Brief: Hunger striker freed 
TEXT: Prominent Ukrainian nationalist Stepan Khmara, who went on hunger strike on April 13, was freed from jail following an opposition boycott of parliament. 
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HEADLINE: FT  13 MAY 91 / Monday Interview: M'learned friend's tough brief - Michael Howard, UK employment secretary 
TEXT: In his short ministerial life, Mr Michael Howard has played many parts, all to mixed reviews. He piloted the Financial Services Bill through the Commons with great technical skill, but some think without much real feel for the task in hand. He was responsible for the poll tax legislation, about which no more need be said; and he ran water privatisation, eventually to acclaim, although at one point it looked as if his own career might not prosper as a result. Now, only eight years after becoming an MP, he is employment secretary as unemployment has crashed through the 2m barrier for the second time since the Tories took office in 1979. It is difficult to ruffle Mr Howard. He spent the years between 1970, when he failed for a second time to capture Liverpool Edge Hill, and 1983 when he won the safe-ish seat of Folkestone and Hythe, building up his reputation at the Bar. Once he has taken a brief, he does not easily yield; colleagues report that following Mrs Thatcher's demise, he remained one of the cabinet's staunchest poll tax diehards. But people say Mr Howard is a briefcase carrier rather than a gut politician; that he is clever but lacks conviction or passion and that he has never had an original political thought in his life. At the first charge, one detects a modest stirring of Welsh blood - the son of a dress-shop owner, he went to Llanelli Grammar School. 'I care deeply and passionately about people, about issues and about the future of this country,' he says. But to the second charge, he pleads guilty. 'I'm not sure you would find all that many practising politicians who can lay claim to original ideas. I think the art of politics is selecting the best of the ideas which originally were thought of by those not active in politics and making an assessment whether they will work and achieve the result you wish to achieve.' Before the interview, his office said he had written no political pamphlets; a fact which turns out not to be quite correct. He has in fact co-authored two: one about the economy with his old friend Norman Lamont - Howard was best man at the chancellor's wedding  - and the other, improbably, with Mr Julian Critchley advancing the case of the East African Asians. He is due to publish one solo this week but it is just a rehash of Central Office nostrums. It is not hard to identify the badge on Mr Howard's philosophical cap. He pays homage to Iain Macleod; but above all, remains loyal to the founders of Thatcherism. 'I think we have established the tramlines along which we intend to travel; they were established during the last 12 years,' he says. One aim of this interview is to find out whether the Thatcherite Mr Howard, surrounded by his paintings of the Battle of Blenheim, envisages any change in employment policy in the light of the change at Number 10. His straight answer to this question is an uncompromising 'No. My agenda was clearly set when I arrived here.' At the top was and is training. He has had the task of implementing the blueprint to create 82 employer-led and dominated Training and Enterprise Councils across the land. 'I can speak for a very long time about this,' he says menacingly, having already spoken for several minutes about this 'very exciting initiative'. It is indeed an important, if last-gasp attempt to smarten up Britain's bedraggled training system, by handing the task to committees led on a part-time basis by top local businessmen. He admits no doubt about the sustainability of the approach, although he says he is frequently tested in his determination to stick to the principle that the businessmen involved must be of chief operating officer grade, rather than, say, personnel directors. 'I remain of the view that it's right to stick to these demanding criteria,' he says. He is also not impressed with the other grumbles Tec chairman vent in private. He thinks the Tecs are on target to deliver their guaranteed levels of performance and that they should work through the current financial year before he considers any further change to their freedom to shift funds from one area of work to another. The Tecs, says Mr Howard, already have more financial and operating flexibility than any comparable body, something which has made them richly inventive. On the future of trades union law, he is elusive. Having suggested early in his term of office that the Thatcher decade had completed the job, he now appears to be wavering. 'We keep it under review and we must always look to see whether there's a need for further change in the law. Some recent developments, such as the episode of the NUM (the Scargill financial controversy), have clearly indicated that the law needs attention, but we haven't reached any decisions yet on what the manifesto should say.' Among the issues he has in mind are the powers of union certification officers, the penalties for improper accounting and access by members to their unions' financial affairs. The government's biggest problem in the employment area, however, continues to be excessive wage pressure during a period of disinflation. He is scornful of suggestions that some move towards a national economic assessment or co-ordinated pay bargaining might have a role, sticking to the Thatcherite dictum: 'Locally devolved pay bargaining is likely to be the most effective.' The creation of a pay review body for the teachers was, he insists, a special case. 'I don't see that as a precursor for a profusion of review bodies in other areas.' Assuming that Mr Howard continues to speak for his party on these matters, that suggests a potentially widening gap with a Labour party committed to a minimum wage, upon which subject Mr Howard adopts his most practised silk's scorn for a piece of bogus court-room evidence. He appears to harbour no fear that the public mood is moving against him in this area. Nor, however, does he have a convincing explanation as to why this attitude should not be applied to wages councils, which set minimum wages for 2.5m workers in certain sectors. 'We see no permanent place for wages councils in our system,' he says, but declines to say when the fox will be shot. He has been asked so often what it feels like to preside over another outbreak of mass unemployment that the answers are cut and tucked into sound bites; Britain still has below average unemployment in Europe etc. The government's job, he says, is to persist with the right, firm financial framework and to take the consequences. That is what he means, he says, when he talks about the relentless, practical struggle over many years to apply the chosen political philosophy. It is only when we turn to Europe that there is a sign of the Majoresque emollience. Mr Howard, like his former boss, enjoyed playing rough on Europe, once accusing Ms Vasso Papandreou, the social affairs commissioner, of bringing the Community into disrepute. On the day that Mrs Thatcher resigned, officials in Mrs Papandreou's directorate were jubilant at the thought that it might mean the end of Mr Howard. Today, however, his tone is softer. He always used to say that one third of the social charter was totally unacceptable, a third possibly negotiable and a third, mainly that pertaining to health and safety, fine. Now, he says, 'it looks as though a dozen out of 50 proposals are likely to be unacceptable', although it remains unclear which of these will be determined by qualified majority and therefore leave Britain out-voted. 'We have done quite well so far, but there's no guarantee that we shall be able to construct the necessary minority on all the proposals.' The more mellow atmosphere, he says, stems partly from a deal he struck with Ms Papandreou earlier this year, when she agreed that draft directives would be shown to member governments before publication and when she agreed to accept additional help to improve the so-called 'impact statements' evaluating the costs and consequences of proposed measures. He must, one imagines, be a formidable opponent in EC ministerial councils. He does his homework, enjoys detail and displays no self-doubt about fundamentals. He has missed only one such council, which took place at the height of the leadership election, when he was doing his lonely best to ensure that Mrs Thatcher fought on. Now she has gone, he will not say whether he thinks the party's chances of election victory have increased or diminished. Personal intimations of mortality were delivered in the recent local council elections, when Folkestone was lost to the Liberal Democrats. Indeed, he makes little of the much discussed change of style at Number 10, preferring instead to laud another of the new prime minister's qualities. 'It's determination that matters,' he says, 'battling.' Personal File 1941 Born south Wales. Educated at Llanelli Grammar School and Peterhouse, Cambridge. 1962 Called to the Bar. 1966; 1970 Contested Liverpool Edge Hill. 1970-71 Chairman of the Bow Group. 1983 MP for Folkestone and Hythe. 1985-87 Minister at trade and industry department. 1987-90 Minister at environment department. 1990 Joined Cabinet as employment secretary. 
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HEADLINE: FT  13 MAY 91 / International Company News: General Motors subsidiary recalls 1,830 Saturn cars 
TEXT: UP TO 1,830 vehicles in General Motors new Saturn line, intended to demonstrate the US car company's competitiveness against its Japanese rivals, are to be recalled. GM's Saturn division, initiated in 1983, says 7 per cent of the vehicles it has built since it began production last autumn, must be replaced because they were filled with a faulty coolant which could damage the engine. The coolant was supplied by a Texaco subsidiary. This is the second recall of Saturn cars. The first, in February, involved 1,210 vehicles with a faulty seat mechanism, which the company also blamed on a supplier. The latest recall is believed to represent the first offer by a large motor manufacturer to replace an entire vehicle for a problem of this type. It demonstrates the importance GM attaches to creating an image of reliability for Saturn. Saturn, a small car made largely from plastics, is an attempt by GM to compete with the quality and production standards of the small, imported Japanese cars which have a big share of the US domestic market. The project has involved ground-breaking agreements with unions, suppliers and dealers. GM's investment amounts to about Dollars 4bn. 
ID: 243
HEADLINE: FT  13 MAY 91 / International Company News: Dresdner moves into private banking 
TEXT: DRESDNER Bank is following the lead of its larger rival Deutsche Bank and setting up a private banking house aimed at creating a more exclusive service for increasingly wealthy and sophisticated German private investors. Hardy &amp; Co Privatbankiers, opening at the beginning of July, will have the characteristics of a private bank, while tapping the resources and technology of the Dresdner Bank group. While no minimum wealth criteria have been revealed, Dresdner suggested it was targeting investors with a net worth of roughly DM5m (Dollars 2.9m) or more. Hardy &amp; Co, a private bank set up in Berlin in 1880, was merged into the Deutsche Landerbank, a subsidiary of Dresdner 10 years ago. The latter sold the Landerbank to Swiss Banking Corporation in 1985, but retained the name of Hardy &amp; Co, which it is now using to set up the new bank. Dresdner will own 100 per cent of the capital, but Hardy &amp; Co's private banking identity will be underlined by two personally liable partners running the business. Based in Frankfurt, it will start operations with a staff of around 40. Mr Utz Pfannschmidt, one of the two partners, stressed the bank would work within, not in competition with, the rest of the Dresdner group, catering for high net worth investors whose increasingly sophisticated requirements could not be met as effectively in the existing structure. The so-called inheritance generation in Germany is presenting the big banks with a considerable challenge as to how to retain such clients. Deutsche Bank has, for instance, bought a stake of more than 80 per cent in the old private bank Grunelius. Mr Gerhard Eberstadt, managing board member in charge of securities and investment, estimated the operation would break even over a period of between three and five years, in what he described as a 'growth market par excellence'. 
ID: 244
HEADLINE: FT  13 MAY 91 / International Company News: Lavalin plans big sell-off 
TEXT: LAVALIN, the big Canadian engineering and manufacturing group, plans to return to basics after a decade of heady expansion. Most of its industrial holdings are being put up for sale. The group, with annual revenues of more than USDollars 1bn, wants to concentrate on its engineering and project management business, developed internationally in the 1960s and 1970s. Lavalin has built its reputation in energy, transportation, aluminium smelting, pulp and paper and many other industrial sectors. Mr Bernard Lamarre, chairman, is offering half Lavalin's 85 per cent interest in UTDC, an Ontario rail equipment maker, and all of Kemtec, a specialised petrochemical producer in Montreal. Together, they have annual sales of about USDollars 500m, are losing money and require injections of new capital. Lavalin bought UTDC in 1986 from the Ontario government, which retains a 15 per cent interest. UTDC pioneered the Vancouver Skytrain people-mover, which Lavalin has tried to sell worldwide. Kemtec has taken a severe blow from declining petrochemical prices. ---------------------------------------------------------------------- NRI TOKYO BOND INDEX ---------------------------------------------------------------------- PERFORMANCE INDEX Average December 1983 = 100        yield    Last    12 wks    26 wks 9/5/91   (%)     week     ago       ago Overall            154.46  7.11   154.36   153.74     146.23 Government Bonds   152.18  6.95   152.23   152.07     143.03 Municipal Bonds    156.32  7.21   156.12   156.37     148.94 Govt.- guaranteed Bonds              159.09  7.27   158.86   158.41     151.54 Bank Debentures    151.52  7.16   151.31   150.29     144.49 Corporate Bonds    157.48  7.38   157.26   154.90     149.15 Yen-denom. Foreign Bonds              161.94  7.92   161.71   158.09     151.18 Government 10-year??            6.63           6.59     6.35       7.31 ---------------------------------------------------------------------- ?? Estimated par yield Source: Nomura Research Institute ---------------------------------------------------------------------- 
ID: 245
HEADLINE: FT  13 MAY 91 / International Company News: Agencies downgrade parts of Reichmann empire 
TEXT: PROBLEMS with tenants and subsidiaries are having a domino effect on some credit ratings of the Reich-mann brothers' business empire. Standard &amp; Poor's lowered its rating on the Reichmanns' 59 Maiden Lane in New York, citing a tenant of the big office development and the parlous state of the New York property market as problems. A USDollars 200m issue of Euro-notes due 1995 secured on 59 Maiden Lane was downgraded to A- from AA. However the agency said this did not affect Olympia and York Developments, the Reichmanns' core holding company. Moody's downgraded nearly USDollars 1bn of Gulf Canada Resources debt because of the company's poor profit prospects and declining interest coverage. The Gulf Canada senior debentures were lowered to Baa-3 from Baa-1. About USDollars 150m of short-term debt issued by a Reichmann property subsidiary in Calgary, Alta, was also downgraded because a leading leaseholder is Gulf Canada. The Reichmanns have several big resource holdings, including Gulf Canada, which operates in oil and gas developments in North America and south-east Asia. 
ID: 246
HEADLINE: FT  13 MAY 91 / International Company News: De Havilland partners appeal for state cash 
TEXT: AEROSPATIALE of France and Italy's Alenia, which have agreed to buy de Havilland of Canada, are asking the Canadian and Ontario governments to chip in as much as CDollars 500m (USDollars 434.7m) towards the cost of modernising the struggling aircraft maker's facilities, writes Bernard Simon. Executives of the two European companies, shareholders in the ATR commuter-aircraft consortium, said the governments' contribution would be about half the amount needed to maintain de Havilland's design and production capacity at its plant in Toronto. Mr Fausto Cereti, Alenia's chief executive, said ATR wanted to create the world's leading manufacturer of commuter aircraft. 
ID: 247
HEADLINE: FT  13 MAY 91 / UK Company News: Cross Border M&amp;A Deals 
TEXT: ----------------------------------------------------------------------- BIDDER/INVESTOR             TARGET     SECTOR     VALUE     COMMENT (POUNDS) ----------------------------------------------------------------------- Elf Enterprise           Occidental       Oil     785m     Occidental Petroleum                Petroleum                        furthers debt (UK/France)         Great Britain (US-owned)               reduction ----------------------------------------------------------------------- Elf Aquitaine (France)/   Elf Enterprise  Oil     N/A     JV formed for Enterprise Oil (UK)       Petroleum                      Occidental buy Ltd (JV) ----------------------------------------------------------------------- Temasek Holding + Govt   Mount Charlotte  Hotels  227.5m  Singaporeans of Singapore Investment  Investments (UK)                 take 30 per (both Singapore)                                          cent stake ----------------------------------------------------------------------- Sara Lee (US)          Linter Textiles  Textiles   Est   Sara Lee beats Corp                        101m  Merrill Lynch (Australia) ----------------------------------------------------------------------- Canada Trustco (Canada) First Federal S&amp;L Banking  111m   US regulators Rochester (US)                    approve ----------------------------------------------------------------------- Mitsui Toatsu/Yamamoto  East Shore     Chemicals  23.3m  Wiggins Teape Chemicals (both Japan)  Chemical Co. (US) disposal ----------------------------------------------------------------------- Aker (Norway)        Omega Marine (US)  Engineering N/A Central part of intl. growth ----------------------------------------------------------------------- Instituto Bancario    Banca Catala de Credit Banking N/A  Catalonia San Paolo di Torino         (Spain)                       popular with (Italy)                                                   foreign banks ----------------------------------------------------------------------- Medeva (UK)                MD        Pharmaceuticals    45m  First step Pharmaceuticals (US)                       in US growth ----------------------------------------------------------------------- Time Warner (US)/    Warner MyCal (JV) Entertainment 4.3m  multi-screen Nichii (Japan)                                           cinema venture ----------------------------------------------------------------------- Source: FT Mergers &amp; Acquisitions International ----------------------------------------------------------------------- 
ID: 248
HEADLINE: FT  13 MAY 91 / Making faces in the mirror 
TEXT: The market seems to be feeling like I do some mornings. The telephone rings; perhaps if I go back to sleep it will go away. Despite thin trading, stock prices go on behaving as if the institutions were flooded with cash. Reality breaks through for a day, always with some utterly predictable bad news, and then fades. The ostrich mood was perfectly expressed by a broker interviewed by one of the wire services in London on Friday evening. Asked to comment on the week's profit warnings, he was ready: 'I don't believe it's as bad as they say.' In a sense, it never is as bad as they say; once a board steels itself to issuing a warning, it always tries to make sure that it will not have to issue a second. There is no reason at all, though, to assume that boards are shading their warnings more than they usually do. Costs are still rising, sales are very weak, and interest rates are being held deliberately high; the average company is bound to suffer. The UK economy is not going through a normal cyclical downturn, but a savage morning after. Every country which has joined the European monetary club as a cure for structural inflation has suffered some years of acute discomfort. Britain, by doing so after a period of financial excess, has ensured that the adjustment will be more painful than many. The corporate escape from the credit squeeze, at least, has been well mapped: the steady stream of rights issues, each greeted with unaccountable shock. Efficient market theorists will argue that all these uncomfortable facts are discounted in present price levels, and some cite the high dividend yields of UK equities in support of this idea. But the international yield gap is normal, and the reactions to news which ought to have been expected suggests that the news is not discounted. On the contrary, it suggests that the market is indulging in the wishful thinking always found at bull market climaxes - reading its picture of reality from its own price level. This is as rational as raising morale by grinning at yourself in your shaving mirror. This used to be quite a habit on Wall Street. The official US leading economic indicator formerly gave more weight to stock prices than it does now. The result was that when the market had a good run, the leading indicator rose, and this was taken as confirmation that high stock prices were justified. The Street grew wiser after 1987, and so did the statisticians. Stock prices have been de-emphasised, and the market takes less notice of the leading indicator. In other respects, the buoyancy of Wall Street is easier to justify than that of London. The consensus forecast is for a recovery, and the Fed is doing all it can to encourage one. Unfortunately, it remains a matter of jam tomorrow; the current news continues to be, mainly, worse then expected. Consumer spending, which is supposed to energise the recovery, remains depressed, despite the reported rise in confidence - not perhaps as surprising as it may look, since real disposable incomes in the US have taken their sharpest fall in 15 years. Investment is dropping, construction is still on its slow way down, and exports are not dynamic. Only the weakness of imports makes the fall in output relatively shallow. Yet while expectations about the US economy are probably drifting into touch with reality, equity prices still make inadequate allowance for debt problems. Something like last Friday's crisis at First National, the Californian life insurance company, should have been discounted. It has been obvious all along that in a depressed economy some companies which issue junk bonds would be in trouble, and so would some companies that held the bonds. Junk bond yields show that the bond market has been rational; but the 50-point fall in equities after the First National announcement suggests that reality stops there. The bond market, however, is being unrealistic in another way. Market comments, with some notable exceptions, are full of dire warnings about inflation - warnings which may in fact prevent the Fed from easing any further for some time. In fact, though, the only sign of inflation is in the level of bond yields; and this owes more to German (and Japanese) inflation expectations than to those in the US. As long as the US Treasury has to compete with the Germans for long bond funds, it must compete on yields. In the real US world, producer prices have fallen for four of the last five months, and the prices of inputs are still very soft; price expectations in industry are as weak as for the best part of two decades, wage rates follow their usual sluggish American course, and productivity has been rising as companies adjust to a soft market. It would take a much more vigorous recovery in demand than even the wildest optimists are now predicting to stretch capacity to the point where margins can be pushed up aggressively. Current estimates are that US output could rise at a 3-4 per cent rate for two years or more before any constraints began to appear, but that is still in the unknown future. In such a time frame US long bonds would surely look highly attractive; but the disappointing response to last week's auctions confirm that this is not yet the market view. The danger is that if the market does come to believe in the low-inflation scenario, while bond yields are still held up by German problems, the yield gap between bonds and equities can only be closed on the equity side. In this sense, the US equity market is potentially more vulnerable to good news than to bad, while the London market may well be more vulnerable to Wall Street than to reality. Finally, a footnote about insider trading. Mr Alistair Alcock, a former director of corporate finance at UBS Phillips &amp; Drew, now at the University of Buckingham, has sent me a couple of spirited articles he has written on the subject in the New Law Journal, which may not be on your normal reading list. He suggests that the insider trading law should be renamed the Protection of Market-Makers Act, which gives you the tone. Try reading law for a change. 
ID: 249
HEADLINE: FT  13 MAY 91 / Brooke in crucial Belfast meeting 
TEXT: MR PETER Brooke, Northern Ireland secretary, will today try to rescue from near collapse his plans for round-table talks on the province's future at what could prove a 'make or break' meeting in Belfast. Unionist and nationalist leaders are expected to be presented with alternative suggestions for the venue of negotiations involving the Irish government. If agreement cannot be reached, Mr Brooke will have to decide whether it is worth continuing the talks. Mr Brooke is believed to have discussed possible fall-back positions with Mr Gerry Collins, Irish foreign minister, at a four-hour meeting in London on Friday. He has taken gambles before in his talks initiative; successfully bringing Northern Ireland's constitutional parties together with a 'take it or leave it' offer before Easter. This time, the Northern Ireland Office appears to be hoping that, after a weekend of reflection by the parties involved and the threat of an embarrassingly early collapse of the talks, there will be sufficient movement today for a compromise to be reached. But Mr Brooke knows there will seem little point in continuing to debate a logistical detail indefinitely. Failure to reach a compromise on this issue suggests the goodwill believed to exist before talks started had been exaggerated vastly. Already two weeks have passed, out of the 11 set aside for round-table talks. Mr James Molyneaux and the Rev Ian Paisley, leaders of the Unionist parties, again insisted at the weekend that they would not hold talks with Dublin ministers anywhere in Ireland while the Republic's territorial claim to Northern Ireland remained. The nationalist Social Democratic and Labour party believes that meetings should rotate between London, Dublin and Belfast. Constructing defences, Page 9 
ID: 250
HEADLINE: FT  13 MAY 91 / Gilt securities win Bank's approval 
TEXT: THE Bank of England gives a clean bill of health today to the UK government bond market - a part of Britain's financial sector vital to the government's ability to borrow funds from the investment community for public spending. The vote of confidence in the gilt-edged securities market - which only last year emerged from a period of sustained losses - comes in a report from the Bank on the financial arrangements underpinning the operations of marketmakers in the securities. Gilt marketmakers encompass 18 financial groups which buy and sell bonds in a secondary market for the securities, mainly on behalf of customers such as pension funds. The marketmakers - through their role in buying gilts from the government and selling them to the international investment community - are likely to be important in the large programme of gilt issues expected this financial year. Up to Pounds 15bn of new gilts may be issued during the year, as the government is in deficit after four years of surplus. Details of the financial system helping the gilt market to work smoothly are contained in a report published by the Bank, before its quarterly bulletin on Thursday. It says the amount of outstanding lending on short-term positions by marketmakers - an indication of the amount of liquidity in the gilt market - rose nearly threefold between 1986 and last year, from Pounds 2bn to Pounds 5bn-Pounds 6bn. The arrangements for channelling funds to and from the gilt market on a short-term basis were altered at the time of financial deregulation in the City in 1986, otherwise known as Big Bang. This introduced a greater element of competition into the market and attracted a number of new overseas entrants, causing a squeeze on margins and a run of losses which ended only last year when the gilt business as a whole made a small profit. The Bank says the new information about liquidity illustrates confidence by the marketmakers in their ability to borrow. It shows too that the specialist groups lending to the gilt market may be well placed to increase their financing operations in other fields such as equities, underpinning London's role as an international financial centre. The report mainly covers the activities of the nine specialist stock-exchange money brokers, which lend money and stock to gilt marketmakers. The specialist groups are James Capel, Cazenove, Lazard Brothers, Prudential-Bache, LM (Moneybrokers), Sheppards, King &amp; Shaxson, Lehman Brothers and Rowe &amp; Pitman. London is top centre for foreign share deals Page 7UK gilts: market looks ahead to bleak signs Page 28 
ID: 251
HEADLINE: FT  13 MAY 91 / Tory peers concerned over ECGD sale: Protests on level of export insurance support may force government concessions 
TEXT: SENIOR TORY peers, including a former trade minister, are seriously concerned about the level of government support for insuring exports, as ministers press ahead with the privatisation of part of the Export Credits Guarantee Department. Protests over aid for insurance on exports to politically sensitive countries in particular could force the government to make concessions in the House of Lords through fear of provoking a large-scale revolt. The bill paving the way for privatising the short-term credit insurance operations of the ECGD is expected to reach the Lords next month. Conservative peers publicly voicing anxiety include Lord Trefgarne, a former trade minister, and Lord Weir, a former president of the Federation of British Electrotechnical and Allied Manufacturers' Associations. Lord Prior, chairman of GEC, is believed to share their anxiety. Others include Lord Tombs, chairman of Rolls-Royce, who sits as an independent crossbencher. At the DTI, Lord Trefgarne was responsible for much of the early preparation for the sale - including negotiations with the Treasury. The disquiet reflects the widespread concern among British industrialists about the level of state aid for exporters compared with overseas rivals, and adds to the difficulties the government faces on the ECGD sale. Only three companies have responded to the government's invitation to tender for ECGD's short-term insurance business. One tender, from Trade Indemnity, was an offer to collaborate with no money on the table. In the Commons, Tory rebels succeeded at the bill's committee stage in inserting a new clause committing the government to continue insuring UK sales to politically risky developing countries for three years after privatisation. The clause was overturned by the government, but is expected to be reintroduced in the Lords. Mr Tim Sainsbury, trade minister, sought to appease MPs and exporters with an assurance that the need for a 'national interest facility' for political risk reinsurance would be kept under review. The government's intention was that the facility would continue as long as it was considered 'essential to meet the reasonable needs of exporters', Mr Sainsbury said. However, Lord Trefgarne said: 'The assurances Mr Sainsbury gave, while helpful, really didn't go far enough.' He also complained about recent rises, in the face of substantial debts incurred, in the ECGD's premiums for exports to more difficult markets. 'Ministers should follow the policy that I think previous ministers have followed which is that British exporters should not be placed at any disadvantage with their competitors . . . The truth of the matter is that most of our competitors have lost even more and are prepared to go on doing so,' said Lord Trefgarne. Lord Weir said the government had to give 'strong, clear' assurances about its support for export insurance in the event of the privatisation failing to have the effect ministers predicted. 'Behind this, one really sees the hands of the Treasury,' he said. Lord Tombs said the DTI's stand on political risk insurance was 'indicative' of its lack of commitment to supporting exporters. Manufacturers only wanted the level of government support brought up to the same level as foreign competitors. 'I think privatisation of the insurances is unlikely to improve the position in the short term because of the government's refusal to take on what can only be a government responsibility,' he said. 
ID: 252
HEADLINE: FT  13 MAY 91 / Criticism mounts over NHS reforms 
TEXT: PRESSURE on the government over its health service reforms increased yesterday when the Institute of Economic Affairs, a leading free market think tank, joined mounting criticism of the way the changes are working. The institute contributed ideas to the government review which led to the introduction of the reforms and it does not question the need for reorganising the National Health Service. However, Dr David Green, director of the institute's health and welfare unit, said yesterday that last month's changes in the hospital service and forthcoming reforms of long-term care 'suffer from the same structural flaw'. By rationing health care within cash limits 'arbitrarily set by government' both reforms reduced consumer choice. He said that the viability of London teaching hospitals such as Guy's - which started the political uproar over the reforms by announcing about 600 job cuts last month - depended on attracting patients from outside the capital. While many patients would prefer to be treated in London teaching hospitals, the reforms did not give them the choice. Allocation of money under the reforms did not follow patients' wishes but went to 'where patients have been assigned'. The institute publishes a pamphlet today on the next stage of the reforms contained in the National Health Service and Community Care Act  - changes in provision for the long-term sick and elderly. Dr Green said these reforms, coming into effect over the next few years, were retrograde and would reduce elderly people's existing choice of care provision. The institute would like individuals to be able to augment state spending on the NHS through personal insurance arrangements - unlike the British Medical Association, which is calling for increased public expenditure. While proposed solutions vary, the current controversy over the health reforms has made the adequacy of Britain's health care expenditure, which is low by international standards, into a live political issue again. The government is trying to shift the argument away from funding to the outcome of health care. Later this month Mr William Waldegrave, health secretary, will publish targets for monitoring and improving the nation's health. If the controversy over the reforms continues, however, there is a danger for the government that the health targets exercise will become embroiled in the heated argument over the adequacy of NHS funding. The Association of Community Health Councils, which represents consumer interests in the service, today joins criticism of the new general practitioner fund-holding arrangements, under which some family doctors have budgets and purchase hospital care for their patients. For the first time, says the association, GPs will be subject to 'financial risks' which may sometimes prevent them from providing the best care. In other circumstances, fund holders might increase discrepancies in standards by being able to negotiate favourable services for their patients. 
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HEADLINE: FT  13 MAY 91 / Letter: A long wait to journey's end 
TEXT: On Friday night, May 3, just before I was due to spend the Bank Holiday weekend with friends in Norman-dy I received a call from them warning me that there were spasmodic strikes by the French engineers on the boats. On checking with Sealink in Newhaven I was told that the 10.15am sailing next day would probably go ahead as planned - information repeated at 7.30am the following morning. On arriving at Victoria in very good time for the 8.32am connection the notice-board announced that the train had been cancelled, without any other information whatever. On trekking across to the so-called international information office, someone helpfully suggested that I take the evening boat-train connection to Newhaven, but without any assurance that there would be a sailing even then. It was a Sealink matter and British Rail could not help. The Sealink office in Victoria was of course firmly closed until at least 9am, by which time I would have missed several connections to the coast. Fortunately a bomb scare led to the evacuation of the international information office and of some platforms, thus delaying departures. I happened to have in my pocket the telephone number of Sealink in Newhaven. I was told initially that the sailing had been cancelled, only to be interrupted by a further message that it was going ahead after all. That was precious little use to me, as it was far too late to reach Newhaven by any conceivable method. On persisting with this mild objection, I was told to take the next train to Dover and that Sealink in Calais would provide transport to Dieppe. At Dover a Sealink hostess assured me that a message had been sent by radio ahead and that I would be met in Calais, intelligence repeated by the ship's purser. But of course there was no-one at Calais, where all the baggage was sent on to the railway station on the assumption that every non-car passenger was going on to Paris. I found one minor Sealink official who put me back on an empty bus going back to the embarkation area, assuring me - I fear correctly  - that no message of any kind had been sent. I then had to wait until the Calais manager could be found, as he was sorting out dockside problems. He was willing to arrange a taxi, so long as the Dieppe manager accepted that the lapses had occurred on the Newhaven-Dieppe stretch. There was another wait as the Dieppe man too was 'busy sorting out dockside problems'. Normally I only drop names in the last few minutes when all else has failed. But I was reduced to giving my profession, saying who my host was and that we were having a business dinner and that an extremely prominent member of the French cabinet, who lives in the neighbourhood, might drop in to join us. But even if President Francois Mitterrand had been expected it would probably not have helped. What mattered was to establish the responsibility within Sealink. I even had to give a hypocritical defence of British Rail. After I had cooled down over a cup of coffee a message came over the tannoy that I was wanted downstairs and a proud Calais manager told me he had persuaded Dieppe to pay for a taxi. My journey back was 'normal.' This means that I had to queue for a long time to get on and off the boat and carry my own luggage. And, despite '1992' and having a British passport, I had to queue again on board for a landing document. What is the moral? Sealink was taken over last year by an international concern, Stena Line, from Sea Containers. Somehow I think it would all have been very different if there had been competition between different companies to carry passengers on that particular crossing. 
ID: 254
HEADLINE: FT  13 MAY 91 / Letter: An alibi for pay rises 
TEXT: Sir, the apparent logic advanced for a few top businessmen's recent large salary increases, as reported in the FT, has been (a) a bonus for the previous year's good trading; (b) that non-executive (ie independent) directors have determined and recommended the increase; (c) that a firm of outside consultants (also independent) have recommended it. Normally, the first of these reasons has much claim to merit as it is based on performance. But it carries less weight in the present difficult times when - as in the case of Prudential  - the rise was accompanied by a cut in policyholders' bonus rates, by nine figure losses on forays into estate agency and reduced profits. The second and third reasons advanced cannot easily claim any such logic, particularly if the companies whose boards have voted the increase have suffered huge losses, as in the case of Midland Bank. We live in a country of rising unemployment (with excessive wage settlements), an increasing number of bankruptcies and a still unacceptably high rate of inflation against which most people have little or no hedge. Awarding company directors large salary increases seems particularly unhelpful and insensitive in view of current economic conditions, even if boards believe they have an alibi in the shape of outside consultants' recommendations. In any event, the moral responsibility for the implementation (or rejection) of such recommendations lies with the boards which commissioned them. The antennae of some company boards seem inadequately fine-tuned for sensitivity. The disadvantages of living in an alibi society is that bad judgments are too easily overlooked. Nicholas Stacey, Reform Club Pall Mall London SW1Y 5EW 
ID: 255
HEADLINE: FT  13 MAY 91 / Letter: Regulatory regime in need of direction - The government must start to give its network of industry regulators a clearer purpose 
TEXT: What do contraceptives and salt have in common with domestic telephone calls, the BBC television licence fee, commuter rail fares in the south-east, gas and electricity charges? The answer - after a decade of free-market reforms  - is that they all have their prices controlled by regulatory authorities. Regulation in the UK, as the diverse list of products and services suggests, not only lacks coherence but is seldom free of controversy. Regulators have sprung up in an ad hoc way, largely in response to political requirements, as government has privatised industries and opened them up to competition. The Broadcasting Act 1990 created no fewer than six regulators to oversee the television industry, for instance. All the regulators, from the Office of Fair Trading, the utilities - gas (Ofgas), telecommunications (Oftel), electricity (Offer), water (Ofwat) - aviation and television last week gathered for the first time to discuss their role at a conference organised by the Institute of Economic Affairs. Having created a patchwork of regulatory bodies the government is starting to consider how to give them a clearer purpose. Mr Peter Lilley, the trade and industry secretary is leading the way by addressing how his department's regulatory responsibilities should be made more coherent. To carry out a thoroughgoing review of the regulators' roles, particularly where the privatised utilities are concerned, Mr Lilley's advisers will have to tackle several questions: What criteria should be used to assess whether a regulator is working efficiently? In telecommunications, for instance, there have been complaints that it has taken Oftel far too long to determine the price and conditions under which BT should make its network available to other operators. Comparisons with regulation in other countries might be one way of judging British regulators; more comparisons between the domestic regulators may be useful. One possibility suggested at the conference by Mr Centro Veljnowski, an IEA economist, was to set up a Whitehall audit unit to examine the costs and benefits of regulation and deregulation. Do regulators need to be more activist to represent consumer interests? One of the regulators' main tasks is to protect consumers against utilities with monopoly power. Yet according to Mr Maurice Healey, director of the National Consumer Council, one of the main hindrances faced by regulators is that they can only react to plans proposed by the companies they regulate; they cannot suggest or stipulate what strategies the companies should follow. When BT proposed charging for its directory inquiries service, Oftel was not able to propose an alternative which consumers might have preferred. It could only comment upon BT's plans, says Mr Healey. What scope is there for the regulators to promote competition? Sir Bryan Carsberg, the director-general of Oftel, recognises his task is considerably eased by new technology which is opening up areas of competition in telecommunications. Because of this he can challenge BT with the prospect of entrants coming into the market with new technologies such as mobile telephones or cable television. At the other end of the spectrum is the water industry, where there are no prospects of technology-driven competition. This has led Mr Ian Byatt, the regulator, to adopt so-called 'yardstick competition'. After comparing the performance and costs of different water companies, Mr Byatt will set prices so that all companies have to match the standards set by the best in the industry. As other regulators run up against the realistic limits to competition in their industries, they too may have to turn to 'yardstick competition' to assess the efficiency of the companies they regulate. What should be the responsibility of regulators in maintaining the social aspects of services provided by utilities? Take telecommunications. As a nationalised company BT ran a national network, charging uniform prices, with revenues from more profitable business services offsetting loss-making domestic and rural services. Promoting access to the telephone was part of a social policy sanctioned by governments of both parties. As a privatised company, which faces growing competition, BT's services are likely to become more tailored to different customer groups, which will be charged different prices. There are concerns among Labour critics and trade unions that less affluent, less profitable residential customers will be overlooked in the new world of competition. Oftel and the government will come under pressure to lay out a clear framework for the relationship between the commercial and social aspects of telecommunications markets and how these social obligations should be financed. All the regulators will face this question of balancing social and commercial demands once competition intensifies. Should the regulators be more open in the way they reach decisions? Agreements with the companies they regulate are often concluded in secrecy. Although all the regulators conduct extensive research into their industries, their conclusions are rarely published. Consumers cannot be sure that the regulator has not been quietly 'captured' by the company it regulates. This is one of the dangers of regulation: gradually the regulators 'go native' and start promoting the interests of the industry rather than those of the consumers. In the US, regulation is much more open with hearings held at state and federal level to inquire into company plans. The risk there is that this quasi-judicial system, in which companies give evidence to public hearings, makes the process adversarial and inflexible, says Mr Robert Osgood, a specialist in US regulation with legal firm Sullivan &amp; Cromwell. 'There is another problem,' says Mr Osgood. 'Judges do not make a coherent management team.' Even if such a judicial system is rejected there is a case for requiring greater openness from the regulators, perhaps modelled on select committee inquiries. The regulators could hold bi-annual reviews of a company's performance which would take evidence from interested parties. The background to important decisions such as significant changes to price caps should be made public. Mr Byatt at Ofwat is leading the way in consulting consumers. His office recently sent out 17m leaflets and held public meetings to seek consumer views on plans to change the way people pay for water services. Who should regulators be accountable to and how should they be held accountable? Regulators should serve consumers, yet their masters are really government ministers. There is the additional danger that if the regulators evade the influence of their companies, they may still be captured by politicians and encouraged to bend to the demands of political expediency. Yet, as the system of regulation is likely to remain a feature of these industries for many years, it would make sense for the regulators to have a power base independent of politicians. An alternative to appointment by ministers would be for subscribers to utility services to elect regulators on the basis of customer manifestos. Their power would then rest upon the relationship with the consumers they serve rather than with ministers. Should the regulators be brought together under one umbrella to create greater coherence in their policies? The idea of a regulator-in-chief has been proposed by the Labour party. It sounds plausible but is probably unnecessary. All the utility regulators rely on the support of the OFT and the Monopolies and Mergers Commission. Sir Bryan Carsberg says: 'The MMC's role as a backstop is very important to underline our powers.' In the gas industry, the MMC's inquiries in the industrial gas market were one spur for Ofgas to take more radical action than it had planned. One possibility would be for the MMC to be more active as an independent auditor of the regulators' performance. If the system has been successful with the privatised monopoly utilities, could it be extended to other areas of monopoly which remain in the public sector? According to Mr Healey, the most important priority for consumers is that responsibilities for owning a corporation and running a service should be separated from those of regulating it. He says: 'This really opens up significant new territory for consumers because it makes it much clearer where responsibility lies for running a service and setting the standards it should reach.' A corporation with a monopoly in a service, which also sets the standards of service it has to meet, is unlikely to set standards as exacting as those set by an independent regulator. British Rail and the Department of Transport between them own, run and regulate the railways. Consumers regard BR and the department as the chief culprits responsible for poor quality, only to find that these two organisations are also judge and jury of consumer complaints. Rather than wait for privatisation, why not establish Ofpost, for the Post Office, Oftube, for the London Underground or Ofrail for British Rail to give consumers a much clearer voice in decision making. After all, this would be a return to the roots of regulation. The US Interstate Commerce Commission, set up in 1887 as the first modern regulatory agency, was modelled on the British Regulation of Railways Act of 1873, a regulatory scheme which the House of Commons soon after declared to be a failure. For modern regulators to avoid such a fate they will need to be ready to reform themselves as well as the industries they regulate. The first article about Britain's regulators appeared on Wednesday March 13. 
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HEADLINE: FT  13 MAY 91 / Letter: Britain should heed Spain's proposal for Community budget distribution 
TEXT: Sir, The British government might take the opportunity of Mr Felipe Gonzalez's visit to London last week to think again about one aspect of its European policy. Spain has put high on its list of priorities for the current intergovernmental conferences a change in the EC's financing arrangements to ensure that the Community budget brings about adequate transfers from the richer to the poorer member states. Such a concept has not endeared itself to those in Britain who fear that it will only inflate EC spending still further and that such transfers are unnecessary and wasteful. No doubt much can and should be done to see that EC monies on regional and social projects are properly used, but problems on this account do not invalidate the argument for having a Community budget, whatever its size, which is consciously redistributive. At present there are serious anomalies with some of the richer EC member states being net beneficiaries. If there was an override mechanism to make sure that the overall effect of Community budget flows was as it ought to be - according to need and ability to pay - there would be less need to distort the Community's individual policies. In particular, countries both rich and poor which currently benefit from the excessive expenditure on agricultural price support might be less resistant to sensible reform of the Cap. This in itself should commend the Spanish proposal to Britain. But there are two other reasons. Since our GDP per head is around the EC average, we should come out of a redistributive budget at least as well as under the present arrangements. Second, since the present arrangements depend on a special corrective mechanism negotiated with difficulty for Britain alone, we should be much less exposed if they were replaced by something which was really communautaire. Sir Michael Franklin, 15 Galley Lane, Barnet, Herts EN5 4AR 
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HEADLINE: FT  13 MAY 91 / Observer: Hear Hear 
TEXT: 'At the beginning of my review, I stated that 1990 had been a difficult year. For me, it was also a rewarding one.' So says Mick Newmarch, chief executive of Prudential Corporation, writing in his annual report for 1990 - a year in which, it may be recalled, the Pru's pre-tax profits rose 9 per cent and his salary rose 43 per cent. 
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HEADLINE: FT  13 MAY 91 / Observer: Bananas 
TEXT: Woody Allen, the American comedian, writer and film director, may not seem the most obvious name to associate with the Italian Co-op, one of the country's biggest retailers with almost L8,000bn (Pounds 3.6bn) in sales. But shooting for a series of five 45-second TV commercials written and directed by Allen is due to start soon. It is not quite the first time Allen, best known for his films of New York life, is making a commercial. An earlier project for the Campari drinks group never got off the ground owing to problems over the script. The scripts for the Co-op's new ads have already been delivered, although executives at Saatchi &amp; Saatchi in Italy, which has the Co-op account, are sworn to secrecy as to their content. However, word is that there is already some concern about the use of typical Allen characters drawn from the US east coast, such as the New York shrink, to sell the fruits, vegetables and other foods promoted by the new ads. Nevertheless, Italy's Co-op, which is both bigger and richer than most of its European counterparts, is determined to go ahead, and may even try to draw attention to its status-raising director by giving Allen an on-screen credit at the end of each commercial. The company is less keen to say how much he is being paid. Peter Falk, the television detective 'Colombo', reportedly earned L700m for his Co-op ads five years ago. Evidently, the company made the artistic Allen an offer he couldn't refuse. 
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HEADLINE: FT  13 MAY 91 / Observer: All or nothing 
TEXT: How easily great schemes can gang a-gley, especially when they're hatched by the notoriously mother-tongue- bound British. In discussions with the rest of Europe about economic and monetary union, UK officials thought they'd hit on a wonderful idea for inching towards agreement on a European central bank while keeping in British hands a goodly portion of the country's gold and foreign currency reserves. Under existing plans for union the UK's reserves would end up, along with those of the other EC nations, in the coffers of the new central bank instead of being locked away at the Bank of England. Such a state of affairs would enrage Tory right-wingers, and make it harder for the govern- ment to win parliament's backing for even a modest show of UK support for Emu. The officials' wheeze was to agree to the transfer of 'reserves' from Britain to the new bank, but without specifying how much. The plan foundered when the British side realised that the wording would have to be translated into French - which insists on nouns having an indefinite or definite article. Use of the prefix des, meaning 'some', rather than the all-encompassing les, would have immediately given the game away. 
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HEADLINE: FT  13 MAY 91 / Observer: Tom-Tom Tim 
TEXT: Tim Renton, Britain's arts minister and humble mortal, recently found himself ushered into the presence of a God, blissfully unaware of the protocol crisis which preceded the auspicious event. One of Westminster's few true gentlemen and far better suited to being arts supremo than Chief Whip, the Machiavellian assignment dumped on him by an increasingly isolated Margaret Thatcher, Renton was heading for the Horniman Museum to meet the Ooni of Ife, divine king of 15m Yoruba people in south west Nigeria. The legacy of a Victorian tea merchant, the Horniman collection embraces artifacts and art from cultures and religious faiths around the world. Proud owner of a stuffed walrus and its very own mummy, the museum has now added an exhibition of Yoruba art, which Renton was invited to look over. But the museum's big-wigs were unsure of the correct procedures to be followed when a minister meets a god. After considerable anguish, it was eventually decided that Renton need not kneel. At the moment of their meeting, however, it was agreed that tom-toms would sound - a salute considered sufficiently grand because the Ooni, it emerged, is only a part-time god. Off-duty, the divinity is a commodities broker. 
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HEADLINE: FT  13 MAY 91 / Observer: Viennese whirl 
TEXT: Vienna may conjure up strains of Strauss and romantic images of nights at the opera. But it seems self-respecting Saudis, used to only the most luxurious of life-styles, regard a posting to the Austrian capital as a positive hardship. Hence the tough job faced by the Saudi delegation to the Organisation of Petroleum Exporting Countries in finding the right head for the cartel's public relations department. The lucky candidate is Mohammed Abdul-Aziz al-Sahlawi, who is reported to have accepted only on condition that he also continues to draw his full salary at home, where he is professor of economics at the King Fahd University of Petroleum. Pecuniary wheeler-dealing apart, the appointment of Sahlawi, a US-educated engineer, is a clear sign of Saudi Arabia's new dominance within Opec.  This is the first time in 15 years that the world's biggest oil exporter has put forward one of its own nationals for a senior post inside the organisation. The surprise decision also leaves a disgruntled Kemal Saiki, who has been running the public relations side for the fractious oil producers for the past year and had been promised the top job. Alas, being Algerian, he's tarred by the Saudis with the same brush as Opec's current president Sadek Boussena. Saudi Arabia is dissatisfied with the way Boussena has managed Opec politics to meet his domestic agenda and he will almost certainly be voted out of office in June. 
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HEADLINE: FT  13 MAY 91 / Green hopes rise in a grey area: A new urgency in Brussels to build an effective and coherent European Community environment policy 
TEXT: When Jacques Delors, president of the European Commission, assembled the chiefs of the EC's civil service in March to lambast them for lack of focus, he alighted on the head of the environment directorate to make his point. 'I want an environment policy, not endless packages for migratory birds,' he is quoted as saying by one of those on the receiving end of the tongue-lashing. Only weeks later he appears to have got one - a policy, moreover, which may square two and a half of the three circles surrounding the Community's environmental effort. This has enabled Mr Carlo Ripa di Meana, EC environment commissioner, to claim that 'we have reached a turning point in EC environmental policy . . . a point where the environment and the single market are on an equal footing'. The claim seems large. Yet already there are signs of more streamlined decision-making and greater effort to frame policies for all EC members. Eventually, Brussels could have a much stronger hand in setting the 'green' agenda. Controversially, it wants economic growth kept within bounds set by what the environment can stand. As one example, the Commission would like a 'green tax' on all forms of non-renewable energy, to curb consumption. Another concern for companies is the Commission's plan to get them to report annually on their effect on the environment. Under current thinking these 'environmental audits' for industry would mostly be voluntary. But they would be compulsory for larger companies in high 'eco-risk' sectors such as chemicals and steel. The edge of EC environmental policy is at present blunted by: the normal requirement for unanimous approval of legislation by the EC Council of Ministers, which tends to pull proposed standards down to the lowest common denominator; the consequential tendency of the richer, 'northern' member states to press ahead unilaterally with stricter measures, which threaten to fragment the single market; the failure of the Community as a whole to match rhetoric - and even formal policy - with action, classically instanced by member states' inability to agree on a site for the European Environment Agency (EEA) which they voted to set up a year ago. Mr Ripa di Meana's optimism will be borne out only if the Commission's new environmental offensive progresses on all three of these fronts. Brussels has advertised this new determination by asking the member states to make the Treaty of Rome 'greener'. It has asked the inter-governmental conference on political union, which is revising the treaty, to change the rules so that environmental legislation is decided by qualified majority vote in the Council - as most single market directives already are. This form of voting, instead of unanimity, requires a weighted majority, with the largest member states commanding the most votes. The Commission also wants the treaty to commit the EC to 'sustainable growth', and to require environmental criteria to be integrated into other Community policies. 'Never before has the Commission so clearly stated that we have to get equal status between the environment and growth - without which growth itself is put at risk,' the green bespectacled environment commissioner enthuses. If endorsed by the inter-governmental conference, the proposed changes in voting requirements could raise standards significantly for legislation on the environment. In strict procedural terms, the unanimity rule is waived only when the Council decides unanimously it will vote by majority. 'I doubt whether Jonathan Swift at his best could have thought of that particular formula,' snorts Mr Ken Collins, the Labour MEP who heads the influential environment committee of the European Parliament. One Commission official says a change in voting rules will achieve a 'middle common denominator', whereby environment provisions will be less quickly 'overtaken by time, events and technological developments'. He cited the Commission's most glowing recent success: tight controls on car and lorry emissions pushed through in the past 10 months. The parliament cajoled the Commission into setting high standards and presenting them to Council as the 'harmonisation' of national regulations. This device exploits a grey area in the treaty as amended by the Single European Act. To use the device the Commission must prove that the environmental measure it proposes is dealing with distortion of competition. Four out of nine pieces of law examined by environment ministers in March passed this test. But despite this advance, member state challenges to majority voting are becoming more frequent. The Commission's lawyers and the European Court of Justice, moreover, monitor use of single market procedures for environmental measures. The UK, for example, may well challenge the Commission's choice of majority voting for its proposals to standardise landfill operations for waste disposal. This case poses the dilemma acutely. The Commission feels certain it could not win unanimity for a worthwhile law. Yet under current provision for majority voting, member states can ignore or go far beyond what is agreed - creating the vision was designed to iron out. But the success of the vehicle emissions legislation which emerged under this procedure has yielded an interim, more richly-textured device, which the Commission has adopted as its new policy framework. Its goal is to prevent the richer and greener EC members with stricter rules from contributing to a 'two-speed' Europe. The new framework aims to bridge an EC north-south divide, reining back states such as Germany and Netherlands, which have tougher standards, and to lash forward countries such as Spain and Portugal which see less need for, and can less easily affordsuch standards. From now on, the Commission proposes a two-stage approach, modelled on the vehicles emissions legislation: a first, compulsory package of laws, followed by parallel, more stringent targets for the Community as a whole to aim at, but which individual member states can progress towards at their own speed. Fiscal incentives can be used to speed up the obligatory standards and - only after these have been achieved EC-wide - to bring forward the tougher norms. The intention is to end the chaotic proliferation of national incentives which are threatening to undermine Brussels competition policy. Germany, for instance, has tried unilaterally to introduce vehicle emission standards beyond current EC policy through tax concessions on cars incorporating advanced catalytic converters. This would give such cars a price advantage, and possibly constitute a barrier to imports of cars falling below these standards. Just as important, if some member states were to follow their own green path, the credibility of a common environmental policy would be shredded. This would undermine the Commission's ability to enforce viable measures on the EC as a whole. But the success of the automotive package, appears to be encouraging more aggressive thinking inside the Commission on how to achieve a balance of incentives and disincentives for environmental ends. No one would accuse the ebullient Italian commissioner himself of thinking small. His most ambitious project is undoubtedly for a mixed carbon and energy tax, in line with the EC's commitment last October to stabilise carbon dioxide emissions at their 1990 level by 2000. When an embryonic plan for a straight 'CO tax' leaked two years ago it was derided as lunatic. 'Then, I was just caressing it,' Mr Ripa di Meana recalls fondly, 'but now, we have won the right to discuss it.' In improbable alliance with Mr Antonio Cardoso e Cunha, the conservative energy commissioner from Portugal, Mr Ripa di Meana has developed a more rounded proposal which the European Council is to report on by July. His own deadline for action is 'the other 1992' - next April's world climate conference in Brazil, where a convention to combat global warming is supposed to be signed. The plan - which the Commission may still water down  - has been refined to keep the 12 together, and to emphasise competitive advantage. The core idea is that while a levy on fossil fuels according to their carbon content would provide the greatest incentive to reduce emissions, it would fall most heavily on coal, then oil, and last, gas, while not touching nuclear energy. This would have an uneven effect across the EC, penalising, say, Spain, while rewarding France's extensive nuclear capacity. But a CO levy with a tax on non-renewable energy sources would even out the effect, and could, the Commission believes, be introduced in a fiscally neutral way by member states. The risk of the Community not acting jointly is, once again, that Germany, Denmark and the Netherlands will go ahead with their own, potentially market-distorting plans. The second emphasis is therefore to sell throughout the EC the merits of a so-called 'no regrets strategy'. This means it should have clear shorter-term benefits, competitive and environmental, to compensate for the scientific uncertainty about the long-term effects of global warming. Mr Jos Delbeke, senior economist in the Commission's environment directive, has listed the benefits for the Centre for European Policy Studies think-tank. These included improved energy efficiency and security; diminished acid rain; more efficient transport policy, and relief of traffic congestion (which the single market will exacerbate); a catalyst to industry to bring on line new capital goods and technology which uses less energy and fewer raw materials. 'Japan has a comparative advantage in terms of energy-efficient equipment . . . and that is the market of the future,' Mr Delbeke underlines; a fillip for greater harmonisation of fiscal policy; and greater macroeconomic convergence within the EC through common transport and energy policies. Nice balance would be needed, with offsets to ensure no loss of competitiveness, Mr Delbeke stresses. 'It is not the idea to create deserts.' Balance of a different sort - the 'you-scratch-my-back' variety  - has prevented the EC from agreeing on a location for the European Environment Agency. France wants a deal on the location of the EEA (Copenhagen and Madrid are front-runners) to be made conditional on confirmation of Strasbourg as the permanent home of the European Parliament. Mr Ripa di Meana's anger at France's de facto veto is matched only by his scorn at her partners' refusal to dirty their hands in the dispute. Without the EEA, many other of his legislative ambitions will be stalled. The agency's core job will be to gather accurate statistics on the EC environment. But it is also the key to a storehouse of measures, including: 'eco-labelling', a plan to institute an awards system for environment-friendly products; and plans to introduce annual environmental audits for industry. In the absence of these measures, national labels following different standards, and voluntary audits without guidelines allowing comparison, are proliferating. The EEA is also vital for regular updating of existing directives, taking in technological advances member states might otherwise incorporate on their own. Mr Ripa di Meana says he will shortly be publishing a report on the EEA fiasco deliberately intended to embarrass the member states. 'To have here blackmail - and that is the word to be used  - is not acceptable,' he vituperates. Harsh words, but the environment will not be seen to be on the same priority level as the 1992 programme until battles such as those over the siting of the EEA are won. 
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HEADLINE: FT  13 MAY 91 / Arts: Rudolf Serkin - Obituary 
TEXT: Rudolf Serkin died in Vermont on May 8, aged 88, and with his death the 20th century has lost one of its greatest pianists. He was born in Bohemia in 1903 of Russian parents, studied in Vienna (where one of his composition teachers was Schoenberg) and made his debut with the Vienna Symphony at the age of 12. It was a concert with the Busch Chamber Orchestra in Berlin in 1920, though, that led to his enduring association with the Busch family. He became Adolf Busch's recital partner in duos and trios, appeared regularly with the Busch Quartet and married Adolf's daughter Irene in 1935; their son Peter, has become a challenging pianist in his own right. In 1939 the Serkins emigrated to the United States, where he was to become head of piano at the Curtis Institute in Philadelphia, and in 1950 to start the Marlboro Music Festival and School with Adolf and Hermann Busch. While Serkin established his reputation as one of the most authoritative and musically disciplined interpreters of the Viennese tradition, he was also from his earliest days a superlative chamber musician, first within the Busch dynasty but later with other distinguished groups such as the Budapest Quartet. He was never a flamboyant technician; his piano tone was always eloquent rather than seductive. But he was a profound thinking musician who placed his considerable powers strictly at the service of the music he respected so deeply. Though his programmes ranged into the dustier corners of the repertory, including the piano works of Mendelssohn, Reger and Strauss, Serkin's art was always centred upon the Viennese classics; his Mozart piano concertos (he returned to them in his 80s for a last series of recordings with Abbado) had limpid grace and lyrical strength, his Beethoven was searching, never pedantic, his Schubert often starkly dramatic. Perhaps his accounts of the Brahms concertos demonstrated his intellectual grasp most magnificently, with their ability to encompass rhetorical grandeur and the most careful introspection in a single dramatic sweep. In his last years his performances were sometimes erratic, pared down to the point of gruffness, but the dedication and self-effacing demeanour of his playing remained. And at its best it could still sustain a tradition that appears to us now as descended from a golden age, which had fashioned Serkin into one of its peerless interpreters. 
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HEADLINE: FT  13 MAY 91 / Arts: Off-Met opera, New York 
TEXT: The New York conservatories provide some of the city's happiest operatic adventures. At the Mannes School, we have had Gluck's Paride ed Elena in an enchanting performance. Paride was the third, and is the most beautiful, of the three reform operas that Gluck and Calzabigi wrote for Vienna. And unlike Orfeo and Alceste it was not revised and commercialised for Paris. In these pages 28 years ago, I wrote with rapture of a Royal Manchester College production with Ryland Davies and Anne Howells among the student performers. If Paride has not captured the world's smaller stages, it may be because its cast is five sopranos (Davies sang Paris an octave down), or because its five acts trace but a single action, Helen's surrender to Paris's wooing. But they trace it with such psychological subtleties  - the letters in Ovid's Heroides are the source of the libretto - and with such musical beauty that listeners remain spellbound. Paris lands in Sparta as a playboy, but falls deeply and truly in love. Like Orfeo, Paride is at once an opera about and a demonstration of music's power to touch the heart. The long, harp-accompanied aria that Paris sings in Act 3, hypnotically beautiful, begins the conquest of Helen's scruples; by Act 5, although Pallas Athene warns the lovers that dreadful, destructive war attends the surrender of reason and decency to emotion, and although they understand the warning, erotic force proves irresistible. The opera, despite its bright C-major ending, is a tragedy, both stirring and profound. The score was given uncut (for the first time since 1770?). The performance, in the salon of the Mannes School - once a convent refectory - was unstaged (no decor, no dancers) but was enacted. It had been prepared and was conducted by Will Crutchfield, who had worked long with his student singers, inspiring them with a feeling for words, tone, sense, and style that made the performance moving and memorable. The Gluckian miracle of poise and formality united with keen, direct emotional expression was achieved. Natalie Arduino was Paris, Laura Danehower was Helen, and Elizabeth Wiley was Cupid. The opera was sung in Italian. The Juilliard Opera Center gave us a Verdi Falstaff, conducted by Julius Rudel, that was not intolerable but had nothing special to offer. The Juilliard drama students put on a happy Happy End that was exciting from start to finish. The Salvation Army libretto - lyrics by Brecht, 'book' by Elisabeth Hauptmann, English adaptation by Michael Feingold - may be ramshackle, but Weill's songs are stunning and stirring. And the drama students, produced by Moni Yakim, put the piece across with irresistible verse and adresse. It was an athletic, very 'physical' production. I hope the Falstaff cast - singing dummies, most of them - saw it, and resolved to 'register' for the instruction in 'body communication' and in getting words across. Deborah Lapidus conducted. At the Fashion Institute of Technology, Stephen Sondheim's Into the Woods was revived. The FIT institutional auditorium is a drear place. Into the Woods has its points, but it is a feeble score, and at FIT patchy, murky, word-killing amplification of the singers, and coarse balance between the orchestra and the stage, obscured the wit of the words and dulled the zest of the young performers. Amplification, like surtitling, is evidently here to stay, but let it be technically competent. Let two other productions, not student, round off the picture of off-Met New York opera. L'Opera Francais de New York offered a delectable double bill in Florence Gould Hall - an elegant little theatre tucked deep beneath a commercial building on Madison Avenue. They were Gretry's Les Deux Avares and Bizet's Le Docteur Miracle. The Gretry is OK; the Bizet - London first saw it in the theatre of Londonderry House, now demolished, with an unforgettable performance by Johanna Peters - is a miniature masterpiece. Yves Abel conducted it as such, and Sharon Azraeli was a winning heroine. These were concert performances, but a staged Iphigenie en Tauride is promised next. Amato Opera plays in a down-town garage converted into a cosy little gem of a tiny opera house where everything tells. Here many singers now famous - Mignon Dunn, George Shirley, Neil Shicoff  - made early appearances. And here Verdi's I due Foscari has been playing - for eight performances, each of them with a different cast. Anthony Amato, the conductor and producer of the enterprise, is an instinctual genius, a born interpreter of 19th-century Italian opera. He gets the tempi, the rubato and the accommodations to the strengths and the failings of the particular singers exactly right. He should surely be conducting at the Met. And in Richard Cerullo he has a designer who works wonders on a shoestring and clothes 19th-century operas in apt, attractive scenery. The Due Foscari I heard was not well sung; I doubt whether any of its performers will go on to achieve Met fame. But it was sung with a communicativeness that brought the opera to life. (Whereas in grander, more pretentious performances in huge houses operas often die.) A skeleton representation of Verdi's orchestra - piano filling in what was missing - played the score. But the clarinet was eloquent, and the music came across and told, keenly. 
ID: 265
HEADLINE: FT  13 MAY 91 / Arts: Pop is the tops - Sponsorship 
TEXT: What are we to make of the current state of arts sponsorship? On the one hand a bank cancelled a party to celebrate a sponsorship and tried to sell on the deal, at a discount, because it did not want to be associated with supporting an arts event while making staff redundant; on the other hand Glyndebourne has raised over Pounds 20m from business inside a year to finance its new opera house. The bank is being over-cautious, and companies are helping Glyndebourne not so much for love of opera but because they want the pay-off - a 20 year guarantee of access to Glyndebourne tickets for entertainment purposes. The money helps the arts but via the dubious route of corporate hospitality, and it doubtless comes from a different budget. Remarkably few sponsorships have been cancelled by the recession - as yet. The problems will arise next year when current commitments lapse and talks on renewal stall. But chief executives are already trying to cut back on sponsorship where feasible. If the London City Ballet gives up next month (and there are reports that, despite being promised an Arts Council grant for 1992-93, the management is determined to stop dancing) the Pounds 800,000 committed by business to the LCB will not be switched to other arts companies but disappear into corporate funds. That, at least, is the line taken by one backer, Barclays Bank. So far the Japanese continue to support the arts and the 1991 Japan Festival in the UK has raised Pounds 15m from business. The oil companies are still committed and last month Mobil announced another Pounds 125,000 sponsorship, the Greensight Project, which develops educational packs for schools, exploring the relationships between industry and the environment through the making of video programmes. But the odds must be against the renewal of such major sponsorships as the Prudential Awards and Shell-Bafta when these Pounds 1m plus projects draw to a close within the next 12 months. The worst is yet to come. The Royal Academy is probably more adept than any other arts organisation at attracting sponsorship. It has to be; it receives no government aid. But even the RA is rather impressed with the Pounds 600,000 guarantee against loss it has conjured up at the last moment for its Pop Art Show, opening on September 13. Not only is this its biggest ever lifebelt but it is a record sponsorship for any art show in the UK. The bulk of the money, Pounds 500,000, comes from Mercury Communications, with the rest from The Independent. The show, the first major survey of Pop Art for over 20 years, is so expensive to put on because of its size - both in the number of pictures that need to be transported, over 200, and the size of some of them. To prove it has no favourites the Pop Art Show will still be running when an exhibition of prints by the Japanese artist Hokusai opens in November - sponsored by Mercury's rival, British Telecom. Before Pop there are the Fauves, opening in June and backed by Ford. At the same time the RA will unveil its new look galleries, named after the Sackler family which has given over Pounds 1m for the facelift. The refurbished galleries provide the chance of a re-hang of the RA's own over-looked art collection, paid for by Texaco, which is becoming a force in arts sponsorship. On October 4 Chicago opens its new public library, a nine storey neo-classical monolith which occupies a whole down town block. This major event, the culmination of a 70 year campaign, will be celebrated with a week of junketings, thanks to WH Smith which is contributing Dollars 300,000 to pay for the ceremonies. This is not unthinking philanthropy on the part of the UK's leading bookseller. WH Smith began trading in the US in 1985 and is a major presence in the massive O'Hare Airport in Chicago where it operates 21 shops. It also functions at five hotels in the city. Already a big name among the travelling public in the Midwest, WH Smith is keen to make friends with more sedentary readers. British Gas may lack a structure to its arts sponsorships, but no one can fault its variety. On April 30 it announced the winners of the first Arts Council/British Gas 'Working for Cities' Awards, and the next night it backed the Toronto Symphony Orchestra's Barbican concert. 'Working for Cities' is about the role of the arts in urban regeneration and the main winners were: for art in public places - the Broadgate in London; for people - Neville Campbell of Phoenix Dance in Leeds; for buildings - Tic Toc in Coventry; for events  - the NGR 90 Festival at Gateshead; for partnership - Fish Quay, North Tyneside; in the pipeline - Riverfront Promenade, Newport. The Barbican concert was in complete contrast - old fashioned patronage and corporate hospitality because British Gas has bought Consumer Gas of Ontario and wants to make friends in Canada. 
ID: 266
HEADLINE: FT  13 MAY 91 / Arts: Tosca - Covent Garden 
TEXT: At regular intervals, for the sake of operatic health and decency, it is proper to recall Joseph Kerman's stern dictum: 'Tosca, that shabby little shocker, is no doubt admired nowadays mostly in the gallery.' When the melodramatic grip fails, what we discover is a showman carefully tormenting clockwork mice. Saturday's revival at the Royal Opera stayed more or less afloat on waves of generous response from the stalls, rather than the gallery. For this was a performance in the annual Midland Bank Proms week - probably the best thing to have happened to Covent Garden since the Second World War - and un-jaded enthusiasm is always on tap. This was what used to be the Zeffirelli production, now staged by John Cox in the handsome old designs of Mongiardino and Escoffier (with sponsorship by Bankers Trust Company). Rather less strikingly lit than before, if memory serves, and certainly less persuasively enacted, but no one person is to blame. What we have is a curdled international brew. No Italians, but ultra-professional American tenor and bass who have to hold their own against an admired German soprano and a distinguished French conductor, neither of them born to do anything at all with Puccini. To the luckless Cavaradossi, Neil Shicoff brings his customary high definition and reckless energy, firing top notes into the house like laser beams. There were places where he and the conductor Michel Plasson were not on the same wave-length (even in 'E lucevan le stelle'). Samuel Ramey's Scarpia, in gleaming black voice, preens and looms - utterly faithful to the words, which come up in the English surtitles with scarifying grossness. Not for the first time, I thought that Ramey was over-painting the sleek menace which his physiognomy and stature already guarantee; even Scarpia needs some down-to-earth, human touches. There is a good, hunted Angelotti from Stephen Gadd, and Eric Garrett repeats his bouncing, twinkling Sacristan. (It is a horrid role; a bit of Verdi's Fra Melitone and some echoes of Wagner's David, in aid of nothing but making a crude contrast with the desperation of the young rebels.) For the unseen Shepherd Boy, Daniel Ison's treble has a nice, natural plangency. That leaves Hildegard Behrens, whose great virtues in the German repertoire are well recognised. As Tosca, her Italian is almost completely unintelligible (except the spoken lines, which she emits in a weird, slow-motion growl); so is her phrasing, which betrays not a trace of feeling for Puccini's elegantly drooping curves. In the slow romantic passages - and in much music which should not be slow at all - Plasson was downright sluggish (the beginning of Act 3 seemed interminable), cruelly exposing the threadbare timbre of the Behrens middle register. It was a blessing that she remained bright and secure at the top; but 'Vissi d'arte', done as a tear-wracked effusion, was a fearsome exercise in non-style. Her dramatic outbursts were generally safer, with a strong suit in sheer physical revulsion against Scarpia's blandishments. Whether with Scarpia or with Cavaradossi, however, she seemed curiously insulated; nobody really played to anybody else. We were being treated to independent solo turns - which do not add up to an effective Tosca. Expert pacing of the score would have been a help, and many an expert hack could have supplied it. Plasson is no hack, and his civilised hand is so sure in the French repertoire it was astonishing to hear this opera limping cautiously along, bland and fuzzy in attack. In the first act only the frank scherzo-music had any spark; the playful and mischievous moments which need to enliven Tosca's scene with her lover came out like squeezed toothpaste. By contrast, the climaxes were often raw and overblown. And for the ironically twisted execution-march Plasson chose a funereal tempo which left it dead. 
ID: 267
HEADLINE: FT  13 MAY 91 / Arts: New Stages Festival 
TEXT: The first Barclays New Stages Festival of independent theatre at the Royal Court will take place from June 17 to July 10. Four companies will participate: the dancing-theatre company Adventures in Motion Pictures; Nottingham-based performance group Dogs in Honey; Graeme Miller's music-theatre ensemble, and Rose English. The festival will be opened by AMP with Town &amp; Country and a revival of its 1988 hit Spitfire. They will be followed by Dogs in Honey with Architecture for Babies; Graeme Miller with A Girl Skipping; and Rose English's The Double Wedding. 
ID: 268
HEADLINE: FT  13 MAY 91 / Economics: Market to focus on likely RPI fall 
TEXT: THERE IS a lot for the market to focus on in the UK, with the performance of the Conservatives in Thursday's parliamentary by-election in Monmouth coming under scrutiny before the release of the retail prices index the following day. Well-highlighted by Treasury ministers has been the likely fall in the RPI on Friday to around 6.2 per cent in April from March's 8.2 per cent. The Treasury has twice used a fall in the RPI as a trigger point for a 1/2 percentage point cut in the bank base rate. The question this week will be whether the government wants to relax monetary policy ahead of Thursday's vote or at the time of a perceived easing in inflationary pressures. However, the market was warned last week that underlying inflation remained stubborn. Mr Robin Leigh-Pemberton, governor of the Bank of England, said the fall would reveal no more than the effect of last year's imposition of the community charge dropping out of the 12-month figures, aided by recent interest-rate reductions. Whatever the Conservatives' electoral plans, the money market expects a  1/2 point cut in interest rates to 11 1/2 per cent next week. Unemployment figures are set to show another very steep rise after March's record jump of 113,000. In the US, expectation of the Federal Reserve easing interest rates again could mount. While a small rise in tomorrow's consumer prices index is possible, further weakness in retail sales and industrial production will be evident. Other notable events and statistics, with market forecasts from MMS International, the financial research company, in brackets include: Today: UK, credit business for March (Pounds 125m) and final retail sales (3.7 per cent). Canada, housing starts for April. Germany, wholesale prices in-dex for April. Basle, Bank of International Settlements meeting. Tomorrow: US, consumer prices index (0.2 per cent), retail sales (0.4 per cent), industrial production (0.0 per cent), capacity utilisation for April (78.6 per cent), Federal Open Markets Committee. Japan, machinery orders for April. UK, provisional producer prices indices for April (input, 0.8 per cent, output up 0.9 per cent to an annual 6.1 per cent), acquisitions and mergers, first quarter, capital issues and redemptions. Wednesday: US, business inventories for March (0.5 per cent), Canada, important wage settlements. Australia, first quarter consumer price index (0.4 per cent). Thursday: UK, labour market statistics, provisional unemployment (up 85,000) and unfilled vacancies for April, provisional average earnings indices for March (9.25 per cent), productivity and unit wage costs (11.5 per cent), provisional figures of vehicle production, index of output of the production industries for March (manufacturing down 0.9 per cent, ind. prod down 0.7 per cent), capital expenditure by the manufacturing industries, financing of the public sector borrowing requirement for the first quarter, monetary statistics. Bank of England quarterly bulletin. Germany, Bundesbank meeting. US, money supply, initial claims. Friday: UK, public sector borrowing requirement for April (Pounds 2.75bn), retail prices index and tax and price index for April (1.1 per cent). US, merchandise trade for March (down Dollars 5.5bn). 
ID: 269
HEADLINE: FT  13 MAY 91 / Trials of setting a date in court: Delays surrounding the Guinness case 
TEXT: THE second trial arising out of the Guinness affair, which had been scheduled to start last week, seems unlikely to begin before October. Earlier dates are still being mooted, but there is a growing feeling that, because of outstanding appeals and the approach of the season when witnesses and judges like to go on holiday, the autumn is the most realistic prospect for the start of the trial. Mr Roger Seelig, former corporate finance director at Morgan Grenfell, and Lord Spens, former director of corporate finance at Henry Ansbacher, are due to stand trial accused of involvement in an unlawful share support operation mounted by Guinness in 1986 during its bitterly-fought takeover battle with the Argyll supermarket group for Distillers, the Scottish drinks group. After several postponements the case, which is expected to last between three and four months, had been scheduled to get under way at Southwark Crown Court ion London last Tuesday. However, because of appeals by Mr Seelig and Lord Spens against pre-trial rulings by Mr Justice Henry, and appeals by three of those convicted in the first Guinness trial last year, that fixture was not met and further delays became inevitable. Mr Seelig and Lord Spens want to challenge in the House of Lords the Court of Appeal's rejection of their appeal against Mr Justice Henry's ruling that evidence they gave to Department of Trade and Industry inspectors investigating Guinness can be used by the prosecution at the trial. The two men argue that the inspectors should have cautioned them against self-incrimination and that the failure to caution makes it unfair for their evidence to be used at the trial. It is an issue which is central to current concern about the powers given to those investigating fraud and the absence of a right to silence for those suspected of white-collar crimes. A prerequisite for an appeal to the Lords is for the Appeal Court to certify that the case raises a question of law of general public importance, which it will be asked to do this week. If that hurdle is surmounted the court will either give leave to appeal or tell Mr Seelig and Lord Spens they must seek leave direct from the Law Lords. Unless there are grounds for expedition, the time lapse between a Lords appeal being lodged and heard is at least six months, which would suggest a hearing date no earlier than November. Even if expedited, an appeal lodged this month would be unlikely to come on before October, because of the legal summer vacation in August and September. Given that the Law Lords' rulings are not normally handed down until four to six weeks after a hearing, the trial date could well be pushed back towards the end of the year. Mr Seelig and Lord Spens have waited more than three years to come before a jury, Mr Seelig having been arrested on October 15 1987 and Lord Spens on March 10 1988. The prosecution of the seven men originally charged in the Guinness affair was transferred from Bow Street magistrates court to Southwark Crown Court in November 1988, when it was expected that the trial would begin the following summer. By June 1989 the date had been moved to the following January. In October 1989 Mr Justice Henry decided on split trials, with Mr Ernest Saunders, the former Guinness chairman and chief executive, in both, and with Mr Seelig, Lord Spens and Mr David Mayhew, senior corporate finance partner of Cazenove &amp; Co, the stockbrokers, alongside him in the dock in the second trial. When the first trial began in mid-February last year it was anticipated that the second would start the following October. When Guinness One ended in late August, however, Guinness Two was pushed back to January 14. Mr Saunders, who had been convicted on all but one of the charges he had faced in the first trial, was dropped from the second. Shortly before Christmas the second trial was split, hiving off Mr Mayhew to be tried in Guinness Three. Since the beginning of this year legal arguments and appeals, coupled with Lord Spens' new lawyers' need for more time to prepare his defence, have resulted in further postponements. Originally both defendants were represented by QCs, junior barristers and solicitors. In April 1989 Lord Spens announced that he could no longer afford the mounting legal costs and was dropping his lawyers. Last November he was granted legal aid, however, and will be defended at the trial by two junior barristers and solicitors. Last year Mr Seelig also decided he could no longer afford legal representation and has since conducted his own defence. The two men are jointly charged under section 13 of the Prevention of Fraud (Investments) Act with conspiring to induce Distillers shareholders to exchange their holdings for shares in Guinness by the dishonest concealment of material facts. Mr Seelig alone faces a similar charge under the same act, as well as two charges of false accounting. Lord Spens is charged with one false-accounting offence. 
ID: 270
HEADLINE: FT  13 MAY 91 / Minister confirms aid to films 
TEXT: THE government yesterday confirmed its plan for a National Film Commission to attract foreign investment in the film industry. The plan, first mooted last June by Mrs Margaret Thatcher, then prime minister, was outlined by Lord Hesketh, minister responsible for the film industry, at the 44th international film festival in Cannes. It follows the announcement of a Pounds 5m package to help UK film makers set up co-production with their more subsidised continental counterparts. The commission will be funded by the Department of Trade and Industry with a budget of Pounds 3.5m spread over four years. Mr Sydney Samuelson, the chairman of Samuelsons, international film production company, has been appointed the first national film commissioner. The role of the commission will include giving advice on taxation schemes, work permits and location schedules. The measures have been criticised by some film makers and the Labour party as insufficient because they do not include special tax incentives. The ailing UK film industry has been pressing for quicker write-offs, reduction of the withholding tax on foreign actors and changes to make the Business Expansion Scheme more suitable to finance feature films. 
ID: 271
HEADLINE: FT  13 MAY 91 / Doubts over the future of N Ireland power chief 
TEXT: THE GOVERNMENT is facing renewed controversy over its plans to privatise Northern Ireland's electricity supply industry amid reports that the chief executive of Northern Ireland Electricity, Mr Anthony Hadfield, is to be removed by his own board. NIE yesterday denied a report that Mr Hadfield had been sacked. It would not comment on a separate report that Mr Hadfield's three-year contract would not be renewed when it expires in July. However Mr Kevin McNamara, Labour's Northern Ireland spokesman, said last night that according to reliable information he had received, a decision was taken 10 days ago by NIE's board. Mr McNamara, with other Northern Ireland MPs, has publicly attacked the government's decision to break up and privatise NIE, the public utility which has a virtual monopoly in the province. Mr Hadfield, who is also deputy NIE chairman, was expected to play an important role in the privatisation process. According to some MPs, NIE managers and senior trade union officials his removal from the board could put a question mark over the future of the government's plans. 
ID: 272
HEADLINE: FT  13 MAY 91 / Constructing defences against terrorist attacks: A company in County Londonderry that refuses to give in to IRA intimidation 
TEXT: RESILIENT is a word often used to describe the people of Northern Ireland. In spite of all the killings and bombings of the past 20 years the province's population shows determination to carry on with normal life. Mr John Henry is an example. He runs one of Northern Ireland's biggest construction companies, in Magherafelt, County Londonderry. It is much like any other large builder's yard, bustling with trucks, but the security checks, the vehicles in the company car park with bullet-proof windows and the surveillance cameras tell a different story. Mr Henry's privately run Henry Bros is the main company in Northern Ireland carrying out construction work for the security forces - the army and the Royal Ulster Constabulary. It is a very risky business. The IRA describes those who carry out such work as 'legitimate targets'. Mr Henry says: 'The IRA always comes for us. Unlike other companies, we see no reason to hide what we do.' The price for such openness has been high. In the past four years alone several people who were associated with the company, including Mr Henry's brother, have been murdered by the IRA. Company drivers have been shot at and the Henry Bros premises have been attacked with car bombs and mortars. In 1986 a manager at the Magherafelt plant was shot by the IRA as he sat in his car. The IRA had mistaken him for Mr Henry. Eighteen months ago a supplier to the company - a cousin of Mr Henry's wife -was blown up in his car. Earlier this year the IRA abducted a company employee and forced him to drive a 'proxy bomb' to a nearby army base. The employee was lucky enough to escape before the massive bomb exploded. Mr Henry and many of his employees endure a besieged existence. Mr Henry is under constant police guard and he drives an armour-plated car. His company yard and his house are kept under constant surveillance. A quietly spoken, genial man, Mr Henry feels the pressure. 'It's when I go to Scotland or away somewhere that I realise just what it's like to relax. Here you can't let down your guard for one second.' Mr Henry, a Protestant, started his company in the mid 1970s. He was once in partnership with two Roman Catholics, but they sold out after IRA intimidation. Most of Mr Henry's 600 employees are Protestant. He says IRA intimidation prevents Catholics from joining the company. There have been times when Mr Henry has felt like giving up. One of his murdered brother's sons became involved with Protestant paramilitaries and is now serving a 12-year jail sentence. Last year one of Mr Henry's own sons was killed in an industrial accident. 'My family urge me to carry on. We have lost family members and employees, but we are also in the business of saving lives,' he says. Henry Bros builds and installs heavily reinforced steel and concrete structures to protect police stations and army posts, as well as bullet-proof windows and blast-proof doors for government offices and residences of senior officials. The company does much of its own research and collaborates with a company in Germany which specialises in counter terrorism and security. Army observation posts, called 'sangers', are built at the Magherafelt plant. The walls of the sangers consist of two layers of inch-thick steel sandwiching slabs of concrete. 'You always have to think about what the IRA will come up with next,' says Mr Henry. 'Now they are using horizontally launched mortars which can even pierce one of these sangers.' Henry Bros' business involves high risk, but it is also profitable. Five years ago company turnover was Pounds 5m. Last year it was Pounds 22m. The company has been forced into being as self-sufficient as possible. Three years ago the IRA sent cards to 30 of Henry Bros' leading suppliers, saying that if they continued selling goods to the company, funerals would follow. 'It had great effect. All our big suppliers refused to do business with us. We felt betrayed. We even had to start buying cement from Poland instead of locally,' Mr Henry says. 'If all the energy and skills we put into this business could instead be concentrated on exports, Northern Ireland could achieve a great deal,' he points out. Henry Bros is hoping for export orders - for its bullet-proof windows. 
ID: 273
HEADLINE: FT  13 MAY 91 / Sunday trading appeal to Law Lords today 
TEXT: THE LONG legal battle over Sunday trading in England and Wales will enter its final stage today when the Law Lords begin hearing an appeal by B&amp;Q, the do-it-yourself chain, which will determine whether the Sunday trading laws are incompatible with European law. B&amp;Q is appealing against a ruling by Mr Justice Hoffmann in the High Court last July that the 1950 Shops Act, which governs Sunday trading, does not contravene the free-trade principles of European Community law. The case concerns High Court injunctions granted to two councils banning B&amp;Q from opening its stores at Norwich and Stoke on Trent on Sundays. The Shops Act makes local authorities the prosecuting bodies for breaches of the law. As a result enforcement is patchy across the country. Some councils pursue any breach of the law while others turn a blind eye. The maximum penalty for Sunday trading is a Pounds 1,000 fine for any one store on any one Sunday. Local authorities can also seek High Court injunctions to prevent breaches of the Shops Act. Because some stores can make as much as Pounds 500,000 profit a year from opening on Sundays, the Pounds 1,000 penalty has not proved an effective deterrent. Local authorities have turned increasingly to injunctions as the best way of banning Sunday trading over the past two years. Two weeks ago, however, the effectiveness of these injunctions was thrown into doubt by a High Court ruling that they should not be granted to local authorities unless they were prepared to give cross-undertakings to the court that if they eventually lost their case they would compensate the stores for any financial losses resulting from enforced Sunday closure. Council lawyers say because of the potential financial risks involved in giving cross-undertakings this decision makes the Sunday trading laws virtually unenforceable. Last week, for example, Texas Homecare, the DIY chain run by the Ladbroke Group, raised the pressure on six local authorities by stating that they could face a potential claim for damages in excess of Pounds 150,000 per year for each store where Texas had given cross-undertakings not to trade. The DIY chain asked the authorities to confirm that such an amount had been reserved in their budgets. B&amp;Q will argue before the Law Lords that the Shops Act is incompatible with Article 30 of the Treaty of Rome, which prevents quantitative restrictions on imports between member states of the EC. Retailers claim that the Sunday trading ban reduces their turnover and results in fewer orders for goods from suppliers in other member states, thereby indirectly restricting the level of imports into the UK from those states. The issue has already been referred once to the European Court. In November 1989 the Court ruled the Shops Act would not be compatible with Article 30 unless the Sunday trading ban had an objective regarded as justified in EC law and the effect on trade caused by the measure did not exceed that necessary to obtain that objective. This left the UK courts with considerable discretion which has only succeeded in increasing the confusion surrounding the Sunday trading laws. Both the Home Office and the British Retailers' Association (BRA) have launched separate initiatives to try to establish common ground between the two sides. 
ID: 274
HEADLINE: FT  13 MAY 91 / UK News (Employment): Breakdown in trust seen at British Rail 
TEXT: STRICT financial constraints on British Rail's managers have led to a breakdown in trust between them and local union officials, according to a study. It says the constraints have prevented BR from replacing its traditional style of industrial relations with improved consultation. The study of attitudes among local representatives of the Aslef train drivers' union found that most believed managers were more likely to breach locally-negotiated agreements at the end of the 1980s than at the beginning of that decade. The survey of 181 union representatives on local departmental committees at train depots found a decline in contact between union leaders and local BR managers, partly because of new management structures. The committees set working conditions such as rosters. The survey found little evidence that BR was developing forms of consultation with individuals to replace this weakening of traditional union mechanisms. Consultation was being 'squeezed out' by pressures of time and financial constraints. The RMT rail union is planning an industrial action ballot on what BR says is a final pay offer of 7 per cent. Aslef and the TSSA white-collar union are seeking arbitration on the offer through the Railway Staffs National Tribunal. The unpublished study by Mr Andrew Pendleton, an industrial-relations lecturer at the University of Bradford, found a decline in the commitment to 'constitutionalism' which has marked industrial relations at BR. BR was prevented from implementing a reform of its union consultation structures in 1989 by a series of one-day strikes by rail unions. It has yet to make fresh proposals for the devolving of pay bargaining to match its corporate structure. The study found that the proportion of union representatives who thought managers could be relied on to observe agreements all or most of the time had dropped from 81 per cent in 1980 to 54 per cent in the summer of 1989. Mr Pendleton says the impression is less of 'an aggressive, confident management decisively removing or ignoring those agreements that stand in their way' than of managers reacting in an ad hoc manner to intense budgetary pressures. 'The overriding impression is one of managers under pressure, caught between the imperative of cost reduction and the constitutionalism of their subordinates, seeking room for manoeuvre in day-to-day depot management.' Workplace Industrial Relations in British Rail: Change and Continuity in the 1980s. Andrew Pendleton, University of Bradford Management Centre, Emm Lane, Bradford BD9 4JL. 
ID: 275
HEADLINE: FT  13 MAY 91 / UK News (Employment): Most tenders from councils won by their own workers 
TEXT: LOCAL authorities' in-house labour forces have overwhelmingly held their own against the private sector under government compulsory competitive tendering, according to an advisory body survey. The survey shows that in-house workforces, known as direct-labour organisations, in England and Wales have won 69.7 per cent of 2,558 contracts in the first four rounds of compulsory tendering. Contracts won in-house represent 84.3 per cent of the total value of contracts on offer. Councils have been obliged by law since 1989 to put out to tender refuse collection, street and building cleaning, catering, vehicle maintenance and ground maintenance. Most contracts are for five years and councils are generally bound to accept the lowest tender. The survey was conducted by the Local Government Management Board, the national body which advises local authorities on training, pay and conditions, and management. It shows wide variations between different services. Refuse collection and ground maintenance face the greatest competition, with an average of 3.4 tenders per contract. Only 10 per cent of refuse-collection contracts were won without competition. Catering in schools and social service departments drew an average of only 1.2 tenders per contract, with 73 per cent of them won without competition. There are marked regional variations, which correspond closely to councils' political control. In-house labour has won all refuse-collection contracts in Labour-dominated Wales and Yorkshire and Humberside and has been very successful in the West Midlands. In London only 58 per cent of contracts have gone in-house, and fewer than two thirds have done so in the Tory-inclined south-east and East Anglia. Contracts lost by councils' direct labour forces have almost all gone to the private sector. There have been few management buy-outs. Compulsory Competitive Tendering Survey 3; Local Government Management Board, 41 Belgrave Square, London, SW1X 8NZ; Pounds 100. ---------------------------------------------------------------------- LOCAL-AUTHORITY COMPULSORY TENDERING ---------------------------------------------------------------------- DIRECT LABOUR ORGANISATION SUCCESS Activity                  % of contracts  % of total value of contracts on offer Building cleaning              59.8              85.9 Refuse collection              72.8              78.7 Other cleaning                 75.2              81.0 Vehicle maintainence           76.9              85.7 Catering (education and welfare)                   98.5              99.4 Catering (other)               75.4              78.9 Ground maintainence            68.6              82.2 Overall                        69.7              84.3 Refuse Collection Contracts ---------------------------------------------------------------------- DIRECT LABOUR ORGANISATION SUCCESS Area                       % of contracts   no of contracts Northern                        78.3             18 Yorks and Humberside           100.0             14 North-west                      73.1             19 East Midlands                   68.6             24 West Midlands                   82.8             24 East Anglia                     65.0             13 South-east                      64.4             47 South-west                      71.1             27 Wales                          100.0             21 London                          57.7             15 ---------------------------------------------------------------------- Source: Local Government Management Board ---------------------------------------------------------------------- 
ID: 276
HEADLINE: FT  13 MAY 91 / UK News (Employment): Team talks deadlock at Royal Mail 
TEXT: NEGOTIATIONS between management and unions on a new framework for industrial relations at Royal Mail, the letters arm of the Post Office, have broken down over proposals for team working. This latest row comes after a decision by the Union of Communication Workers, the main Post Office union, to ballot counter and clerical staff, who work for the Post Office's Counters subsidiary, over a 6.8 per cent pay offer. Mr Alan Tuffin, general sec-retary of the union, has described the offer as 'inadequate'. Royal Mail has wanted to introduce team working into its sorting and delivery activities for some time but failed in its attempt to link the issue to pay during last year's annual negotiations. It became clear from a heated debate yesterday at the union's annual conference in Blackpool that any renewed attempts to push through the proposals as part of this year's pay talks in September could provoke industrial action. Agreement was reached with the UCW last year for a joint review, outside the wage talks, of four issues. The issues are: productivity; automation; team working; and a new framework for industrial relations to fit in with the restructuring of the business. It is planned to replace the 64 divisional districts early next year with nine independent business centres. Discussions on the new framework, as well as the team working proposals, have run into trouble because of UCW objections to, in particular, the role of team leaders. The union has refused to accept that team leaders should have the power to discipline team members. The UCW also fears that particular references to team working in Royal Mail proposals for the new industrial relations framework will undermine the shopfloor role of the union. The management states in a document setting out the plan: 'Team members will be able to express any concerns they may have either individually or jointly to their team leader or team manager. In the first instance issues will normally be discussed with the team leader, who will be responsible for . . . identifying ideas and opportunities for further improvement.' The Post Office said last night that the review was 'fundamental to future working relations with the unions, and the direction we need to take to meet changing customer needs'. 
ID: 277
HEADLINE: FT  13 MAY 91 / UK News (Employment): Small businesses still in recession, says CBI 
TEXT: BRITAIN'S small businesses are still in the middle of a deep recession, with output plunging more quickly than at any time in the last decade, according to the Confederation of British Industry. The CBI says that a fall in orders between January and the end of April means that three-quarters of small businesses are now working below capacity. Manufacturers were expecting a decline in output early in the year, but the downturn was more severe than anticipated. Most companies say they expect the rate of deterioration in business to moderate during the next few months, echoing the CBI's most recent quarterly trends survey. Mr Tom O'Connor, chairman of the CBI's smaller firms council, said the latest survey confirmed that business was 'bumping along the bottom', with recovery some way off. The report, based on a survey of nearly 750 companies with fewer than 200 employees and conducted in early April, found that businesses were experiencing difficulty in raising their prices. 
ID: 278
HEADLINE: FT  13 MAY 91 / UK News (Employment): Postal order charges 
TEXT: POSTAL order charges increase today for the first time in 12 months. Charges on orders up to and including Pounds 1 remain at 25p. Charges for orders valued from Pounds 2 to Pounds 10 rise 5p to 49p and the charge for Pounds 20 orders rises 7p to 75p. 
ID: 279
HEADLINE: FT  13 MAY 91 / UK News (Employment): Steel output still falling 
TEXT: THERE is no sign of the recession bottoming out, according to steel production figures for April published by British Steel. The company said steel production in April averaged 336,700 tonnes a week, 3.3 per cent above the figure for March but 11.6 per cent below output for April 1990. 
ID: 280
HEADLINE: FT  13 MAY 91 / London is top centre for foreign share deals 
TEXT: THE Bank of England has confirmed the London Stock Exchange as the biggest foreign equity market in the world. Reforms introduced in most continental European bourses - in the Netherlands, Germany, France and Switzerland - have not yet threatened its dominant position. The Bank's Quarterly Bulletin reports that London, third largest overall last year with equity turnover totalling Pounds 305bn (sales only), now accounts for more than two thirds of reported trading of equities outside their country of origin. 'Overall,' it says, 'London has been successful in attracting trading of foreign, particularly European, equities because of its historically open capital market and its low costs compared with other exchanges.' Accurate data on foreign equity trading in London became available only in February 1990. This followed the full introduction of Sequal, the London Stock Exchange's trade reporting and confirmation system for stocks quoted on Seaq International, the exchange's screen-based professional market for trading foreign equities. The data reveal that foreign equity trading (Pounds 150bn, sales only, in 1990) accounted for just under half of total turnover on the London Stock Exchange last year. This compares with foreign business of Pounds 4.3bn for Frankfurt and Pounds 2.5bn for Paris. Figures for the New York Stock Exchange, the next biggest foreign equity market, are not generally available, but in the first quarter of 1990 it was estimated that foreign equity turnover was only 25 per cent of that in London. Tokyo came third last year, a long way behind with Pounds 7.3bn. Japanese stocks took the largest share of London's foreign equity turnover in 1990, accounting for just over a quarter of the total. German shares were also heavily traded, accounting for about 23 per cent. Other European shares contributed most of the remainder. The Bank concludes that trading costs are low in London and that London's trading structure, with market makers taking positions between buyers and sellers, provides superior liquidity for large wholesale trades. 'In the current liberal capital environment,' the Bank says, 'trading will tend to move to where market conditions are favourable.' 
ID: 281
HEADLINE: FT  13 MAY 91 / Some rail and Tube fares rise 
TEXT: BRITISH RAIL increased fares on some routes, mainly non-InterCity, yesterday with some fares coming down. Examples of day-return fare rises are: Bath to Bristol up 50p to Pounds 3.90; Oxford to Evesham, up Pounds 1 to Pounds 9; and Carmarthen to Swansea, up 80p to Pounds 4.30. On the London Underground off-peak, one-day Travelcards rose by between 10p and 20p. 
ID: 282
HEADLINE: FT  13 MAY 91 / Tories plan VAT rise says Smith: Increase in rate to 22 per cent said to be on taxation 'hidden agenda' 
TEXT: LABOUR WENT on the offensive over tax and spending policy yesterday by raising the spectre of a Tory 'hidden agenda' to increase value added tax should the Conservatives be returned to office after a general election. In an assault on the Tories' record, Mr John Smith, the shadow chancellor, accused the government of 'sheer hypocrisy' in claiming to have lowered taxation when the total tax burden, taking in National Insurance and VAT, had risen from 34.75 per cent in 1978-79 to 37.75 per cent in 1990-91. Defending the government's achievements, Mr David Mellor, the chief secretary to the Treasury, once again asked how Labour would raise public spending by Pounds 20bn without increasing taxes. The new skirmishing over taxation came as all the parties were manoeuvring for maximum advantage before Thursday's by-election in Monmouth, where the Tories are defending a 9,000 majority. In spite of the efforts of Tory leaders to stamp out speculation over a June general election some Conservatives still believe a good result in the seat might bolster the case for an early poll. Prior to a week-long programme of speeches to businessmen in Manchester, Leeds and Birmingham, Mr Smith raised the VAT issue in his address to the Banking, Insurance and Finance Union in Blackpool. He warned that if Mr Norman Lamont, the chancellor, were to fulfil his promise to lower basic tax rates to 20p in the pound he would either have to cut public spending or shift the burden to another tax, probably VAT. Labour has calculated that to fund a 5p cut in basic rate income tax the Tories would have to increase VAT from 17.5 per cent to 22 per cent. Officials pointed out that the Tories had shifted the tax burden to indirect taxation when Sir Geoffrey Howe raised VAT from 8 per cent to 15 per cent, shortly after denying any such plans at the preceding election. Mr Mellor said in a BBC interview that there was no conflict between lowering taxes and increasing public expenditure. 'The record shows we have been able to strike a balance', he said, adding that Labour had yet to show how it would 'outbid' the government on spending without tax increases. 
ID: 283
HEADLINE: FT  13 MAY 91 / Downing Street quiet on what Sir Robin Butler saw 
TEXT: THE tight-lipped world of Downing Street news management was itself under close scrutiny yesterday when it emerged that Sir Bernard Ingham, for 11 years Mrs Margaret Thatcher's press overlord, had found himself victim of the censor's blue pencil. Infamous for his non-attributable quotability, Sir Bernard's autobiography has undergone some selective and, most probably, financially damaging editing by the sensation-shy Cabinet Office. The memoirs, entitled Kill the Messenger, have been long-awaited for revelations on the more controversial moments of the Thatcher years. Not least, pundits were anxious to read an account of the Westland helicopter affair in 1985-86 which led to the resignation of Mr Michael Heseltine as defence secretary. Under the so-called Radcliffe rules, however, civil servants and ministers must submit their drafts to the Cabinet Office. The Sunday Times, ru-moured to have paid a six-figure sum for the serial rights, yesterday had to make the best of having Sir Robin Butler, Britain's chief home civil servant, as its unpaid editor. While carrying an officially abridged version it tried to make good the damage with a front page report of what Sir Robin saw. Deletions included passages criticising Mr Heseltine's judgment and others on Mrs Thatcher's often stormy dealings with European partners and Sir Geoffrey Howe, her deputy prime minister. On the key question of whether Downing Street or the Department of Trade and Industry leaked the memorandum from the then solicitor general which was critical of Mr Heseltine, Sir Bernard was allowed to go on the record with his plea of innocence. Downing Street yesterday was characteristically taciturn about whether The Sunday Times would be hauled over the coals for its revelations - as, it pointed out, it was unclear whether or not they were revelations. Its classic reply: 'We don't answer hypothetical questions,' was a well-known formula of Sir Bernard's, who was yesterday understood to be unavailable for comment. 
ID: 284
HEADLINE: FT  13 MAY 91 / Fabian call for overhaul of regulation 
TEXT: THE SYSTEM for regulating utilities should be radically overhauled, with commissions introduced to hold open hearings on the utilities' plans, according to a Fabian Society paper published today. The society, a left-of-centre think tank, argues that US-style regulatory commissions should be created to oversee the water, gas and electricity industries. At the open hearings consumers and other interested parties could give evidence. The commissions would be much more open than the current regulatory offices Ofwat, Ofgas and Offer. The study, by Professor Michael Waterson of Reading University, argues that commissions holding open hearings would be more appropriate for water, gas and electricity because there are limited prospects for introducing competition there. He argues that forms of regulation should be tailored to the characteristics of the industries concerned, however. So in industries such as telecommunications, where technological change is opening opportunities for competition, the current body, Oftel, is perfectly adequate. Prof Waterson acknowledges that public commissions can be much more expensive than regulatory offices. He says the latter system might be usefully extended to organisations such as the Post Office and British Rail, which are becoming more commercial. Regulation and ownership of the major utilities, Fabian Discussion Paper No 5; 11 Dartmouth Street, London SW1; Pounds 10. In need of direction, Page 23 
ID: 285
HEADLINE: FT  13 MAY 91 / Japanese to open machine tool plant 
TEXT: A NEW Japanese assault on an important sector of the European machinery market is officially launched tomorrow from the unlikely venue of a refurbished factory in Salisbury. Within sight of the cathedral spire, Kitagawa, the world's largest producer of power chucks for machine tools, has joined forces with Mr Tertius Threipland, a British entrepreneur, to begin manufacturing chucks in Europe for the first time. The move could increase the competitive pressures on the five big European producers, of which the 600 Group's Pratt Burnerd is the best known in the UK. Many producers have been hit badly by recession. Mr Threipland is chairman and managing director of Kitagawa Europe, a partnership with the Japanese parent company, which for 10 years has been distributing Kitagawa products into European markets. The partners are switching to manufacturing in Europe because of long-term growth prospects and, said Mr Threipland, because the 1992 single market reforms might make it difficult to import chucks from Japan. He said: 'We hope we will now be more acceptable in Germany, which has been the most nationalistic about machinery and accessories, particularly on conspicuous products like chucks.' Mr Threipland, who for years has wanted to own a UK chuck manufacturer, admitted: 'We had to fight quite hard to convince the Japanese to choose the UK rather than Belgium and Germany.' The UK was chosen because of labour costs, availability of technology and skills, and the fact that the European sales headquarters was already in Salisbury. The factory is one of the few opened recently in Europe in the machine tool sector. In spite of the recession in the UK, Mr Threipland hopes it will be running at two-thirds capacity by early autumn, producing 200 chucks a month -of which 70 per cent will be for export. The factory now employs six people, but as the product range is expanded in the next five years the workforce should reach 40 to 45. The total investment is expected to reach Pounds 5m by then. Japanese companies rarely enter manufacturing joint ventures with individual entrepreneurs overseas, although associations are more common between the big Japanese trading houses and foreigners. There will be no Japanese-style company anthems, but Mr Threipland did have the builders and decorators working at Japanese speeds over Christmas to get the factory ready. It was completed on New Year's Day. 
ID: 286
HEADLINE: FT  13 MAY 91 / S Africa squatter camp attack claims 27 lives 
TEXT: AT LEAST 27 people were killed yesterday in an attack on a squatter camp near Johannesburg, despite last week's outline agreement between the African National Congress (ANC) and the South African government on steps to end violence in the townships. Squatters said their attackers, Zulu inhabitants of the local hostel in the township of Kagiso, were armed with spears and other sharp instruments. At the insistence of Zulu Chief Mangosuthu Buthelezi, spears were omitted from a list of weapons banned last week by the South African authorities. The ANC is demanding that the carrying of spears be illegal, and has said it will pull out of talks on the country's political future unless this demand is met. The ANC has given the government until Thursday to comply with this demand, while its national executive will meet later today to consider the rest of the outline agreement reached last week with Pretoria. This involved the banning of all so-called 'traditional weapons' apart from spears and sticks, the phasing-out of single-sex hostels and the prohibition of the use of live ammunition by police for crowd control. That agreement was reached between Mr Nelson Mandela, the ANC deputy president, and Mr FW de Klerk, the president, assisted by a handful of advisers. ANC officials stress that it could still be rejected by the organisation's national executive, triggering an earlier threat by the ANC to withdraw from talks. Mr Mandela said in an interview published in the Johannesburg Sunday Times that he was 'optimistic that we would be able to save the peace process'. However, he stressed that they would pull out of talks unless the government met every demand in its recent seven-point ultimatum, which included the issues addressed in last week's talks. Meanwhile, South African police opened fire early on Saturday morning on a group of right-wing whites who attacked a squatter camp in the western Transvaal. It was the first time in decades that police had fired on whites, and two white farmers were injured. The whites had attacked a group of blacks who had re-occupied land from which they were forcibly removed 13 years ago. Judgment is expected later today in the trial of Mrs Winnie Mandela, on charges of kidnapping and assault with intent to commit grievous bodily harm. Mr Justice Michael Stegmann, the presiding judge, is expected to deliver his verdict by Wednesday. 
ID: 287
HEADLINE: FT  13 MAY 91 / International Economic Indicators: How to compare relative economic wealth - National accounts 
TEXT: THE MOST CONVENIENT way to compare the economic size and wealth of countries is to convert figures for gross national product into a common currency using market exchange rates. But the results can be misleading. The dangers are illustrated in this week's table, in which data on the gross national product or gross domestic product of each country have been converted into a common currency, the European currency unit (Ecu). Some surprising things emerge. For example, Japanese GNP apparently contracted last year, to Ecu2,332.4bn from Ecu2,625.2bn in 1989, so reducing Japan's share in the total output of the six largest industrialised countries to 22.5 per cent in 1990, from 24.2 per cent in 1989. Yet Japan's economic growth rate was the highest of the six countries, as the lower half of the table shows. This apparent contradiction is explained by the yen's 21 per cent depreciation against the Ecu between 1989 and 1990. Large fluctuations in exchange rates can give a misleading picture of changes in economic fortunes. What matters in comparing economic size is the relative purchasing power these figures represent: the quantity of goods that nominal GNP will buy in each country. The OECD has calculated the levels of income needed in each national currency to purchase an identical basket of goods and services at prevailing domestic prices. In 1990 a specific basket of goods costing dollars 100 to buy in the US would have cost Y19,800 in Japan and pounds 63.40 in the UK. Converting each country's GNP into dollars using these purchasing power parity (PPP) exchange rates provides a better guide to economic size, one that adjusts for fluctuations in exchange rates. The Japanese share in total PPP-adjusted GNP did rise from 18.6 per cent in 1989 to 19.3 per cent in 1990, as one would expect. The adjustment for PPP produces a very different picture of relative economic size in 1990. Both the US and the UK have a higher share of the six countries' total output on the basis of the PPP measure than on the basis of current exchange rates, and vice versa for the other four. The graph shows levels of average GNP per head in 1990, converted into dollars. At current exchange rates (on the vertical axis) Germany had the highest income per head, followed by Japan and the US. Using PPP exchange rates, however, (on the horizontal axis) this order is reversed. At current exchange rates the relative size and income per head of the German and Japanese economies is over-stated, relative to their purchasing power equivalent - they both lie to the left of the 45 degree line. This means that prices overall are higher in Japan than in the US at current exchange rates. Why then do US companies not sell more goods in Japan, until the price differences disappear? Perhaps transport costs, tariffs, or restrictive practices prevent US companies from doing so or, alternatively, Japanese consumers prefer Japanese goods. A better explanation is that prices are higher for non-tradable goods (services such as domestic banking and insurance, taxis and hair cuts) in the continental European economies and Japan than in the US and UK, because these economies are relatively more efficient at producing tradable (largely manufactured) goods, and relatively less efficient at producing non-tradable goods. Thus, these four countries have higher real exchange rates (defined as the relative price of non-tradable goods in terms of tradable goods). The prices of tradable goods are brought into rough equality by global competition (ignoring the impact of trade barriers). Consequently these countries will have relatively high domestic prices for non-tradable goods at market exchange rates. This will boost the value of their output at current exchange rates. If developing countries were to be included in the chart they would all lie below the 45 degree line. This is because they are relatively less productive than developed countries at producing tradable goods than they are at producing non-tradable goods. Thus dollars 1 buys far more services in, say, Indonesia than in the US at current exchange rates. In recent weeks the FT has published the following tables: Balance of Payments (April 15), Money and Finance (April 22), Production and Employment (April 29) and Prices and Competitiveness (May 7). Back issues can be obtained by writing to the Back Issues Department at the FT or by telephoning 071-873-4683/4 ------------------------------------------------------------------- INTERNATIONAL ECONOMIC INDICATORS: NATIONAL ACCOUNTS ------------------------------------------------------------------- Figures for GNP/GDP are in billions of European currency units (Ecu). The first breakdown is in current prices and the second shows growth rates in the constant price series. UNITED STATES Gross      Private   Private          Govt.     Net CURRENT        National       Cons.    Invest.         Spend.   Exports PRICES          Product                     as a % of GNP 1984            4,780.6       64.4      17.6            19.5     -1.6 1985            5,266.8       65.5      16.0            20.4     -1.9 1986            4,302.3       66.1      15.6            20.6     -2.3 1987            3,912.7       66.6      15.5            20.4     -2.5 1988            4,118.6       66.4      15.3            19.7     -1.5 1989            4,720.7       66.3      14.8            19.7     -0.9 1990            4,288.0       67.0      13.6            20.1     -0.7 2nd qtr. 1990    4,453.2       66.6      13.9            20.0     -0.5 3rd qtr. 1990    4,245.3       67.0      13.8            20.0     -0.8 4th qtr. 1990    4,030.3       67.4      12.6            20.5     -0.5 1st qtr. 1991    4,140.5       67.3      12.1            20.5      0.1 % growth in CONSTANT PRICES              GNP       Cons.    Invest.          Govt.   Imports 1984                6.8        4.8      30.6             4.4     23.9 1985                3.4        4.7      -3.2             7.9      3.4 1986                2.7        3.9       0.4             4.2     11.8 1987                3.4        2.8       4.6             2.3      8.2 1988                4.5        3.6       5.5             0.2      7.1 1989                2.5        1.9       1.6             2.2      6.0 1990                0.9        1.0      -3.7             2.8      2.8 2nd qtr. 1990        1.0        1.3      -2.6             2.4      2.8 3rd qtr. 1990        1.0        0.8      -3.5             3.3      3.1 4th qtr. 1990        0.5        0.1      -7.4             3.8     -0.5 1st qtr. 1991       -0.6       -0.5     -10.1             2.4     -2.9 ------------------------------------------------------------------- JAPAN Gross      Private   Total            Govt.     Net CURRENT        National       Cons.    Invest.         Spend.   Exports PRICES          Product                     as a % of GNP 1984            1,609.6       59.3      28.0             9.8      2.9 1985            1,781.5       58.7      28.0             9.5      3.7 1986            2,034.0       58.4      27.7             9.6      4.3 1987            2,104.0       58.4      28.4             9.4      3.7 1988            2,466.7       57.6      30.4             9.1      2.9 1989            2,625.2       57.3      31.5             9.1      2.1 1990            2,332.4       56.8      32.9             8.9      1.4 2nd qtr. 1990    2,249.2       57.0      33.0             8.8      1.1 3rd qtr. 1990    2,287.9       56.7      33.5             8.8      1.0 4th qtr. 1990    2,443.6       56.3      33.4             9.1      1.2 1st qtr. 1991 % growth in CONSTANT PRICES              GNP       Cons.    Invest.          Govt.   Imports 1984                4.3        2.8       5.8             2.7     10.6 1985                5.2        3.4       6.5             4.2     -0.9 1986                2.6        3.4       4.3             5.5      0.6 1987                4.3        4.2       8.2             1.8     10.5 1988                6.3        5.3      14.2             3.7     21.3 1989                4.7        4.4       9.1             6.0     22.2 1990                5.6        4.1      10.1             1.4     11.8 2nd qtr. 1990        6.9        6.3      11.3             0.9     18.1 3rd qtr. 1990        5.5        4.1      11.4             1.5     10.4 4th qtr. 1990        4.7        1.8       9.1             1.5      2.7 1st qtr. 1991 ------------------------------------------------------------------- GERMANY Gross      Private   Total            Govt.     Net CURRENT        National       Cons.    Invest.         Spend.   Exports PRICES          Product                     as a % of GNP 1984              790.6       56.7      20.4            19.8      3.1 1985              828.5       56.3      19.5            19.8      4.3 1986              914.1       54.9      19.5            19.7      5.9 1987              973.2       55.1      19.6            19.7      5.6 1988            1,023.8       54.4      20.4            19.4      5.8 1989            1,093.5       53.6      21.6            18.5      6.3 1990            1,189.9       52.9      22.4            18.3      6.3 2nd qtr. 1990    1,174.4       53.2      22.4            18.3      6.0 3rd qtr. 1990    1,196.4       52.5      22.1            18.1      7.3 4th qtr. 1990    1,210.1       52.9      23.6            18.3      5.2 1st qtr. 1991 % growth in CONSTANT PRICES              GNP       Cons.    Invest.          Govt.   Imports 1984                3.3        1.5       3.0             2.4      5.3 1985                1.9        1.4      -2.0             2.1      3.7 1986                2.3        3.4       4.8             2.6      3.5 1987                1.6        3.3       2.6             1.6      4.8 1988                3.7        2.7       7.9             2.3      6.0 1989                3.9        1.7       8.8            -0.9      8.8 1990                4.5        4.2       8.8             2.6     11.5 2nd qtr. 1990        3.4        4.4       7.5             1.4      5.3 3rd qtr. 1990        5.5        4.1      12.7             2.5     13.5 4th qtr. 1990        4.8        4.0       6.2             4.7     15.1 1st qtr. 1991 ------------------------------------------------------------------- FRANCE Gross      Private   Private          Govt.     Net CURRENT        National       Cons.    Invest.         Spend.   Exports PRICES          Product                     as a % of GNP 1984              634.8       60.5      19.0            19.9      0.4 1985              691.8       60.8      18.9            19.6      0.7 1986              743.6       60.2      19.7            19.2      1.0 1987              768.2       60.7      20.0            19.1      0.2 1988              813.5       60.0      21.2            18.8      0.1 1989              874.5       59.7      21.8            18.3      0.1 1990              936.7       60.0      21.7            18.3     -0.1 2nd qtr. 1990      935.7       59.9      21.6            18.4      0.1 3rd qtr. 1990      942.8       59.8      22.4            18.3     -0.5 4th qtr. 1990      947.0       60.4      21.3            18.4     -0.1 1st qtr. 1991 % growth in CONSTANT PRICES              GNP       Cons.    Invest.          Govt.   Imports 1984                1.3        1.1      -2.4             1.1      2.7 1985                1.9        2.4       2.8             2.3      4.6 1986                2.3        3.7       9.0             1.7      7.0 1987                2.4        3.0       5.0             2.8      7.9 1988                4.2        3.5       8.6             2.8      8.7 1989                3.9        3.2       7.3             0.2      8.2 1990                2.8        3.1       3.3             3.1      6.3 2nd qtr. 1990        2.7        3.9       1.3             3.0      4.5 3rd qtr. 1990        3.1        2.5       9.0             3.4      9.8 4th qtr. 1990        2.1        2.8      -0.1             3.2      3.7 1st qtr. 1991 ------------------------------------------------------------------- ITALY Gross      Private   Total            Govt.     Net CURRENT        National       Cons.    Invest.         Spend.   Exports PRICES          Product                     as a % of GNP 1984              526.4       62.3      23.0            16.5     -1.8 1985              563.3       62.8      22.5            16.7     -1.9 1986              613.9       62.4      20.7            16.5      0.4 1987              655.0       62.6      20.8            17.0     -0.3 1988              704.7       61.9      21.4            17.3     -0.6 1989              787.2       62.0      21.6            17.0     -0.7 1990 2nd qtr. 1990      852.0       62.0      20.6            17.2     -0.1 3rd qtr. 1990      851.3       62.4      21.2            16.9     -0.5 4th qtr. 1990 1st qtr. 1991 % growth in CONSTANT PRICES              GNP       Cons.    Invest.          Govt.   Imports 1984                3.0        2.1      10.1             2.5     11.3 1985                2.6        3.1       1.5             3.5      4.6 1986                2.5        3.8       0.2             2.9      4.6 1987                3.0        4.2       6.7             3.7     10.1 1988                4.1        4.1       7.8             2.8      6.9 1989                3.2        3.8       4.0             0.5      9.6 1990                1.9 2nd qtr. 1990        2.0        3.0       2.6             0.9      8.5 3rd qtr. 1990        1.6        2.6       4.5             1.6      6.4 4th qtr. 1990        1.1 1st qtr. 1991 ------------------------------------------------------------------- UNITED KINGDOM Gross      Private   Total            Govt.     Net CURRENT        National       Cons.    Invest.         Spend.   Exports PRICES          Product                     as a % of GNP 1984              550.0       61.4      17.3            21.5     -0.2 1985              604.9       61.2      17.2            20.7      0.9 1986              571.7       63.1      16.9            20.7     -0.7 1987              598.0       63.0      17.8            20.3     -1.1 1988              703.4       63.7      20.2            19.7     -3.5 1989              756.5       64.2      20.1            19.5     -3.8 1990              760.8       63.5      19.0            20.0     -2.5 2nd qtr. 1990      745.0       63.3      19.5            20.2     -3.0 3rd qtr. 1990      781.3       63.6      18.3            20.2     -2.1 4th qtr. 1990      783.9       62.7      18.6            20.2     -1.5 1st qtr. 1991 % growth in CONSTANT PRICES              GNP       Cons.    Invest.          Govt.   Imports 1984                1.6        1.6       7.8             0.9      9.9 1985                3.7        3.6       3.5             0.0      2.6 1986                4.0        6.3       1.7             1.8      6.9 1987                4.6        5.1      10.5             1.3      7.8 1988                3.9        6.9      17.5             0.6     12.8 1989                1.9        3.9       1.9             0.6      7.3 1990                0.7        1.0      -5.4             1.7      1.6 2nd qtr. 1990        2.4        1.9      -4.2             4.4      3.4 3rd qtr. 1990        0.3        1.1      -5.8            -0.2     -0.3 4th qtr. 1990       -1.4       -1.5      -3.1             0.6      1.0 1st qtr. 1991 ------------------------------------------------------------------- Seasonally adjusted data used in all cases. Statistics for Germany apply only to western Germany. GNP/GDP is broken down into private consumption expenditure, investment (the sum of gross fixed capital formation and the change in stocks), general government final consumption, and net exports (exports of goods and services minus imports of goods and services). The US includes investment by government in the government series rather than under investment.  Quarterly GNP/GDP totals are annualised. The growth rates are the percentage change over the corresponding period in the previous year, and are positive unless otherwise stated. The figures in the fifth column of each set of growth rates refer to import volumes. Data supplied by Datastream and WEFA from national government sources. 
ID: 288
HEADLINE: FT  13 MAY 91 / Israel mars superpower tete-a-tete: Baker and Bessmertnykh seek to 'kick start' Mideast peace process 
TEXT: MR James Baker, the US secretary of state, and his Soviet counterpart, Mr Alexander Bessmertnykh, met over a 'working dinner' on the banks of the Nile last night in an against-the-odds attempt to 'kick start' the Middle East peace process. The deepening dilemma facing the two men is how to persuade Israel to take even the first tentative steps towards an historic compromise with the Arabs, based on key UN resolutions 242 and 338 requiring Israeli withdrawal from territories occupied in the 1967 war. As they sat down for their repast the news from Israel could hardly have been less promising. Mr Yitzhak Shamir, the Israeli premier, again insisted at the weekend that Israel would not withdraw from the occupied territories. Mr Baker would also not have been encouraged by the negative Israeli reaction to his announcement on Saturday that Gulf states led by Saudi Arabia had agreed to send an observer to the proposed regional Middle East peace conference. Mr Shamir's senior adviser dismissed the announcement as unimportant. He said such countries had to go much further, ending hostile relations and the Arab economic boycott of Israel and taking a full part in any peace negotiations. 'We don't need observers as far as the Arab states are concerned, we need participants,' Mr Yossi Ben-Aharon, the director of the prime ministry, said. However, there was one small chink of light from Mr David Levy, the foreign minister, who adopted a less strident tone, offering the Gulf Co-operation Council (GCC) a cautious welcome and expressing hope that a peace process could be started. Mr Shamir also repeated a somewhat softened line on the key issue of the settlements by saying they would eventually be a subject for negotiation, but not at this stage. This fits with the position Mr Shamir has consistently adopted when confronting the demand that a peace conference be based on a 'land for peace' formula. He says this would pre-ordain an outcome unacceptable to his government. But he has left open the possibility that all such demands could be negotiated at a second stage of a two-step peace process. Mr Baker, whose fourth mission to the Middle East in two months has been variously described as 'do-or-die' and 'make-or-break', is in danger of seeing his efforts running into the sand unless he can produce a formula to narrow what appear to be almost irreconcilable differences between the two sides. With Israel insisting that any regional gathering must be limited to a more or less ceremonial introductory session hosted jointly by the US and the Soviet Union, and the Arabs demanding UN involvement in a conference with real powers, Mr Baker and Mr Bessmertnykh have their work cut out for them. Perhaps the most promising development in the absence of any sign of real progress is that for the first time in more than a generation Washington and Moscow are actively co-operating in an attempt to break the Arab-Israeli impasse. The idea that the foreign ministers of the two superpowers would be dining in Cairo in an effort to resolve one of the world's most intractable problems would have been unthinkable until recently. Whether the fact that it took place in the only Arab capital to have recognised Israel will budge the hardline Israeli government is another matter. 
ID: 289
HEADLINE: FT  13 MAY 91 / US Treasury clears British company 
TEXT: A BRITISH company blacklisted by the US Treasury as a suspected agent of the Iraqi government was yesterday cleared of suspicion and allowed to continue trading with American corporations. Sollatek, an electronics company based in London, is the fourth organisation named by the Treasury's Office of Foreign Assets Control on April 1 to have been issued with a licence pending its removal from the blacklist. The action follows discussions with officials at the UK Department of Trade and Industry. PMK, Qudos and Liverpool Polytechnic were granted similar licences last week. Mr Manhal Allos, director, said last night he had not ruled out legal action against the US government. 
ID: 290
HEADLINE: FT  13 MAY 91 / Savouring the first taste of democracy 
TEXT: 'SAVE DEMOCRACY, change society' says a slogan scrawled on a wall in Kathmandu. It has been just a year since the people of Nepal marched through the streets demanding multi-party elections and a new constitution to limit the power of their monarch, King Birendra Bir Bikram Shah Dev. Yesterday, 11m of the Himalayan kingdom's 18m people went to the polls to exercise their new rights. Voters lined up hours before polling stations opened at 8am, with many then waiting hours to vote. 'I am voting for the party that I like,' said a 77-year-old woman. Beaming with pride, she added: 'This is the first time I have voted in my life.' The two main parties in the race for parliamentary seats are the Congress party and the Nepalese Communist party, former partners in the interim coalition government which has ruled for a year. In Kirtipur, on the outskirts of Kathmandu, voters queued at the local Hindu shrine doubling as a polling station. 'I am very, very happy to vote, even if I have to wait in the queue for five hours,' said Surendra, 22, a business student at the local college. He said he voted for the Congress party, but he stood with arms linked around his friend, Ram, 20, who says he voted for the Communists. 'This town will divide half for Congress, half for the Communists,' said Ram, 'but it will not cause any problems. The elections decide only the parliament and not our relationships. The government may not last, but friendships will.' More than 75,000 policemen and 100,000 soldiers were called out to guard polling stations. Soldiers armed with submachine-guns patrolled the streets in armoured vehicles, despite a promise from the government to deploy troops only in the event of violence. Shops in all of the big cities were closed for election day and the streets of the capital were virtually empty, in stark contrast to the frenzied days of campaigning that led up to the election. For weeks Nepal has been besieged by party vehicles, blaring slogans and playing Nepalese folk music 24 hours a day. Walls, buses, trees, and houses are covered with colourful drawings of the various party symbols - cows, trees, suns, and fish  - as well as Nepali and English graffito asking for voter support. Mr Krishna Prasad Bhattarai, the prime minister and leader of the Congress party, toured the country in an army helicopter for four days before polling. Throughout Nepal engineers set up computers, facsimile machines and high-speed printers in preparation for voting. Mr Anders Koldby, a Danish consultant whose government contributed Dollars 1m of computer equipment to the Nepal Election Commission, said: 'Our biggest problem is that only 50 districts have telephones. In the other 25 districts, we are trying to run fax machines by battery.' The election commission now has 26 computers and 50 districts have fax machines. Mr Neel Kantha Uprety, co-ordinator of the computer division of the Election Commission, said the problem was to convince people they could work with the equipment. 'Some are afraid to touch a computer. They see it as a magic box. It's a whole new world for us.' 
ID: 291
HEADLINE: FT  13 MAY 91 / Poland to discuss arrears settlement 
TEXT: POLAND HAS indicated it is willing to negotiate a settlement of its Dollars 1bn (Pounds 588m) interest arrears owed to commercial banks before starting talks on a comprehensive agreement over its medium- and long-term bank debt. The move, at a meeting with leading bankers in Frankfurt last week, marks a significant shift in the Polish government's negotiating position. It was previously unwilling to negotiate over arrears except as part of a comprehensive debt agreement. The government, which has not paid any interest on its bank debt since the start of last year, also offered last week a Dollars 100m interest payment and said it would deposit 20 per cent of interest going forward into a special account at the Bank for International Settlements in Basle. Banks are holding out for more, but the offer has opened the way for progress to a comprehensive debt agreement, including debt-cut options where loans will be exchanged for concessional bonds, bankers say. More talks with Poland's bank creditor group are expected this month. Poland's bank debt comprises about Dollars 10bn of its total Dollars 45bn foreign debt. The US and other nations have pressed the banks to match a debt write-off of at least 50 per cent granted by official creditors of the Paris Club. But many banks resist such a large write-off. 
ID: 292
HEADLINE: FT  13 MAY 91 / Krajina votes on rule by Croatia 
TEXT: THE Serbian minority living in Croatia's region of Krajina voted yesterday in a referendum on whether they wanted to unite with Serbia and stay within a federal Yugoslavia. An early count indicated that most people voted in favour of joining Serbia. It was the first of five plebiscites to be held this month across the country and a 'yes' vote will add to tensions between the minority Serbs and the Croatian authorities. Croatia, along with the other western republic, Slovenia, has already taken steps towards secession and insists that the present federation of six republics be transformed into a loose organisation of independent states. Serbian leaders in Krajina said they would fight attempts by Croatia to impose 'outside rule' over their territory, which they have proclaimed autonomous. This is despite an accord reached last Thursday by the collective presidency to try to halt clashes between Serbs and Croats which have brought the country to the brink of civil war. Croatian authorities declared the referendum illegal. 
ID: 293
HEADLINE: FT  13 MAY 91 / Tyminski leads 'X' party 
TEXT: MR STANISLAW Tyminski, the main populist challenger to Poland's ruling Solidarity establishment, was formally voted in yesterday as leader of his new 'X' party at a congress in Warsaw. The Polish-Canadian businessman has been barred from running for parliament in elections expected this autumn, following a new electoral law requiring five years' residence to become a deputy. The electoral law, approved by the Sejm, the parliament's lower chamber, on Friday, has yet to be passed by the upper house. It adopts a proportional system for the Sejm favouring smaller parties. The Senate will be elected on a first-past-the-post system. The 'X' party's delegates, representing some 5,000 members, met behind closed doors with officials promising details of its programme later in the week. 
ID: 294
HEADLINE: FT  13 MAY 91 / Greek deficit falls by 13.6% 
TEXT: Greece's current account deficit fell 13.6 per cent to Dollars 1.69bn (Pounds 1bn) in the first quarter, reflecting a sharp rise in invisible receipts and better export performance, writes Kerin Hope in Athens. But the visible trade gap widened by 14.3 per cent to Dollars 3.45bn, mainly because of higher prices for imported fuel, the Bank of Greece says. It is the first time in over two years that the current-account deficit has shown a quarterly improvement. 
ID: 295
HEADLINE: FT  13 MAY 91 / Supreme Soviet to allow sacking of workers for indiscipline 
TEXT: The Supreme Soviet has also amended labour legislation to permit managements to fire workers who are guilty of indiscipline without the agreement of the trade unions. The agreement is a compromise, following a veto by President Mikhail Gorbachev of an earlier Supreme Soviet decision to allow managements to fire workers freely. The new decision lays down that unions must be consulted, and that their veto will remain where the labour code has not been breached - as over redundancies. Soviet President Mikhail Gorbachev and Russian Federation leader Boris Yeltsin yesterday met heads of 14 of Russia's 16 autonomous republics to try to further unify the nation, news reports said. The two have put aside their bitter political rivalry in recent days. The republics represent about 20m of the 147m people in the huge Russian republic. At the meeting, it was decided that the autonomous republics would sign the Union Treaty as equal subjects, the Interfax news agency reported. The Treaty is Mr Gorbachev's plan to redefine the relationship between the central government and the republics. 
ID: 296
HEADLINE: FT  13 MAY 91 / Moscow moves towards volunteer armed forces 
TEXT: THE Soviet Parliament yesterday approved an experiment for 'contract', or volunteer sailors, in a move which is seen as the first tentative step to transforming the vast Soviet armed services from a conscript to a professional force. The Supreme Soviet also approved a cut in naval service from three to two years, bringing it into line with the army. Mr Anatoly Lukyanov, the Supreme Soviet Speaker, said after the result had been declared that 'a professional army is born'. Colonel General Grigory Krivosheyev, deputy chief of staff of the armed forces, told the deputies the experiment, to run from 1991 to 1994, would provide vital information on the possibility of creating a professional army. The experiment will run in four 'large naval units' - possibly the four main Soviet fleets. Under it, seamen and petty officers will all serve an initial six months - after which those wishing to volunteer will serve a further two and a half years, while those wishing to remain as conscripts will serve a further 18 months. The pay of the volunteers is likely to be much higher than the conscripts - ranging from Rbs250 to Rbs400 a month, compared to wages which are as low as Rbs10 a month. Soviet forces are estimated at around 5m strong, with the navy accounting for only about 500,000 of these. The army has so far strongly opposed a move towards a professional service, arguing that it is an indispensable medium of bringing together the diverse nationalities of the Soviet Union, and that it would be too expensive. The Interior Ministry Troops, or MVD, whose numbers have been swollen over the past year as their services were increasingly required to cope with internal strife, are also to discuss introducing professional status. 
ID: 297
HEADLINE: FT  13 MAY 91 / US team to advise on Soviet food distribution 
TEXT: THE US will send a team of agriculture experts to Moscow this week to help solve the Soviet Union's food distribution problems. President George Bush's offer to provide advice on a distribution system follows a 45-minute telephone conversation between him and President Mikhail Gorbachev at the weekend. It comes as the US administration considers a Soviet request for a Dollars 1.5bn (Pounds 880m) agricultural export credit. White House officials have said that, while Mr Bush is sympathetic to easing any shortage of food on humanitarian grounds, he is worried by the lack of movement towards a market economy. A senior US national security adviser said last week that Mr Bush believed that what the Soviets needed most was technical assistance. 'There is almost certainly enough food in the Soviet Union. What's happening is it's not getting to the markets, partly because of transportation, partly because prices are so low that people are holding off the market, thinking that prices are going to go up.' The mission of farm experts could thus be a prelude to approval of some form of credits, which are backed by legislators from farming states. Senator Robert Dole, the Republican minority leader from the grain state of Kansas, said yesterday that the Senate should take up the export credit guarantee issue this week as long as there was provision for certain individual Soviet republics to participate. The experts' team will be lead by Mr Richard Crowder, under-secretary of agriculture, and will include Mr Ed Hewett, the leading Soviet specialist on the national security council staff. Mr Bush and Mr Gorbachev also discussed remaining arms control issues, notably the proposed agreement on reducing strategic arms and remaining problems over implementation of the treaty to reduce conventional forces in Europe, according to the White House. 
ID: 298
HEADLINE: FT  13 MAY 91 / IMF chief backs Egypt on debt 
TEXT: MR MICHEL Camdessus, IMF chairman, yesterday pledged support for Egypt's efforts to persuade foreign creditors to forgive a large part of its Dollars 35bn (Pounds 20.7bn) foreign debt. Mr Camdessus told President Hosni Mubarak the fund would back Egypt's application for debt forgiveness at a meeting of the Paris Club of creditor nations this month. He was speaking on the eve of this week's signing in Washington of a new Dollars 400m standby agreement, under which Egypt has pledged to press ahead faster with liberalising its economy. 'Your country has a convincing programme. I think it will get strong support from the international community,' Mr Camdessus is reported to have said. Mr Mubarak leaves later this week to visit France, Germany, Italy, Luxembourg and Turkey, in efforts to secure debt forgiveness under terms like those accorded to Poland recently. The Paris Club last month agreed to cut Warsaw's Dollars 35bn official debt by 30 per cent over the next three years and by 20 per cent more if Poland stuck to an agreed economic reform programme. Egypt recently raised energy prices and import tariffs in a drive to cut its budget deficit, a key IMF demand. 
ID: 299
HEADLINE: FT  13 MAY 91 / World News in Brief: Senna wins in Monaco 
TEXT: Brazil's Ayrton Senna, driving a McLaren, won the Monaco Grand Prix. Britain's Nigel Mansell, in a Williams, finished second. 
ID: 300
HEADLINE: FT  13 MAY 91 / World News in Brief: Ingham speaks out 
TEXT: Sir Bernard Ingham revealed the traumas, battles and crises which highlighted his 11 years as Margaret Thatcher's press secretary. Downing Street quiet over what Sir Robin Butler saw, Page 7 
ID: 301
HEADLINE: FT  13 MAY 91 / World News in Brief: Kurds shun western plan 
TEXT: Iraqi Kurds have shunned Operation Gallant Provider, a western plan to ferry them down from the mountains on the Turkish border to their homes in the provincial capital of Dahuk, where troops loyal to President Saddam Hussein are deployed, Page 4 Prime minister John Major attended a charity pop concert at Wembley Arena which is aiming to raise Pounds 20m for Kurdish refugees. A worldwide television audience of 50m tuned in to the event. 
ID: 302
HEADLINE: FT  13 MAY 91 / World News in Brief: Africa famine warning 
TEXT: Aid workers warned the Horn of Africa could this year suffer the highest number of famine deaths, as Ethiopia, itself ravaged by famine, appealed for urgent help to feed 1m refugees from neighbouring Somalia and Sudan facing starvation. 
ID: 303
HEADLINE: FT  13 MAY 91 / World News in Brief: Soviet navy move 
TEXT: The Soviet parliament approved an experiment for 'contract', or volunteer sailors, in a move seen as a tentative step toward transforming the vast Soviet armed services from conscript to professional forces. US team to advise on Soviet food distribution, Page 2 Meanwhile, Armenian Prime Minister Vazgen Manukyan said large-scale Soviet army raids on villages in the southern republic had practically stopped but again voiced fears that Moscow could enforce an economic blockade. 
ID: 304
HEADLINE: FT  13 MAY 91 / Chancellor faces growing pressure to cut base rates 
TEXT: MR NORMAN LAMONT faces a tough decision this week on whether to bow to growing pressure for a cut in UK interest rates or to hold out for further evidence of a decline in inflation. The signs at the weekend were that the chancellor may hold off from easing borrowing conditions over the next few days, partly to signal his unhappiness about the high level of underlying inflation, particularly as measured by wage increases. However, the government will face a barrage of calls from industry and political opponents to cut base rates, now at 12 per cent, in the light of fresh evidence about the depth of the recession. Concern about the most serious economic decline for 10 years promises to be a factor in the voting in Thursday's by-election in Monmouth. Government figures due on Thursday are expected to show that unemployment rose last month by about 85,000, following the record increase of 113,000 in March. The latest data on bank lending, due today, are likely to illustrate the low level of demand in the economy, in spite of the recent sequence of rate cuts which have brought base rates down from 14 per cent in mid-February. Speculation has mounted that Mr Lamont will use the opportunity of a large fall in the retail price index, due to be announced on Friday, to sanction a further  1/2 percentage point cut. The annual rate of increase in the RPI, 8.2 per cent in March, is likely to have come down by about 2 percentage points last month - largely due to technical factors resulting from the community charge and changes in mortgage rates. Underlying inflation - the RPI less the effects of the poll tax and interest rates - appears to be coming down less quickly. Moreover, the latest figures for the rate of increase in average earnings, to be announced on Thursday, are expected to show this figure was stuck at more than 9 per cent in March, the same as in February. UK monetary officials are concerned that companies may be trying to pass on to consumers, in the form of higher prices, too great a proportion of their own cost increases due to wage rises. Last week Mr Robin Leigh-Pemberton, governor of the Bank of England, issued a veiled warning against the idea of cutting rates too quickly. One theory is that policymakers may deliberately pass on the chance of cutting rates on Friday - if only to keep financial markets from linking announcements about falls in the RPI to an automatic easing in monetary conditions. Anthony Harris, Page 24 Economic Notebook, Page 25 Gilts, Page 28 
ID: 305
HEADLINE: FT  13 MAY 91 / Middle East peace effort falters 
TEXT: US officials were last night gloomy about progress towards a Middle East peace conference after six hours of inconclusive talks between Mr James Baker, secretary of state, and Syria's President Hafez al-Assad. A senior official said there had been 'no particular progress' on critical issues such as Arab insistence, against Israeli objections, on United Nations involvement in a proposed peace gathering. Mr Baker, who is on his fourth visit to the region since the end of the Gulf war in March, left Damascus for Cairo where he held a 'working dinner' last night with Mr Alexander Bessmertnykh, the Soviet foreign minister. Mr Baker is due to visit Jordan and Israel in the next few days. Washington and Moscow are collaborating in efforts to organise a regional peace conference, but these are in danger of collapsing because of wide differences between Israel and the Arabs, especially Syria. Mr Baker tried unsuccessfully yesterday to persuade Mr Assad to show greater flexibility on the details of the proposed Middle East conference. Mr Assad wants the full application of UN resolutions requiring Israeli withdrawal from occupied Arab land, including Syria's Golan Heights, captured in the 1967 war and subsequently annexed. A spokesman for Mr Assad, seeking to put the best face on unpromising discussions with Mr Baker, said that 'President Assad reiterated Syria's real desire to establish a just and comprehensive peace in accordance with UN resolutions . . . He also affirmed the continuation of Syria's readiness to co-operate with current efforts to achieve the best formula that would push forward the peace process.' Mr Baker, in concert with Mr Bessmertnykh, is trying to increase the pressure on Israel and the Arabs to bury their differences, but he is battling against a long legacy of bitterness and distrust. US officials in Cairo were pessimistic about chances of Israeli co-operation. will know exactly what separates the parties and then we will determine what the next steps are,' one official said. Mr Yitzhak Shamir, Israel's premier, re-stated his determination at the weekend never to yield territory seized in 1967. 'We will not give up, not only Jerusalem, but any portion of the land of Israel,' Mr Shamir said in a speech. Mr Baker received what amounted to a glimmer of good news on the eve of his latest Middle East shuttle when the Gulf states led by Saudi Arabia announced they would send an observer to a proposed peace conference. The six Gulf Co-operation Council states also said they would participate in discussions with Israel on such issues as disarmament, water conservation and the environment. US officials described these undertakings as something of a 'breakthrough', since the Gulf states had never before signalled a willingness to sit down at the same negotiating table as Israel; but in a statement that is certain to displease the Americans, a senior Israeli yesterday described the GCC announcement as unimportant. 
ID: 306
HEADLINE: FT  13 MAY 91 / UK softens stance on EC social charter 
TEXT: THE GOVERNMENT can now support most elements of the European Social Charter, although remaining opposed to some of the proposals, according to Mr Michael Howard, the employment secretary. His remarks, in an interview with the Financial Times, suggest that much of the hostility towards the charter expressed by the British government under Mrs Margaret Thatcher has disappeared. Mr Howard said he had been 'very encouraged' by the recent approach of Ms Vasso Papandreou, European social affairs commissioner, and by changes in the form and content of legislative proposals. His comments represent the most conciliatory note struck so far between the British government and the European Commission over the social charter. The government originally criticised it on the grounds that it would damage business. They follow attempts by Mr John Major, the prime minister, to improve relations with the European Community. Mr Howard said he believed Britain would now be opposed to only a dozen of the 50 proposals expected in the 'social action programme'. The minister has said until now that a third of the social action proposals would be acceptable, a third would have to be negotiated and a third would be unacceptable. He said changes in the past six months had led to a significant shift in these proportions. 'There are many measures which we fully support, indeed the majority of measures coming out under the social action programme. There are some we shall continue to resist,' said Mr Howard last week. The government had managed to negotiate changes in the form of some proposals, he said. It had also been encouraged because some of the proposals which it thought were going to appear as being directives have become non-binding recommendations. He said he had been encouraged when Ms Papandreou accepted his suggestions earlier this year that draft proposals should be shown to member states before being published, and that each government should help evaluate the costs to business. Among the proposals which have proved less difficult than the British government feared is the directive on written employment contracts first published in November. However, directives on working time and employee consultation remain controversial. Separately, Mr Howard said he was keeping under review the rule that the employer-led Training and Enterprise Councils should be headed only by chairmen and chief executives of private-sector companies, and in no case by personnel directors. He said a future trade union act following a general election would probably contain proposals to tighten the regulation of union financing in view of anomalies shown by the handling of National Union of Mineworkers' finances. Mr Howard also reiterated that the 26 wages councils setting minimum wages for 2.5m workers had 'no permanent place' and would eventually be abolished by the government. Monday interview, Page 38 
ID: 307
HEADLINE: FT  13 MAY 91 / Hard Ecu plan to be reviewed: UK may back down after concession on single currency timing 
TEXT: BRITAIN MAY back down on its hard Ecu plan following an important concession on the timing of a single currency proposed at a meeting of EC finance ministers. The hard Ecu is a central plank in the British government's ideas for European economic and monetary union but the idea has gained few supporters in the rest of Europe. The proposal will be reviewed by senior UK officials in the next few weeks with the option of dropping it as a goodwill gesture to Britain's partners. Such a turnabout could raise political difficulties because the Conservative government has long insisted that its hard Ecu alternative has been generating interest abroad in spite of Labour scepticism. According to the concession proposed at the weekend meeting in Luxembourg by Mr Jacques Delors, president of the European Commission, Britain could sign a treaty on Emu later this year without agreeing on the final goal, to which the UK attaches strong reservations, of a single European currency and a new European central bank. That would mean Britain could join the other EC nations in stage two of Emu but leave open the question of further involvement until the late 1990s. According to some countries' schedule, the third and final phase of Emu would begin around 2000, and usher in the full operation of a new, single currency and the new central bank. The general feeling from the meeting, said Mr Philippe Maystadt, the Belgian finance minister, was that 'no country should be allowed to stop others advancing to Emu and that no country could have a single currency imposed on it'. The proposal was supported by Sir Leon Brittan, the EC's competition commissioner. 'It could be made clear that the UK was formally reserving its position, not just on when, but on whether, it accepts a single currency,' Sir Leon said. The British government reacted cautiously to Mr Delors' proposal. Mr Norman Lamont, the UK chancellor, said the suggestion was 'constructive but not a dramatic breakthrough'. There were still 'a million questions', many of them posed by other countries, that had yet to be answered about Emu. Downing Street also made clear that the option was just one of many coming out of the negotiations. Tory MPs appeared divided on the issue although, at first sight, the Delors plan may appeal to the leadership on the grounds that it should largely remove the controversy within the party on the Emu issue in the run up to a general election that most now believe will come in the autumn. However, there is also considerable concern that acceptance of the compromise might be seen as tacit endorsement of a 'two-speed' Europe - something the government has always vigorously opposed. The hard Ecu, proposed two years ago with Mrs Margaret Thatcher's support, was designed partly to keep Britain in the mainstream of the Emu debate. The proposal is for a new currency with anti-inflationary characteristics, which would be used by European businesses alongside existing national currencies. It would be separate from the existing basket Ecu - the notional currency which the European Commission hopes will evolve ultimately into a new single financial unit for Europe. The hard Ecu strategy is to be discussed by the main Whitehall committee responsible for the approach to Emu. The committee is chaired by Mr Nigel Wickes, a second permanent secretary at the Treasury, and includes representatives from the Foreign Office, the Bank of England and the prime minister's policy unit. In the light of the less than wholehearted support received from the rest of Europe, the hard Ecu could be abandoned, although Britain would probably continue to press for some of the basic tenets behind the proposal, such as the need to fight inflation. Apart from the main discussions, Mr Pierre Beregovoy, the French finance minister, sought to smooth over differences with the Germany on the timing of the formation of the European Central Bank. His officials spoke only of an institutition 'pre-figuring' the bank being set up in 1994. However, Mr Theo Waigel, the German finance minister, remained insistent that it should be formed only on the eve of a single currency. Two-speed Emu, Page 3 
ID: 308
HEADLINE: FT  13 MAY 91 / Trade blocs are here to stay: America 
TEXT: Mexico's gross national product is less than 4 per cent of America's. Its exports account for only one third of one per cent of US domestic consumption. So why does the prospect of a free trade agreement with Mexico excite so much more interest in Washington than the Uruguay Round trade talks - which affect US trade with the whole world, including economic powers such as Japan and Germany? The answer lies partly in American indifference to the wider world. Mexico has a long border with the US; the hope that free trade will encourage it to export goods rather than people is taken seriously. Mention the General Agreement on Tariffs and Trade (Gatt), however, and you invite the blankest of stares. The man on Main Street probably could not identify Geneva on a map, still less comprehend why a bunch of European bureaucrats should exert influence over US trade policy. Never forget that international bodies count for little here: after 40 years, some congressmen still believe the World Bank is an aid agency based in New York. Gatt is obscurity squared. The deeper answer is that bilateral pacts, such as the planned agreement with Mexico, are more acceptable to the aggressive American psyche that the abstract logic of multilateral trade liberalisation. Support for free trade in the US has a short history. In the late 19th century when Britain was trumpeting the virtues of trade liberalisation (and gradually sinking below the waves as an economic power) the US was busy creating an industrial powerhouse - behind high tariff walls. The US conversion came in the aftermath of the second world war, when Europe and Japan were weak and no threat to the US market. With the loss of economic hegemony, analysts are again questioning the merits of traditional free trade. US fears are encapsulated in a recent essay* by Mr Clyde Prestowitz, a former senior official at the commerce department who heads the Economic Strategy Institute, a Washington think-tank. Mr Prestowitz invents the term 'Gattism' to describe 'a belief, bordering on religious faith, in the power of ever more detailed trade rules to solve major domestic and international trade problems'. He dismisses the Uruguay Round as a 'futile, legalistic crusade to homogenise different nations'. The Gatt is based on two fundamental principles: 'national treatment' and 'most-favoured nation'. Under national treatment, members agree to treat foreign companies exactly as they treat domestic companies. Under most-favoured nation, liberal rules agreed between any two Gatt signatories must be extended to all others. Mr Prestowitz (and many others) regard both principles as unjust. This is because they do not require comparable rules to be applied in all member countries. A restrictive country can impose all kinds of barriers (provided it does not discriminate against foreign companies) while its exporters piggy-back on the liberal laws agreed elsewhere. 'Gattism' reflects a belief that unilateral trade disarmament is beneficial. (Like Christians turning the other cheek, free market purists welcome dumping and other infractions because they initially benefit the consumer.) The economic case for unilateralism, however, is weaker than often pretended. If you make the usual sweeping neo-classical assumptions - no economies of scale, no unemployment (because prices clear all markets) and no uncertainty about the future - you can show that a small country should eschew protection. But even in this fairy tale world, neo-classical theory indicates that a large country such as the US can benefit by imposing an 'optimal' tariff: at a certain level of protection, the gain from the improvement in its terms of trade more than offsets the loss of imports. Game theory suggests this remains true even if other countries retaliate. Free market purists are thus being dogmatic when they claim to have 'proved' that unilateral trade liberalisation is beneficial. It need not be even in their idealised world. Nor is the empirical evidence compelling: the huge success of Japan and South Korea suggests that, for individual countries, a combination of export promotion and import restriction can be more profitable than unilateral trade disarmament. But it is not an option for the world as a whole. The question, therefore, is how to persuade countries to pursue policies that may not always be in their own interests but which benefit everybody in the long run. One popular option is to lay greater stress on reciprocity - a principle that horrifies purists. 'I will open my markets if you will open yours' is an offer that politicians and businessmen find difficult to reject. Unlike strict 'Gattism', it seems self-evidently fair. Yet it is most easily pursued through bilateral agreements in which like-minded countries can directly trade concessions. Seen through US eyes, mercantilist Japan is dominating Asia through a network of direct foreign investment links. European Community nations, while outwardly in favour of multilateral trade liberalisation, are consolidating the advantages of preferential trading links through the Single Market programme. In the circumstances, who can blame the US for trying to forge its own regional trade bloc? Whatever happens to the Uruguay Round, pacts with Canada and Mexico mark only the beginning of a more assertive - and more selfish  - US trade policy. * The Last Gasp of Gattism. Harvard Business Review March-April 1991. 
ID: 309
HEADLINE: FT  13 MAY 91 / Justinian: The admissibility of evidence 
TEXT: The two former City merchant bankers who are awaiting trial on charges arising out of the Guiness affair failed in the Court of Appeal (Criminal Division) to have the testimony they both gave to Department of Trade appointed inspectors declared inadmissible at their forthcoming trial. Mr Roger Seelig, former corporate finance director at Morgan Grenfell and Lord Spens, former director of corporate finance at Henry Ansbacher, may have a legitimate grievance that the law does not cover the questioning of those involved in inspectors' investigations under the Companies Act. Answers given by any person to inspectors are admissible in guidance in subsequent proceedings. But are the answers safeguarded in the way that police questioning is? The legal issue is simple enough. Are DTI inspectors within the meaning of the phrase in the Police and Criminal Evidence Act 1984, namely 'persons charged with the duty of investigating offences?' If they are, they would be bound to caution witnesses who appeared before them. Even if the inspectors were investigating criminal offences, and there had been a breach of the code established under the 1984 Act, it would still have been in order for the trial judge to admit the evidence. Mr Justice Henry, who will be trying the second Guiness case and who conducted the pre-trial hearing, had decided that fairness to the accused would not be threatened by allowing the evidence to be heard by the jury. (Clearly, the prosecution attached great importance to the admissions made by the two men to the inspectors.) The judge also rejected the claim that improper means had been used to compel the two men to incriminate themselves. The Court of Appeal had little difficulty in concluding that inspectors do not investigate offences of a criminal nature. They investigate events of a commercial or financial nature, in the course of which they are very likely to uncover criminality on the part of one or more of the actors in the events under investigation. The inspectors' task is quintessentially inquisitorial; and the task partakes of none of the aspects of the criminal process which is designed to protect the accused from any oppressive action by criminal investigator or prosecutor. Inquisitions are by design held unremittingly to discover the truth. The English criminal trial, on the other hand, is a restricted method to determine the guilt or innocence of an accused according to a high standard of proof. The trial process is the semblance of truth, or at least may only approximate to the truth. If the inspectors had nevertheless to caution a witness according to a well-recognised formula before asking any questions, or advise that he or she need not answer a question thought to incriminate the witness, it would place an absurd restriction on the ability of the inspectors to uncover all the relevant information. Indeed, it may even be necessary for inspectors to withhold information from a witness until the questioning takes place, or to confront a witness with a highly material document for the first time during the questioning. Such tactics would be regarded as highly irregular in a criminal trial. Inspectors normally try to be fair to witnesses, but in the final analysis their duty is to extract the optimum information and report their findings. Mr Seelig and Lord Spens had asserted that there had been a conspiracy between the inspectors, the DTI, the Serious Fraud Office and police officers that the inspectors would use their statutory powers for an ulterior purpose - namely, to build up a case for preferring criminal charges and not for the purpose of investigating company affairs. Two years ago such a danger was recognised by providing that where evidence of a crime had been uncovered and referred to the prosecuting authority, the minister could discontinue the inspectors' investigation. But those who have to undergo the probing questions of inspectors will doubtless feel that the exercise smacks of a preparation for criminal proceedings. Since criminal charges, not infrequently, do follow these inspectors' reports, such reaction of those investigated is not unreasonable. It all seems unfair. Any unfairness in the procedure is publicly tolerable, indeed necessary in the cause of finding the truth. What becomes less tolerable is the publication of the inspectors' report - always held up pending any criminal proceedings - because the individuals may be revealed for their commercial irresponsibility, if not also for their criminality. Mr Robert Maxwell, the publisher, smarted under the public condemnation of his behaviour as a director over the affairs of Pergamon in the 1970s. It is a common feature of public inquiries generally that prospective witnesses are encouraged to come forward by promises that they will be given immunity in respect of their testimony. The attorney-general then declares that evidence before the inquiry will not be used in any subsequent criminal proceedings. Something akin to that concession would be appropriate for investigations by DTI inspectors. There is even a case for treating the investigation, with its draconian powers, and the public report that follows as a substitute for a criminal trial, leaving it to stockholders or creditors to take proceedings. But that would require an even more sophisticated approach to the dubious value of criminal justice, as opposed to a searching public inquiry and civil action, in unravelling complex financial dealings. 
ID: 310
HEADLINE: FT  13 MAY 91 / Money Markets: D-Mark stays weak 
TEXT: THE D-MARK traded among the weaker members of the European exchange rate mechanism last week, despite its slight improvement against the dollar and Japanese yen. Currency trading was subdued, with the early part of the month lacking much important economic news. There were no data on the UK or Japanese economies and the only US figure of any significance was Friday's producer price index for April. Economic news from Germany was not encouraging, increasing the risk that there will be a current account deficit in 1991, after last year's surplus of DM75.5bn. The unified Germany has not yet managed a monthly surplus so far this year. In March the current account shortfall was a substantial DM5.3bn, compared with DM1.5bn in February. A deficit of around DM3.5bn was expected, but payments for the Gulf war increased the figure. A trade surplus of only DM2.8bn, against a forecast of about DM3.5bn, was perhaps more worrying. The size of the problem can be gauged by the fact that the old West Germany had a current account surplus of DM12.2bn and a trade surplus of DM13.8bn in March last year. In the first three months of this year the German current account deficit was DM8.9bn. Demand for goods in the east has sucked in imports and led to a fall in exports, as West German industry has struggled to meet demand. Imports rose 14 per cent to DM159.0bn in the first quarter, compared with a year ago, while exports fell 6.6 per cent to DM165.8bn. This state of affairs, coupled with rising inflation and political instability in eastern Europe is not likely to improve the D-Mark's appeal, particularly if the Bundesbank continues to resist the temptation to raise interest rates. 
ID: 311
HEADLINE: FT  13 MAY 91 / International Bonds: Dealers slow to appreciate benefits of rechristening 
TEXT: THE Association of Inter-national Bond Dealers is to meet for the last time later this week. At its annual conference in Hong Kong, the regulatory body of the Eurobond market will be reconstituted under a new name which better reflects its broadening constituency. The change marks a shift in direction as the AIBD leaves behind its roots as a trade association and espouses broader issues. However the move to re-christen the AIBD has met surprising resistance, considering the disadvantages of a name which, in the minds of many market participants, still stands for the Association of International Beer Drinkers. The proposal to change the name to the International Capital Market Association met with disapproval from nostalgic traders unwilling to see the organisation move away from its traditional base. The AIBD's leadership, however, sees the need for the association, which has already developed from a trade association to a regulatory bond, to evolve. The similarity between the pronunciation of IPMA and ICMA prompted some disquiet at the International Primary Market Association, the trade association of the new issues market which broke away from the AIBD in the mid-1980s. Some market participants feel there is no longer a separate role for IPMA, and the two trade associations should band together. In that case, issues such as the payment of lead management commissions could be discussed and resolved in the context of a more powerful body. However, a potential merger between the two groups still seems to be a long way off, and political interests may forestall any such development. There have been no discussions between the two bodies, even though many members are in both, and might favour a streamlining. The proposal to rename the organisation ICMA also met some objections from foreign members who felt that 'capital' might be misunderstood. Consequently, the proposed name has been changed to the International Securities Market Association (ISMA), which was felt to be both sufficiently broad and accurate. 'The name (AIBD) no longer truly represents our members, a lot of whom have taken on several other functions (apart from dealing),' said Mr John Langton, the AIBD's chief executive. As well as the handful of statute changes (including the name issue) due to be discussed at the meeting, a number of issues not on the official agenda are likely to arise. Under an amendment to the directive proposed by the French, Eurobond transactions would have to be traded on regulated exchanges, and more extensive price and volume reporting would be required. Although all UK and some European firms report their trades to the AIBD, the association would not be recognised as an exchange. The AIBD has been actively lobbying the EC to prevent such a development, but a stalemate appears to have been reached. The argument advanced by the French, that off-exchange trading means inadequate investor protection, is strongly rejected by the AIBD, which, as a designated investment exchange under UK law, has been fighting to have its statues and rule book recognised. The AIBD is concerned that forcing all trades on to regulated exchanges will limit cross border trading and reduce liquidity. At the moment, something of an impasse appears to have been reached, with the UK, Germany, the Netherlands, Luxembourg, on one side, and the rest of the community, led by France, on the other. However, the AIBD is optimistic that it will succeed in persuading the EC to accept its statutes and rules as fair and equitable. The next step would be to try to obtain regulatory status, Mr Langton said. The dispute over settlement procedures between the two European clearing systems, Euroclear and Cedel, is also likely to resurface, even though most market participants say they have 'learnt to live with it'. Hopes have again been raised that agreement is near after an AIBD market practices committee last week and a number of meetings between the three parties (with the AIBD acting as a go-between). 'Euroclear has made a number of concessions and Cedel has respected those and made some concessions too,' said Mr Langton, who added that there was 'an excellent chance' the problem would be resolved during this week's meeting. Last year, the two clearing systems agreed to renegotiate their 10-year-old bridge agreement, widening the issue at stake from an original contention about primary market settlement. The bridge between the clearers is the mechanism by which settlement information is exchanged and is generally agreed to have become outdated. A memorandum of understanding was signed last September. In October, Cedel put forward a proposal incorporating the need for multiple exchange of files. Then in December, Euroclear put detailed proposals to Cedel which included a commitment to incorporate multiple exchange of files, seen as an important concession by Euroclear. One issue which has never failed to spark complaints in the AIBD's 23-year history is that of subscription rates. Under a proposed statute change, the flat fee, currently SFr6,000, would be substituted for a set range of SFr7,500 to SFr10,000. The change is part of an attempt to improve the limitation of liability of individual members to claims against the association by limiting liability to the annual subscription rate. However fees have frequently been a contentious issue, last leading to strong objections at the AIBD's Dallas meeting in 1988, when members complained they were subsidising the development of Trax, the AIBD's screen-based reporting system. Because the AIBD has a strong UK membership, and is a self-regulatory body under UK law, continental European members have often complained they were financing UK members' compliance with UK regulations. Now that Trax is running, and the commercial operations of the AIBD are generating funds, there may be resistance to any increase in fees. But for most leading firms, the costs involved are not significant. The issue of cost has also arisen in the context of the meeting's location in Hong Kong this year. Some dealers said it made the conference too time-consuming and too expensive. Indeed, fears that a quorum might not be met have prompted proposals to increase the number of proxies. However, the choice of a more expensive location - along with some more important issues - have helped encourage firms to send more senior executives, while in previous years, junior traders without the authority to make decisions were sometimes sent. Discussions about any move towards live screen prices are unlikely to advance. Although this is felt to be a likely development in the longer term, the daily feeds which the AIBD provides seem to be considered satisfactory. The expense and the complexity of developing live screen prices in Eurobonds are a deterrent, but such a shift also runs counter to some strong vested interests within the Eurobond market. Some banks feel their ability to trade profitably would be compromised by too much transparency. 
ID: 312
HEADLINE: FT  13 MAY 91 / Syndicated Loans: Scandinavian deals dominate activity 
TEXT: SCANDINAVIAN borrowers dominated the syndicated loans market last week with a flood of deals intended to refinance short-term debt and provide medium-term financing. Skandinaviska Enskilda Banken - the largest commercial bank in Sweden, and the bank affiliated to the Wallenberg family - last week launched a SKr9bn acquisition finance facility for Patricia, the Wallenberg family's fund-raising arm. The facility will be used specifically to help finance the acquisition of shares in Saab-Scania, the motor and aerospace group. Investor and Providentia, the two Swedish investment companies controlled by the Wallenberg family which jointly own Patricia, made a SKr12.8bn takeover bid for outstanding shares in Saab-Scania in February. SEB Capital Markets is agent and arranger for the facility, which is being placed with a group of key relationship banks, both international and domestic. These are thought to include J. P. Morgan, Citicorp, Manufacturers Hanover, NatWest, Credit Lyonnais, Deutsche Bank and Swiss Bank Corporation among others, although no commitments are in place yet. The deal has an interesting structure because the loan will be available in tranches of different maturities - namely nine months, two years and five years. The pricing ranges from 85 basis points over the London interbank offered rate (Libor) to over 100 basis points. The facility will be guaranteed by Investor and Providentia and follows a three-year, Dollars 1.1bn acquisition finance facility for Patricia arranged by SEB earlier this year. Standard &amp; Poor's, the international credit-rating service, said last week that Patricia's A-1 commercial paper rating would be upheld. The rating had been placed on CreditWatch in February following the SKr12.8bn takeover bid for Saab-Scania. Separately, SEB Capital Markets launched a Dollars 250m five-year facility last week for Trelleborg, the Swedish mining and industrial conglomerate. The facility consists of a Dollars 200m term loan and Dollars 50m revolving credit facility. Bankers consider the pricing - of 50 basis points over Libor for the first three years, and 55 basis points over Libor thereafter - generous. The Dollars 1.36bn syndicated loan arranged for Stora, the Swedish pulp and paper group, by SEB Capital Markets was signed last week. The five-year revolving credit and term loan facility was oversubscribed, raising Dollars 1.7bn, so the 22 participating banks have had their contributions scaled back accordingly. The loan is intended to refinance Stora's short-term debt, mainly stemming from the acquisition last year of Feldmuhle Nobel, the German forestry and engineering group. Manufacturers Hanover launched a three-year Dollars 60m syndicated revolving credit facility for Ratos, the Swedish investment company which has big shareholdings in companies such as Esselte, Asea, Stora and Industrivarden. Ratos plans to expand its international activities and is using the facility as a back-up for its Eurocommercial paper programme. The interest margin is 55 basis points over Libor, but fees are not being disclosed. Manufacturers Hanover and Den Norske Bank are joint arrangers for a Dollars 60m secured five-year loan for Helikopter Service, the Norwegian group which is Europe's second largest commercial helicopter service and flies workers to North Sea oil platforms. The loan, in limited syndication, will help finance the purchase of helicopters as well as the refinancing of two existing facilities. ------------------------------------------------------------------- EUROMARKET TURNOVER (M DOLLARS) ------------------------------------------------------------------- Primary Market Straights   Conv    FRN   Other US dollars       1,274.2     0.0     0.0   10,890.8 Prev               812.1   249.1    85.0   15,159.3 Other            1,195.9     0.0   171.5    6,913.9 Prev             2,614.2   284.7     8.9    8,120.6 Secondary Market US dollars      18,001.9   703.8 7,172.3    8,075.5 Prev            23,033.3 1,151.4 6,714.9    9,920.8 Other           25,400.5   866.7 2,700.8   35,743.0 Prev            39,089.6 1,603.9 5,219.0   45,111.6 Cedel     Euroclear    Total US dollars   17,120.0     28,998.5     46,118.5 Prev         19,937.5     37,188.3     57,125.8 Other        29,598.0     43,394.3     72,992.3 Prev         43,290.9     58,761.6     102,052.5 Week to   May 9, 1991 ------------------------------------------------------------------- Source: AIBD ------------------------------------------------------------------- 
ID: 313
HEADLINE: FT  13 MAY 91 / UK Gilts: Market looks ahead to bleak signs 
TEXT: THE GILTS market is looking ahead to a week of bleak news about the extent of the UK recession. The government is likely to announce on Thursday a large rise in unemployment and a further slump in manufacturing production. A day after this comes the latest information on inflation, as measured by the retail price index, which is expected to show that the annual rate of increase was just over 6 per cent last month, from 8.2 per cent in March. Whether the government will use the latest economic indicators as an opportunity to make a further cut in base rates, now at 12 per cent, is hotly contested. The Bank of England has already made its views known. Mr Robin Leigh-Pemberton, the Bank governor, issued a thinly veiled warning last week about the dangers of cutting interest rates too quickly. The Bank is especially worried about underlying inflation - usually measured by the RPI, less the effects of the poll tax and mortgage payments - which is falling far less rapidly than the 'headline' rate. According to this argument, the expected fall in the RPI is explained more by technical factors, related to changes in the poll tax and interest rates, than by continued signs of demand being squeezed due to recessionary forces. Mr Leigh-Pemberton's statement was followed on Friday by the Bank lending to the money market at the prevailing base rate of 12 per cent for two weeks - a move which underlined the Bank's view that an imminent cut in rates would be inappropriate. Despite the Bank's signals, Mr Norman Lamont, the chancellor, has the final say over monetary policy. He may feel that recessionary conditions are so tough that a  1/2 percentage point cut is justified - as part of the series of moves which have brought base rates down by 2 percentage points since February. Even more to the point, a cut in rates this week might help the Conservatives' chances of winning the general election, which could be held later this year. In the gilts market, the expectation is that Mr Lamont will cut rates soon. This sentiment helped to bring down yields at the short end of the market over the past week, while those for long-dated gilts stayed virtually static in lacklustre trading. In deference to the Bank's views, some believe Mr Lamont may make his announcement not on Friday, at the time of the RPI figures, but a few days later. If Bank officials are looking forward to this week's events with a certain grim foreboding, they are probably glad to have last week out of the way. What had been an embarrassment to the Bank - a tranche of Pounds 800m-worth of 9 per cent Treasury stock maturing in 2008 which had remained unsold for a month - was disposed of last Wednesday by the straightforward move of cutting the price by 2 points. The manoeuvre led to sniping by some gilt specialists, who reckoned the market-makers buying the securities gained too much of a bargain. Some eyebrows were raised because the Bank sold the stock at a price of 1/16 less than the market price. This discrepancy meant the Bank (and ultimately the taxpayer) gained from the transaction some Pounds 500,000 less than it would have done by selling at the market price. However, to show that it was not put off by the episode, the Bank announced on Friday the sale of Pounds 200m-worth of 2 1/2 per cent index-linked stock -one segment worth Pounds 100m carrying a maturity in 2001 and the rest due in 2011. The securities, available for dealing from today, should be far easier to sell and should make last week's headaches for the Bank seem like a bad dream. 
ID: 314
HEADLINE: FT  13 MAY 91 / Italian Government Bonds: Sentiment strong despite government action 
TEXT: THE ITALIAN government bond market appears to have performed impressively this year in spite of, rather than because of, the actions of government. The cabinet crisis in April which forced the formation of Italy's 50th post-war government has threatened to delay several important bond market reforms, including procedures for reclaiming 12.5 per cent withholding tax paid by overseas buyers. Perhaps more seriously, the formation of a four-party coalition had delayed agreement on spending cuts designed to rein in this year's budget deficit. This weekend, however, the new cabinet agreed a budget package to bring the deficit back to the target of L132,000bn, or 10 per cent of gross national product. Before the cabinet agreement, bond yields had continued to fall. The first 10-year government bond issue launched in February at a net yield of 12.64 per cent currently yields around 11.6 per cent, 10 basis points lower than at the end of April. Analysts say lower yields stem from consistent overseas buying of Italian government paper. As in other higher-yielding markets such as Spain, international buying has been based on the view that exchange rate co-operation will force yields down to the level of the lowest-yielding market in the European monetary system - Germany. 'A lot of international fund managers have accepted the idea of convergence of European bond markets and are shopping around for bargains,' said one London-based money manager. 'Fixed-income investors have taken to behaving like equity investors.' The inflow of foreign funds into Italy has meant an easing of short-term interest rates, with three-month money rates falling from 11 3/8 per cent in late April to 10 7/8 per cent last week. Yesterday the Bank of Italy cut the discount rate by one percentage point to 11.5 per cent, effective today. Overseas buying has also been in evidence in the Eurobond market, where borrowers such as Volkswagen, Barclays Bank and Credit Local de France, have tapped international demand for Lira-denominated securities. The Euro-lira sector has been dominated by supranational borrowers such as the European Investment Bank and the World Bank. Italian investors do not pay withholding tax on bonds issued by these agencies. The Italian currency has rewarded the faith of international investors by remaining strong, within the limits of its 2.25 per cent divergence limit against the D-Mark. The lira is the second strongest currency within the European exchange rate mechanism, after the peseta. From L760 against the D-Mark at the beginning of 1990, the Italian currency now stands at around L740. However, dealers suggest this buoyant mood is fragile. It has been spurred by the anticipation that tax barriers to international investment will be dismantled. Delay could turn sentiment. Equally, convergence of European bond markets depends on economic and monetary integration. Any hint that Italy will not play a full role in the next stage could leave the government bond market exposed. Italy's record of economic management has been criticised by the International Monetary Fund and the Bundesbank. Hence agreement on the package of spending cuts by the cabinet could be crucial to sustaining the confidence of bond market investors. 
ID: 315
HEADLINE: FT  13 MAY 91 / US Money and Credit: Delayed reaction to poor refunding 
TEXT: THE CURIOUS performance of the US bond markets on Friday afternoon was a little like that of a tightrope walker who successfully crosses the high wire, but then slips and falls at the far end from pent-up fright. And the main reason for the market's sudden fall - the poor reception for the US Treasury's quarterly refunding - could continue to reverberate for quite a time yet. Four-fifths of the way through last week the credit markets were breathing a collective sigh of relief. The Treasury's record Dollars 37bn refunding on Tuesday, Wednesday and Thursday was hardly a runaway hit, but at least it had not spooked the bond market. Calm seemed to prevail, despite the fact that Thursday's auction of 30-year bonds attracted the smallest amount of bids since these securities were first offered to the market on a regular basis in the 1970s. There was only Dollars 1.41 in bids for every dollar of the Dollars 11.75bn on offer. And, while the average yield on the bonds sold was 8.21 per cent, in line with the market's expectations, there was a particularly large 'tail' - the difference between the average and highest bid  - of three basis points. That indicated dealers had widely different views of the value of the paper. Why did this news not send prices plunging immediately? One reason was that the market was anticipating good figures on inflation on Friday, which it duly got: the producer price index rose only 0.2 per cent in April, in line with expectations, in a further demonstration that the recession is putting the squeeze on inflation - though the bond market is reluctant to accept this. When this good news failed to attract fresh buying, however, the initial relief that the Treasury refunding was over turned to concern over the poor reception received by the long bond, and prices began to tumble as dealers tried to cut their inventory ahead of the weekend. The fall was intensified by a rumour that Californian insurance regulators, who on Friday clamped strong controls on a troubled insurer, First Capital Life, were also demanding that it liquidate its junk and investment grade bond portfolios. The upshot was that the new benchmark long bond closed the week at 97 7/8 , compared with 99 1/16 in the auction, while the yield rose from 8.21 to 8.31. Both factors underline the market's concern about an oversupply of paper, and this source of anxiety is not about to go away. The Federal government is anticipating borrowing needs of some Dollars 115bn in the third quarter, and estimates of its requirements from now to the end of September range as high as Dollars 155bn. That could cause a lot of indigestion. However the position may not be quite as bleak as it first appears. Ms Kathleen Stephansen of securities firm Donaldson, Lufkin &amp; Jenrette points out that some Dollars 70bn of this may be earmarked to support the Resolution Trust, which is cleaning up the savings and loans mess, and the trust may not be able to use that amount in so short a time. Furthermore, money borrowed for the thrift bail-out does not increase overall demand for credit and does not stimulate aggregate demand. Even so, the government's funding requirements could prove even bigger than now forecast if the economy does not start soon showing signs of an upturn, which would boost its tax receipts. The recent spate of economic indicators has been thoroughly confusing. The optimists - and they include most Wall Street analysts  - insist this is yet another sign that the US is approaching an economic turning point, as the downward movement of the last 10 months reaches the bottom of the trough. However, as yet there have been few signs of an upturn in industry's order books. The key automotive sector remains flat on its back, and there is some fear the consumer-led downturn may now be followed by a sizeable drop in business expenditure. Another potentially worrying sign is the slow growth in money supply that re-appeared in April, although this could have been a seasonal freak. There will be more clues on Monday and Tuesday, with the release of data on industrial production, retail sales and consumer price inflation in April. And the Federal Reserve's policy-making Open Markets Committee will have these on hand on Tuesday when it meets to consider monetary policy. Unless the newly released figures - or the Fed's own preliminary money supply growth statistics for early May - are dreadful, the central bank seems unlikely to change its policy, which took the Fed funds rate down to 5 3/4 per cent at the end of April. ------------------------------------------------------------------- US MONEY MARKET RATES (%) ------------------------------------------------------------------- Last   1 week    4 wks   12-month   12-month Friday    ago     ago     High        Low Fed Funds (weekly average)   5.56      5.50     5.00     11.00     2.00 Three-month Treasury bills     5.59      5.62     5.66     7.94     5.54 Six-month Treasury bills              5.86      5.80     5.84     8.04     5.62 Three-month prime CDs                5.95      5.95     5.98     9.01     5.90 30-day Commercial Paper              5.83      5.85     5.80     8.28     5.85 90-day Commercial Paper              5.83      5.85     5.80     7.98     5.85 ------------------------------------------------------------------- ------------------------------------------------------------------- US BOND PRICES AND YIELDS (%) ------------------------------------------------------------------- Last     Change            1 week     4 wk. Fri.     on wk     Yield     ago     ago Seven-year Treasury   99 13/32  -3/8      7.96     7.89     7.83 20-year Treasury     108 5/8     -1       8.34     8.23     8.15 30-year Treasury      97 7/8              8.31     8.22     8.15 ------------------------------------------------------------------- Source: Salomon Bros (estimates). Money supply: In the week ended April 29 M1 fell by dollars 1bn to dollars 840.3bn ------------------------------------------------------------------- 
ID: 316
HEADLINE: FT  13 MAY 91 / International Company News: Northwest slides deeper into red 
TEXT: NORTHWEST Airlines, the US carrier taken private via a leveraged buy-out, has reported a Dollars 62m loss after tax in the first quarter of 1991, writes Nikki Tait in New York. This compared with a Dollars 39m deficit in the same period a year earlier. The loss was scored on revenues almost static at Dollars 1.64bn. Like most of its rivals, Northwest blamed the losses on the effects of the Gulf war and depressed domestic demand. Operating costs rose to Dollars 1.76bn, from Dollars 1.72bn. 
ID: 317
HEADLINE: FT  13 MAY 91 / International Company News: Shearson faces losses after Dollars 144m charge for quarter 
TEXT: SHEARSON Lehman Brothers, the investment banking subsidiary of American Express, is to take a Dollars 144m pre-tax charge against second-quarter earnings because of a clampdown last Friday by California's insurance regulators on a troubled life company in which Shearson holds a large stake. Analysts expect the write-down to push Shearson into the red, despite the markets boom which has been boosting Wall Street profits this year. The brokerage made Dollars 51m in the first quarter. The losses will also lower the profits of American Express, which faced severe problems with Shearson in early 1990, when it was forced to inject hundreds of millions of dollars into the business following a Dollars 915m loss. Mr John Garamendi, the recently appointed Californian insurance commissioner, issued a 'cease and desist' order on Friday against First Capital Life Insurance, a San Diego-based company whose parent, First Capital Holdings, is 28 per cent owned by Shearson. The previous week First Capital Life had faced a flood of customers seeking to cash in their policies amid reports the company - which has a large exposure to the junk bond market - faced severe financial problems. The commissioner's move prevents the company from writing new business or making payments to its parent, and places a moratorium on policy surrenders and life insurance policy loans. The commissioner is seeking longer term solutions to the company's problems, which could include asset sales and a capital infusion. Unfounded rumours on Friday that the company had begun selling off its junk bond portfolio contributed to a sharp afternoon decline in bond prices and a sympathetic drop in equity markets, with the Dow Jones Industrial Average losing 50.98 points on the day. Shearson's write-down covers all its investment in First Capital Holding. However, Wall Street analysts say the brokerage house could face further losses if it had to compensate those holders of First Capital policies who brought them through Shearson. Shearson, however, says it believes the insurer has 'the resources to meet at least the principal payments of policyholders' and it is not in a position to make any open-ended commitments to them. The company has also been resisting the commissioner's appeals for it to inject fresh money into First Capital. 
ID: 318
HEADLINE: FT  13 MAY 91 / International Company News: Germans plan Europe rating agency 
TEXT: A GERMAN initiative to develop a new European rating agency is soon to be promoted in other European countries. The aim is to create an entity which will cater for local investors' needs in the single market. Although several small rating agencies already exist in other European countries, the Germans are keen to develop a single Europe-wide institution, or at least to harmonise standards across a federation of agencies. A group of some 20 German companies and institutions, principally inspired by Deutsche Bank, Germany's largest bank, are poised to set up a project company which will put the concept to a wider audience, including the French Italians and Britons. Those ratings ascribed to debt instruments alert investors to grades of risks and to changes in those risks. While the process has been less crucial to the European capital markets than those in America, the two big US agencies, Standard &amp; Poor's and Moody's, have established a significant presence in Europe. Moody's, for instance, claims to rate around 78 per cent of the outstandings in the Euro D-Mark bond market. Promoters of the new agency believe that, while the US agencies provide a highly efficient service for large corporations selling their debt to global investors, they do not have the capacity to analyse medium-sized companies in Europe targeting a more specialised investor interest. The Germans also argue that the American agencies are driven by US accounting principles and focus on short-term performance criteria that are less relevant for Europe. The group points out that the growth of capital market borrowing instruments reduces companies' dependence on bank-financed debt, which in turn increases the importance of ratings. The new agency should allow less well-known companies to reach new investors anywhere in Europe, through the common language of a simple debt classification. Commercial paper, medium-term notes, and multi-currency bonds would all be candidates for ratings, according to working party outlines. German interest in the project has been spurred by the recent development of a D-Mark commercial paper market, permitted since the beginning of the year. It already has outstandings of around DM1bn, issued by only a handful of borrowers. 
ID: 319
HEADLINE: FT  13 MAY 91 / UK Company News: Palma drops dividend on Pounds 2m losses 
TEXT: LOSSES HAVE deepened at Palma Group, the Leicester-based textile company, in the 13 months to January 31. From a deficit of Pounds 246,000 in the year 1989, the group declined to losses of Pounds 2m pre-tax. This came on turnover down at Pounds 29.93m (Pounds 31.98m), though continuing activities contributed Pounds 18.04m (Pounds 17.75m). Mr Peter Bailey, chairman, said that 'in a very tough period, trading conditions were as bad as at any time' in the board's memory. At the outset there was low demand and it had deteriorated further. The result was affected by an exceptional provision of Pounds 240,000 (nil) for reorganisation at Pex, and increased interest of Pounds 1.56m (Pounds 707,000). Losses per share totalled 7.97p (0.83p) and the dividend is passed. The total payout last time was 3.7p. During the 13 months, the Montfort Somercotes subsidiary was closed, and certain of the Clothkits mail order assets and its name were sold to Freemans, the catalogue operation. 
ID: 320
HEADLINE: FT  13 MAY 91 / UK Company News: 'Unique opportunity' for Tootal holders 
TEXT: Coats Viyella, which is bidding Pounds 252m for the Tootal textile group, yesterday urged its target's shareholders to accept a 'unique opportunity' to realise a premium value for their shares and to participate in the benefits of the merger. In a letter to Tootal shareholders, Coats said that it only needed a further 12.7 per cent acceptances by the closing date on Friday for the offer to become unconditional. 
ID: 321
HEADLINE: FT  13 MAY 91 / UK Company News: Racal demerger plans face delay 
TEXT: DETAILED plans for the demerger of Racal Electronics, which Sir Ernest Harrison, the UK electronics group's chairman is due to announce with the interim results in June, may not be fulfilled before next year. With less than a month until the plan is to be presented to shareholders, Racal has still not appointed new non-executive directors who will need to decide what to do with Racal Electronics' Pounds 375m of debt ahead of the proposed flotation of Racal Chubb. Sir Ernest is expected to announce on June 12 the timing of the first stage of the demerger - the hand-out to shareholders of Racal Electronics' 80 per cent share in Racal Telecom, the subsidiary that operates Vodafone, the world's largest cellular radio telephone network. But before the proposed flotation of Chubb, Racal's wholly owned security subsidiary, new non-executive directors will have to scrutinise how much of the debt should be left with the 'rump' of Racal Electronics. Last November, when Sir Ernest announced he would break up Racal after what he said was the market's persistent under-valuation of the group, he promised to appoint independent directors early in the new year. Sir Ernest has said he will lead a management buy-out team once the slimmed-down Racal Electronics had traded for an appropriate time in the market. The amount of debt carried by the slimmed down Racal Electronics would have a bearing both on how easily Sir Ernest could find MBO finance and the financial return for the MBO team, analysts say. Racal Telecom already has a quotation and would not be encumbered by any of its parent's debt. As a result, the first stage of Sir Ernest's plan would not require the scrutiny of new independent directors, analysts say. Racal Electronics and its advisers, NM Rothschild, have been talking to potential new non-executive directors and are expected to announce the new appointments no later than June. 
ID: 322
HEADLINE: FT  13 MAY 91 / UK Company News: Radio Clyde falls 42% 
TEXT: RADIO CLYDE Holdings, the Glasgow-based commercial radio company that recently merged with Radio Forth, was hit by a slump in national advertising in the first half of the year. Pre-tax profit fell by nearly 42 per cent to Pounds 700,000 (Pounds 1.2m) on turnover down 26 per cent to Pounds 3.46m (Pounds 4.68m) in the six months to March 31. National advertising revenue fell by 39 per cent, whereas the local decline was only 5 per cent. At the half-way stage, Clyde had Pounds 3m cash and had earned Pounds 220,000 (Pounds 180,000) in interest. Mr John Bowman, finance director, said the war chest was still intact after the all-share Radio Forth deal. The group's ambitions for growth extended to local radio south of the border as well as to a possible bid for the first national commercial station. It has taken a 40 per cent stake in Buzz FM a new statio in Birmingham, and increased its stake in Satellite Media Services to 28.6 per cent. Earnings per share fell to 7.3p (12.2p). The interim dividend is held at 3.25p, but cost goes up to Pounds 291,000 (Pounds 205,000) because of payments to former holders of Forth shares. 
ID: 323
HEADLINE: FT  13 MAY 91 / UK Company News: CRS hits Pounds 45m and lifts market share 
TEXT: CO-OPERATIVE Retail Services achieved a 14 per cent increase in trading surplus to Pounds 44.9m for the year to January 26, despite depressed conditions in its sector. Mr Harry Moore, chief executive of the UK's largest retail co-operative society, added that CRS had taken market share from competitors as net sales moved ahead by 11 per cent to Pounds 1.29bn (Pounds 1.16bn). In particular, he highlighted the performance of the non-food division where sales had risen by 14 per cent to Pounds 191m and trading surplus by 34 per cent. Home furnishing and electrical goods had especially defied national trends. Mr Moore thought the non-food division, which aimed to sell middle-market products, had benefited during the recession as customers focused on achieving value for money. On the non-food side, CRS claimed it was the UK's fifth largest department store operator with 49 shops, many of which have adopted the Living format, and 11 specialised stores including five Homeworld outlets. However, the society's dominant activity is in food retailing, where it claims at least 3.5 per cent of the UK grocery market with 480 outlets. These include about 100 Leo's out-of-town superstores as well as the more traditional Stop &amp; Shop corner shops. Both have a strong emphasis on price. Purchase of the Cambridge Society last October helped boost sales of the division which rose by 12.5 per cent to Pounds 944m. On a like-for-like basis, they would have increased by nearly 11 per cent. There was a 13.5 per cent rise in trading surplus. The inclusion of Cambridge's borrowings was a factor behind a sharp increase in CRS's net interest payments to Pounds 14.31m (Pounds 10.04m). Operating surplus, struck after payments of interest on CRS's shares and grants and donations, fell to Pounds 19.91m (Pounds 20.04m). The retained surplus was Pounds 22.61m (Pounds 23.35m). A change in CRS's constitution later this month will alter substantially its relationship with the Co-operative Wholesale Society. This follows the abandonment of merger talks last summer. 
ID: 324
HEADLINE: FT  13 MAY 91 / UK Company News: Logitek says yes to Microvitec 
TEXT: LOGITEK, the computer services group, has finally agreed to a revised offer from Microvitec, the computer peripherals maker from which it had been fighting off a hostile takeover bid. Logitek is recommending a new and higher offer by Microvitec of 20 Logitek shares for 21 Microvitec shares, which values the company at approximately Pounds 3.5m. This compares with the one-for-one all share offer which valued Logitek at Pounds 3.3m. Microvitec had already acquired or agreed to acquire 22.5 per cent of Logitek's ordinary capital. The agreement ends Microvitec's one and a half month struggle for Logitek through which it sought to create an enlarged group andturn round its flagging fortunes. 'Unless you're small and innovative and keep coming out with super products, to have any chance of survival in the electronics industry you've got to have size,' says Mr James Bailey, the chairman of Microvitec. 'With the Logitek deal going through, we can expect 1992 to be a super year,' he added. Microvitec was not as fortunate in its bid to raise approximately Pounds 2.56m through a rights issue of 14.4m new ordinary shares to help fund the acquisition. The issue, while fully underwritten, closed with only 6.22 per cent of acceptances. 
ID: 325
HEADLINE: FT  13 MAY 91 / UK Company News: Board changes at Conder 
TEXT: MR CHRISTOPHER Stewart Smith is resigning as chairman of Conder, the Winchester-based construction and property group which last month announced it had fallen deeply into loss in 1990. Mr Michael Pelham, managing director, also plans to resign from the board at the annual meeting next month. Mr Stewart Smith, a former director of P&amp;O who took over as chairman of Conder in 1987, is to remain as a director until a replacement non-executive chairman is appointed. Mr Alan Lovell, finance director, takes over as acting chief executive. The shares closed 3p lower on Friday at 46p. Last month, Conder said it had been driven into a 1990 pre-tax loss of Pounds 19.29m. Losses on curtain walling contracts for two City office developments were at the heart of the fall. That came after a strong performance in 1989 when pre-tax profits soared by 67 per cent to Pounds 10.42m. Heavily geared at the last year-end, Conder has since sharply reduced borrowings with the sale of properties and a forecourt services business. 
ID: 326
HEADLINE: FT  13 MAY 91 / UK Company News: Pounds 70m write-down at Ensign Trust 
TEXT: A SHARP drop in the value of its unlisted investments resulted in a Pounds 69.7m write-down at the interim stage for Ensign Trust, which has recently faced the possibility of being wound down by the Merchant Navy Officers Pension Fund, its largest shareholder. Net asset value per share at March 31 totalled 53.6p, a decline of 57.52p on the 111.12p standing 12 months earlier In addition to the write-down, which was equivalent to 23p per share, a further write-down of Pounds 17.8m has been made in the unlisted investment portfolio, equivalent to 5.9p per share. For the half year to March 31 the trust reported a loss before tax of Pounds 58,000 compared with a profit of Pounds 75,000 previously. The Pounds 44,000 surplus available to shareholders in the previous half-year was reversed in the revenue account to a deficit of Pounds 567,000. Losses per ordinary share amounted to 0.19p (earnings 0.03p) and a same-again interim dividend of 0.3p per share is being paid. However, the board does not expect to recommend payment of a final dividend. Borrowings increased by Pounds 26.23m to Pounds 118.18m (Pounds 91.94m). The group is looking to gradually reduce the unquoted portfolio proportion of its overall assets. Disposals will be made with a view to receiving full value for the investments, and the proceeds will go to reducing the level of its gearing, it said. The group warned that the loss of income from Argosy Asset Management, formerly a wholly-owned subsidiary, would reduce future revenues. Argosy, which was considered unable to continue to operate autonomously after it lost its contract to manage the MNOPF's investment portfolio, was acquired by Ivory &amp; Sime, which took over management of Ensign Trust's investments from Argosy. 
ID: 327
HEADLINE: FT  13 MAY 91 / Pirelli treads a careful path on Continental: The latest twist in the saga 
TEXT: The man from Mercedes-Benz was astounded. A Pirelli manager had just offered a big tyre price reduction, something the German luxury car company had neither asked for nor expected. With stories like this, it is no wonder some analysts say the tyre industry almost seems to have a death wish. Tyre producers have indulged in an orgy of price-slashing. This has depressed their own selling prices even further at a time of crisis in the industry and left the car companies crowing with delight. As tyremakers' profits have been decimated, due both to the motor industry's tough cost-cutting efforts and their own aggressive competition, car producers have enjoyed price cuts of more than 20 per cent in the past year or so. Adding to the tyre manufacturer's woes is the downturn in vehicle sales in some European markets after the steep decline in the US. On new car business, says Mr Philip Wylie, motor analyst with Salomon Brothers in London, 'they're all losing money on each tyre they make'. It is against this background that the latest, almost melodramatic, phase in the tussle between Italy's Pirelli and Continental of Germany has been played out. Having been rebuffed in its first attempt at merger talks, Pirelli has succeeded in getting so-called 'round table' discussions under way. And the man who so vigorously kept Pirelli at bay, Mr Horst Urban, Continental's combative chief executive, has had to go. His departure was announced on Friday. Mr Urban had initially found it easy, helped by Morgan Grenfell, Continental's UK merchant bank adviser, to shoot down Pirelli's suggested merger terms. These would have basically involved Continental paying a high price to take over Pirelli's tyre assets, but then ceding management control to Milan. At this stage, it is anyone's guess what will happen. Clearly, a merger looks far more likely, but it is still by no means a foregone conclusion. Nor is it entirely apparent that an amalgamation would produce significant benefits. Despite the big international takeovers in the tyre industry, such as Japan's Bridgestone buying Firestone, and Michelin of France taking over Uniroyal-Goodrich, the aggressive pricing tactics of the big manufacturers continue. Michelin, which has announced big job cuts, is seen as one of the top price-cutters. 'Competition has been stepped up another pace,' says Mr John Lawson, motor analyst with Nomura Research in London. 'The US market is going from bad to worse, so the timing of the acquisitions everyone has made there look disastrous.' This obviously also includes Continental's own purchase of General Tire, now feeling the brunt of the US automotive slump. Pirelli's argument, which claims support from owners of more than 51 per cent of Continental's shares - including 5 per cent in its own hands - is that the need for a merger is strengthened by the crisis. It has outlined big savings on production, marketing and development, as well as geographical advantages. Continental has admitted savings could be made, but disputes their size. In the end, Mr Urban's uncompromising tone proved too discordant for the supervisory board, which forced him out last week. His backing, even from the labour representatives, dissolved as it apparently became clear that the company, and the industry, was in a worse situation than he had portrayed it -especially in the viciously competitive US market. The feeling grew that discussions with Pirelli should be pursued more constructively. The head of the non-executive supervisory board is Mr Ulrich Weiss, an executive of Deutsche Bank, which also owns Morgan Grenfell. At a supervisory board meeting on the Friday before last he clashed with Mr Urban -embittered sources in Continental talk of provocation. Mr Urban told Mr Weiss after the meeting that he would resign if the board did not support him. It was that issue which the board met to discuss in Hanover on Thursday. Lining up with Mr Weiss was Mr Friedrich Schiefer, finance director and chief executive-designate of the Allianz insurance group. Allianz holds 5 per cent of Continental's stock and is thought to be in the Pirelli camp. They, it is believed, were joined by Mr Gunther Sassmannshausen, former head of the Preussag steel and metals group, Mr Ernst Pieper, chief executive of Preussag, and Mr Klaus Piltz, chairman of the Veba energy group. Faced with such weighty opposition, Mr Urban agreed to go. He is succeeded by 60-year old Mr Wilhelm Winterstein, six years older and generally seen as an interim choice. Mr Winterstein, previously purchasing director, has been in the tyre business for 35 years and is thought more likely to enter into talks with Pirelli in a positive spirit. In Milan, the Italian company has built a wall of silence around its headquarters, saying nothing about where, when, or at what level these talks will take place. The company is avoiding triumphalism - otherwise obvious in the Italian press. But by stressing the need for 'the utmost confidentiality' in the discussions with Continental, it is acknowledging the delicate balance in Germany which has tipped the scales against Mr Urban. Thus, the traditionally taciturn Pirelli is more circumspect than ever for fear of triggering an adverse reaction in Germany which might embarrass its supporters there. The most sensitive issue is control of the combined tyres operation, if a merger comes about. Despite the strong trading links between Italy and Germany, Italian companies are much less conspicuous in the German market than vice versa. Not only does the short-termism often evident in Italy's business sector clash with longer-range German practices, but Italian companies often face severe image problems in Germany. Their relative absence there reflects the tendency to concentrate on southern Europe and the immense difficulties which Italian businessmen often have in finding high-quality German managers. Thus, apart from discussions on valuations and the structure of any merger, control is likely to be the trickiest issue that Pirelli must address. Nevertheless, its mood marks a sharp change from the bitter words of the letter it issued to shareholders last February following the decision by Continental's supervisory board not to pursue talks. Pirelli referred angrily to the inconsistency of the response shown towards its plans by 'the heads of some major German institutions'. Although these were not named, the reference to Mr Weiss was unmistakeable. Pirelli claimed that he initially 'gave his agreement and support' to its tyre merger proposal. Deutsche Bank, in turn, accused Pirelli of acting in a way that was 'misleading and thus likely to produce a false impression'. That atmosphere of tit-for-tat accusations has now evaporated. But when the final chapter of this saga is written, the position of Germany's biggest bank - and the issue of bank-industry links and boardroom representation in Germany in general - will warrant special attention. So will the need for comprehensive, stringent takeover and share disclosure rules. For while the Pirelli-Continental affair will not make bid-sensitive German executives quake in their boots, it has added a fascinating but more uncertain dimension to Germany's mergers and acquisitions scene. 
ID: 328
HEADLINE: FT  13 MAY 91 / Economics Notebook: Election fever haunts UK policies 
TEXT: THESE are difficult days for knowing what is happening in the British economy. But it is as good a time as any for evaluating the policy priorities of Mr Norman Lamont, the chancellor. The UK's usual statistical fog is being compounded by political noise as both leading parties appear determined to stay on election alert. So far, the most obvious symptom of this double malaise has been Mr Lamont's tendency to accentuate the positive side of UK economic developments in his recent public statements. But with pressure rising among Tory backbenchers and in financial markets for another cut in British bank base rates from their current 12 per cent level, there is a risk that the noise will direct economic policy and drive a wedge between the Bank of England and the Treasury. Signs of incipient tension emerged last week. In a lecture at Exeter University, Mr Robin Leigh-Pemberton, the governor of the Bank of England, underlined that the big fall in the retail prices index for April, which is expected to be published on Friday, should not be interpreted as a sign that underlying inflation is falling as sharply. Using veiled 'central bank speak', Mr Leigh Pemberton voiced his own and the Bank's belief that there should be a pause before base rates fall further, following their 2 percentage point drop from 14 per cent in the two months between mid-February and mid-April. Last Friday, the Bank hammered home this message in its money market operations by lending Pounds 965m at the base rate level of 12 per cent for 14 days. Throughout last week, however, financial markets chose to believe that interest rates would fall soon. The domestic money market betted heavily that Friday's big RPI drop would be the occasion for another 0.5 percentage point base rate cut. It was encouraged by the expectation that the annual rate of RPI inflation in April will have fallen to about 6 per cent from 8.2 per cent in March as the impact of last year's poll tax bills drops out of the index. The Nationwide Anglia Building Society last week pre-empted such a move by cutting its mortgage rates by 0.7 per cent. Until recently, the Treasury and Bank appeared equally concerned about underlying inflation. It is probably still the case that Treasury officials would like some delay in the downward movement of interest rates to evaluate the economic effects of the cuts already made. But it is also possible to detect some difference in tone over monetary policy between the Bank and Treasury. The Treasury's reaction to last week's developments was muted. While the Bank was sticking its neck out against an interest rate cut, officials in Whitehall said the Treasury was 'agnostic' over whether conditions would soon be right for a base rate move. All of which brings us back to Mr Lamont. He earned a reputation as an iron chancellor in his early months in Number 11 Downing Street, as he carried out the tough counter-inflationary policy that his predecessor, Mr John Major, summed up with the words: 'If it isn't hurting, it isn't working.' But Mr Lamont sang a different tune when in Washington last month for the spring meetings of the International Monetary Fund and World Bank. Then the talk was of recovery 'round the corner' as he forecast that Britain would reduce its inflation rate to near-European levels 'within a very short period of time'. The chancellor's comments about economic recovery came at a time when Britain's economic statistics are more than usually confusing. His confidence was based almost entirely on the latest quarterly survey of industrial trends from the Confederation of British Industry (CBI). In particular, he picked on the CBI's report of a partial recovery in business optimism as a sign that forward-looking economic indicators were pointing his way. Since then, other surveys by the Institute of Directors and 3i, the investment capital group, have indicated a revival of confidence among businessmen. In addition, the Central Statistical Office's (CSO) longer-leading cyclical indicator has turned sharply upwards since the beginning of the year. It may be indicating a revival in the economy over the next six months. But the good news in all these indicators - including the CSO leading indicator - is limited to measures of expectations and confidence. Last week's newspaper headlines telling of job losses in companies such as Rolls-Royce suggested that the economy is still in recession. This week's indicators of economic activity, covering unemployment and industrial production in April and March respectively, are unlikely to lift the gloom. The City scents that Mr Lamont, in seeing recovery through the statistical fog, has chosen to put as positive a gloss as possible on economic developments for political reasons. His statement that recovery was round the corner came just days before the May 2 local government elections. If anything, the political pressure on the chancellor to enhance the 'feel good' factor in the economy has increased since then. Quite apart from excitement over a possible general election, this Thursday sees another by-election test for the government in Monmouth - which has been a safe Conservative seat. For these reasons, some City analysts have suggested that the base rate cut could come as early as Wednesday, when the Treasury should have its first insight into the April RPI and conveniently ahead of the Monmouth vote. Such a move is far from certain. It would be odd in view the Bank's firm action on the money markets last week, but not unprecedented. It would also have to be judged against the economic data that has still to be released this week. But with election fever running strongly, the chancellor may find it difficult to square his political instincts with his job as custodian of the nation's economic welfare. Over the next few weeks, the electorate, financial markets and international investors should be better able to judge whether Mr Lamont's first priority is defeating inflation - as he has always professed - or whether he is more anxious to secure victory for his party at the polls. 
ID: 329
HEADLINE: FT  13 MAY 91 / Liffe plan for lira futures 
TEXT: THE LONDON International Financial Futures Exchange (Liffe) is developing a futures contract on Italian government bonds. If plans to launch the contract later this year go ahead, it will be the first futures contract denominated in lira. The exchange has completed a feasibility study, according to Mr Michael Jenkins, Liffe's chief executive. 'Our aim is to have some sort of co-operation with the Italian authorities,' he said. The contract would be based on Buoni del Tesoro Poiennali (BTPs), domestic government bonds of a type with maturities between four and 10 years. The Italian government bond market is the third largest in the world, after Japan and the US. However, it ranks much lower in turnover, as much of the market is held by small domestic investors, and high proportions of instruments are short-dated and floating-rate. However, the Italian government has begun to extend the maturity profile of its debt. Since the beginning of March, the government has issued L10,000bn (Pounds 4.6bn) of 10-year BTPs in three tranches. The Italian authorities also last month eased procedures for the reclaiming of withholding tax for foreign investors. It is expected that the tax will eventually be abolished. The Italian bond market has attracted considerable overseas investment this year, partly due to such measures. Total turnover in BTPs is believed to be in the region of L3,000bn daily. About 40 per cent of that business is believed to be conducted in London. 
ID: 330
HEADLINE: FT  13 MAY 91 / Brent Walker to unveil Pounds 1bn write-down 
TEXT: BRENT WALKER, the heavily-borrowed UK leisure group, is expected to disclose a write-down in the value of property and assets from Pounds 1.1bn, net of debt, to about Pounds 100m when it announces its preliminary results for 1990 on Wednesday. The disastrous figures have prompted some of the group's bankers, which are collectively owed Pounds 1.4bn by Brent Walker, to talk privately of ousting Mr George Walker, the chairman and chief executive, who engineered the group's rapid rise in the 1980s. But, according to a source close to the company, neither Mr Walker nor other Brent Walker directors had heard from any bankers and the chairman had 'no intention of stepping down'. Mr Walker and Hill Samuel, the merchant bank, are planning to present proposals for a financial restructuring to bankers, led by Standard Chartered, after the preliminary results are announced. It is understood that Brent Walker will propose to cut debt to almost Pounds 1bn by the year-end with asset sales. This could lead to the sale of the Brighton marina, the Puerto Sherry marina in Spain, a 50 per cent share in London's Trocadero, the retail, leisure and office complex, and hotels and casinos. The refinancing plan is also expected to propose that Brent Walker retains the pub retailing division and William Hill, the profitable betting shop chain it bought for Pounds 685m from Grand Metropolitan in 1989. However, the banks are believed to be anxious about Mr Walker's desire to keep William Hill. The chain is one of Brent Walker's most saleable assets. Last autumn, the Bank of England was widely thought to have urged restraint on Brent Walker's more hawkish bankers, amid an uncertain economic atmosphere. The Bank is being kept informed of negotiations. The banks demanded a financial restructuring as a condition of their agreement last November, which froze capital repayments until the end of this year. Brent Walker's 1990 assets will exclude the Pounds 160m which it says it is owed by Grand Metropolitan as a partial refund on the purchase price of William Hill. Brent Walker demanded the refund because it said the chain's profits were not as high as GrandMet had stated. It withheld payment of a final Pounds 50m instalment on the purchase price until the dispute over the Pounds 160m could be settled by arbitration. In January, the High Court ruled that Brent Walker should pay the Pounds 50m. It has not yet paid. 
ID: 331
HEADLINE: FT  13 MAY 91 / Managers cautious on US equities 
TEXT: BRITISH institutional fund managers remain optimistic about the prospects for UK and Japanese equities, but are becoming noticeably more cautious about US stocks, a Gallup survey revealed yesterday. A monthly poll of institutional investors produced by Gallup for the securities group, Smith New Court, also found that fund managers intend to increase their weighting in UK property and run down their holdings of cash. It is widely believed that the British economy will improve over the next year, with only 4 per cent expecting it to deteriorate further. Base rates are forecast on average to fall to 10.3 per cent in a year's time. Investors are enthusiastic about the outlook for global equities over the next year, with the FT-SE 100 index expected to rise from 2523 at the time of polling last week, to a mean 2747, the Dow Jones Average from 2939 to 3113, and the Nikkei index from 26,478 to 29,064. However, in the short term, investors appear to be taking a more cautious view of the equity markets. Bulls of the UK market over the next three months outnumbered bears by only 3 per cent. A balance of 22 per cent was bearish about the US market and 12 per cent more were bearish about the continental European markets. The May survey covered 92 institutions handling funds totalling Pounds 380bn. 
ID: 332
HEADLINE: FT  13 MAY 91 / Letter: Secession in India 
TEXT: Sir, With reference to Joe Rogaly's article on India ('Passage to India', April 23) and the subsequent letter from Mr Pritam Singh (May 3), while there may well be a good case for decentralisation in India, by giving more powers to the states, this should not be confused with the aims of those demanding secession. Less centralisation could be good for India, but allowing secession of any part of the country should not be encouraged. It would weaken India and damage regional stability. Daljit Sehbai, Reform Club, Pall Mall, London SW1 
ID: 333
HEADLINE: FT  13 MAY 91 / Letter: Bank's role 
TEXT: Sir, As the director of a small company that would not be in business without the help my bank has given me over the years, I think that Mr F X O'Malley (Letters, May 2) is wrong in suggesting that managers should visit their customers. Surely his time and that of his bank manager would be better employed by making sure that he regularly updates his company's cash flow and any other financial projections deemed necessary. From my experience, this should be done at least once a month and the information then forwarded to the bank manager for review. Far from being a subjective approach, this is the best method I know for detecting problems at an early stage. Robin Huttenbach, Nelson Design, Southbank Technopark, 90 London Road, SE1 
ID: 334
HEADLINE: FT  13 MAY 91 / Letter: SQM - privatisation, investment and capital expenditure 
TEXT: Sir, On December 19 1990, the FT published an article which contained several inaccuracies about Sociedad Quimica y Minera de Chile SA (SQM). We would like to correct the most important errors. SQM was privatised in 1988 with many shares being taken up by its employees. SQM is therefore run for the benefit of not only its shareholders but also its employees as employees are shareholders. Your article wrongly suggests that employees were duped out of their shares in Pampa Calichera. The correct position is that the shares of this company were purchased by Sociedad de Inversiones Pampa Grande SA The purchase was made in order to defeat a hostile and risky takeover bid mounted by foreign investor competitors of SQM. The majority of the shares in Oro Blanco, Pampa Grande and Pampa Calichera continue to be owned by employees of SQM and its subsidiaries. Over the past three years, SQM has made a significant investment of more than Dollars 13m in building houses and in improving current housing conditions of its employees in Maria Elena and Pedro de Valdivia. SQM's employees earn on average between Dollars 600 and Dollars 700 a month. The minimum monthly wage in Chile is about Dollars 75. Moreover, free housing, water, electricity and schooling, together with subsidised health service and transportation, are also provided to SQM's employees. Although your article correctly records planned future expenditure of Dollars 238m on plant improvements, it did not mention that since SQM's plants were built in 1930 they have been constantly updated and modernised; in the past three years alone more than Dollars 90m has been spent on plant improvements. On average, SQM's plants are less than 10 years old. SQM is a publicly listed company strictly controlled by the Chilean SEC, with a well-known board of directors and with no political allegiance to previous or current regimes in Chile. Patricio Contesse, general manager and CEO, Sociedad Quimica y Minera de Chile SA, Santiago, Chile 
ID: 335
HEADLINE: FT  13 MAY 91 / Leading Article: Mr Lilley and competition 
TEXT: MR Peter Lilley, the trade and industry secretary, has repeatedly emphasised his commitment to free competition. However, the effectiveness of government policies intended to promote that objective is blunted by a number of anomalies and shortcomings. Mr Lilley should use his promised statement on competition issues, due in the next two months, to set out a more coherent approach. His first priority should be to end the confusion created by his own ill-judged efforts to tighten scrutiny of UK acquisitions by foreign state-controlled bidders. The Monopolies and Mergers Commission has blocked only one of the five such deals referred to it - and then chiefly on grounds of market share. As Sir Gordon Borrie, director-general of the Office of Fair Trading put it last week, the discrepancy between Mr Lilley's stance and the MMC's findings has thrown merger policy into disarray. The legality of Mr Lilley's position is also doubtful. The Rome Treaty explicitly prohibits discrimination between private and publicly-owned companies, and state control is not recognised as a criterion by the European Community's merger policy, which takes precedence over national regulations in controlling large deals. That is not to dismiss Mr Lilley's underlying anxiety that state-owned companies enjoy unfair financial advantages. But the sensible solution is to impose more transparency and discipline on governments' dealings with nationalised industries, as EC competition authorities are seeking to do. New legislation Britain also needs to align itself with EC practice by giving the OFT powers against cartels comparable to those enjoyed by Brussels. At present, it is difficult to curb UK restrictive trade practices unless they involve wider Community interests. A White Paper proposing to correct this anomaly has gathered dust for almost two years. Mr Lilley should commit himself to introducing legislation in the next Parliament. The biggest challenge, however, is to ensure the long-term consistency and impartiality of competition policy. That can be assured only if it is insulated from the unpredictable impact of short-run political influences. As an outspoken critic of government intervention, Mr Lilley should recognise the value of reforms to entrench that principle. Strengthen OFT The first should be to strengthen the role of the OFT, at present mainly an adviser to government. It should be given at least as much autonomy as regulators of privatised utilities, which are formally not part of Whitehall and report directly to Parliament. Like them, the OFT should also have the authority to refer cases to the Monopolies and Mergers Commission. That power should, as a minimum, extend to mergers, where the wide discretion at present enjoyed by the trade and industry secretary is hardly conducive to firm and consistent policy. An independent OFT, immune from the intense political lobbying which often accompanies large mergers, would be far better placed to decide objectively whether they should be referred. Clarity and efficiency would be further served by publishing the principles and precedents employed by the MMC and by requiring its members to serve on a full-time basis. There may also be a case for entrusting the OFT with some surveillance over the regulators of privatised industries. Though the record of the regulators to date is encouraging, their performance should be subject to independent scrutiny. That is particularly true in industries such as telecommunications, where the government retains influence. In some respects, the power of national competition authorities is being eroded by Brussels. That makes it all the more important, however, that they pursue policies consistent with the EC approach and enforce them just as vigorously. If the stiffer competition expected after 1992 is to produce its full benefits, it needs to be promoted within countries as well as between them. This is a point that the Labour party, as well as Mr Lilley, should keep in mind. 
ID: 336
HEADLINE: FT  13 MAY 91 / Leading Article: US versus the World Bank 
TEXT: IF THE US administration wants a greater emphasis by the World Bank on the private sector, it has an odd way of showing it. The main manifestation so far has been its blocking last week of agreement to an increase in capital for the part of the World Bank group created specifically to help the private sector: the International Finance Corporation. The IFC, which enjoyed growth of 20 per cent a year in the late 1980s, claims its expansion has been constrained this year by a lack of capital. The longer the delay, the more it will be hampered from doing its job in future. The price the US wants for its assent to a capital increase is a more explicit focus by the World Bank group on the private sector. Once this price has been paid, the US has said that an increase of Dollars 750m should be considered, instead of the doubling of its Dollars 1.3bn in capital that the IFC is seeking. The most significant suggestion from the US - that the World Bank might lend directly to the private sector - would require a change in the Bank's articles of association and implies a profound shift in Bank strategy. Yet, however frustrating they may find US tactics, many are prepared to concede that, up to a point, the US has a point, The Bank could work more closely with the IFC and should do more to help the private sector. The question is how. A distinction must be made between helping the private sector and lending directly to it. The former does not entail the latter and the latter does not imply the former. It is equally important to remember what direct lending to the private sector would signify. World Bank lending to the private sector with government guarantees would reinforce government meddling in the private sector. But lending to the private sector without a guarantee could threaten its credit rating. More risk Some might argue that the World Bank should bear more risk, but the implications could be grave. Consider the IFC itself. It has been bolstered by its successful equity investments in Third World stock markets and companies, but the performance of its loan portfolio has been weak. The fundamental question is how far direct lending to the private sector would further the World Bank's development aims. One powerful case can be made for such lending. The current policy means that the World Bank can give help to state-owned companies, but not to private companies that do the same job. That constraint on the Bank acts as a disincentive to privatisation and an obstacle to involvement with privatised companies. Important worries Yet there are also important worries. In many developing countries it is small and medium-sized businesses that most need additional capital. Since the Bank is unable to assess the viability of such borrowers directly, it has to rely on intermediaries to do the job. In the past, these intermediaries have often proved ineffective and sometimes corrupt. The value of lending by the World Bank to big private sector companies is more debatable still. If such a company is not creditworthy, the Bank should not lend to it; if it is creditworthy, loans from the Bank may merely keep it out of private capital markets. It is also important to remember that the World Bank has a unique role in funding what will remain public functions in most developing countries: education, for example, or large scale irrigation, or roads. Any change in World Bank policy must not threaten its ability to raise money and lend for such purposes. In short, the Bank should listen to the US; it should improve its understanding of the private sector; and it should consider direct lending to it - but only on a limited basis and, if possible, through expansion of the activities of the IFC. For its part, the US should remember both that helping the private sector does not entail lending directly to it and that development was not brought about by the private sector alone even within the US. Not least, it should heed its own advice about the importance of the private sector and back a substantial capital increase for the IFC. 
ID: 337
HEADLINE: FT  13 MAY 91 / Arts: Peer Gynt - Berlin Festival 
TEXT: While A Doll's House and John Gabriel Borkman play among the magic dozen at the Berlin Theatre Festival (to May 20), the Deutsches Theater's sparkling new Peer Gynt gives Berlin audiences the rare fortune of seeing significant productions of early, middle and late Ibsen all within a fortnight. In this context, what a revelation the poet of Peer Gynt is - lyrical, witty, infinitely various. Morality, introspection, the rumbling, grumbling later playwright, these just peep through in Fredo Solter's interpretation, which offers a surprise Ibsen; tongue in cheek, spring in step, spirit soaring. Solter's is the lightest, brightest Ibsen staging I have seen. Clouds and stars, fjords and floods, cut across a giant gauze sheet which revolves with the seasons - autumnal brown, midsummer blue. Against this ever-unrolling backcloth, mood and timbre change as delicately as in Grieg's Peer Gynt suite; cool pastels for Solveig, burning red for the troll orgies, hard yellow sun and green moon for the exotic wanderings. A cornucopia of images, animals, masks, music, taped voices, suggest the whirlpool of Peer Gynt's mind. Claudia Geisler's Solveig, straw-hatted and flaxen-haired, stands like a Nordic Tess of the d'Urbervilles against the midnight sun. Transvestite trolls, plastic buttocks, tails and fangs attached, tumble out as from a nightclub down the road, and there's a joke about their Berlin accents. Peer mounts a troll girl as she mounts an electric-eyed rhino, tongue spurting flames, and all three whoosh off down a fjord. Man as beast, cooped up with his own conflicting sexual fantasies; Ibsen was writing half a century before Freud and the raw fear of Peer's responses still shocks as something new. Solter pulls together Peer's youthful imaginings and his later life as wealthy capitalist as two sides of the same coin. Peer Gynt was written in the same year (1867) as Das Kapital and Solter plays the speculator's ventures as no less fantastical than the young man's dreams. It's a wild, lavish reading of the play - a cast of 25 treble up over 70 parts - yet one with diminishing returns, as each gimmick must work harder while charming less hypnotically. Solter's vision would fit well into three hours, yet the play runs for five. The Deutsches Theater, Max Reinhardt's home in the 1920s and the National Theatre of the former DDR, has a repertoire of 20 such classical productions and is not a theatre to offer compromises. As Peer, Daniel Morgenroth's triumph is to hold the stage despite the distractions of the zoo. With absolute conviction he grows from gangly youth to autocrat. His voice - energetic staccato bursts modulating up to panic, down to reflection - speaks his continuing restlessness. Facial muscles are never still, knees knock together, hands wrestle with each other nervously. At once funny and vulnerable, he sweet-talks us into accepting the excess of his desires while acknowledging their theatricality. Yet each time Morgenroth pushes beyond the game, and when he comes to peel back the onion layers of his life at last and finds no kernel to himself, we agonise with him in his and our own exhaustion. 
ID: 338
HEADLINE: FT  13 MAY 91 / Arts: Lenny Kravitz - Brixton 
TEXT: Lenny Kravitz, a one man encyclopaedia of pop, wowed them at the Academy on Saturday. This whisp of American black charisma does something so obvious that you wonder where he has been all these years. He recreates the guitar rock of the seventies, but with an up-front commitment drawn from the caring nineties. So he is Hendrix and the Jacksons one minute; and a preacher man ('Thank God for the music, not me') the next. The impact is greatest when he sings as if his life depends upon it, and rips off all those guitar riffs long left undisturbed in the vault. When he talks, in a surprisingly cultivated 'please love me' accent, the honey is laid on a bit thick. He even leads on Bob Marley's mother to show off his 'keep the faith' credentials. It makes for a totally absorbing show. I enjoyed the raunchier songs, like 'More than anything in this world', where he deals with safe pop platitudes about 'lurve', better than the communal chant of 'Let love rule', but personality cannot come in small doses. Kravitz, backed by a red blooded West Coast bands, was a revelation; catch him. 
ID: 339
HEADLINE: FT  13 MAY 91 / Arts: Today's Television 
TEXT: After all the work to bring us pictures of eastern Europe after Marxism, the thought of a personal document from Czech film maker Martin Chlupac is attractive. In Open Space (7.40 BBC2) he explains how the Czechs can now afford to buy only a twentieth of the country's property, and how the new Skoda, being developed with Volkswagen, is too expensive to sell in its own country. Horizon (8.10 BBC2) investigates the fatal virus diseases which have emerged since the 1970s: is there a connection between Marbur disease, Lassa fever, and Aids? Some American scientists are convinced there is a common thread and are trying to find a means of control before the next virus results in an epidemic. The C4 series Watching The Detectives (9.00) goes to New York for a profile of the city's 'toughest and most decorated ex-policeman turned private eye', Bo Dietl. For Panorama (9.30 BBC1) Tom Mangold has spent three years investigating '20 years of obsession and betrayal'. He tells the story of James Jesus Angleton, the CIA's counter-intelligence chief during the cold war. In Film 91 (10.30 BBC1) Barry Norman talks with Dirk Bogarde about his new film 'These Foolish Things'. 
ID: 340
HEADLINE: FT  13 MAY 91 / Management: Food for thought 
TEXT: The most seductive claim made by advocates of customer service - that it promises huge pay-offs in terms of profitability - is also the most elusive to measure. As intuitively appealing as the relationship between service levels and profits may be, the only data a manager has is usually the 'hard' data concerning costs. Decisions about the level of quality to build into a given package - including product, service and value - have been largely based on those figures and, as Harvey Shycon, a consultant with Arthur D Little, notes, 'hunches'*. Shycon defines customer service as part of a total package comprising three elements: the product itself, the service that comes with it, and, inextricably linked with these two, value. The pay-off is defined as the incremental profit received - both from increased market share, sales and revenues as from reduced costs - as a result of better service. He claims that Little has developed a way of measuring both the costs and revenues of different levels of service which allows companies to design a total quality package to optimise return on investment. During the course of its work for a large food products company, which had a US market share of 38 per cent, Little found that the company had a 41 per cent share of a customer's business. This compared with 32 per cent for its nearest competitor, and its higher share appeared to be linked to the greater frequency of deliveries. More frequent deliveries was good for this customer, a large regional food chain; it reduced inventory, labour costs and improved the freshness of the products it sold. For the food products company, it meant a higher cost of service, but improved margins and volume of sales. This translated into an 8 per cent increase in sales volume and an almost 15 per cent improvement in profit. There appears to be proven benefits in the case of this customer, but would the same level of benefits apply nationally? Little set out to determine the value to the customer of specific service elements provided by the manufacturer. 'By comparing those service elements with the service packages provided by major competitors and determining how the customer spilt its purchases among several suppliers, we could determine how the customer valued the total service package in all its aspects and what level of service the customer was willing to pay,' Shycon said. The study suggested that the behaviour of the regional food retailer - that more frequent deliveries would induce it to pay higher prices and increase purchases from the company - was common to all food retailers. Detailed statistical work was done to determine more precisely the value to the customer of each element in the service package. The bottom line? Two additional market share points nationwide boosted revenues by Dollars 15.8m a year, of which Dollars 4.75m was additional profit. *Measuring the pay-off from improved customer service, Prism, Quarter 1 1991. Available, Arthur D Little, Berkeley Square House, Berkeley Square, London W1X 6EY. Tel 071-409 2277. 
ID: 341
HEADLINE: FT  13 MAY 91 / Management: In pursuit of repeat business - Simon Holberton concludes his series on Total Quality Management by stressing the importance of customer service and assesses Rank Xerox's attempts to achieve it 
TEXT: Few phrases have seized the corporate imagination more in recent years than 'customer service'. Honoured, perhaps, more in the breach than the observance, serving customers better has been elevated to the top of many lists of top corporate priorities for the 1990s. Customer service - which is a way of life in Japan and, to a lesser extent, the US - is often confused in Britain with servility. It should not be. Customer service is the hard-headed pursuit of market share by winning the loyalty of customers. Serving customers better, Total Quality Management theorists and practitioners maintain, is the proven path to increased profitability. They cite studies which show that well served customers are more likely to make repeat purchases of goods and services than those who are not. Throughout the 1980s, customer service as a concept has broadened; TQM proponents applied it to the internal operations of an organisation as well. Like many management ideas, this is a self-evident proposition but a powerful one, nevertheless. Loyal, or repeat, customers can have a significant effect on a company's profitability. Studies show that they not only tend to spend more over time, but that they are also more cost-effective. This is because the costs of customer acquisition - marketing and advertising - can be spread over time. There are other benefits. A satisfied customer may tell up to eight others of the good service he has received; a dissatisfied customer may tell up to 15 others. As a study published last year by Bain &amp; Co, a management consultancy, noted, 'just avoiding this negative publicity has value' - although quantifying it precisely is not possible. For the past six years Xerox, the office equipment manufacturer, has been trying to live up to its goal of making customer satisfaction its top business priority. It has found that the pursuit of this goal has led it to reconsider its organisational structure and the way it remunerates its employees. The former is designed to place the whole capabilities of the company - especially the service side of its business - closer to the customer, while the latter aims to reinforce its rhetoric with real financial advantages to employees. In Britain, Rank Xerox's way of getting closer to the customer has been to divide the country into five regions and bring together sales, service and administration. In the words of one recent management presentation to staff: '(The regions) must exercise local, pro-active, situational decision-making in order to be truly responsive to our customers.' It added that, in a business where the office equipment market is fast becoming a commodity market, 'customer service, support and application capabilities are now the key factors that influence customer buying decisions'. Those buying decisions, says Rob Walker, director of quality and management systems for Rank Xerox UK, can be worth a lot of money. Last year, customers discontinued using 5,500 Xerox machines out of about 140,000 installed. If Rank Xerox had retained them all, the impact on its bottom line profit would have been an extra Dollars 8.5m in 1990, and, over three years, an extra Dollars 30m. 'If you then add in the opportunity cost the effect on the bottom line is large,' says Walker. 'Not all of this is, however, controllable and recoverable. But we reckon that 30 per cent of it is. So the financial impact of dissatisfied customers is large.' Rank Xerox spends a lot of time trying to understand its customers, especially the dissatisfied ones. At present the company estimates that 7 per cent of its customer base is dissatisfied, and it is aiming to reduce that level of dissatisfaction to zero by 1993. It attempts to measure the level of customer satisfaction/dissatisfaction through the responses it receives to two surveys conducted for it by an independent market researcher. The first is an annual survey, sent out to more than 130,000 customers. Last year, this survey had a 39 per cent return rate. 'We take the dissatisfied responses and try to determine the root causes for the dissatisfaction,' says Walker. The second is a questionnaire sent out 90 days after a Xerox machine has been purchased. (Before that the purchaser should have been called by a customer care officer, and the salesperson responsible for the account should also have made a call to see that everything is functioning correctly.) A 'vulnerable' report is completed which highlights dissatisfied customers. These are acted upon by people in the regions, who meet, decide an action plan, and agree with the customer what needs to be done to remedy the problem. The nature of the complaints is also analysed to see if there are any generic problems with equipment or service delivery. Walker says the company has set up three cross-functional teams - comprising people from sales, service and administration, management and non-management from all levels throughout the organisation - to look at reliability, the order-to-install life-cycle, and response time. Their job is to improve the process. Surveys, teams and analysis may be a rational way of understanding customer satisfaction/dissatisfaction and alerting management to problem areas, but senior management at Xerox soon discovered, in the words of Vernon Zelmer, managing director of Rank Xerox, that 'it is hard to distinguish customer satisfaction from employee satisfaction. You can't have one without the other.' 'Without happy and satisfied employees, who believe in what they do and who can see the managers 'walk as they talk', then the message will fall on stony ground.' For the past two years, therefore, Rank Xerox has been working on employee satisfaction. This has involved work on role clarification (understanding what the job is); employee involvement (being involved in the job specification); training; reward and recognition; and measurement. One of the more intriguing aspects of this has been the decision to tie a percentage of all Rank Xerox's 4,000 UK employees' pay to the achievement of customer satisfaction targets. The percentage of pay affected by this increases as employees become more senior in the company. Directors have 30 per cent of the value of their package riding on attainment of pre-set goals. 'We look for incremental improvements in customer satisfaction each year,' says Walker. 'Last year we set ourselves a target of growth of 4 percentage points for 1991. Xerox Europe has just told us they want it up by 6 points.' He claims that the company works hard at not allowing managers to make trade-offs between attaining customer satisfaction targets and ones relating to purely functional and financial goals. 'If we deliver customer satisfaction all the other things will follow,' he says. 'This is probably the most difficult time since 1980/81 but we are still making investment in customer satisfaction.' Zelmer is convinced that tying part of his employees' pay to the attainment of service goals is the right way to go and is working. He says there has been a positive correlation with the introduction of the new pay scheme and the company's market share in the UK. Although he believes that customer satisfaction ought to have been Xerox's prime aim from the moment it embarked on its quality drive - some 10 years ago - he is certain that to have tied remuneration to customer satisfaction goals would have been wrong. 'You can't do that until people have some control over what they do,' he says. Management evaluation has also changed. Zelmer subscribes to the view that 'experience shows that 90 per cent of the time it is management that's the problem, not the people.' Xerox, among other companies, has introduced a form of assessment where the managed evaluate the managers. Known as the 'management practice survey', employees are asked to rate their manager. The results are anonymous and the manager sits down with his staff and goes through them. Yet this survey, and others, have shown up the gulf that still exists between the aspirations of people who work at Rank Xerox and the reality of working there. As Walker notes, the four things that employees most value - fairness and respect, reward and recognition, career opportunities, and pay -are the things managers are least successful at delivering. 'We are trying to understand what the employees are saying to us and the role of management in motivating them,' he says. 'We want the role of manager to change from director to teacher and counsellor. But we still have a long way to go; you don't change behaviour overnight. Employees have to see senior managers behave in the appropriate way. It's difficult; it's the next big leap for us.' Though Walker maintains that people are always capable of stepping outside the boundaries of their jobs/responsibil-ities they will do so only if they are given support. 'They won't if you step on them the first time they do it.' And that is a real challenge for management. While senior managers accept, intellectually, the new style and behaviour the company wants them to exhibit, '60 per cent of them got to where they are under the old style,' he says. Previous articles were published on March 20, April 3 and April 12. For reprints call John White on 071-873 3547. 
ID: 342
HEADLINE: FT  13 MAY 91 / Construction Contracts: Kier Group active in the Caribbean 
TEXT: KIER INTERNATIONAL's Caribbean companies are busy with a batch of newly-awarded contracts valued in excess of Pounds 10m. Included is a Pounds 6m plus contract to build an office building in New Kingston, Jamaica, for the Life of Jamaica Insurance Company. Occupying a floor area in excess of 220,000 sq ft, the 10-storey building will feature among the largest office complexes in the city, The building will comprise a 45,000 sq ft basement under a two-storey block. A three-storey tower will be built at one end of the block while a much larger one numbering 10 storeys will feature at the other end. Construction will be of reinforced concrete with beams, slabs and precast double tee sections over an atrium at 10th floor level. Work has just begun with completion scheduled for December 1992. A Pounds 2.2m contract for improvements to Union Island Airport, St Vincent is due to begin shortly. The project, for the Government of St Vincent &amp; The Grenadines, includes land reclamation, construction of a runway and terminal building together with associated roadworks. Completion is scheduled for May 1992. A Pounds 1.5m design &amp; build contract for Consulting Services began recently. The project is to construct additional facilities, including a swimming pool, for the Carinosa Villas complex in Ocho Rios, Jamaica. The architect is Lane Pettigrew and completion is scheduled for July. Also due for completion in July is a Pounds 300,000 office extension in Kingston, Jamaica, for Dunn Cox &amp; Orrett. Work is under way to add a fifth floor to a four-storey office building. 
ID: 343
HEADLINE: FT  13 MAY 91 / Construction Contracts: Manchester prison redevelopment plan 
TEXT: MOWLEM MANAGEMENT has been awarded a further contract by the Directorate of Works, Home Office, at Strangeways Prison, Manchester. Following on from the award of the new entry complex, it has been appointed as management contractors for the Pounds 12m redevelopment of the Croft site to the north of the main prison complex. The work is a further phase of the overall refurbishment scheme for HM Prison, Manchester. The works will include new kitchen facilities, a physical and recreational centre and a new training and industries centre together with major reconstruction works to external areas, including upgrading of perimeter security and the construction of a road bridge across Sherbourne Street connecting the Croft site to the main prison complex and the new entrance facilities. Pre-commencement work on the project has started with construction scheduled to commence in July and completion in December 1992. 
ID: 344
HEADLINE: FT  13 MAY 91 / Construction Contracts: Expansion of Strand law courts 
TEXT: KYLE STEWART has been awarded a Pounds 10m contract by PSA Projects for the redevelopment of the east wing of the Royal Courts of Justice in the Strand, London. Work is scheduled to commence shortly on the contract under the project management of PSA Projects which involves the stripping out of the northern half of the east wing, a Grade I listed building and the reconstruction of existing floors from basement to third floor and roof space, to create 14 courts and ancillary areas. Much of the existing fabric of the building will be retained. The chimneys, outer, main and cross walls will be fully braced following internal demolition. The listed roof trusses and major timbers will be stored prior to eventual reinstatement. The contract is scheduled for completion in May 1994. 
ID: 345
HEADLINE: FT  13 MAY 91 / Construction Contracts: Modernising offices in the City 
TEXT: Two contracts in the City, valued at over Pounds 15m, have been won by WILTSHIER CONSTRUCTION (LONDON). The first, worth Pounds 8.5m, is the internal modernisation of a 23-storey office block with two six-storey podiums in Angel Court, London EC2 for the Morgan Guaranty Trust Co of New York. Awarded by competitive tender, the eight-month contract will be completed in December. The second, for Land Securities, is a six-storey office block in Gough Square, London EC4 where Wiltshier has recently completed an office block development. The building will be clad in high quality brickwork with natural stone features. The Pounds 7m contract is due for completion in 18 months. 
ID: 346
HEADLINE: FT  13 MAY 91 / Construction Contracts: Furnishing superstore in Gateshead 
TEXT: A construction management contract for the Pounds 10m Ikea furnishing superstore to be built in the Metro Centre, Gateshead, has been awarded to BALLAST NEDAM CONSTRUCTION whose northern region will undertake the project. Work on the single-storey 165,000 sg ft building, Ikea's fourth in the UK, is scheduled to begin in May and will be opened early in summer 1992. The site covers 15 acres and occupies one of the last remaining development plots within the Metro Centre alongside the A1. The steel-framed building will incorporate a showroom, a 226-seater restaurant, a marketplace for loose household items, customer warehousing for self-selection of flat-pack items, general warehousing and office facilities. Car parking for 1,100 vehicles will be provided. The site is a reclaimed coal stock-holding and grading yard and a feature of the construction project will be the extensive foundation works. Ballast Nedam anticipates the contract being let in about 16 works packages, the first tenders for which have already been issued. At peak periods some 350 people will be working on site. Ballast Nedam is a member company of British Aerospace. 
ID: 347
HEADLINE: FT  13 MAY 91 / Appointments: Senior executives at Whitbread 
TEXT: Mr Miles Templeman, managing director of the Whitbread Beer Company, and Mr David Thomas, managing director of Whitbread Inns, have been appointed to the main board of WHITBREAD. They will continue in their present posts. Mr Bernard King retires in July, but will continue as a non-executive director until July 1992 primarily to advise on corporate strategy. Mr Martin Findlay, vice chairman, retires in July 1992, but continues as a non-executive director until 1994, remaining responsible for the community investment programme, Business in the Community, and organisation of the Whitbread round the world yacht race. ***** The following have ben elected to the LONDON BULLION MARKET ASSOCIATION's management committee: Mr Robert Guy, chairman; Mr Dick Gazmararian, vice chairman; Mr Alan Baker, Mr Colin Griffith, Mr Martin Stokes, Mr Paul Lennie, and Mr Robert Stein. ***** Mr Fred Perkins has been appointed managing director of FT INFORMATION SERVICES, a new post. He is responsible for the electronic information businesses of the Financial Times. The new role brings together the existing FT operations: Profile, Analysis, Finstat, Business Research Centre, Cityline, and Syndication. Mr Perkins' experience of the on-line business information industry includes Transvik, which provides a fully automated trading system for financial markets; Quotron, part of Citibank; ICL; and IP Sharp Associates, now part of Reuter. 
ID: 348
HEADLINE: FT  13 MAY 91 / Appointments: Board directors at Clyde Petroleum 
TEXT: Dr Ian G. Duncan joins the board of CLYDE PETROLEUM as an executive director on June 1. He is general manager of the company's business in the Netherlands. Also joining the main board is Mr Roy A. Franklin, manager of acquisitions and disposals for BP exploration in London. On August 1 he will join Clyde as general manager, UK operations, and a director of Clyde Expro; he will be appointed a director of Clyde Petroleum on October 1. These appointments are prior to the retirement of Dr AR Matthews, technical director, at the end of the year. On June 1, the following functional general managers will be appointed to the board of Clyde Expro, the group's principal UK and international operating subsidiary: Dr IL Abbotts, international exploration; Mr DG Byers, corporate development; Mr AJ Paxton, finance; and Mr AG Windham, legal and administration. ***** BRITISH NATIONAL FREIGHT ASSOCIATION has appointed Mr Ron Willis, managing director of RW Freight Services, as national chairman. ***** THE MITSUBISHI BANK has appointed Mr Tetsuya Wada and Mr Melville Haggard as deputy general managers in London to succeed Mr Satoshi Sadakata, deputy general manager, who is returning to a senior post in Tokyo. His responsibility for corporate and special finance in London branch will be split into two departments with Mr Wada heading corporate finance and Mr Haggard heading special finance. 
ID: 349
HEADLINE: FT  13 MAY 91 / Appointments: Managing director at Chubb Fire Security 
TEXT: CHUBB FIRE SECURITY, the fire protection specialist, has appointed Mr Richard Marshall as managing director. Mr Marshall, a physicist, has extensive marketing and general management experience in the UK, Europe and North America. Until recently he was international operations manager of the American-based company Varian Associates Inc where he was responsible for the operation of the US and 20 overseas subsidiary companies. ***** Mr Alec Lafone, distribution manager of Glaxo Pharmaceuticals UK, has been elected president of the FREIGHT TRANSPORT ASSOCIATION. Appointed vice chairmen are Mr Angus Clark, distribution director, J. Sainsbury, and Mr Bill Houseman, national transport manager, J. Bibby Agriculture. 
ID: 350
HEADLINE: FT  13 MAY 91 / Construction Contracts: Newspaper production facility 
TEXT: The south west regional office of BOVIS CONSTRUCTION in Bristol has been awarded a Pounds 14.5m management contract by The Western Morning News Co, part of the Northcliffe newspaper group, to build its new 12,675 sq metre headquarters at Derriford, in Plymouth, 4.5 miles north of the city centre. Bovis Construction, a P&amp;O company, will start work in June on the 64-week project which will provide a combined printing plant, editorial and administrative offices. Designed by Nicholas Grimshaw &amp; Partners, the building, which has views of Dartmoor and Plymouth Sound, resembles a grounded glass ship. Clad completely in curved faceted glass walls, the entire printing operation will be visible from the exterior. The 'open' production areas are situated on two levels and will house the operations of both the evening and regional morning newspapers, providing views through the illuminated press hall. As the building is cut into a hillside, pedestrian access will be directly into level two. More than 4,500 sq metres of space will be provided in both open plan and private offices built around a central atrium which will also accommodate a reception area. The company boardroom will be situated in a tower, which resembles a ship's bridge, standing 22 metres above the main building. The main structure of the building is of in situ reinforced concrete with flat slabs to office areas, ribbed slabs to production areas and circular columns extending through all floors to support the steel standard section cambered roof beams. The north and south external elevations will feature faceted glass walls. Cambered roof beams will be supported by fabricated 'tusk' columns. The glass panel system used will comprise fixed cast steel glazing arms and struts which will be secured to the concrete columns. 
ID: 351
HEADLINE: FT  13 MAY 91 / The Week Ahead 
TEXT: PARLIAMENTARY DIARY TODAY Commons: Spring adjournment motion. Motion on Coal Industry (Restructuring Grants) Order. Opposed private business from 7pm. Lords: Agricultural Holdings (Scotland) Bill, report. Northern Ireland (Emergency Provisions) Bill, committee. Crofter Forestry (Scotland) Bill, second reading. Question to Government on future of Rosyth naval base. Select Committees: Environment - subject, EC draft directive on waste landfill. Witnesses: Association of Metropolitan Authorities; Association of County Councils (Room 21, 4pm). Public Accounts - subject, fraud and irregularity. Witnesses: Sir Michael Quinlan, Ministry of Defence, and officials (Room 15, 4.30pm). TUESDAY Commons: Opposition debate on National Health Service followed by Opposition debate on policies to combat world famine, flood and refugees. Lords: Gaming (Bingo) Bill, third reading. Criminal Justice Bill, report. Motion on Education Reform Act 1988 (Application of Section 122) Order. Select Committee: Members' interests - subject, registration and declarations. Witnesses: Conservative MPs; Rev Martin Smyth MP (Room 15, 5pm). WEDNESDAY Commons: Debate on government expenditure plans for 1991-92 to 1993-94. Motion on Education (Grant Maintained Schools) Regulations. Lords: Debate on government support for the arts. Debate on National Health Service. Question to government on disposal of farm and equine animal carcasses. Select Committees: Agriculture - subject, commodity markets (cereals). Witnesses: University of Cambridge Department of Land Economy; University of Newcastle Department of Agricultural Economics (Room 19, 10.45am). Defence - subject, procurement of Upholder class submarines. Witnesses: MoD officials (Room 16, 10.50am). Energy - subject, British Nuclear Fuels report and accounts. Witnesses: BNF officials (Room 8, 11am). Employment - subject, child labour. Witnesses: Low Pay Unit; Scottish Low Pay Unit (Room 17, 11am). Health - subject, maternity services. Witnesses: Dr J Chapple; Dr D Dornai; Prof N Nevin; Dr G Marsh; Miss C Bradley; Mrs C Nightingale and Dr M Hepburn (Room 21, 4.15pm). Public Accounts - subject, advisory services. Witnesses: MAFF; Scottish Office Agricultural and Fisheries Department (Room 16, 4.15pm). Transport - subject, developments in EC aviation policy. Witnesses: Malcolm Rifkind MP, Transport Secretary, and officials (Room 17, 4.15pm). Treasury and Civil Service - subject, international monetary arrangements. Witnesses: Prof Alexander Nove; Prof Michael Kaser; Prof Phil Hanson; Bill Newman (Room 8, 4.30pm). Committee on Opposed Private Bill: Aire and Calder Navigation Bill (Room 5, 10.30am). THURSDAY Commons: Planning and Compensation Bill, remaining stages. Lords: Child Support Bill, third reading. Atomic Weapons Establishments Bill, second reading. Select committees: Environment - subject, EC draft directive on waste landfill. Witnesses: David Trippier MP, Environment and Countryside Minister, and officials (Room 20, 10.30am). Health - subject, public expenditure. Witnesses: Birmingham Action on Child Care; Department of Health (Room 8, 10.30am). Committee on Opposed Private Bill: Aire and Calder Navigation Bill (Room 5, 10.30am). FRIDAY Commons: Private members' motions. Lords: County Courts' Remedies Regulations, 1991, motion for approval. Coal Mining Subsidence Bill, second reading. Medical Qualifications (Amendment) Bill, second reading. UK COMPANIES TODAY COMPANY MEETINGS: Alexandra Workwear, Savoy Hotel, Strand, WC, 12.00 Alexon, Langham Hilton, Portland Place, W, 11.00 Anglo-Park, Societe Generale Merchant Bank, Exchange House, Primrose Street, Broadgate, EC, 10.00 Barr &amp; Wallace Arnold Trust, Queens Hotel, City Square, Leeds, 12.00 Fortnum &amp; Mason, Basil Street Hotel, Basil Street, SW, 10.30 Hambro Countrywide, 41, Tower Hill, EC, 12.00 Home Counties Newspapers, Naval &amp; Military Club, 94, Piccadilly, W, 3.00 IMI, Birmingham Metropole Hotel, NEC, Birmingham, 12.00 ISA Intl., 14, Eldon Place, Manningham, Bradford, 3.00 Merchants Trust, 20, Fenchurch Street, EC, 12.30 Olim Convertible Trust, Pollen House, 10-12, Cork Street, W, 12.30 BOARD MEETINGS: Finals: Govett American Endeavour Interims: Cronite Greenall Whitley Sanderson Electronics TOMORROW COMPANY MEETINGS: Canning (W), Canning House, St. Pauls Square, Birmingham, 12.00 Croda Intl., New Connaught Rooms, Great Queen Street, WC, 11.00 Edinburgh Fund Managers, 4, Melville Crescent, Edinburgh, 12.15 Estates &amp; General, Selfridge Hotel, Orchard Street, W, 12.30 Marley, Riverhead, Sevenoaks, Kent, 12.00 Mersey Docks &amp; Harbour, Atlantic Tower Hotel, Chapel Street, Liverpool, 12.00 Smith &amp; Nephew, Grosvenor House Hotel, Park Lane, W, 11.00 SmithKline Beecham, Barbican Conference Centre, EC, 2.30 BOARD MEETINGS: Finals: Allied-Lyons Drayton English &amp; Intl. Fitzwilton Hartlepools Water Interims: Alexanders Hldgs. Apollo Metals Hanson Leeds McLeod Russel Mining &amp; Allied Supplies Vaux WEDNESDAY MAY 15 COMPANY MEETINGS: Arcolectric, Central Avenue, East Molesey, Surrey, 11.00 EW Fact, 457-463, Caledonian Road, N, 12.00 Goal Petroleum, Browns' Hotel, Albermarle Street, W, 12.00 Great Southern, Ironmongers' Hall, Shaftesbury Place, Barbican, EC, 4.30 Ibstock Johnsen, Hyde Park Hotel, Knightsbridge, SW, 12.00 Legal &amp; General, Temple Court, 11, Queen Victoria Street, EC, 2.30 Simon Engineering, Holiday Inn Crown Plaza Midland Hotel, 16, Peter Street, Manchester, 12.00 Spirax-Sarco, Queens Hotel, Cheltenham, 3.00 Steel Burrill Jones, Baltic Exchange, 14-20, St. Mary Axe, EC, 12.00 Sun Alliance, 1, Bartholomew Lane, EC, 12.00 Swallowfield, Castle Hotel, Taunton, Somerset, 12.00 Ultramar, Savoy Hotel, Strand, W, 11.30 United Friendly Insurance, 42, Southwark Bridge Road, SE, 12.00 BOARD MEETINGS: Finals: Baris French Connection Jermyn Inv. Sainsbury (J) SPRAIT Interims: Avon Rubber Concentric Countryside Props. Diploma Grand Metropolitan Group Dev. Cap. Trust Richards THURSDAY MAY 16 COMPANY MEETINGS: Associated British Ports, Ironmongers' Hall, Barbican, EC, 12.00 Bilston &amp; Battersea Enamels, Singer &amp; Friedlander, Calthorpe Road, Birmingham, 12.00 Bowthorpe, Gatwick Road, Crawley, 3.00 Clarke Nickolls &amp; Coombs, CNC House, 33, High Street, Sunninghill, Ascot, 11.00 Dolphin Packaging, Fleets Lane, Poole, 12.00 Enterprise Oil, Glaziers' Hall, 9, Montague Close, London Bridge, SE, 12.00 Epwin, Savoy Hotel, Strand, W, 12.00 Filofax, 21, Conduit Street, W, 11.00 Guinness, Grosvenor House Hotel, Park Lane, W, 12.00 Harrisons &amp; Crosfield, Baltic Exchange, 14-20, St. Mary Axe, EC, 12.00 Jeyes, Queen Elizabeth II Conference Centre, Broad Sanctuary, SW, 12.00 Jourdan (Thomas), Unity Works, Sutherland Road, Walthamstow, EC, 10.00 Laing (John), Dacorum District Council Pavilion, Marlowes, Hemel Hempstead, 2.15 MB-Caradon, Plaisterers' Hall, 1, London Wall, EC, 12.00 Morrison (Wm.) Supermarkets, Bankfield Hotel, Bradford Way, Bingley, 11.00 Nestor-BNA, The Brewery, Chiswell Street, EC, 12.00 Scholl, Windsor Guildhall, High Street, Windsor, 11.30 Sharpe &amp; Fisher, Pittville Pump Room, Evesham Road, Cheltenham, 12.00 Shell Transport &amp; Trading, New Connaught Rooms, Great Queen Street, WC, 11.30 United Biscuits, Assembly Rooms, George Street, Edinburgh, 12.00 BOARD MEETINGS: Finals: Allied Partnership Appleby &amp; Westward Bank of Ireland F &amp; C Germany Inv. Trust Fine Art Dev. Jackson Hartstone LWT RIT Capital Partners Time Products Warner Howard Yorklyde Interims: Ashley Group BOC Govett Atlantic Inv. Trust Thomson Corp. Tomkinsons FRIDAY MAY 17 COMPANY MEETINGS: AAF Inv., 7, Queen Street, Mayfair, W, 11.00 ASW, New Connaught Rooms, Great Queen Street, WC, 12.00 Britannia Group, 83, Promenade, Cheltenham, 10.00 Clifford Foods, Balcony Restaurant, Grandstand, Ascot, 11.30 Dinkie Heel, Crest Hotel, Filton Road, Hambrook, Bristol, 12.00 Forward Technology, Brewers' Hall, Aldermanbury Square, EC, 12.00 Gibbs &amp; Dandy, Chiltern Crest Hotel, Waller Avenue, Luton, 11.00 Grampian Hldgs., Royal Scottish Automobile Club, 11, Blythswood Square, Glasgow, 12.00 Laird, Browns' Hotel, Dover Street, W, 12.00 Laporte, Butchers' Hall, 87, Bartholomew Close, EC, 12.00 Lec Refrigeration, Shripney Works, Bognor Regis, 11.30 Lopex, Savoy Hotel, Strand, WC, 1.00 Page (Michael), 39-41, Parker Street, WC, 12.00 Pittard Garnar, Sherborne Road, Yeovil, Somerset, 12.00 Sphere Inv. Trust, Great Eastern Hotel, Liverpool Street, EC, 12.00 BOARD MEETINGS: Finals: Capital House Inv. Growth Cullens Personal Assets Trust Ulster TV Value &amp; Income Trust Interims: F &amp; C Eurotrust Northern Indl. Improvement Tst. Company meetings are annual general meetings unless otherwise stated. DIVIDEND &amp; INTEREST PAYMENTS TODAY Atlas Copco A SKr8 Do. B SKr8 Boddington 3.85p British Vita 3.4p Brunswick 11cts. Candover Invs. 5.5p Capita 3p Gent (SR) 1.25p Halifax Bldg. Society Fltg. Rate Ln. Nts. 1994 Pounds 169.53 Jacob (W&amp; R) IrPounds 0.07 Magnetic Materials 0.9p Nat. &amp; Provincial Bldg. Society Fltg. Rate Nts. 1999 Pounds 339.69 Nichols (JN)(Vimto) 6.7p Oliver Group 4.75p Robinson (Thomas) 2.5p Royal Bank of Scotland Fltg. Rate Nts. 2005 Pounds 169.07 Rutland Trust 0.53p Scholes 1.6p Treasury 3% 1991 1.5pc. Wessanen (Koninklijke) 1.8p TOMORROW ASEA Ser. A SKr13 Dop. Ser. B SKr13 Akzo (Reg) FL5 Do. (Br) FL5 Do. Br Certs FL5 Compagnie Bancaire FFr10 Evans Halshaw 7.65p Fujitsu 7% Bds. 1998 3.5pc. GR (Hldgs.) 0.4p Life Sciences 1.9p Linread 3.7p Merivale Moore 2.75p Nat West Bank 11.375p RBC Far East &amp; Pacific Fd. Ptg. Rd. Pf. 74cts. Worcester 2.68p Young Group2.6p WEDNESDAY MAY 15 Abbott Labs 25cts. Argos 4p Barclays Bank 16% Un. Cap. Ln. 2002/07 8pc. Do. 8 1/4 % Un. Cap. Ln. 1986/93 4 1/8 pc. Birmingham District Council 11 1/2 % Rd. 2012 5 3/4 pc. Britannia Bldg. Society Fltg. Rate Nts. 1995 Pounds 324.00 Buckingham Int. 1.6p Burndene Invs. 15% Un. Ln. 2007/12 7 1/2 pc. Cambridge Elect. 7.6p Chase Manhattan 30cts. Do. Fltg. Rate Sub. Nts. 2000 Dollars 165.33 Colgate-Palmolive 53cts. Conversion 10% 1996 5pc. Do. 10% 1996 A Pounds 3.0411 Do. 9 3/4 % 2006 4 7/8 pc. Edinburgh Fd. Mngrs. 7.5p Exchequer 13 1/4 % Ln. 1996 6 5/8 pc. F &amp; C Smaller Co's 6% Cm. Pf. 2.1p First Chicago Fltg. Rate Sub. Cap. Nts. Feb. 1997 Dollars 168.42 Forth Ports Authority 3 3/4 % Funded Debt 1 7/8 pc. Gates Rubber 4 1/4 % Rd. Db. 2 1/8 pc. Glasgow Corp. 3 1/2 % Irrd. 1 3/4 pc. Do. Gas 6 3/4 % Ann (Perp) 3 3/8 pc. Do. Gas 9% Ann (Perp) 4 1/2 pc. Do. Waterworks Funded Debt 4% 2pc. Hambros Inv. Tst. 5% Cm. Pf. 1.75p Hewitt (J) 1.5p Inter-American Dev. Bank 9 3/4 % Ln. 2015 4 7/8 pc. Kleinwort Benson 10.7p Local Authority 9 3/8 % Bds. 15/5/91 4.5334pc. Marsh &amp; McLennan 65cts. Midland Bank Sub. Fltg. Rate Nts. 2001 Pounds 162.00 Nat West Finance Junior Gtd. Fltg. Rate Nts. Dollars 210.54 North Midland Construction 0.75p Nova Corp. of Alberta 13cts. Ottoman Bank Pounds 11.00 Pacificorp 36cts. Scottish American Inv. 4% Irrd. Db. 2pc. Scottish Eastern Inv. Tst. 4% Perp. Db. 2pc. Do. 4% Db. (Rd.) 2pc. Scottish Mortgage &amp; Tst. 4 1/2 % Irrd. Db. 2 1/4 pc. Second Alliance Tst. 4 1/2 % Db. (1956) 2 1/4 pc. Securities Tst. of Scotland 7% Db. 1988/93 3 1/2 pc. Standard Life Assurance 5% Perp 2 1/2 pc. TSB Gilt Fd. Ptg. Rd. Pf. (Class A Ptg. Rd. Pf.) 2.675p Treasury 12 3/4 % Ln. 1995 6 3/8 pc. USLIFE 41cts. Wells Fargo Fltg. Rate Sb. Cap. Nts. 1998 Dollars 166.88 THURSDAY MAY 16 Bank of Scotland Und. Fltg. Rate Prim. Cap. Nts. Dollars 411.65 Bilston &amp; Battersea Enamels 1.25p Britannic Assurance 17.3p Inv. Tst. of Guernsey 1.32p Lambert Howarth 7.65p Morgan Guaranty Tst. of New York Fltg. Rate Dep. Nts. 1991 Y535,458 Scimitar Worldwide Selection Ptg. Rd. Pf. (USDollars Shares) 32cts. Do. (Sterling) 51p Do. (ECU) ECU0.32 Do. (Worldwide Inc. Fd.) 50cts. Do. (Worldwide Bd.) 32cts. TI 13p Thorpe (FW) 0.7p Treasury 2% IL 1994 Pounds 1.2565 FRIDAY MAY 17 AAF Inv. 6p Arcolectric 0.58p Do. A N/Vtg. 0.58p BNB Resources 3.1p Baynes (Charles) 0.8p Clifford Foods 7p Do. A N/Vtg. 7p Commercial Union 14p EBC 4.5p Electricite de France 11 3/4 per cent Gtd. Ser. Ln. 2009/12 (Reg) 5 7/8 per cent. Essex Furniture 1p Flash Sec. Fltg. Rate Nts. (3 mnths) 1993 Dollars 1625.96 Goal Petroleum 1.1p Home Counties News. 5.5p MB-Caradon 5.75p Manders 5p Mersey Docks &amp; Harbour 3.3p Morrison (Wm.) 1.2p RG (1991) 0.75p Rugby 3.6p Sime Darby Berhad 3.5SEN Stag Furniture 3.5p Standard Chartered 7.5p Treasury 9% Ln. 1994 4 1/2 pc. United Friendly Insurance B (Rest. Vtg.) 6.75p SATURDAY MAY 18 Grampian Hldgs. 3.5p Lec Refrigeration 10.5p Treasury 10% 2004 5pc. SUNDAY MAY 19 Exchequer 9% 2002 4 1/2 pc. Treasury 10 1/2 % 1999 5 1/4 pc. 
ID: 352
HEADLINE: FT  13 MAY 91 / UK News (Employment): Rowntree Mackintosh offers 37-hour week 
TEXT: one of the most significant concessions on shorter hours outside the engineering and water industries. The offer provides a fillip for the campaign by UK unions to reduce working hours. The success of engineering unions in winning 37-hour deals in plants throughout the country has so far failed to spread significantly to other industries. Rowntree's offer, presaged at the start of the year when the company invited union leaders for talks on hours, was made last week during pay negotiations. The company proposed a 9 per cent pay deal and said it was prepared to reduce the 39-hour week by an hour in November and another hour in May 1993, subject to discussions at the company's plants. Deals would have to be made at factories on how the hours reductions should be arranged and on ways to limit the costs of the reductions, the company said. Union leaders said they would be balloting immediately on the 9 per cent offer, which they expected would be accepted. They believe there could be opposition to the hours proposal, however, because of the conditions attached. These include a shortening of tea breaks, one of the issues which caused controversy in negotiations in the engineering industry. Engineering unions claim that more than 500,000 of their members are covered by agreements for reductions in the previous norm of 39-hour weeks. Some water companies have also conceded hours. Elsewhere unions are attaching shorter hours claims to almost every pay submission, but with limited success. British Rail and British Gas have both offered reduced hours, but on terms that have so far proved unacceptable to the unions. Rowntree's proposed deal appears more likely to be acceptable, even if hard bargaining may be needed before implementation. The company, part of Nestle, the Swiss foods group, employes 5,000 process workers, although the offer does not cover those who work in Glasgow. 
ID: 353
HEADLINE: FT  13 MAY 91 / Postal order charges rise 
TEXT: POSTAL order charges increase today for the first time in 12 months. Charges on orders up to and including Pounds 1 remain at 25p. Charges for orders valued from Pounds 2 to Pounds 10 rise 5p to 49p and the charge for Pounds 20 orders rises 7p to 75p. The Post Office said the new prices were to ensure that the postal order service remained viable. 
ID: 354
HEADLINE: FT  13 MAY 91 / Fallout from 'WA Inc' damages Labor: An inquiry in Perth has heard allegations of a web of deals 
TEXT: A JOKE is going round Australia's eastern states about a frog who asks a Western Australian girl for a kiss, claiming it will restore him to human shape and bring back his fortune. The girl is about to oblige, but her sister grabs the frog, puts it in a jar, and closes the lid. 'Why did you do that?' asks the girl. 'Don't be silly,' says the sister, 'everyone knows a talking frog is worth more than a Perth entrepreneur'. The story illustrates the disdain with which Western Australia (WA) is viewed among the eastern establishment following the collapse of high-profile entrepreneurs like Mr Alan Bond and Mr Laurie Connell. But if early indications from an inquiry now sitting in Perth are substantiated, it may turn out that self-respect is the least of WA's losses from a period when critics claim the state abandoned many of the standards which are essential for efficient government. The fallout will almost certainly lead to the ejection of the state Labor government after a decade in power, and will damage the re-election prospects of Mr Bob Hawke's federal Labor government, which will suffer by association. For much of the 1980s, Perth was the get-rich-quick capital of Australia, an easy-money town where entrepreneurs like Mr Bond and Mr Robert Holmes a Court built business empires which shook boardrooms on three continents. But as the entrepreneurs succumbed to their mountainous debts, details emerged of what is alleged to be a web of deals between government and local businessmen, known collectively as 'WA Inc', which the Liberal opposition claims has cost taxpayers more than ADollars 1bn (Pounds 833m). 'WA Inc' is being investigated by a Royal Commission, due to report in January, which has already heard evidence of alleged undeclared donations to Labor funds, illicit bank accounts used to finance propaganda, and envelopes stuffed with money kept in ministers' offices. One witness said dealing with Labor was like dealing with the Mafia. Later, the inquiry will investigate deals involving government share dealings, financial guarantees, and investments in companies and projects associated with well-known entrepreneurs. There are also allegations of illegal wire-tapping, improper land and property dealings, and less than enthusiastic investigation of complaints by the state police. Two deals carried out by Liberal governments in the early 1980s will also be investigated. The key figure in the inquiry is Mr Brian Burke, WA's Labor premier from 1983 to 1988, when he became Australian ambassador to Ireland and the Vatican - a post from which he resigned last month after beginning his evidence to the commission. Mr Burke denies any impropriety, and maintains that the commission will clear his name. However, it is clear that his government had a close relationship with local businessmen. Under Mr Burke's leadership, the state took an active role in promoting projects through direct investment or share dealing by government-owned institutions. Among the most costly were a ADollars 150m investment in Rothwells, Mr Connell's failed merchant bank, and losses of more than ADollars 300m on a series of deals relating to a proposed petrochemical complex which was never built. Mr Burke, a charismatic former television journalist, was easily able to overcome opposition within his own party - as the first Labor premier for a decade he was seen as a messiah who had led the party out of the wilderness. But evidence is growing that the implementation of government policies owed as much to the Australian phenomenon of 'mateship', or cronyism, as to political dynamism. Witnesses who have yet to give evidence before the inquiry allege several public service heads of department were removed or shifted to non-jobs to make way for 'mates' of Mr Burke who were politically sympathetic. 'It was not enough to be neutral; it was not enough to be an able public servant. They wanted people who were on their side,' one displaced official claimed. Mr Barry MacKinnon, the state Liberal leader, says many of the appointees were 'compliant but not qualified', and blames much of the subsequent disaster on their inability to manage or give dispassionate advice. Others, like Mr Lyndon Rowe, director of the WA Confederation of Industry, say the 'mateship' syndrome is an inevitable consequence of life in a small town of around 1m people, even if it is the capital of a state the size of western Europe. But it is a phenomenon from which Labor appears unwilling to distance itself. Dr Ian Alexander, a state MP who left Labor partly because of 'WA Inc', says his efforts to persuade the party to condemn the Burke government's activities were repeatedly rebuffed. 'It is not the done thing to dump on your mates. That is part of the Australian tradition, and that is fine, but when people have been found to have acted in this way, somebody at the top needs to make clear that they cannot do so with impunity,' he says. Dr Carmen Lawrence, the premier, refuses to condemn the Burke government, in spite of the judgment of most political analysts that only that step can save her government from a huge defeat at the polls. Dr Lawrence concedes that the steady drip of disclosures from the commission is damaging Labor, but says it is 'important to be loyal to the tenets of the party'. Her strategy seems to be to hang on to office in the hope that the commission will also damage the Liberal opposition, or that the voters' mood will have changed by polling day in two years' time. The danger is that whichever party wins the next election, the legitimacy of government in WA may have been damaged so deeply that it will take years to recover. As Mr Rowe puts it: 'The real cost of this whole exercise is not the money that has been lost, it is the added cynicism in the electorate about the political process, which in Australia does not have a high reputation at the best of times'. 
ID: 355
HEADLINE: FT  13 MAY 91 / Brazilian privatisation chief retracts resignation 
TEXT: THE head of Brazil's privatisation programme has been persuaded by President Fernando Collor de Mello to withdraw his resignation to prevent further delays to already much-postponed state sell-offs. Mr Eduardo Modiano, president of the National Development Bank and the Privatisation Commission, had presented his resignation on Thursday along with some 50 government officials, following the departure of the economy minister, Ms Zelia Cardoso de Mello. However, after meeting Mr Collor on Saturday, Mr Modiano agreed to stay, explaining later: 'The privatisation programme would suffer a loss of continuity with a change of command at this moment.' He added that Ms Cardoso had encouraged all those of her team 'whose programmes had not yet borne fruit' to stay. Mr Modiano and Mr Joao Santana, the new infrastructure minister, are the only members of the original economic team to stay on. The privatisation programme, initially scheduled to start last June, is now expected to be given a boost. Mr Marcilio Moreira, the new economy minister, has cited it as one of his priorities and according to Mr Modiano the prospectus for the first sale, that of the steel company Usiminas, will be agreed on this week. 
ID: 356
HEADLINE: FT  13 MAY 91 / Centrist party favourite in Nepalese poll 
TEXT: NEPALESE voters went to the polls yesterday in this nation's first multi-party elections in 32 years, the outcome of which will determine the future of democracy in the tiny Himalayan Hindu kingdom. The Nepali Congress party, a centrist group backed by India, was the favourite going into the polls. But many observers believe no single party will muster an absolute majority. This would force the Congress party leaders to join the smaller parties, the Communists or the National Democratic parties, representing royalist interests, in a coalition government. There was a 60 per cent turnout at the polls, according to the Nepal Election Commission. Voters chose 205 MPs from among 1,345 candidates, representing 20 political parties, including 219 independent candidates. Twenty-five people were injured in election-related violence, the commission said. Police and soldiers were deployed throughout the country and the army reportedly fired shots over the crowd at two centres. Two ballot boxes were stolen in the Pyuthan district in mid-western Nepal, the sole constituency where the election is to be re-held. The Congress party and the Communist (United Marxist-Leninist) party were both seeking seats in the election. The two had joined forces just over a year ago in a popular revolt against Nepal's monarch, King Birendra Bir Bikram Shah Dev. That uprising resulted in a new constitution and the promise of a multi-party political system. Since then the Congress party and the Communists have ruled Nepal jointly through an interim cabinet led by prime minister Krishna Prasad Bhattarai of the Congress party. Preliminary results were to be announced by this morning. 
ID: 357
HEADLINE: FT  13 MAY 91 / Italy's discount rate cut after budget agreed 
TEXT: ITALY yesterday cut its discount rate by one point to 11.5 per cent. This followed agreement by the cabinet on Saturday to a budget package worth L14,200bn (Pounds 6.5bn) to bring the deficit back into line with this year's L132,000bn target. The moves marked the end of a tense week for Mr Giulio Andreotti's new government, in which it appeared to be in danger of a renewed crisis and possibly early elections. Saturday's mini-budget, which represents a compromise between calls for tough spending curbs and demands to protect public expenditure, has put off that risk, at least for the time being. The new measures will partly satisfy the treasury minister, Mr Guido Carli, who reportedly threatened to resign if his spending cuts were not accepted. Mr Carli has also won agreement on preparing for the part-privatisation of various state enterprises. The cabinet agreed small rises in employee pension contributions, and tensions between the coalition parties could return in days given the decision to prepare a draft pensions reform law by June 15. Both trade unions and the Democratic Party of the Left (the former Communists) criticised the increases in pension contribution. The Socialists, who had argued that changes to the pension system were not part of the policy package agreed by the coalition parties last month, will have been pleased with the discount rate cut. Some L7,100bn is to be saved this year by reducing turnover among public-sector employees and spending freezes. Meanwhile, a similar amount will be raised by additional indirect taxes and levies, including charges on portable telephones and credit cards. Italy's leading businessmen have criticised the budgetary measures as being insufficient and weighted too heavily towards revenue raising rather than spending cuts. However, the discount rate cut, which will help reduce inflation and lower the government's borrowing costs, has met with approval. 
ID: 358
HEADLINE: FT  13 MAY 91 / Ministers unworried by idea of two-speed Emu: EC representatives start to look at the realities of economic and monetary union 
TEXT: 'The prospect of a two-speed monetary union was raised - and no one was shocked,' said Luxembourg's finance minister, Mr Jean-Claude Juncker, after he finished chairing an informal meeting on Saturday of EC finance ministers. This indeed was the weekend - at the probable half-way point in the EC's negotiations on economic and monetary union (Emu) - that realities of various kinds set in: The reality that there has been far more talk than action in getting the Twelve's economies to converge on sound budgetary principles. The reality that, even with crash adjustment programmes in weaker EC economies, the Twelve will not be able by the late 1990s to move in perfect unison to a single currency. The reality that there is little practical difference in granting a grace period to a country (Britain) which is for the moment politically unwilling to join Emu and granting one to countries which are economically unable to do so for a while. The reality that Germany has monetary might, and perhaps right, on its side in arguing against setting up a fully-fledged European Central Bank until it has a real job (running a single currency) to do. Mr Jacques Delors said Saturday's meeting was 'the best discussion we have ever had on convergence'. He was referring to the general endorsement that ministers gave to the idea that the Community should soon start designing specific 'adjustment' plans for countries with chronic spending deficits and/or double digit inflation. The EC's monetary committee has suggested three candidates - Italy, Greece and Portugal - for adjustment programmes. Mr Delors played down this innovation, noting that Greece had already submitted itself to EC scrutiny in return for an EC balance of payments loan, while Portugal and Ireland had called on Brussels for technical help in setting budget policy. But introducing specific EC surveillance, well before the planned 1994 start of the formal Emu transition phase, and extending it to all Twelve (as France and Spain suggested), is sure to stir controversy. Mr Norman Lamont, the UK chancellor of the exchequer, said that, even after 1994, the necessary deficit-pruning and anti-inflation measures should be left to individual governments. As a form of monetary convergence, Mr Anders Rasmussen, the Danish finance minister, suggested that from 1994 on, the fluctuations in the narrow EMS band should be reduced from 2.25 to 1.5 per cent, and that in 1996 the wider 6 per cent band (within which sterling and the peseta currently gyrate) should disappear altogether. But for all such adjustment programmes, ministers generally recognised that a two- or multi-speed move to Emu was inevitable, a forecast that many of them and Mr Delors himself had earlier decried when it came from the lips of Mr Karl Otto Pohl, the Bundesbank president. It was important to 'de-mystify' a two-speed Emu, Mr Delors said. The likelihood, he said, was that a majority of countries would assume the Ecu as their single currency in the late 1990s, and that those countries staying outside the Emu for a time would have their currencies linked to the Ecu, by something similar to today's European Monetary System. After Saturday's meeting, the Commission president refused to elaborate on his idea, hinting indeed that he might have been precipitate in raising it so long before the expected wrap-up of Emu negotiations in the autumn. Signalling clearly the likelihood that the UK would sign the Emu treaty could still cause the Major government problems with diehard anti-EC Tories in the run-up to the UK general election that could also come this autumn. Mr Pierre Beregovoy, the French finance minister, echoed Mr Delors, saying: 'The treaty must be written so that it does not pre-empt a UK decision, while at the same time allowing the Emu process to go ahead.' Mr Philippe Maystadt, finance minister of Belgium, which like France wants fast movement to Emu, described as the Delors idea as interesting. But Mr Carlos Solchaga, the Spanish finance minister, said he thought 'it could create more problems that it would solve'. He appeared to worry that if the UK got its let-out clause, it would leave Spain more isolated in the negotiations. For economic reasons, Spain wants a relatively lengthy transition to Emu, but for political reasons does not want to be lumped with the likes of Greece in getting a special grace period. On the vexed issue of when the European Central Bank (ECB) should be set up, Mr Beregovoy sought to smooth over differences with Germany, with his officials talking only of an institution 'pre-figuring' the ECB being set up in 1994. Mr Theo Waigel, the German finance minister, remained as firm as ever in insisting that the ECB should only be established on the eve of a single currency, and that calling any lesser institution the ECB would be dangerously misleading. 'Wrong labels can lead to wrong behaviour,' Mr Waigel said. 
ID: 359
HEADLINE: FT  13 MAY 91 / Kohl sees party fall behind in opinion poll 
TEXT: GERMAN Chancellor Helmut Kohl received a further blow to his political prestige at the weekend when the unfavourable result of an opinion poll prompted opposition calls for an early election. The poll by the Emnid institute, published in Der Spiegel, the weekly news magazine, indicated that if a general election had been held on Sunday, the ruling Christian Democrats (CDU) would have received only 38 per cent of the votes, 6 points less than in December's first all-German vote. The opposition Social Democrats (SPD) improved sharply from 34 per cent to 40 per cent. Mr Hans-Jochen Vogel, the SPD's chairman, said Mr Kohl should call a new election to end internal government squabbling and deal with the problems in east Germany. Germany's current account fell further into deficit in March, mainly through payments to finance the Gulf war. The DM5.3bn (Pounds 1.8bn) deficit was the largest ever for one month. It compared with one of DM1.5bn in February this year and a surplus of DM10.4bn in March, 1990. The surplus totalled DM2.8bn, against DM2.6bn in February and DM13.8bn in March last year. Exports were down by 13 per cent and imports 5.4 per cent higher. 
ID: 360
HEADLINE: FT  13 MAY 91 / Hopes of EC unity on minimum for VAT 
TEXT: THE Luxembourg presidency of the EC is to try next month for an agreement by 11 Community states on a minimum standard rate of value added tax, leaving the UK alone in its opposition to any EC regulation of fiscal rates. A discussion in Luxembourg on Saturday by EC finance ministers on how to bring indirect tax rates closer together, in advance of the planned removal of tax checks at internal EC borders in 1993, revealed a three-way split. Luxembourg had only Spain's backing for its proposal of a 14 per cent minimum standard VAT rate, while nine governments indicated their desire for a 16 per cent minimum. Mr Norman Lamont, chancellor of the exchequer, said Britain believed indirect tax rates should be market-driven, and it would oppose any EC tax proposals, all of which require unanimity to pass. Mr Jean-Claude Juncker of Luxembourg said his country, with its traditionally low indirect tax rates, had some sympathy with the UK argument, but wanted to use the last month of its presidency to get some agreement on the issue. Approximation is already, in fact, happening with low-rate countries such as Luxembourg and Germany raising their VAT rates, and higher-rate countries like France, Belgium and Ireland lowering theirs. But this process is not going fast enough for others to contemplate abolishing all cross-border tax checks in less than two years without fear of trade distortions. Other proposals to be tackled by finance ministers on June 3 include reduced VAT rates for necessities, and minimum excise rates on petrol, tobacco and alcohol. 
ID: 361
HEADLINE: FT  13 MAY 91 / East German wage rises criticised 
TEXT: DISRUPTIVE migration of east Germans into west Germany is likely to be spurred rather than lessened by high wage rises east of the Elbe, according to a study conducted by US economists. The report, from the University of California at Berkeley, is critical of the sharp rise in wages in east Germany since unification got under way last year. By accentuating the cost squeeze on already uncompetitive east German companies, the rise of 42 per cent in nominal wages in the first 10 months of last year has contributed to mass unemployment and short-time working. After extensive analysis and field work in east Germany, the study calls the economic collapse there 'one of the worst and sharpest depressions in European history'. Opinion surveys carried out for the team in east Germany challenge the conventional German wisdom on the reasons for east-west migration. Both the government and trade unions maintain that wage differentials between east and west need to be reduced to ease the danger of a further influx westwards of east Germans. Nominal east German wages are only about 50 per cent of west German levels. A number of recent pay deals envisage equalising pay rates by 1994. 'We found that few workers will migrate for higher western wages. Most prefer to work in the east in spite of the wage differential, and are prepared to wait there for new jobs to appear if they become unemployed,' says the report, which will appear in the spring issue of Brookings Papers on Economic Activity. It concludes: 'Higher wages (in east Germany) will cause more migration by increasing unemployment than they will deter by closing the wage gap.' The report recommends that the Bonn government pay a wage subsidy or 'employment bonuses' to all private sector companies hiring in the east. Last year's wage rises were in contrast to a 50 per cent reduction in industrial output and in the prices of manufactured goods in east Germany after the introduction of the D-Mark on July 1 1990. The report says the suggested wage subsidy could be as high as 75 per cent of a worker's wage. The scheme would more or less pay for itself as it would foster economic activity by increasing profitability and investments. Expenditure on the subsidy would be offset by additional state income from tax and social security contributions, reductions in unemployment benefit payments, and by enhancing the value of privatised companies. Although criticism of high wage levels has also been made by German economists and, increasingly, the government, the US economists are the first to offer a detailed solution to the problem. They say their proposed wage subsidy would make a crucial difference to the survival prospects of most east German companies. After currency union last year, they estimate, only 8 per cent of the east German labour force worked in companies which earned sufficient revenue to cover short-term costs. The fundamental problem hindering privatisation of east German companies is that most of them have negative value, since their costs exceed revenue in the absence of great productivity improvements. Report available from Dr Janet Yellen, Walter A. Haas School of Business, University of California at Berkeley, 350 Barrows Hall, Berkeley CA 94720, US. 
ID: 362
HEADLINE: FT  13 MAY 91 / Joan of Arc festival day protests 
TEXT: A French Royalist party member is arrested yesterday as he tries to lay a wreath on Joan of Arc's statue in Paris. Marchers defied a ban to observe the saint's festival day 
ID: 363
HEADLINE: FT  13 MAY 91 / World News in Brief: Fans cheer Arsenal team 
TEXT: Up to 200,000 fans cheered the Arsenal football team when it brought the League Championship Trophy through the streets of north London in a victory parade. The team has entered the history books as the greatest champions this century after suffering just one defeat all season. 
ID: 364
HEADLINE: FT  13 MAY 91 / World News in Brief: Rail fares rise 
TEXT: Passengers faced increased fares on a number of mainline rail routes and the London Underground. Off-peak tickets for Network SouthEast travellers went up and among main routes affected was the Pennine link between Liverpool, Manchester and north-east England. 
ID: 365
HEADLINE: FT  13 MAY 91 / World News in Brief: Steps taken to transform Soviet forces 
TEXT: The Soviet parliament approved an experiment for 'contract', or volunteer sailors, in a move seen as the first tentative step to transforming the vast Soviet armed services from a conscript to a professional force. The Supreme Soviet also approved a cut in naval service from three to two years, bringing it into line with the army. 'A professional army is born,' said Supreme Soviet speaker Anatoly Lukyanov. US team to advise on Soviet food distribution, Page 2 Meanwhile, Armenian Prime Minister Vazgen Manukyan said large-scale Soviet army raids on villages in the southern republic had practically stopped but again voiced fears that Moscow could enforce an economic blockade. 
ID: 366
HEADLINE: FT  13 MAY 91 / Survey of Cardiff (10): A three-way strategy - Professional services 
TEXT: MANY OF Cardiff's striking new office buildings are occupied by the city's leading accountants, solicitors and architects - visual evidence of prosperity and growth in the mid and late 1980s, when annual fee income rose between by 30 and 50 per cent each year. However, the economic downturn has now reached the city professions, albeit in a mild form. Hywel G Jones, South Wales senior partner in Coopers &amp; Lybrand Deloitte, the UK's largest accountancy firm, points out that it would have been unrealistic to expect the growth rates to continue at such levels: 'We were seeing growth rates in our firm of between 40 per cent and 50 per cent a year. It was obviously not going to continue at that level. I do not think the professions will have it as good in the next 10 years as they have in the past 10.' But most large professional firms expect growth rates in fee income this year of between 10 per cent to 15 per cent. The smaller professional practices, concentrating on private-client and domestic work, have been hit hardest. The larger firms still have the benefits of Cardiff's dominance of service provision in South Wales, the work from inward investment projects, strong working relationships between the public and private sectors, and efficient networking facilities. The gap is widening between the large firms and the rest. Coopers &amp; Lybrand Deloitte, Peat Marwick, Touche Ross, Ernst &amp; Young, and Price Waterhouse all have substantial offices in Cardiff with national and international work as well as local. Most is generated, rather than referred from other practices in their networks. Professional polarisation has also had an impact on architects. Firms such as Hoggett Lock-Necrews get about 40 per cent of their work from outside Wales. The only profession not to see polarisation is the Bar, which is not organised on partnership or firm lines. The four sets of chambers operating from Cardiff are still expanding, but commercial solicitors tend to instruct barristers from specialised commercial chambers in London. Mr Robert Ellis, the partner in charge of accountants Touche Ross, points out that professional services in Cardiff have increased continuously in expertise, and that clients who 10 years ago would have automatically gone to London for advice now seek professional services in Cardiff. Three common factors have emerged in the way the professions are coping with the present situation, and their plans for the 1990s. These are: to widen the markets they serve on a geographical basis; to deepen the level of specialties they offer; and to build up links with practices in other European Community and overseas countries. The first means, in effect, that firms are competing not only in the local market but nationally. All the city's leading firms judge themselves by City of London standards, and believe that, apart from projects involving large numbers of people or very specialised functions, they can compete in quality and price. Professional fees in Cardiff are considerably lower than in London. The hourly rates of the leading Cardiff solicitors are between one third and a half of those of top City solicitors. The accountants have a price differential of around a third less than London. Cardiff's lawyers and accountants are seeking to exploit this by combining it with niche products and geographical access. Phillips &amp; Buck, with 22 partners and 100 lawyers, has joined the Eversheds network to gain access to a national spread of offices. Mr David Vokes, managing partner, says this trend of increasing the geographical access (both nationally and through association with other European Community practices) fits in with the move to growing specialisation. 'We are in the business of solving clients' problems. While most of our business is based in South Wales, we are able to call on resources elsewhere. This provides flexibility.' he said. A speciality where Cardiff firms have a competitive edge nationally is professional advice on inward investment. Coopers &amp; Lybrand Deloitte, for example, has built up a centre of excellence in work of this kind, and most major projects are now referred to the Cardiff office by the group's other UK practices. The second thrust of the strategy is to widen and deepen the levels of specialisation on offer. Huw Williams is a partner at Edwards Geldard, the law firm, and is in charge of the its work for the Cardiff Bay Development Corporation. He is a specialist in planning and environmental law. 'In the past, the legal work on the Bay would have gone straight to London,' he said. 'I think that what we have proved is a speedy response of specialised units which are based locally. Specialisation is the key to success, and that is what we have been concentrating on.'. The accountants have been at the forefront of the move to greater specialisation with the Cardiff majors providing a full range of financial, corporate and management consulting services. Hugh Thomas is the partner in charge at Price Waterhouse and a strong proponent of accountants becoming more involved with clients. 'I think we feel we are contributing more and as Wales becomes more entrepreneurial, there is a need for wider and wider advice,' he said. One example of this is the computer consulting business established by Ernst &amp; Young in Cardiff. Ieuan Griffiths, the senior manager in charge, believes such services are now a crucial part of the overall package on offer: 'We can start from scratch and go straight through with the client in implementing strategy. Projects in some cases last a few months, in others more than two years.' The third part of the strategy and the most difficult to assess is the development of links with professional practices in other Community countries. The accountants have had a head start with their existing international links and the law firms have concentrated on developing relationships on non exclusive terms with continental law practices. Cardiff's professions have promoted awareness of the European single market in a vigorous fashion. Today, for example, Edwards Geldard and Ernst &amp; Young host a seminar on business in Europe - appropriate in a city where two of the main roads are named after Nantes and Stuttgart, Cardiff's twin cities. 
ID: 367
HEADLINE: FT  13 MAY 91 / Survey of Cardiff (11): Reaching for the stars - Stewart Dalby asks whether more hotels are needed 
TEXT: ON THE face of it, Cardiff seems to have plenty of hotels. If you emerge from Central station and look skywards slightly to the right, your eyes are met by the masthead of the Holiday Inn (182 rooms). It is unusual to see a Holiday Inn in a British city centre: they tend to be built on the periphery of towns, close to motorways. Two hundred yards from the Holiday Inn, past the ice rink, is the International Hotel (143 rooms), built by Brent Walker at a cost of Pounds 7.5m, and opened last September. If, instead of crossing St Mary's Street to the Holiday Inn in Mill lane, you turn left down St Mary's Street, you quickly come to the Royal Hotel (63 rooms). Continue past St David's Hall, and you come to the Angel Hotel (91 rooms). Situated between Cardiff Castle and the Arms Park rugby ground, the Angel describes itself as the city's premier hotel. Close by is the Park Hotel (119 rooms) and the Crest Hotel (157 rooms). Farther out, near to the motorway, are the Post House (150 rooms) and the Moat House (144 rooms). All of these are three- or four-star hotels. Most could be described as new 'business' or old 'town' hotels. They all charge between Pounds 50 and Pounds 80 a night. If a couple of places not mentioned are included, the total number of bedrooms in quality hotels is around 1,000 to 1200. If one were to include two-star hotels, Cardiff probably has some 6,000 rooms available. How much accommodation does a city need? Albeit a capital city, though one which is not yet an established business-and-services centre, nor on the well-mapped circuit for cultural and heritage tourists? For the moment, the answer would seem to be: about what it has got. The occupancy rate of the Holiday Inn, for example, is 70 per cent, spread through the week. It is full of business people during weekdays, while weekends are a moveable feast. If there happens to be a rugby international at Cardiff Arms park, the hotel is full to overflowing; if there is not, it can be empty. According to Jack Nicholas, general manager of the Holiday Inn, a good weekend trade was beginning to build in family tourists taking advantage of heavily discounted room prices. But this was thwarted by the Gulf war and the recession. The past few months have seen a decline in weekend bookings. Most of Cardiff's other quality hotels probably have occupancy rates similar to that of the Holiday Inn, though the International Hotel has an occupancy rate of 50 per cent, being a new hotel still building up business. If supply seems to be roughly in line with current demand, the situation could soon change, even though a Copthorne hotel is being built, for Cardiff has aspirations to become both an important business-and-services centre and a cultural tourist city, in the manner of York, Chester or even Glasgow. For most people, the transformation to a services or business city is linked with the Cardiff Bay Development Corporation. When the barrage is built across the bay, Cardiff could become a maritime city with some 5m sq ft of extra office space, many tourist and leisure facilities, and 30,000 new jobs in buildings that will be put up on what is now largely derelict land. The development corporation believes it will be 10 to 15 years before these targets are realised. Before then, other developments could ensure a greater demand for hotel rooms. Opposite the International Hotel is the half-finished World Trade Centre, being developed by Brent Walker. Technical problems have delayed its completion. But with a city grant and a soft loan from the European Investment Bank, it should now be finished by the middle of next year. It will have exhibition space and conference facilities for 5,000 people. Brent Walker also bought the ice rink in 1989. It has managed to change its use designation (though it is home to a successful ice-hockey team, which will continue to use it), and it can now be covered over and used, for example, for rock concerts. It seats 4,000. Despite Brent Walker's well publicised financial problems of the past year, these projects are proceeding, and will mean a greater demand for hotel space. So, too, may the efforts being made by Cardiff Marketing, a private company supported by local councils and the Cardiff Bay Development Corporation. The thought underlying Cardiff Marketing's efforts is that, if Glasgow can be publicised into life, then why not Cardiff? It is, after all, a capital city with a rich cultural identity. It is estimated that 2m visitors went to Cardiff last year, but fewer than 100,000 went to tourist centres for information. The potential is therefore considerable. The city may even get a five-star hotel. 
ID: 368
HEADLINE: FT  13 MAY 91 / Survey of Cardiff (12): Nothing at the top level, but still a good choice - Restaurants / Anthony Moreton studies the menu 
TEXT: WHEN DE Courcey's restaurant burnt to the ground last month, a pall darker than the smoke from the fire hung over the business community. De Courcey's had, within a very short time, become one of the favourite places in which to talk shop. The restaurant was the brain-child of Thilo and Pat Thielmann. He had been manager of the Holiday Inn, and the two of them decided to open a top-drawer restaurant, to which they eventually hoped to add a number of bedrooms, to create the sort of restaurant with rooms that is so common in France. The wooden building had an unusual history. It had been brought over from Scandinavia in 1892, by a Nordic businessman who had settled in Cardiff and wanted to live somewhere that reminded him of home. It was not only built of wood, but the rooms were panelled. These the Thielmanns had carefully restored, by stripping off layers of paint. Within its short three-year life, the Thielmanns had turned the place, an out-of-town restaurant deep in Cardiff's green belt, into one of the best restaurants in Wales. In three hours in the early hours of an April morning, the fire that consumed it left just the four brick chimney-stacks. The Thielmanns will no doubt create another restaurant. In the meantime diners, as well as business lunchers in Cardiff, are not starved for choice. Good restaurants have grown with the city over the last decade, and if none has reached the very top level Cardiff is not unique in this respect. It is a curious fact that the Good Food Guide names 32 top-rated restaurants in Britain, but only four in cities outside London - in Norwich, Plymouth Bradford and Bristol. One of the growing favourites in Cardiff is Trillium, which at first glance looks like a club library whose back part changes into a conservatory. Welsh Water's main Cardiff office is around the corner, and many of its executives, including the chairman, Mr John Elfed Jones, are to be seen there. Slightly further out of the city centre is La Chaumiere, where Karen Duncan and Rory Garvey took over some 18 months ago. The restaurant sits in the shadow of Llandaff cathedral, but it gets rather more of its clientele from the nearby BBC headquarters than from ecclesisatical patronage. An innovative in-town restaurant is the Armless Dragon, where the proprietor, David Richards, is also one of the two chefs. Although the basis of the cuisine is European, there are touches of far-distant places and an emphasis on pure foods. Diners include a good sprinkling of mandarins from the Welsh Office. One who has made a notable mark is Meirion Dally who, with his wife Ann, has created a Welsh ambience at Blas ar Gymru, or A Taste of Wales. Wales has never had a particularly strong tradition of native dishes, but the Dallys have attempted to get as close to a Welsh cuisine as possible. They even offer Welsh wine, produced just outside Cardiff. The waiters and waitresses at Blas ar Gymru are dressed in traditional Welsh outfits, including the stove-pipe hats, and the piped music is Welsh. Dishes include laver bread (a processed seaweed), cockles, Welsh cakes and Lady Llanover duck, a traditional Welsh way of preparing the bird. Not far away, and in direct competition, is Yr Ystafell Gymreig - The Welsh Room. Although the name is Welsh, the emphasis is more mainstream European with fillet steak Lloyd George offered as a touch of Wales. It also has laver bread on the menu. Among ethnic places, the Indian Ocean is a transplant from the people who gave London the Red Fort; and a recent Chinese addition is the Orient Rendezvous, from which a dum sum could be dropped-kicked into the Arms Park, the great rugby ground, across the road. In a previous incarnation, this restaurant was called Spangherro's - after the famous French rugby forward. Nearby is the Noble House, where lovers of Chinese are frequently serenaded by a harpist. The restaurant most characteristic of its homeland is Le Cassoulet, where the emphasis is on the dishes of the south of France. Cassoulet Toulousain is always on the menu, and is a must for those who want to savour the flavours of Provence. Two restaurants that have undergone something of a sea change are Gibsons and Le Gourmet Enchante. Gibsons is the doyen of Cardiff dining places, its chef-owner, Mrs Irene Caning, being virtually the first to bring innovative French cuisine to the city. Le Gourmet Enchante was a more recent addition in the same vein. Both have, in the past few months, taken on a new identity, with new menus placing them more firmly in the mainstream of French-style cooking. Gibsons has changed into Quayles, with Mrs Caning still in charge; while Le Gourmet Enchante is now merely Le Gourmet, and describes itself as a brasserie. For music-lovers, the Celebrity restaurant, in the St David's Hall, offers not just reasonably-priced food but an attractive wine list at tempting prices. -------------------------------------------------------- WHERE THEY ARE -------------------------------------------------------- IN TOWN Le Gourmet, Wesley Lane. Tel 394767 Celebrity restaurant, St David's Hall. 227211 Noble House, Wood Street. 388430 Orient Rendezvous, Westgate St. 226901 -------------------------------------------------------- SLIGHTLY FARTHER AFIELD Armless Dragon, 97 Wyvern Road. 382357 Blas ar Gymru, 48 Crwys Road. 382132 Le Cassoulet, 5 Romilly Crescent. 221905 Quayles, 8 Romilly Crescent. 341264 Yr Ystafell Gymreig, 74 Whitchurch Road. 342317 Trillium, 40 City Road. 463665 -------------------------------------------------------- IN THE SUBURBS La Chaumiere, 44 Cardiff Road, Llandaff. 555319 Indian Ocean, 290 North Road, Gabalfa. 621152 -------------------------------------------------------- 
ID: 369
HEADLINE: FT  13 MAY 91 / Survey of Cardiff (9): Euro-flights may be spokes from a hub -The airport 
TEXT: JUST BEFORE seven o'clock on the morning of April 8, a Jetstream 31, of Manx Airways, took off from Cardiff-Wales airport, at Rhoose, 15 miles west of the capital, with a full payload of 16 passengers. One hundred minutes later, it touched down in Brussels, and a dream nurtured for years within the Welsh business community had become reality. Capt Norman Brewitt, the airline's chief pilot, who was at the controls, had helped to introduce a service much needed in Cardiff - a direct link between the Welsh capital and the de facto, if not de jure, capital of the European Community. Four hours after the Brussels flight, another Manx aircraft, a JE 103, took off for Dusseldorf. The two flights represented a double first: the first time Cardiff had been linked directly to these European cities, and the first time Manx had run a continental service. Mr Terry Liddiard, managing director of Manx, says the company wants to create a hub of services from Cardiff: 'There is enormous potential in South Wales, and we see it as a major centre for our services. We hope to bring in a twice-daily Paris flight later this year, and introduce another service to Manchester in the autumn.' Manx already operates services from Cardiff to the Isle of Man (its home base), Glasgow, the Channel Islands, Dublin and Belfast. Cardiff is not without international flights. Air France introduced a Paris service last year; and KLM, through one of its subsidiaries, has for some years operated one to Amsterdam. The latter, like the Brussels flights, provides a connecting point for passengers who want to fly on to other destinations without having to use Heathrow or Gatwick. There have been a number of attempts to bring intercontinental carriers into the Welsh capital, but this has proved a difficult business to generate. Airlines providing flights to Toronto, Florida and the Caribbean have come and gone, to the dismay of the airport's director, Mr Graham Greaves. These carriers have either been absorbed by bigger partners, or fallen into financial difficulties. But Mr Greaves promises: 'We shall have Toronto, and Orlando in Florida, on the schedules this year - Toronto for the first time direct.' Nationair, the Canadian airline, will serve Toronto with a Boeing 757, and the UK carrier Monarch is also using a 757 on its North American operations. The core of Mr Greaves' strategy, though, is to develop Cardiff as a business centre for European destinations. 'We must try and generate more scheduled flights,' he says. 'This is where our destiny lies.' Businessmen in South Wales have for years bemoaned the lack of direct links with European centres. Since Cardiff is one of the UK's three main centres of government, they believe that Brussels, in particular, should be a big earner, especially as civil servants need to travel there for meetings. But the South Wales business community is not large, and it will need to use the airport to the full if Manx's enterprise is to be justified. The omens are not overwhelmingly favourable, however, despite the cries for such a link. Air France, for instance, has not had great success with its Paris service, launched last year, though this may have something to do with the less-than-convenient time-slot. Like most regional airports in Britain, Cardiff, until last year one of the fastest-growing, must therefore continue to rely heavily on its charter traffic for its immediate profitability. 'About 85 per cent of all our traffic is in the charter business,' says Mr Greaves. 'That, inevitably, peaks between June and September; and so, to utilise the airport's facilities more sensibly, we need to flatten that peak by attracting out-of-season business.' But Cardiff, again like other regional airports, has been hit by the recession and the Gulf war. It also faces competition from Bristol which, with a catchment area of some 4m people, compared with Cardiff's 2.5m, is in a healthier position to attract holidaymakers bound for Spain, Greece and the ski slopes. Mr Greaves takes encouragement from what he detects as a change in holiday patterns. 'Holidaymakers are looking to go further afield. They are looking to the Caribbean and Florida, and this is where Cardiff has a distinct edge. We have the second-best weather conditions of any British airport.' He also considers that Cardiff's runway, extended four years ago, provides advantages. 'Our 7,723ft runway can handle all the big giants - including Concorde.' Two years ago, a British Airways jumbo flew non-stop from Cardiff to Seattle on America's west coast, with a full payload. And this winter some 30 aircraft landed at Cardiff on diversions from Heathrow and Gatwick. In the summer, Concorde will take a party of Americans, holidaying in Europe, back home from Cardiff. When British Airways opens its giant maintenance plant alongside the airport, five jumbos a month will be flown into the airport, to be handled in the hangar - a welcome boost in landing fees. Those fees helped to increase profitability to a record Pounds 1.9m in 1989-90, the last year for which figures are available. The figures will tumble for the year just ended, given the difficult time experienced by airlines and airports around the world. But the Pounds 12m capital-spending programme is going ahead. Work begins this summer on a lounge for international passengers, and better Customs facilities will be provided. These should be ready by the end of next year. 
ID: 370
HEADLINE: FT  13 MAY 91 / Survey of Cardiff (8): End of S4C contract trims HTV's profits - Stewart Dalby tunes in to 'media city' 
TEXT: CARDIFF HAS such a vibrant and diverse media scene that it has often been termed 'media city' in its promotions. Depending on where you are and how you set your aerial, it is possible to receive seven different television channels or variants of channels. Similarly, it is possible to tune in not only to Radio Wales but also to the other five BBC stations, as well as a variety of commercial ones. The city has its own morning, evening and Sunday newspapers - the morning paper, the Western Mail, styling itself 'the national newspaper of Wales'. Cardiff is also thought to have more independent television producers than any city outside of London. If video companies and design concerns are included, around 6,000 people are employed in the media industry, some 2,500 of them involved directly in broadcasting. One reason why there is such life in the media sector is the Welsh language. After the failure to get an assembly for Wales, in the late 1970s, a public-service Welsh-speaking television station, S4C, was established in 1982-83. There was perceived to be a genuine need. Between a fifth and a third of people in Wales speak Welsh. Yet it was not just a question of language: there was a cultural identity to be catered for. At the same time, non-Welsh-speaking people were increasingly fed up with hours (often peak hours) of viewing time devoted to programmes in a different language. The fourth channel was therefore a neat political solution to a social and cultural problem. The fact that Cardiff is a national capital, rather than just the centre of a region, influences the printed media, too. John Humphries, editor of the Western Mail, pursues what he calls a twin-track policy: 'We have to compete with all the London-based newspapers - notice I call them London-based and not national newspapers - on international, political and sports coverage. At the same time, we have to supply news about Wales, in which there is great interest.' News of Wales is editionised. The Western Mail has nine editions, regional and otherwise. Two pages of news about Wales are changed each night. The paper feels strongly about local issues. Recently it took David Hunt, secretary of state for Wales, to task for failing to push through parliament the private bill that would have allowed a barrage to be built across Cardiff Bay. The existence of S4C has meant that the two main television channels, BBC Wales and HTV, have prospered, because, in a sense, they had a captive market. S4C has a budget of about Pounds 44m and runs about 25 hours of Welsh-language programmes which go out on Channel 4. Until recently, those which were not produced by the BBC were largely made by HTV. The main commercial channel had a five-year contract to make nine hours a week for S4C. Since the contract expired, however, S4C has turned more and more to the growing band of independent producers. Loss of revenue through the drop in demand from S4C has contributed to a huge dent in HTV's pre-tax profits, though other factors have included: a new exchequer levy imposed in January 1990, changes in the way programmes are made, a poor advertising market, and competition from independent producers in areas other than Welsh-language programmes. Pre-tax profits for the year ended December 1990 were Pounds 5.3m on turnover of Pounds 179m. A direct comparison is difficult, because of a change in the year end; but for the five months that ended December 1989 they were Pounds 7.4m, and for the year ended July 1989, Pounds 14.5m. Hard times have also resulted in severe staff cuts. Some 700 people are now employed, compared with more than 1,000 two years ago One way to improve profits might be to make more programmes for the national network. But the domination of the network system by the big five commercial companies (Central, Thames, London Weekend, Yorkshire and Granada), says Mansel Jones, head of press and public relations at HTV, makes it difficult for medium-sized commercial companies such as HTV to get a look in. HTV faces further competition in that, by 1992, 25 per cent of output must be made by independent producers. But before then - this month, in fact - it faces a stiff challenge when its licence comes up for renewal. The new round of franchises, which will be partly determined by sealed cash bids, is considered unfair at HTV. Mr Jones has compared them to a 'blind crap shoot'. There is a feeling at HTV that the expertise in making programmes for Wales should count for something more than cash in an envelope when the bids are sorted. BBC Wales, too, has been experiencing upheavals. As part of the Funding the Future exercise, which requires the BBC as a whole to save Pounds 75m by 1993, it is looking for savings of Pounds 2m and the loss or contracting out of 300 jobs. It, too, has to commission 25 per cent of its output from independents by 1992. With this shake-up under way, Geraint Talfan Davies, controller of BBC Wales, sees the challenge of the future as making more English-speaking programmes, not just for Wales but also for the national network. Recently, BBC Wales announced that it would, for the first time, appoint a non-Welsh-speaker to a top programme post. BBC Radio Wales already has a substantial number of its programmes networked: last year, it had 306 hours broadcast on other BBC stations. Gaynor Shutte, the new editor of BBC Wales, wants to increase this substantially, not just because it is lucrative, but because it keeps up standards. In contrast, BBC Television Wales networked only 20 hours last year, partly because of its Welsh-language obligations. (BBC Scotland networked 160 hours of its programmes). But Geraint Talfan Davies hopes the number of networked hours will reach three figures in the next few years. 
ID: 371
HEADLINE: FT  13 MAY 91 / Survey of Cardiff (7): Technology transferred - Education and training 
TEXT: MOTORISTS faced with delays due to road-widening schemes may at some stage in the future give thanks for the day when Ron Brindle, a civil engineer, walked into the University of Wales College of Cardiff. Mr Brindle came in with an idea which, developed in conjunction with the university college, has led to a soil-nailing machine which can drastically reduce the amount of time it takes to widen roads. The machine, which uses high air-pressure to fire nails into the soil at 200mph, has been patented and developed; and licencing arrangements have been made worldwide. The University of Wales College of Cardiff (UWCC) became involved through its commercial consulting arm, and a licence was given to the Welsh-based Ryan International group. The project is one of 12 licences in which UWCC is involved with the private sector. This story of the soil nailing machine illustrates the emphasis at UWCC on commercial services and technology-transfer schemes. The college, with 1,000 academic staff, 28 schools and departments and more than 9,000 students, is the largest of the colleges that make up the University of Wales. Its size and commercial contacts mean that it has a significant role in the life of the city. In 1989-1990, it won Pounds 2.1m worth of research contracts from British industry, and through other consultancy work generated an additional Pounds 1.8m. There have been several instances of high-technology companies being spun off by the university college, as a result of projects in which it was involved. Geraint Jones is the head of UWCC's commercial services section, and at the forefront of efforts to boost academic and industry links. 'There is often a difference in time scales, but our people are very appreciative of industry's ethos. It is important to retain a balance between pure research and the subsequent use of new knowledge,' he said. The section acts as a focus for liaison with industry. Companies involved in projects include such big names as British Steel, Ferranti, Procter and Gamble, as well as local companies. Links are further fostered through placements of Cardiff graduates in 15 companies, to help with research under the Science and Engineering Research Council's Teaching Company scheme. UWCC prides itself on a number of pace-setter departments which are generally regarded as centres of academic excellence. These include city and regional planning, aeronautical and mechanical engineering, maritime studies, nasal physiology, the semi-conductor and microelectronics centre, and the automotive industry unit at the Cardiff Business School, which is part of the university college. The mood at UWCC is one of cautious optimism, exemplified by a new Pounds 27m engineering faculty building scheduled to come on stream by 1993 and catering for 1,100 students. UWCC has also emerged as one of the UK's leading centres of Japanese studies with a number of Japanese joint honours schools introduced at undergraduate level where Japanese is combined with such disciplines as law or business studies. The university college's most direct contact with business in Cardiff is through the Cardiff Business School, the fourth largest in the UK with 1,000 students and 13 full-time professors. Its courses include both undergraduate and postgraduate work and the school tailors courses for managers in local companies. Recent research contracts include a study of the Principality's labour market, for Welsh Water. Professor Roger Mansfield, the school's head, sees a role for the school as a catalyst and enabler, to improve management skills in Wales. 'The rapid development of short courses is based firstly on serving the growing needs of the region, and secondly, developing courses in areas of particular research strength.' Cardiff is particularly strong in the automative industry, Professors Dan Jones and Garel Rhys having built an international reputation. Consequently, most of the big motor manufacturers have used Cardiff for consulting work. At a non-academic level, training and education for jobs in Cardiff is focused on the new South Glamorgan Training and Education Council (TEC), set up in February. It has a staff of 50 and a budget of Pounds 12m. Paul Sheldon, its chief executive, believes the tough decisions the TEC will be making on training-provision in Cardiff are bound to be controversial: 'Our primary client is the employer. We have to ensure that we are training people for real jobs. That means we will have to look carefully at the quality and scope of the training on offer at present.' The South Glamorgan TEC faces four priorities in determining the future of training in the Welsh capital: The TEC has to carry out a quality audit of training provision, and decide which courses and schemes to scrap. Mr Sheldon thinks the 60 organisations currently involved in training is too many. There needs to be greater targeting in training in Cardiff. Traditionally, the take up-rates for adult training in Cardiff is around 90 per cent of places filled, compared with 60 to 70 per cent nationally. However, if people in Cardiff are being trained for skills where there are no job prospects, such courses will have to be scrapped, and emphasis placed on market-led targetting. There are no models to forecast how the south-east Wales economy will perform - an obstacle to detailed labour-market planning. Discussions are being held with various groups in Cardiff to see if such a model can be developed. The public sector as an employer plays a crucial role in the Cardiff labour market, with nearly 50 per cent of jobs in the city coming from the public sector. Public sector orientated programmes need to be included in training provision. 
ID: 372
HEADLINE: FT  13 MAY 91 / Survey of Cardiff (4): Authorities back a five-year initiative - Marketing the city 
TEXT: ST DAVID's Day is always special for the Welsh, but this year March 1 was extra special for Cardiff. In the presence of the Princess of Wales, and with the young Prince William making his first public appearance, the city launched a marketing campaign to make itself better known and understood around the world. Under the aegis of the city, five public bodies unveiled a Pounds 10m marketing programme with the title: Just Capital. The five are: South Glamorgan county council, the Welsh Development Agency, the Wales Tourist Board, Cardiff Bay Development Corporation and the city council. They guaranteed to put up Pounds 5m over the next five years, and set out to find a similar sum from the private sector. Marks and Spencer immediately contributed Pounds 20,000. At the same time, it was announced that Wynford Evans, chairman of the recently-privatised South Wales Electricity, would become chairman of Cardiff Marketing, a private company established out of the ashes of the municipally-run Cardiff Marketing Bureau, on June 1; and that Norma Jarboe would take over immediately as chief executive. 'The problem Cardiff has always had to face,' says Mr David Seligman, a solicitor and city councillor who headed the move to go private, and who remains chairman of Cardiff Marketing until Mr Evans takes over, 'is that people have the wrong impression about the city. Abroad, they simply wonder where it is in the UK. Here at home, it is generally seen as a dirty place with few amenities, not worth a visit. Incredibly, people still think it's a town of coal and steel. 'Once they get here, they find a magnificent modern city, a city that can fill a theatre with opera and a concert hall on the same night. What they find is not at all what they imagined. Our task is therefore to get the world to see that Cardiff is a fine place: that way, we shall attract tourists, inward investment, more jobs and help enlarge the city's prosperity.' That view is echoed by Miss Jarboe, who can take a dispassionate approach. 'Changing the image is what we must be about,' she says. 'People who come are bowled over, and are only too happy to return.' Discounting the fact that it is Miss Jarboe's job to 'sell' the city, she can be more dispassionate than the locally-born solicitor who is her present chairman, because she is an American and her links with the Welsh capital were minimal before her appointment. Norma Jarboe, who is 44, was born in New Mexico, moved east to college in Denver, and still farther east to work in New York on urban affairs and public-policy planning for Citibank. Soon after the Brixton riots in London, in 1981, the bank was asked to second someone to London to work on inner-city problem areas, and she was 'volunteered'. Although primarily concerned with Brixton after her arrival in London, her work subsequently branched into fellowship programmes and youth enterprise schemes; until 1986, when she herself branched out as a consultant in the field of public affairs, community relations, sponsorship and communications. The thinking behind Cardiff's marketing programme has been heavily influenced not only by the need to alter perceptions of the city, but also by the success that Glasgow achieved with its Glasgow's Miles Better campaign. 'Glasgow have done what we want to do here,' Mr Seligman says. 'At one time Glasgow was thought of as a rough, tough city. Today, it is seen as a city of culture, a place of refinement, a place in which to do business, and a place where people will happily move to work.' Mr Seligman wants people around the world to think in the same way about Cardiff. 'Despite the general perception, we have already had a lot of success in attracting companies here. We have attracted Tesco with a headquarters operation, for instance, National Provident Institution and Rothschild. All of these have come in the past few years, so we knew that with a bit of a push we could use the campaign to broaden and develop the economic base of the city.' Miss Jarboe says that the first step will be to bring the message to the city itself. Already posters with the Just Capital logo are beginning to appear on sites around the city. 'We must give them a sense of involvement, a sense of pride,' she says. Miss Jarboe speaks quickly. Thoughts and ideas pour out of her. 'Take the taxi drivers,' she says. 'They are often the first people a visiting businessman meets. Get them to enthuse about the city, give them civic pride, and they will help influence the visitor. When we have laid the groundwork here in Cardiff, we'll take the programme wider: national within the UK first, then international. This has always been an international city, and we will capitalise on that.' All this is planned on Pounds 2m a year in each of the coming five years. Can it be achieved? More important, can the Pounds 5m that has to come from the private sector be raised? Cardiff is not a city of big employers. Few have more than 1,000 people, and few of these have their headquarters in the city. Most of the potential donors that Mr Evans will have to approach probably have headquarters in the south east of England, so their allegiance to the Welsh capital is not as deep as his own. His task as chairman of Cardiff Marketing is all about money and raising it; but in the present economic climate, charitable giving is being reduced. The Welsh politician, Ray Gunter, said in 1964, when Harold Wilson appointed him minister of labour, that he had been given the 'bed of nails'. The parallel with Mr Evans' task is not inapposite. 
ID: 373
HEADLINE: FT  13 MAY 91 / Survey of Cardiff (5): A Welsh song for Europe 
TEXT: THIS IS Europe Week in Cardiff. The festival is a promotion of Europe within the Welsh capital and, in particular, of the city's place within Europe. It sees French fashion, German food, Italian music, opera from the Welsh National Opera Company - and, this being Wales, a rugby festival. Cardiff is Europe's youngest capital, created in 1955. Although twinned with Stuttgart and Nantes, it has not had particularly strong links with continental Europe since its coal trade collapsed after the second world war. 'This festival,' says Roger Paine, the city's chief executive, 'is intended to raise the importance of Europe within Cardiff. In doing that, we want it also to raise our profile within Europe. 
ID: 374
HEADLINE: FT  13 MAY 91 / Survey of Cardiff (6): Principality House may set pace - The property sector 
TEXT: LATER THIS summer, just off the main pedestrian shopping area of Queen Street, Principality House, a new 62,500 sq ft office building, will be completed at a cost of around Pounds 12m. The development, undertaken by the Principality Building Society, could well act as the new benchmark for Cardiff office rents. The reason why the property sector is excited about the completion of Principality House is that the 50,000 sq ft to be let (the rest will be occupied by the society) could set a new high for office rents in the city. At present, office rents are stalling at a Pounds 16.40 per square foot high. Rents at Principality House could possibly reach Pounds 18. Traditionally, rents in Cardiff have tended to be lower than in many other regional centres, although prime office rents almost doubled from Pounds 8 per square foot in 1987 to Pounds 15 in 1990. A survey last year, by Knight Frank &amp; Rutley, indicated that, while Cardiff was on a par with Newcastle and Manchester, prime office rents in the Welsh capital were Pounds 3.20 per square foot less than in Bristol, often used as a comparison with the city. The property market in Cardiff has held up in the economic downturn. A review by the property advisers Debenham Tewson showed that Cardiff had felt the effects of recession less than cities such as Bristol and Leeds. Mr Rhys James, a director of Debenham Tewson, said that rents in Cardiff had not fallen during the past year. Mr Roger Thomas, regional director of Cooke &amp; Arkwright, another of the city's leading surveyors and estate agents, reports similar findings. Activity in the commercial property sector has slowed over the past year, but companies in the market for property are more selective, with continued demand for good quality new or refurbished accommodation. 'We need to get the picture in perspective. The so-called property recession does not compare with that of 1973-74 and 1983-84,' he said. 'Despite short-term pressure, there are still underlying reasons for optimism about the long-term future in Cardiff.' The commercial property sector is predominantly office and retail space. By the end of 1990, the city had nearly 4.5m sq ft of office space. However, much of it consists of 1950s and 1960s buildings, which will either have to be refurbished or pulled down in order to meet tenants' rising expectations. New developments since the late 1980s have provided opportunities for pioneering projects. 'Design is an important element of what contractors now want, and there is a strong architectural tradition here,' commented Mr Terry Hoggett, of architects Hogget Lock-Necrews, the firm which designed Principality House. Cardiff's property market falls into three distinct areas: the city centre; the M4 corridor with business parks at St MelIons and Llanishen on the outskirts of the city, and several retail projects located at Culverhouse Cross; and the Bay area. Rents in the centre and on the M4 corridor area are roughly the same, but it is the Bay which could have the most impact in the long term. The development is to be phased over a 15-year period, but the office space allocation in the Bay area is more than 5m sq ft, rather more than Cardiff's stock of office space at present. However, in the city as a whole there is still a shortage of large office units. It is a shortage that worries Mr Graham Moore, the property director of the Welsh Development Agency: 'If we get a large company relocating and it needs 60,000 sq ft immediately, we have got a problem. There is a window of opportunity in Cardiff, and developers need to be encouraged to build speculative projects,' he said. The WDA is not actively involved in the Cardiff office market. It is concerned about the lack of institutional investment in speculative development in the city, and the discrepancy in rents between the city and other regional centres. The Knight Frank &amp; Rutley report found that institutions were reluctant to invest in Welsh office space. 'The small investment market in south-east Wales has not yet reached the critical mass for a flourishing market to develop,' it stated. Mr David Swallow joined the WDA last year in a newly-created post of private funding director. The agency hopes that its Welsh Property Venture Initiative, which seeks generally to attract institutional money into Welsh property, will have a spin-off effect on the Cardiff commercial sector. Mr Swallow has found no such reluctance among the institutions to invest heavily in the retail sector. Demand for retail property has been hit by the general cutback in high street spending, although with a catchment area of 1.3m shoppers several new developments have come on stream. GRE Properties, which has opened a specialist centre called the Capitol site, in the city centre, has introduced a number of turnover rental deals, a new feature of retail rents in South Wales. Industrial property in Cardiff often tends to be overshadowed in what is essentially a service city. The market was affected by the loss of land to B1 use, and the relocation of business from parts of Cardiff Bay as that area was prepared for redevelopment. Consequently it has been difficult to identify trends. Rents have been sustainable with modern units of under 3,000 sq ft reaching between Pounds 5 and Pounds 5.50 per square foot. Medium-sized modern units are fetching rents in excess of Pounds 4 per square foot, and larger units around Pounds 3. Interest in the sites and units being developed in Cardiff Bay is continuing to grow, although there are unlikely to be any mass building programmes in the city in the immediate future. 
ID: 375
HEADLINE: FT  13 MAY 91 / Survey of Cardiff (3): The barrage meets its first storm - Cardiff Bay / The future of the plan, after a parliamentary jolt 
TEXT: MANY PEOPLE describe Cardiff as a major international city waiting to happen. After the confusion in parliament last month, the wait may be longer than they expect. Progress of a locally-sponsored private bill, to allow a barrage to be built across Cardiff Bay, creating a non-tidal 500-acre freshwater lake, was blocked at an all-night sitting. A group of Labour MPs who oppose the scheme, largely on environmental grounds, made long speeches and raised persistent objections. The government says it will now take over legislation to build the barrage, and bring in its own bill. Without the barrage, which would cost about Pounds 80m, says the Cardiff Bay Development Corporation, Cardiff will not be transformed into an important maritime city. The corporation is charged with renovating and developing 2,700 acres of partly-derelict land around the bay. Although Cardiff is the national capital of Wales, it has yet to find a new wider role. The bay was once the port for heavy industry; but coal and steel went into decline, and Cardiff, though still active as a port, conducts a fraction of the business it once did. Much of the land around the bay has fallen into disrepair. The bay itself is heavily tidal, with an average drop of 40ft between tides. At low water, it is a vista of unattractive mud flats. Under Mr Peter Walker, the former secretary of state for Wales, new industries, both British and foreign, were attracted to the valleys and other parts of Wales. Cardiff has begun to develop as a financial centre, servicing these industries. It has also become something of a media city, with many independent film-production companies. But in terms of rebirth, it trails behind such cities as Bristol and Cambridge. Some relocation towns along the M4 have developed London-type congestion and high costs. Cardiff, towards the end of the motorway, has not yet been overrun by developers. Land and property were cheap, and skilled labour was available. What was needed was for the land around the bay to be revived. In 1987, the Cardiff Bay Development Corporation was set up. Like many of the other 10 urban development corporations, its purpose was to rejuvenate and restore degraded acres, using government money as a catalyst. Its plans were drawn on a grand scale: 1,000 acres of the 2,700 under its control were considered to be immediately developable. Within 10 years, some 4m sq ft of office space and 5m sq ft of industrial factories could be built. There would be 6,000 houses, a quarter of them social accommodation for low-income families. There were plans for an opera house and a maritime museum, as well as marinas, hotels and shops; 30,000 jobs would be created directly, and up to 15,000 indirectly; around Pounds 2bn of private capital would be invested. Cardiff would become a grand maritime city, a bit like Sydney. The barrage across the bay was the basis for the grand design - but without it, the mudflats were so unattractive that investors and developers would not take the bay seriously. Three years were put into preparing the private bill. It had to be a parliamentary private bill, because the barrage was a single engineering project, albeit a large one. But now the bill has now been thrown out. What has gone wrong? In a sense, nothing. David Hunt, the present secretary of state for Wales, has said that the government will pick up the parliamentary bill, and make it part of its official business. With the government whips behind it, it will almost certainly get through at some point. But the question is: when? Much of the opposition to the barrage was on environmental grounds. The mudflats are the habitat of wading birds, and the bay has been designated a site of special scientific interest. There were fears that a barrage would cause flooding. The rivers Taff and Ely flow into the bay, and there has been flooding in the past. A fresh-water lake would create problems with algae, said opponents of the barrage, so that the lake would be muddy brown rather than blue, making swimming impossible. Finally, it was suggested, the ground water-table would be affected by a lake, so that houses would suddenly start to develop fungus in their basements. The seven Labour MPs, who conducted the filibuster that blocked the private bill, emphasised these issues. But many of the criticisms have been met by the development corporation. It says research has shown that algae can be dealt with, as can the threat of flooding. The corporation proposes to spend Pounds 5m to provide an alternative wildlife sanctuary for the wading birds a few miles way. The ground-water problem is being investigated. At bottom, the opposition of the Labour MPs ' not all of them Cardiff members ' seemed to centre not simply on environmental problems, but on a mix of arguments. These ranged from the view that Cardiff should become a better capital of Wales rather than an international city, to the belief that too many developers would make too much money out of lakeside projects. The development board may have done itself a disservice by inadvertently creating the impression that, without the barrage, there would be no development around the bay. This is not the case. So far, the private sector has invested about Pounds 250m in the bay area. The board itself has been active in infrastructural development. It is spending money on a peripheral distributor road, which loops off to the east and west of the M4. Perhaps because of the time taken over the bill, it has studied other development areas and learned from their mistakes. Unlike Southampton, say, where the waterfront developments are divided from the old town centre, Cardiff Bay projects will be locked on to the established city centre. The development corporation is anxious to begin; the South Glamorgan county council supports the barrage; Cardiff city council wants it. The danger is that the government bill, which Mr Hunt now promises, may be a long time coming. A general election might bring a change of government, and the Labour party does not have the same commitment to the barrage. Further delay could mean the difference between a piecemeal waterside development and a dream enterprise. Opinion polls in the local press suggest that most of the people favour the dream. 
ID: 3323
HEADLINE: FT  25 APR 91 / International Company News: Saab-Scania falls 47% as car division losses mount 
TEXT: SAAB-SCANIA, the Swedish vehicle and aerospace group, yesterday reported a 47 per cent fall in profits after financial items to SKr267m (Dollars 43m) for the first quarter of 1991, due to mounting losses at Saab Automobile. Saab-Scania, recently bought out by the investment group controlled by the Wallenberg family, predicted that annual earnings would be lower than the 1990 result of SKr2.2bn. Group sales slipped by 6 per cent to SKr6.94bn (Dollars 1.11bn), mainly because the Scania truck division suffered a 10 per cent fall in sales to SKr5.4bn. Losses at Saab Automobile, the 50:50 joint venture with General Motors, increased by 52 per cent to SKr1.011bn during the period. This reduced profits for Saab-Scania by SKr506m. Excluding Saab Automobile, profits for the rest of Saab-Scania declined 6 per cent to SKr764m. Saab Automobile reported a 16 per cent fall in volume sales to 20,800 vehicles, with demand weakening mainly in the Nordic region. Sales amounted to SKr3.36bn, a 18 per cent fall. Sales for Saab Automobile are not consolidated in Saab-Scania results. Saab-Scania and General Motors are discussing a new injection of capital into Saab Automobile. They will decide whether more funds are needed for the company's rationalisation after a review of its capital structure is completed in June. No forecast was offered for Saab Automobile's 1991 profits. The company noted that rationalisation measures taken in 1990 did not affect the first-quarter results. Scania division earnings were also lower than last year's first quarter, but were not specified. Scania's annual profits were predicted to be below last year's SKr2.9bn. Sales of trucks and buses fell by 6 per cent to 7,800 vehicles. Profits increased at the aerospace division, however, with a 17 per cent rise in sales to SKr1.18bn as orders climbed for the Saab 340 and Saab 2000 commuter aircraft. Earnings for 1991 are expected to exceed last year's SKr111m. Saab Combitech, the defence technology division, reported unchanged earnings on sales up by 38 per cent to SKr622m. 
ID: 3324
HEADLINE: FT  25 APR 91 / International Company News: AGF sees increase of 5% 
TEXT: ASSURANCES Generales de France (AGF), the country's second largest state-owned insurer, shrugged off losses on its international activities last year to produce a 5 per cent overall net profits increase, writes William Dawkins. AGF's net earnings rose in line with forecasts to FFr2.7bn (Dollars 461m) from FFr2.57bn in 1989, on turnover up by 20 per cent over the same period, to FFr46.03bn from FFr38.22bn, the group said yesterday. Half of the turnover growth came from acquisitions. Group investment income rose to FFr9.18bn from FFr7.67bn, while profits on asset sales climbed to FFr3.37bn from FFr2.45bn. Life insurance produced an 8.8 per cent rise in sales to FFr15.9bn, with growth mainly coming from savings and retirement contracts. Profits on AGF's life activities rose by 4.6 per cent to FFr1.5bn net. AGF's international division saw its turnover rise by 54 per cent to FFr11.2bn from FFr7.2bn, within which 38 per cent came from new acquisitions including NEM in Britain, ICI in Ireland and l'Escaut, a Belgian insurer. AGF's reinsurance business produced a 17 per cent rise in turnover to FFr2.3bn. 
ID: 3325
HEADLINE: FT  25 APR 91 / International Company News: Zenith slides deeper into red 
TEXT: ZENITH Electronics, which is competing for a share of the high-definition television market, yesterday unveiled a deeper first-quarter loss and a drop in sales. The US company, which is in the middle of a proxy battle, incurred a first-quarter net loss of Dollars 23.7m, or 85 cents a share, compared with a loss of Dollars 4m, or 15 cents, last time. Mr Jerry Pearlman, chairman, described the first-quarter results as 'unsatisfactory'. News of the loss was not expected to help Zenith as it fights a proxy contest by Nycor to replace three directors. A count of the proxy votes from yesterday's annual meeting was not expected to be announced for at least several weeks. Nycor, a holding company spun off from Fedders, the air conditioner maker, holds 8.2 per cent of Zenith's shares. It claims the company has no business plan to turn around consumer electronic losses. Nycor and Fedders are controlled by the Giordano family of New Jersey. Zenith has responded that the Giordanos, with only low technology experience, do not understand the long-term, high-tech strategy of the company, which is engaged in a race for the estimated Dollars 80bn market of high-definition television. Zenith may have undermined Nycor's arguments about weakness in consumer electronics with its sale in March of a near 5 per cent stake to Goldstar, South Korea's largest consumer electronics maker, for Dollars 15m. Goldstar wanted access to the US company's high technology. 
ID: 3326
HEADLINE: FT  25 APR 91 / International Company News: French group advances 
TEXT: LYONNAISE des Eaux-Dumez, the newly-formed French water distribution and construction combine, reported increased turnover and profits for 1990, writes William Dawkins. The group turned in net profits of FFr1.42bn (Dollars 230m) last year, slightly below the FFr1.48bn forecast by the Lyonnaise des Eaux water distribution group and the Dumez construction company at the time of their merger in July. The result is a 12.8 per cent increase on the combined earnings in the previous year, on a 13.4 per cent increase in pro-forma turnover to FFr72bn. Earnings per share rose 17.6 per cent to FFr31.6. Mr Guy de Panafieu, group administrator and managing director, forecast that turnover would rise by between 5 and 10 per cent this year. The former Lyonnaise des Eaux contributed FFr896m to net profits. Lex, Page 22 
ID: 3327
HEADLINE: FT  25 APR 91 / UK Company News: Hardy Oil &amp; Gas calls for Pounds 27.6m 
TEXT: HARDY OIL &amp; Gas, the exploration company demerged from Trafalgar House, yesterday launched a 1-for-4 rights issue of 17.8m shares to raise about Pounds 27.6m. Shareholders will be offered new shares at 160p apiece to enable the group to invest in further exploration. The cash call was accompanied with an up-beat profit forecast for the year to March 31. Group profit after tax is expected to almost double to Pounds 10.1m (Pounds 5.1m), after taking into account estimated Petroleum Revenue Tax credits of Pounds 4m. However, the recent fall in oil prices forced the group to warn that the current year's trading profits might be 'adversely affected', despite hedging two thirds of its oil production. Analysts believe profits could fall by up to Pounds 7m. Hardy's share price - after an initial fall of 10p - recovered to end the day 5p down at 192p. Earlier this month the company announced its most significant gas find in the North Sea, 150 miles east of Aberdeen, since joining the stock market two years ago. It has also announced discoveries of potential significance in the US, Canada and the Netherlands, while building up a portfolio of exploration acreage, with stakes in noted oil-bearing regions such as the Gulf of Mexico and Western Australia. Mr Peter Elwes, chief executive, said he wanted to build on the recent discoveries. The rights issue was an exercise 'in cash flow management.' It would help fund the exploration which would generate the group's income. He also hoped it would help reduce borrowing, although he added that since the group's debt was all project-related he was not under any pressure to tap the equity market for cash. Hardy's share of the development of the Ravenspurn North gas field and the acquisition of an interest in the producing Harriet oil field in Australia have been financed largely by bank loans. By the end of last month some Pounds 35.4m had been borrowed. Mr Elwes hoped the contribution to profits from the sale of gas - particularly from Ravenspurn, which is priced in sterling and not subject to short-term price fluctuations - would do much to offset the instability of the oil price. To finance acquisitions and drilling in North America the company has arranged an Dollars 80m (Pounds 46.8m) credit facility. At the end of March it had borrowed Dollars 53.2m of this amount. 
ID: 3328
HEADLINE: FT  25 APR 91 / UK Company News: Devenish hits back at criticism on strategy 
TEXT: DEVENISH, the West Country brewer fighting off a hostile bid from Boddington, yesterday gave its first detailed response to the attack on its strategy by the pubs, hotels and health-care group. Directors met with advisers to begin drawing up 'a line by line rebuttal' to be sent to shareholders by May 6, 14 days after Boddington issued its formal offer document. Mr Michael Cannon, chairman of Devenish, responding to allegations that his company had committed a U-turn in buying and then selling wholesalers, accused Boddington of the 'biggest ever U-turn' in brewing history. Mr Cannon said: 'Ours was a blip of a U-turn compared with their massive blunder. The sale of our wholesalers was just a short, sharp reversal of strategy which generated a healthy profit. The same can not be said for Boddington's decision to buy and then sell its breweries.' Boddington bought the Oldham Brewery in 1982, followed by the acquisition of Higsons Brewery three years later. The group's brewing business was then sold by November 1989. The group said it recognised that 'the longer term prospects for profitable growth linked to brewing and brand ownership were unexciting'. In response to Boddington's accusation that Devenish had failed to achieve its ambition of increasing its estate from 400 to 1,000 houses, Mr Cannon said he still intended to buy more pubs 'but only when the price is right'. The West Country brewer is already buying individual pubs but admitted that it has put its plans to bid for a for a larger group of pubs on hold until the big brewers drop their prices. Mr Cannon also denied Boddington's charge that Devenish had wasted millions of pounds of shareholders' money on advertising the Newquay Steam brand. He said the promotional expenditure had been worthwhile and had helped push up sales to about 100,000 barrels a year. He added: 'The board's investment in Newquay Steam achieved its purpose. How does Boddington expect to launch a new product without advertising?' 
ID: 3329
HEADLINE: FT  25 APR 91 / Business Law: A case of good timing over VAT 
TEXT: THERE ARE few opportunities more welcome than that of using someone else's money, free of charge. When that opportunity is offered by the government to exporters of goods in the form of a cash refund of tax not yet paid, it would be madness not to take advantage of it. This has certainly been the view of a number of manufacturing exporters in relation to value added tax and, until Customs and Excise attacked the Philips Electrical group of companies, at the end of 1989 the arrangement apparently worked well. How that arrangement operated demonstrates a principle of VAT which is of interest and potential benefit not just to exporters but to all those who pay it. The events which followed the attack on Philips reveal a good deal of confusion in VAT administration policy. The scheme, if it can be called that, used the simple mechanics of VAT to achieve a substantial cash flow benefit. It works as follows. A business which sells goods only to UK customers taxes those sales at the standard rate of 17.5 per cent. It will pay over to Customs the tax which it charges and collects (output tax) having first deducted from that payment the amount of VAT paid to its own suppliers on purchases and other expenditure (input tax). A business which sells goods for export does not charge VAT on those sales (they are zero-rated) but can claim back its input tax from Customs, ie, it receives repayments of VAT. The difference between the two types of businesses is that an export business can claim its VAT repayments monthly, whereas most businesses which have to charge their customers VAT make returns and account for VAT quarterly. A company which makes both standard-rated sales in the UK and zero-rated export sales would normally make three-monthly VAT returns. Such a company can improve substantially its cash flow by selling the exports through a subsidiary, registered separately for VAT. The export company then makes monthly returns, claiming repayments of the tax charged to it on sales by the parent, up to 10 weeks before that same tax has to be paid by the parent to Customs and Excise. The advantage to be gained by doing this was recognised by a number of companies as long ago as the early 1970s when VAT was first introduced in the UK. They have operated the system successfully since then, and with at least tacit approval from Customs and Excise evidenced by their discretionary agreement to the use of monthly returns. However, for reasons that have never been made clear, Customs took exception to the scheme operated by Philips. Philips' appeal went first to the VAT Tribunal where Philips lost; then to the High Court in May last year where Customs conceded defeat having agreed the tribunal's decision was wrong. At the same time, Customs asked the judge, Mr Justice Roch, to give his view on the critical point of the tribunal decision - whether or not Philips had made a 'supply' to the export company. Originally, Customs had informed Philips that there was in its view no supply of the goods to the export company and the supply for export was in fact made direct from the manufacturer. Thus there was no tax to be charged between the companies and no claim to input tax to be made by the export company. The tribunal supported Customs, saying that if the export company did take ownership of the goods at all, it was for so fleeting a moment as to be compared with an inter-city express train passing through a station. There could therefore be no supply made under those conditions. In the High Court the matter was settled by consent, leaving Philips to continue with the scheme subject to agreed conditions. In the judge's opinion there was no requirement in the VAT legislation as to the length of time for which a transferee should have ownership of the goods to establish that a supply had been made to him. He went on to make the incisive comment that any other interpretation would create considerable difficulties in the levying and recovery of VAT, particularly in chains of transactions where title might pass instantaneously through a number of persons. There is much to be read between the lines in this case. It is clear from their conduct of the case that, having argued the point successfully at the VAT Tribunal, Customs suddenly realised that the decision would cause enormous administrative difficulties. This shows an unexpected lack of foresight in a department responsible for an important part of government policy. In any event, there was a clean and simple alternative for Customs. Monthly returns are allowed at the discretion of the commissioners and, if they wished to make Philips an exception to the generally permissive treatment accorded to exporters, the commissioners could have directed Philips Exports Ltd to make quarterly returns. This would have largely erased the cash flow benefit of the scheme to the company. To reverse that direction, Philips would have had to show that the commissioners were behaving unreasonably in denying them the monthly facility. What then prompted Customs to take the action they did? To understand their position, it must be appreciated that the VAT timing point used in the export scheme is a general feature of the UK VAT system and can provide a benefit even without intentional arrangement. As the quarterly tax periods allocated to businesses for VAT accounting are not all coincidental (Customs could not cope with 1.4m returns at one time) there are three different quarterly return groups, the maximum variation in period ends being two months. In large commercial transactions, particularly property transfers, this can be important because the VAT charge on a sale can be a cash flow cost or a benefit, depending upon whether the vendor must account to Customs for the output tax before or after the purchaser obtains the benefit of his claim to the input tax. There have been wholly contrived cases, which have demonstrated the timing point only too well and have rightly been stopped. There was, for instance, the enterprising individual who registered two businesses with conveniently overlapping VAT periods. He then 'sold' an article of jewellery at a grossly inflated price from one business to the other, thereby creating a charge of VAT which could be claimed as input tax and banked for the remaining time before it was to be paid over as output tax by the 'vendor'. Nevertheless, it must be said that, in general, Customs have never been too happy when the timing works against them, despite the rigidity of the tax point regime which they insist must be observed by taxpayers. When VAT was introduced on land and buildings in 1989, it was pointed out to the department that businesses might suffer if they had to wait for three months to claim the substantial input tax on the purchase of new premises. At that time, Customs said that they would consider making early repayments of tax in such cases, before the normal quarterly period end. In reality, the position is quite different. Businesses which make unusual claims to repayment of tax must undergo time-consuming credibility checks even where the claim is made at the normal time. These will frequently involve visits from the local VAT office before their claims are approved for payment. Some of those checks are to ensure that the vendor has properly accounted for the tax which includes a check on the due date for payment. This attitude is an unnecessary source of annoyance, as well as cost, to the trading community. On the whole, the VAT system works to the advantage of the Revenue. However, the system which provides for easily administered, self-assessed tax collection at each stage of the journey from production to final consumer inevitably contains in its structure benefits for some taxpayers. This should be accepted by Customs. Further, the civil penalty system, progressively introduced since 1985, allows for little or no mitigation when errors or defaults are made by taxpayers. It is tempered only by a concession that in cases where Customs are extremely late in making repayments Customs will pay a compensation supplement. Because these sanctions against underpayment of VAT are heavily biased in favour of the Revenue it is hard to see the justification for tilting the administrative balance of the collection system any further in favour of the department. If a realisation of that fact was at least part of the reason for Customs withdrawing from the Philips case, it would be an encouraging sign of as yet unseen maturity in the administration of VAT. The author is senior tax manager at City solicitors Ashurst Morris Crisp. 
ID: 3330
HEADLINE: FT  25 APR 91 / UK Company News: Ensign Trust completes Argosy sale 
TEXT: Ensign Trust has completed the disposal of Argosy Asset Management, its wholly-owned investment management subsidiary which is being wound down after losing the management in March of the main Merchant Navy Officers Pension Fund valued at Pounds 1.5bn. Ensign, 78 per cent owned by the MNOPF, is selling Argosy's remaining interests to Aberdeen Trust for Pounds 900,000 cash. Earlier this month it announced the sale of the bulk of Argosy's investment management interests to Ivory and Sime for Pounds 1.75m. Ensign also owns 39 per cent of Aberdeen's ordinary share capital. The interests to be sold include those in Argosy's fund management subsidiaries in Australia, Luxembourg, Scotland and Finland. 
ID: 3331
HEADLINE: FT  25 APR 91 / UK Company News: Ashtead seeks Pounds 5.8m and sees profit fall 
TEXT: THE ONRUSH of equity financing in the construction industry continued yesterday when Ashtead, the acquisitive plant hire group, announced it was raising approximately Pounds 5.8m net of expenses in a 1-for-4 rights issue. The issue of 4.49m new ordinary shares at 135p represents a 15.6 per cent discount to Tuesday's market price. Yesterday the shares slipped 2p to 158p on the news. The new shares will rank for the final dividend for the year to April 30. The move is aimed at strengthening the group's financial position to enable it to take advantage of the opportunities for expansion in the wake of the recession, directors said. 'Our competitors clearly have had a horrid time, and we expect more to go into receivership as conditions improve,' said Mr Peter Lewis, chairman. Historically bankers have tended to let their troubled customers go when it looks like they are going to be able to sell their assets, he explained. Additionally, Ashtead considers that its 5 per cent share of the highly-fragmented UK plant hire industry leaves it with significant scope for further expansion. The group's strategy through the current UK recession has been to maintain its business infrastructure of 49 profit centres and increase its market share even at the expense of short-term profitability. The rights issue was announced as Ashtead forecast a near-halving of pre-tax profits for the year to April 30. In the absence of unforeseen circumstances profits will be not less than Pounds 4m and earnings per share not less than 14.3p, the company said. This represents a 49 per cent fall in profits from last year's Pounds 7.82m and a 50 per cent drop in earnings per share from a previous 28.44p. Trading conditions deteriorated in the second half, following a disappointing first half which saw profits fall 31 per cent to Pounds 2.5m (Pounds 3.6m). Operating margins, although still among the highest in the industry, slipped from 20 per cent to 18 per cent in the second half, resulting in a forecast of 19 per cent for the whole year. Pending acquisitions, the proceeds of the rights issue will be used to reduce borrowings which have risen to about Pounds 14m. Gearing, which stood at over 83 per cent at the year-end will come down to about 40 per cent, directors said. 'I think we have taken our medicine in the form of this year's results, and now we stand a better chance to benefit from any upturn in the industry,' Mr Lewis said. On the basis of its profits forecast, the group expects to recommend a final dividend of not less than 3.025p making a total of 4.125p (3.75p). 
ID: 3332
HEADLINE: FT  25 APR 91 / UK Company News: Sovereign Oil expands 
TEXT: SOVEREIGN OIL &amp; Gas, the North Sea exploration and production company, reported an advance from Pounds 1m to Pounds 3.9m in pre-tax profits for 1990 after a strong rise in oil prices at the outset of the Gulf crisis. Mr David Biggins, managing director, said he hoped for some stability in the value of sterling against the dollar this year to provide a reasonable future for the company's business. The weakness of the dollar against the pound had produced an oil price of Pounds 8 per barrel in February which was 'sheer misery' for North Sea independent oil producers, he said. Sovereign is partly hoping to hedge its exposure to the dollar oil price by increasing its stake in the Victor gas field which sells gas to British Gas on long-term contracts priced in sterling. Sovereign increased its stake in the field from 3 to 5 per cent with a Dollars 30m purchase from Superior Oil, an affiliate of Mobil. Turnover rose to Pounds 20.4m (Pounds 12.3m). Earnings per share increased from 0.9p to 4.9p. 
ID: 3333
HEADLINE: FT  25 APR 91 / UK Company News: Increased interest payments reduce CWS to Pounds 19.1m 
TEXT: CO-OPERATIVE Wholesale Society, the co-operative trading company which has substantial interests in retailing, farming and manufacturing, raised trading profits from Pounds 30.7m to Pounds 44.1m in the year to January 12. However, pre-tax profits fell from Pounds 19.7m to Pounds 19.1m after a higher interest charge of Pounds 21.8m (Pounds 13.8m). And following a Pounds 10.9m loss arising from bad-debt provisions in the banking group there was only Pounds 12.3m transferred to reserves in comparison with Pounds 34.7m last year. Sir Dennis Landau, chief executive, said the society's property development and engineering businesses had also proved vulnerable to the downturn in the economy but that retailing had proved resilient and had increased profits by Pounds 6m. He singled out for praise the performance of the Scottish retailing arm which which operates a wide spread of outlets, ranging from superstores to small shops in the Orkney, Shetland and Western Isles. In total, the group's retailing activities now represent 30 per cent of turnover. Almost half of CWS's business is accounted for by supplies to its retail society shareholders although these operations are run on a cost-recovery rather than a profit basis. Sales topped Pounds 3bn for the first time climbing from Pounds 2.68bn to Pounds 3.03bn as the society benefited from the inclusion of North Eastern Co-op, which joined CWS in June. During the year, CWS spent almost Pounds 150m on capital expenditure. Sir Dennis said this had helped sow the seeds for future development which augured well for the future of CWS and the Co-op as a whole. 
ID: 3334
HEADLINE: FT  25 APR 91 / UK Company News: Scottish Power boosts options 
TEXT: SCOTTISH POWER, the larger of the two Scottish electricity companies due to be floated in May, said it had raised its exposure in the electricity options market with a 77 per cent increase in its option contract with the 12 English regional electricity companies. It also said that losses of supply contracts to industrial customers in its own area in the current round were significantly smaller than in last April's round. Last year Scottish Power lost 6 per cent of its business with large industrial customers - which take more than 1MW - measured by volume. Although that is lower than the losses suffered by the regional companies in England, Scottish Power emphasised that it was not immune from competition in Scotland and that has had a 'material' effect on the prices it can charge. Scottish Power increased its power sales in volume terms in the past year by 7 per cent through exports to England. The company has agreed option contracts covering 320MW of power to the regional companies compared with 180MW last year. This is not a contract to supply electricity but a financial instrument under which Scottish Power guarantees a price for power which applies when the price prevailing in the electricity pool exceeds it. The regional companies pay an initial fee and Scottish Power still expects to make money if it has to supply the power. Mr Michael Smith, marketing and distribution director, said Scottish Power had signed option contracts with industrial users in England in the current round of contracts which outweigh by three-and-a-half times the contracts lost. Scottish Power recently agreed with another supplier an option contract for well over 200,000 gigawatt hours of power with an unnamed customer, offsetting option contract losses of 83,000 gigawatt hours. Mr Smith said that Scottish Power's retail shops had roughly doubled their share of the south of Scotland white goods market last year to about 25 per cent, thanks to a large scale reorganisation and upgrading of its shops. 
ID: 3335
HEADLINE: FT  25 APR 91 / UK Company News: Aquascutum chairman retires a year after takeover by Renown 
TEXT: MR GERALD Abrahams, chairman of Aquascutum, has retired from the board of the fashion company after 44 years' service. His departure comes almost exactly a year after the acquisition of Aquascutum by Renown, Japan's biggest clothing company. At the time of the takeover, Mr Abrahams said that he looked forward to working with Renown and continuing to run the company from London. But his departure and the appointment as chairman of Mr Paul Bennett, previously head of the company's Far East operations, is perhaps an indication of the greater in-fluence Renown is now intending to exercise over the business. In particular, Renown is planning to speed up the development of the company in North America and the UK. Mr Bennett has also been appointed joint managing director along with Mr James Stokes, the former vice-chairman. Mr Abrahams' wife, Marianne, who was the ladies fashion director, has also retired from the board. They have however, been appointed the company's president and vice-president respectively. 
ID: 3336
HEADLINE: FT  25 APR 91 / UK Company News: Austin Reed down 48% as white-collar recession bites 
TEXT: AUSTIN REED, the upmarket clothing retailer and manufacturer, blamed a dearth of tourists and a 'white-collar recession' for a decline of nearly 48 per cent in pre-tax profit for the year to January 31. The taxable figure fell from Pounds 6.9m to Pounds 3.6m, the lowest since 1983. Turnover declined by nearly 8 per cent to Pounds 78.4m (Pounds 85m) and trading profit by 34 per cent to Pounds 6.5m (9.9m). Interest charges were little changed at Pounds 2.9m (Pounds 3m). Mr Barry Reed, chairman and grandson of the founder, said the start to the current year had been the worst he could remember. He has been on the board for 33 years. The final dividend is held at 6.5p, making an unchanged total of 9.5p. This was only just matched by earnings per share of 9.5p (17.3p). An extraordinary loss of Pounds 1.3m on the closure of Cashmeres of Scotland led to a retained loss. Cashmeres, which was built up to 11 small US branches, had entailed an investment of Dollars 2.2m (Pounds 1.3m) over the past 3 1/2 years, said Mr Reed. Over the past two years it had lost Pounds 1.1m. On UK trading, he said: 'The Gulf situation caused tourism to dry up which affected retailing in London. 'While womenswear stayed level with the previous year, men's tailored clothing was difficult. This recession has been atypical because it has been a white collar one in London and the south-east.' The group had closed two branches leaving a total of 40. About 10 per cent of the 2,000 jobs in retailing and manufacturing had been shed. In manufacturing, exports were up, sales to other retailers were 25 per cent down and inter-company sales were static. Borrowings (including credit finance) peaked at Pounds 20m but finished the year at Pounds 14.5m (Pounds 13.7m), compared with shareholders' funds of Pounds 54m (Pounds 55.8m). COMMENT It is possible to defend these figures as 'no worse than expected,' bearing in mind the company's dependence on the highly elastic, south-eastern end of the men's suit market. But there is still plenty of scope to quibble. Some of the customers, for instance, must be in the less-squeezed, mortgage-free bracket; the Cashmere venture was a failure; and the figures would have been even worse but for a Pounds 500,000 property profit and a sharp cut in capital spending. This year started with a 17 per cent sales fall in February, since when some ground has been made up. Progress will come from eliminating Cashmere's losses and lower interest payments; tight cost control is promised. A forecast pre-tax profit of Pounds 4m, but a higher tax rate, gives a prospective p/e of nearly 18 on the A share price of 170p. Japanese takeovers of Daks-Simpson and Aquascutum have stirred up some speculative interest, but with 60 per cent of the stock held by family, directors and friends, it looks as though it will be up to the present management to make better use of the prime sites and prestigious brand names. They should be helped considerably by economic recovery. 
ID: 3337
HEADLINE: FT  25 APR 91 / UK Company News: Ibex talks could lead to offer below market value 
TEXT: IBEX, the USM-quoted recruitment and employment agency, said yesterday that it was in talks that might or might not lead to an offer being made at a price materially lower than the current market value. The announcement sent the shares plummetting 7p to 11p. At 18p, they were standing at their lowest point since the company joined the USM in April 1989, representing a steep decline in the company's market value since it floated at 175p per share. Ibex's market capitalisation at yesterday's closing level was Pounds 1.5m. Ibex and Hoare Govett, its financial adviser, said they could provide no further information on the situation. Last September, the company reported that it had just broken even in the six months to end-June, producing pre-tax profits of Pounds 7,000 against Pounds 1m in the corresponding period. That was after finance charges of Pounds 477,000 (Pounds 169,000). Earnings per share were nil (5.7p). Mr Hugh Laughland, chairman, then blamed the deterioration on a 'substantial reduction' in demand for the group's services. Turnover was up at Pounds 17.77m (Pounds 15.23m) owing to an increased number of branches. He also said the company had agreed to sell P&amp;M, its advertising business, for a nominal sum. The other main businesses are Austin Benn, a recruitment consultancy for sales and marketing staff and ABC Contract Services, which supplies temporary staff for the construction, warehousing and distribution industries. 
ID: 3338
HEADLINE: FT  25 APR 91 / UK Company News in Brief 
TEXT: PEEK has acquired 80 per cent of Philips Verkeers-en Vervoerssystemen, a subsidiary of Philips of the Netherlands, for an initial Fl 13.1m (Pounds 3.9m). Consideration will be satisfied via the issue of 6m ordinary shares, with any balance in cash. Peek has an option to acquire the remaining 20 per cent within three years. ***** ROYAL BANK of Scotland is to transfer the business of its Chicago, Houston and Los Angeles representative offices to its two main offices in New York and San Francisco. ***** SAATCHI &amp; SAATCHI: acceptances under the rights issue, including subscriptions and commitments by certain US shareholders in a private US placement, have been received in respect of 494.43m new ordinary, or 89.5 per cent. Directors and others have subscribed and committed Pounds 5m in respect of the management investment. ***** WATTS BLAKE Bearne has agreed to pay Pounds 5.3m cash to acquire the majority of the German clay operations of Didier-Werke. ***** YOUNG GROUP has obtained concessions from the Venezuelan Ministry of Mines to extend the operational reserves of subsidiary Carbones de Naricula to 30m tonnes over ten years. ***** YORKSHIRE CHEMICALS has acquired Opca of Milan for Pounds 1.9m cash. Opca serves the Italian leather industry with finishing products. 
ID: 3339
HEADLINE: FT  25 APR 91 / UK Company News: Disposal helps limit fall at British Dredging 
TEXT: a period when the UK building trade hit a severe recession - British Dredging managed to limit its profits fall to just under 14 per cent, from Pounds 4m to Pounds 3.45m. The final dividend is raised to a proposed 4.8p, to lift the total from 7p to 7.4p. This marine dredging company is also involved in the supply of sand and gravel, the manufacture of paving blocks, other concrete products and tiles, builders' merchanting and ship repairing. Mr Fane Vernon, chairman, said that the structure of the group was changed significantly during the year by the sale in April of a 50 per cent stake in British Dredging Aggregates to RMC Group for Pounds 4.39m and by July's acquisition of Selco Trade Centres, the building materials supplier, for an initial Pounds 3.5m. Mr Vernon noted that the Pounds 443,000 contribution from Selco partly offset reduced trading profits from established operations, where concrete products fell to Pounds 792,000 (Pounds 1.23m) and marine aggregates to Pounds 331,000 (Pounds 1.79m). Group operating profits were down by Pounds 1.42m at Pounds 1.9m, though the share of profit of associated undertakings rose to Pounds 308,000 (Pounds 13,000) and net interest received almost doubled to Pounds 1.25m (Pounds 674,000). Earnings slipped to 13.06p (14.53p) per share. There was an extraordinary gain of Pounds 2.58m (Pounds 322,000) relating mainly to proceeds from the disposal to RMC. The company was proud of its 'very strong' position, with net short-term cash deposits, loan notes and investments at the year-end totalling Pounds 7.2m (Pounds 6.9m). 
ID: 3340
HEADLINE: FT  25 APR 91 / UK Company News: ADT reveals Dollars 96m provisions against sold Sechura businesses 
TEXT: ADT, the Bermuda-based car auction and security group, has made provisions of Dollars 95.7m (Pounds 56m), against businesses recently sold by Sechura, a Canadian former associated company in which Mr Michael Ashcroft, ADT's chairman and chief executive, has revealed an interest. In a footnote to its annual report, filed with the Stock Exchange yesterday, ADT revealed that last year Sechura disposed of a string of loss-making businesses, and reorganised its capital structure. As a result of that restructuring, ADT's former 47.8 per cent interest was eliminated. Consequent on Sechura's restructuring, said the annual report, and 'given the uncertainty with respect to the future value' of the businesses Sechura has disposed of, ADT recorded 'provisions totalling Dollars 95.7m against the carrying value of amounts owed by and investments made in these operating businesses'. The ADT report added: 'While the company may recover a portion of this sum, the amount and timing is uncertain.' The businesses Sechura disposed of had been sold to it by ADT in 1987. Documents issued in December 1990 as part of Sechura's restructuring said that Mr Michael Ashcroft and his wife, Susan, between them owned 29.1 per cent of voting shares in Sechura. Earlier this month Laidlaw, a Canadian waste management group which owns 28.4 per cent of ADT, sued the Bermuda-based group in a New York court, alleging that transactions between ADT and Sechura had led to an 'illusory profits stream' for ADT. The allegations were rejected by ADT, which threatened a counter-suit for defamation. Laidlaw withdrew its suit last week following an agreement that gives it four seats on the ADT board and ensures that outsiders outnumber executive directors there. Laidlaw insisted, however, that it had only withdrawn, not dropped, its case against ADT and said that investigations into its allegations would continue through an audit committee set up by the new independent directors. The ADT annual report makes no mention of Mr and Mrs Ashcroft's stake in Sechura, and says: 'There were no contracts of significance during or at the end of the year in which a director of the company is, or was, materially interested.' ADT shares closed 3p lower yesterday, at 86p. See Lex 
ID: 3341
HEADLINE: FT  25 APR 91 / UK Company News: Fall in US visitors hits Partridge 
TEXT: Shares of Partridge Fine Arts yesterday fell by 6p to 73p after the antique furniture dealer warned shareholders that trading in the current year had been badly affected by the fall in the number of visitors, particularly from the US. Mr John Partridge, chairman, told the annual meeting that the decline in trading would hit first half profits. The position would not improve until more people came to the UK. Turnover rose 2.9 per cent to Pounds 13.2m for the year to end-October, although pre-tax profits advanced 28 per cent to Pounds 4.1m as a result of increased cash resources. 
ID: 3342
HEADLINE: FT  25 APR 91 / UK Company News: Poor second half as CI dips 38% 
TEXT: CI GROUP, the formerly acquisitive steel and engineering concern, saw pre-tax profit fall 38 per cent to Pounds 4.83m in the year to January 31. The decline, from Pounds 7.77m, came in spite of a 9.5 per cent turnover increase to Pounds 93.75m (Pounds 85.61m). CI said this was accounted for by acquisitions early last year. Mr Albert Hargreaves, chairman, said the pain of UK recession had been felt since October. Only Pounds 1m was added to interim pre-tax profits of Pounds 3.8m. In the steel division, turnover expanded 8 per cent to Pounds 49m, but pre-tax profit fell 34 per cent to Pounds 3.2m. Worst hit had been sales of reinforcing material to the construction industry. Engineering turnover rose 11 per cent to Pounds 44.7m, but profit fell to Pounds 1.62m. The capital goods business slipped into loss as sales plummeted by a third. Early this year, Mr Cedric Grew, a driving force behind the acquisitions policy, resigned as chief executive. He was replaced by Mr Rob Yates, the former head of the steel division. Mr Hargreaves said the resultant review of activities had focused on the problem areas of reinforcing, capital goods and part of the foundry business. Two factories had been closed and further rationalisation was going on. An extraordinary charge of Pounds 1.46m (Pounds 696,000) was made. Some unspecified costs were also incurred above the line, as the workforce was cut by 7 per cent to 1,500 and Mr Grew was paid off. Mr Hargreaves said the group had grown quickly and encompassed 20 companies. 'But probably 80 per cent of the turnover is generated by 20 per cent of them.' It would concentrate on areas where it had a significant market share or a concentration of management skills. A prime example was industrial flooring, where Redman Fisher Engineering had won a Queen's Award for export. Operating profit fell to Pounds 6.64m (Pounds 9.31m) and interest charges rose to Pounds 1.81m (Pounds 1.55m). Year-end gearing was reduced to 40 per cent (44 per cent) of shareholders' funds of Pounds 16m (Pounds 17m). Capital spending was cut from Pounds 3m to Pounds 2.5m. Earnings per share slid to 3.77p (5.93p). A slightly reduced final dividend of 1.225p leaves the total unchanged at 2.05p. COMMENT Several nettles have been grasped at CI, as the changed leadership has given belated priority to managing recession rather than growth by acquisition. Cash has started to move in the right direction and orders have picked up since a dismal February. With 79 per cent of sales in the UK, the group has obvious vulnerability and many uncertainties remain, not least over how much more the reorganisation will cost. A second-half improvement might rescue profit to another Pounds 4.8m, a prospective p/e of 7.8 on yesterday's close of 29 1/2 p. Its 25 per cent discount to the engineering sector reflects uncertainty over both trading prospects and the results of the reorganisation. Until the picture is clearer, the share price is unlikely to make much headway. 
ID: 3343
HEADLINE: FT  25 APR 91 / Trading decline sees Dencora fall to Pounds 2m 
TEXT: With the management preferring to retain commercial properties rather than sell them at the depressed prices of 1990, Dencora, the East Anglian property group, saw profits fall from Pounds 7.06m to Pounds 2.21m pre-tax in the 12 months to end-December. Net asset value was down 17 per cent at 280p (336p). Turnover dropped to Pounds 34.34m (Pounds 41.22m), with a contraction in trading to Pounds 27.31m (Pounds 36.1m) and an expansion in rental income to Pounds 7.04m (Pounds 5.13m). Net interest payable was Pounds 405,000 higher at Pounds 5.35m. Fully diluted earnings tumbled to 7.7p (21.6p) but the single dividend is maintained at 5.5p. Bank borrowings at the year-end were up at Pounds 71m (Pounds 59m). 
ID: 3344
HEADLINE: FT  25 APR 91 / Manchester wins Olympic heat 
TEXT: LIKE A bruising heavyweight boxer scoring a famous victory, Manchester out-slugged London yesterday and won the right to bid for the Olympic Games in the year 2000. The result was a terrible mauling for the capital but a powerful boost to Manchester and north-west England. At a meeting of the British Olympic Association (BOA) in London, Manchester won unanimous support for its bid and was thus catapulted into the billionaire bidding game that will preface the millennial Olympics. The host city for the Games of 2000 will be chosen by the International Olympic Committee in September 1993. Manchester's rivals are expected to include Berlin, Peking, Sydney, Milan, Brasilia and Belgrade. Last September Manchester was roundly defeated in its bid to stage the 1996 Olympics, which were won by Atlanta. But it says it has learnt from that episode, and that its new bid will be better and stronger. Mr Bob Scott, chairman of the Manchester Olympic bid committee, said yesterday: 'We're going to go hell for leather for 2000. This is not just Manchester's bid. It is the British bid.' London's campaign was led by Mr Sebastian Coe - Olympic gold-medal runner, millionaire world record holder and would-be Conservative MP. After losing the vote, Mr Coe, crest-fallen, claimed London had mounted a credible bid. The hope had been that a successful London campaign would have proved a fillip for development in the Docklands area of east London and a spur to accelerating transport and other spending. But Mr Coe was floored by a campaign led by an even richer man, the Duke of Westminster, president of the Manchester committee, who told the BOA that he was not a Londoner but had lived in Chester for 22 years - and his family for 900. From the briskness and gumption displayed by the Duke and his colleagues, it was clear Manchester was going to keep bidding for the Olympics until it won them. Manchester city council has said it will underwrite the bid. Fourteen Olympic-style sports venues are said to exist already in Manchester and the North-west, with eight to be built or under construction by September 1993 and a further five at the planning stage. Manchester claims that its transport infrastructure is the best in Britain, and that the core sports venues and planned Olympic village would be within 15 minutes of each other. Mr Graham Stringer, leader of Manchester city council, said: 'We are determined to give Manchester, and Britain, the best possible platform for its case to host the 2000 Games.' A study by Kleinwort Benson has forecast an Olympic operating surplus of around Pounds 190m if Manchester wins. According to insiders Manchester beat London because of the technical competence of its experience of Olympic in-fighting. What hampered London, it is thought - the BOA would not say - was the capital's lack of an umbrella council, its crowdedness, grime, and terrible transport. Yesterday it was tottery old London versus a wily and free-punching northern foe - virtually a push-over. 
ID: 3345
HEADLINE: FT  25 APR 91 / IMF urges cut-off point for benefit 
TEXT: A CUT in the length of time during which unemployment benefit is paid in Britain is urged by the International Monetary Fund, which also warns that the UK is facing the deepest recession of the Group of Seven leading industrial countries. The IMF's suggestion of the benefits limit is a part of a package of measures intended to curb the UK's high level of wage increases. In its World Economic Outlook, the IMF says that action is needed to increase the responsiveness of British wages to market conditions and to promote labour mobility. It also suggests 'increasing training programmes and improving the functioning of labour exchanges' to prevent a rise in unemployment in the recession similar to the sharp increase witnessed in the early 1980s. Britain must maintain monetary and fiscal policies 'conducive to a substantial downward adjustment in the growth of wages,' the IMF says. While warning of the depth of the recession, the IMF says there is 'little scope for a significant reduction in UK interest rates' unless this is fully justified by sterling's position in the exchange rate mechanism of the European Monetary System and clear signs that underlying inflation is falling. IMF projections point to a sharp 2.1 per cent drop in UK gross domestic product this year. Growth next year is forecast at around 1.9 per cent. However, unemployment will keep on rising in 1992 and is expected to average 8.5 per cent of the labour force next year compared to 7.5 per cent this year and just 6 per cent in 1990. Britain faces several years of slow growth, it indicates. Between now and 1996 the IMF expects GDP growth in the UK will lag slightly behind the average annual increase of 2.1 per cent which was seen in the 1980s. The IMF did not elaborate on its suggestion for a cut-off point on unemployment benefit. The government said yesterday that it was keeping the impact of the benefit system on the labour market under review but insisted that it was not considering any proposals to cut the duration of unemployment benefit payments. Basic unemployment benefit, currently Pounds 41.40 a week, is paid in Britain for up to a year, but after that individuals who have no savings can claim indefinite income support at only a slightly lower weekly rate. Mr Tony Blair, shadow employment secretary, said: 'It would be wrong to think that a cut in the period of unemployment benefit would, of itself, bring lower unemployment.' Mr Blair endorsed other comments in the report, saying: 'I would agree with the IMF in the importance of better training, a better employment service and, in particular, we believe it is right now to adopt a temporary work programme to prevent the unemployed becoming long-term unemployed.' 
ID: 3346
HEADLINE: FT  25 APR 91 / The Lex Column: Lyonnaise 
TEXT: There was some confusion in Paris yesterday about what to make of last year's FFr1.425bn net profit from Lyonnaise des Eaux-Dumez, the first set of results since the utilities and construction groups merged their activities in September. A figure close to FFr1.5bn had been forecast in the pro forma profit and loss account. Lower than expected capital gains as well as a disappointing performance from the Canadian construction materials group Westburne appear to be responsible for the shortfall. Lyonnaise shares slipped FFr9 to FFr618 on the day, though that may have had as much to do with the forecast that this year's earnings would only advance in line with the likely 5 to 10 per cent increase in sales. At this early stage of the venture, it is difficult to tell whether Mr Jerome Monod's vision of an integrated group solving problems of infrastructure around the world will succeed. He certainly would appear to be getting the upper hand in what many suspected would not turn out to be a marriage of equals, or so the earlier than expected disposal of Dumez's electrical equipment businesses would suggest. That might even point to a Westburne sale as part of the ongoing programme of asset sales, though now is hardly the best time in the cycle to be speeding it along. French utilities have been popular with investors and Lyonnaise has outperformed the market by 5 per cent over the last year. But the market's hesitancy is reflected in the fact that its rival, Generale des Eaux, which swallowed Societe Generale des Entreprises that much earlier, has outperformed by 10 per cent over the same period. 
ID: 3347
HEADLINE: FT  25 APR 91 / The Lex Column: ADT 
TEXT: Given the habitual secrecy of ADT's chairman Mr Michael Ashcroft, it was never to be expected that the company's annual report would give many clues to the real state of its affairs. But it does confirm what a deplorable muddle ADT has become. Investors have every reason to ask why the disposal of ADT's 48 per cent holding in Sechura has given rise to a Dollars 96m write-off, or indeed why there is no suggestion in the accounts that a principal shareholder in Sechura was Mr Ashcroft himself. Above all, there is no real explanation of why a year which saw the issue of ADT paper to the value of Dollars 335m also saw a horrendous drop of Dollars 842m in the group's cash mountain. As always, the answer will lie not in the group's operating businesses but in Mr Ashcroft's dabblings around the fringe. So far as can be told from an exceptionally opaque flow of funds statement, the operating businesses net of capital expenditure, tax and dividends were broadly cash neutral in the year. The same dabblings doubtless lie behind the drop of almost 20 per cent in the group's net asset value in the year. It would be nice to know what has happened to Mr Ashcroft's salary as a result of all this. Needless to say, in accounts certified by Coopers &amp; Lybrand 'in accordance with auditing standards generally accepted in the UK', we are not told that either. 
ID: 3348
HEADLINE: FT  25 APR 91 / The Lex Column: Laura Ashley 
TEXT: The transformation of Laura Ashley from small family business to closely scrutinised public concern has been a painfully fraught affair. However, yesterday's announcement of a second consecutive annual loss may prove the nadir of the group's fortunes. Much has been achieved over the last year, not least the overdue closure of its manufacturing plants. Gearing has been brought under control through the disposal of peripheral assets, the arrival of new Japanese capital and impressively brutal financial controls. Stock in the core Laura Ashley business, for example, has been slashed by more than a fifth. There is a long way to go before the group can make the most of its prized asset: an international brand name which covers an enviable product range. There is still a big marketing challenge to be addressed, notably in clothing, where the image badly needs bringing up to date. Cost pressures from rents and wages remain intense, the plight of UK retailers is getting no better, and the company has still to master the art of dealing with third-party suppliers. The shares - up a penny at 80p yesterday - have risen roughly 50 per cent since late January. At that level, the prospective multiple is more than 20 times for 1992. It will be some years before police horses are again controlling crowds desperate to throw money at a Laura Ashley issue. 
ID: 3349
HEADLINE: FT  25 APR 91 / The Lex Column: Industry surveys the gloom 
TEXT: FT-SE Index: 2,488.6 (-15.2) A couple of days ago, the UK chancellor announced that his assessment of the economy would henceforth rely more heavily on anecdotal surveys of consumer and business confidence. The latest quarterly survey from the British Chambers of Commerce will have dampened his spirits accordingly. The level of home and export orders is plunging faster than ever, in both manufacturing and services. Expectations on employment and investment are down again, as is capacity utilisation. Against the odds, there is a modest revival in business confidence. Significantly, though, it relates more to sales than to profitability. There is room for slight scepticism on the findings, since the Chambers of Commerce survey does not have the same long history as that of the Confederation of British Industry. But there is no reason to suppose the two will differ radically. If the CBI confirms the picture in its quarterly survey next week, the equity market will have to rethink the timing on the recovery of the UK economy as a whole. Equally, the chancellor might be tempted to rethink his views on interest rates. But as luck would have it, sterling is proving a minor casualty in the battle between the D-Mark and the dollar, besides perhaps suffering from market nerves ahead of next month's UK local elections. Earlier this week, it was the second strongest currency in the ERM after the peseta. It has now fallen to fifth place. There is no real threat from the mooted rise in German interest rates, since the D-Mark has meanwhile dropped to second bottom in the system after the French franc. But with sterling now bang in the middle of its divergence range, it is a risky time for UK rates to move aggressively the other way. 
ID: 3350
HEADLINE: FT  25 APR 91 / Letter: Water meters - a fair but costly option 
TEXT: Sir, Mr D. A. Fagandini is quite right (Letters, April 20) to point out that substantial cost savings are possible with a water meter, though much depends on the size of the property concerned and the customer's consumption. Thames Water has regularly told its customers about the meter option. We give details every year with our billing document and our customer service staff will offer advice to anyone who calls. We believe that metering is the fairest option but it would be vastly expensive to meter all private premises in our region. This is especially true in London where installation costs could be as high as Pounds l,000 per property because of the need to separate supply pipes. This should be seen against an average household's annual bill of Pounds 130 - among the lowest in the UK, and Europe. Our price rises - up to 4.5 per cent above inflation for the next five years -are necessary to correct years of under-investment. Our aim is to give customers one of the best water and sewage services in Europe and meet the highest environmental standards. M R Hoffman, group chief executive, Thames Water, 14 Cavendish Place, W1 
ID: 3351
HEADLINE: FT  25 APR 91 / Letter: Quite a time for teenagers 
TEXT: This has been quite a time for the economic teenagers - those who rush to dramatic but volatile conclusions on the basis of ephemeral indicators. At the end of last week there were cries of 'credit crunch' on the basis of a one-month drop in seasonally adjusted bank lending this March to Pounds 0.7bn (or 0.1 per cent) compared to an average of Pounds 5bn in each of the preceding six months. A reduction of base rates, we were assured, was now urgent. Then on Monday there was the opposite alarm. The volume of retail sales in March rose by 3.7 per cent above that of February. Now we were told that base rate reductions must be put on hold in view of the vigorous rebound in consumer spending. Both conclusions were of course absurd. Next Tuesday we will have the Bank of England's analysis of bank lending on a three, six and 12-month basis. It has already told us that, on any of these bases, narrow money (M0) is well within, but not below, the government's target range. Broad money, which the government does not target, has been growing by between 6.8 and 9.9 per cent per annum - if anything, reassuring compared with the double-digit rates experienced for so long. The idea of a retail sales boom is even more absurd than the opposite one of a credit crunch. The main reason for the March upsurge was, of course, the desire to beat the April VAT increase. A secondary factor was the early Easter. On a slightly longer view, sales volume fell smartly in the final three quarters of 1990 and recovered very slightly in the first quarter of 1991 to end up half a per cent lower than a year ago. In other words, sales are just about dragging themselves off the bottom. The trade figures are not now as fashionable as credit and retail sales. This is partly because the recession has reduced imports, while the discovery by the Central Statistical Office of hitherto unrealised invisible earnings has diminished the current deficit by some Pounds 6bn per annum. Nevertheless, teenagers found the estimated March current deficit of Pounds 432m 'disappointing' and 'double your money'. Why? Because it was twice as high than February's erratically low deficit and because the so-called market consensus was for a deficit of Pounds 300m. This latter guess was simply the average of the previous five months; and the actual shortfall from it was very well within the normal range of variation. The entire deterioration is due to a swing from an erratically high surplus in volatile items, such as aircraft and precious stones in February, to an erratically low one in March. If we look at quarterly export volumes, and exclude oil and erratics, they have been roughly level pegging since the second quarter of 1990, with small fluctuations in both directions. Imports, on the other hand, have been very gradually declining with economic activity. Arguments about the importance or otherwise of the balance of payments will well up again with economic recovery and will not be stilled until there is a single European currency and no intra-European payments figures. Roll on the day. ------------------------------------------------ EFFECT OF REVISIONS ------------------------------------------------ Current balance Pounds bn (At annual rate) Old         New 1989                 -19.8       -19.9 1990                 -16.0       -12.8 1990 1st half        -19.2       -19.0 1990 2nd half        -12.9        -6.6 1991 1st quarter         -        -5.8 Source:  CSO ------------------------------------------------ 
ID: 3352
HEADLINE: FT  25 APR 91 / Letter: The stop-go schools of motoring 
TEXT: Sir, You refer to the problems of traffic in densely populated Britain. How does western Germany, with similar population density but already 30 per cent more cars, manage to keep its traffic flowing so relatively well, both on the highways and in the cities? If we introduce further costs for motorists which are out of line with our European competitors, will this not contribute to our economic decline? What about countries such as the Netherlands with much higher population densities? Chris Gannon, Carmela Cottage, High Street, Long Wittenham, Oxon 
ID: 3353
HEADLINE: FT  25 APR 91 / Letter: The stop-go schools of motoring 
TEXT: Sir, If the Cambridgeshire County Council would like to see a real traffic jam ('Paying the price of traffic jams', April 22), I suggest they visit Japan. They might also learn that loading motorists with an ever increasing array of charged penalties or other obstacles makes not a scrap of difference. Adrian Jenkyn, Jenkyn Associates International, 204 Azabu House, 7-13 Roppongi 1-choma, Minato-ku, Tokyo 
ID: 3354
HEADLINE: FT  25 APR 91 / Economic Viewpoint: A country with a fix-price culture 
TEXT: When unemployment exploded in the early 1980s and then continued to climb more gradually, ministers suggested that the phenomenon was related to excessive pay increases. Indeed, the Treasury issued a mustard-coloured paper, The Relationship between Employment and Wages, in January 1985, with the unusual by-line 'Review by Treasury Officials', presumably to show respectability. Respectable or not, the thesis is true - although there is much room to argue about how far the trouble is with money wages, how far with real wages and how far with something more elusive, like real pay objectives. The Treasury paper, written when ERM was under veto, concentrated on real pay and estimated that for every 1 per cent it rose above some appropriate level, employment would fall by  1/2 to 1 per cent (other things being equal, which they are usually not). Ministers were, therefore, puzzled and almost embarrassed when unemployment virtually halved, falling from 11.1 per cent of the workforce in 1986 to a low of 5.6 per cent in 1990, without any visible wage moderation and indeed some modest reacceleration as the last boom got going. The answer to the puzzle is, I am afraid, that part of the fall in unemployment in the late 1980s was unsustainable. Economists who had no political axe to grind hesitated to say this for good reasons. They hoped that there had been a sufficient productivity breakthrough, and not just a temporary boom-related upsurge, to raise the warranted rate of pay growth consistent with high employment. They also hoped that the labour market had become more flexible - that is, more responsive to supply and demand changes - so that pay would respond to any required application of the economic brakes without having to endure agonies of massive unemployment first. These hopes have obviously proved too optimistic, but more definitely on labour market flexibility than on productivity. The official estimates showing annual UK labour cost increases of 11 per cent, based on a 2 per cent fall in productivity for the whole economy are as suspect as the trade figures were before the statisticians found missing invisibles (see below). Productivity has always moved with the business cycle; but the statisticians may well have underestimated even year-on-year productivity, which the CBI puts at nearly 4 per cent in manufacturing. Even with that correction, British labour costs are still rising by about 5 per cent, compared with 1 per cent in Germany. The real disappointment is that pay should have taken so long to respond to the slowdown in demand which has been going on for more than two years. Employers and unions appear to have responded not to fundamentals but to a backward-looking glance at the headline Retail Prices Index. There are two aspects of perverse labour markets. One is the rate of unemployment required to maintain in being any reasonably low and stable rate of inflation, once it has been achieved (the so-called NAIRU, or non-accelerating inflation rate of unemployment). The second relates to the even higher transitional unemployment costs of moving from one rate of inflation to a lower one. Recent academic estimates of the UK NAIRU have varied from 6 per cent to 9 per cent, or 1.8m to 2.5m. Although much too high, it has, if anything, been slightly less than actual average EC unemployment. The real British disease has been the even higher transitional unemployment required to achieve each percentage point reduction in inflation. The late Sir John Hicks used to distinguish between flex-price and fix-price economies. Flex-price economies respond to a slackening of demand by reductions in pay and prices or in their rate of increase. In fix-price systems, wages and prices have a large inertia and adjustments are made by means of quantity. Stocks pile up, outside purchases are curtailed, and workers are laid off. The UK is by and large a fix-price economy. This is shown not only in the stickiness of wage inflation, but of price inflation too in many sectors. Employers respond to difficulties by cutting outside purchases, trimming staff; but they reduce list prices or wages only as a last resort. Eventually, of course, prices and margins do get trimmed and pay increases do come down to what the international competition can justify. But after a painfully long interval when many jobs have disappeared. Gavyn Davies of Goldman Sachs is very likely right in pointing to the parallel with the corresponding stage of the 1980 recession when both the headline RPI and pay settlements suddenly fell with astonishing speed - the latter from 16 1/2 per cent to 9 per cent in the course of the year. This time Davies expects a drop from 10 per cent to 7 1/2 per cent. The headline RPI will not, of course, be the basic cause of wage de-escalation, but the fig-leaf which will be used to justify it. But what a cost this fall in pay settlements will have exacted on both occasions. Unemployment is now rising by some 300,000 a quarter and is likely to be within spitting distance of 3m before the rise tapers off, even assuming a gradual recovery from recession from mid-year onwards. Eventually ERM membership should acquire enough credibility to speed up these adjustments. In any case a change in business culture is as important as changes in laws and incentives. The Thatcher years may have laid the ground for this change. But it has not yet happened. 
ID: 3355
HEADLINE: FT  25 APR 91 / Letter: The real roots of poverty 
TEXT: Sir, As a former teacher in a supposedly 'ghetto' area of New York and today a social services worker in Lambeth, I recognise - and reject - the diagnosis of the underclass offered by the American academics presented in Michael Prowse's sympathetic piece, 'The underclass is no illusion' (April 22). However, if their diagnosis smacks of Thomas Malthus and Samuel Smiles, the alternative that Prowse offers, that of mass relocation of the poor, also has roots in a more repressive era. His suggestion of moving people out of the ghetto en bloc, as was also achieved in 'ghetto' parts of London in the final quarter of the last century and through urban planning in this, is merely an act of dispersal and dilution. Sprinkle the poor through those neighbourhoods with economic abundance, says this theory, and the problems would be set to right. But what is wrong with trying to redress - by economic, educationa1 and other means - the injustices to poor people in the communities in which they already live, and by activities which encourage their existing survival structures? Individuals and families do suffer damage by deprivation, but it has to be said that the problem is not fundamentally the people or even for that matter, the place. What is missing from communities afflicted by unemployment, drugs, or other perils, on either side of the Atlantic, is hope - hope that is associated with individual and group economic progress, community pride, and legitimacy of social institutions. Until American policymakers discard Dickensian fantasies about lifestyles of the poor and start dealing with poverty, they'll be as far off the mark as their Victorian forebears. Yours sincerely Geof Rayner vice-chair, The Public Health Alllance, Snow Hill House, 10-15 Livery Street, Birmingham 
ID: 3356
HEADLINE: FT  25 APR 91 / Hiccups over monetary growth 
TEXT: TECHNIQUES to monitor monetary growth across Europe will be vital to the operation of the new European central bank, due to be set up during the final stages of economic and monetary union (Emu). Officials at the Bank of England, in conjunction with other European central banks, are working on a novel, highly secret approach to this subject. The FT has stumbled upon a Bank briefing paper on the project, part of which we reproduce here. The European Aggregates Targeting (EAT) programme is aimed at finding monetary indicators that will faithfully monitor changes in the pan-European economy. That is no mean task, given the range of economic and cultural conditions across the continent. Britain's role in EAT can be traced to the mid-1980s. Disillusioned with the performance of existing monetary aggregates, a small team of Bank officials started work on a Grand Unifying Theory (GUT) of monetary targeting. The group explored new thinking that went beyond conventional monetarist economics. It drew on people skilled not just in this field but in biochemistry, an area where Britain has a world reputation for innovation. The GUT team's radical approach paid off with the theory that changes in the UK money supply could be modelled on genetically-induced interactions during the digestion of food. The influences of genetic programming on this process were found to be similar to the way that factors such as wage claims, unemployment and production efficiencies affect the money supply. The practical relevance of the GUT ideas was established in a programme of tests, which used human volunteers with a range of genetic characteristics. Virtually all aspects to the trials were satisfactory. Outbreaks of inflation were characterised in the GUT model by localised physiological disturbences. Ingestion of specific foods accurately simulated external economic shocks; lobster for an England cricket victory, rice pudding for an oil-price rise and a well-grilled steak for a broadside from the Bundesbank on price control. More quantitatively, the studies held out the prospect of a new regime of monetary indicators - code-named Biological Universal-Rule Parameters, or BURPs - which would be far better than any previous monetary aggregates. Mr Nigel Lawson, then chancellor, was elated with the project's success. But Mrs Thatcher, then prime minister, was more sceptical; apart from her own personal disagreements with Mr Lawson, she had little confidence in the practical capabilities of UK biochemists, whom she had never forgiven for failing to patent monoclonal antibodies. After Mr Lawson resigned in 1989, the GUT work foundered - until Mr John Major took over as prime minister and recognised its significance to Emu. Mr Major, whose straightforward eating habits based around a liking for ice cream and brown sauce are well known, was instinctively attracted to the GUT concept. He also seized upon the work as a demonstration of how Britain could use its capabilities in the monetary field to the benefit of Europe, following up the UK's pioneering studies on the hard Ecu currency. After Mr Major broached the matter over dinner with the other European heads of state, EAT was born. EAT has led to the establishment of several loosely linked projects across Europe. Germany, France and Denmark have led the way with a joint effort, the Strategic Alliance Aimed at Monetary Indicators (SALAMI). Italy has its Provisional Attempt at Short-Term Aggregates (PASTA) project, while Spain is working on the Critical Inflation-Target Reduction Scheme (CITRUS). EAT has found that, despite the cross-border differences in genetic programming and eating habits, the same basic theories hold across the entire continent. Although it is too early to be sure, we can hold out the hope that ultimately EAT will produce an all-encompassing monetary index for Europe, provisionally labelled the Highly Operational Target Aimed at Inflation Reduction, otherwise known as HOTAIR. 
ID: 3357
HEADLINE: FT  25 APR 91 / Letter: Sophistication of the Polish consumer 
TEXT: Sir, Although I am unable to devote the time necessary to refute each point James Morgan addresses in 'Poland wakes to the day of the deal' (April 13) let me bring just one of his mis-statements to light. In his attempt to characterise Polish consumers as unsophisticated and naive, Mr Morgan writes that Poland is filled with 'goods well past their sell-by dates, which are incomprehensible to most Poles. The labelling of these goods comes in any language but Polish'. For a few weeks last year I conducted an economic experiment by working as a street-side vendor in Warsaw. After all, how could I claim to offer economic advise to Poland without a real, first-hand knowledge of the nuts and bolts of the Polish economy? So I joined the crowd of Polish traders on the night train to west Berlin, stocked up with several crates of Dutch chocolates, returned to Warsaw, and set up shop on Marszalkowska Street. The first thing that virtually every potential customer did was bring my attention to the expired sell-by date. It was the worldly American who had unwittingly purchased out-dated merchandise. Likewise, with the ski jackets I was selling the next week. Although 'Made in China' does not look much like 'Wyprodukowano w Chinach', it was universally understandable - and unfortunately not much of a selling point. It is the clever entrepreneurial spirit of the Poles, not their desire to cheat and exploit, that will lead to Poland's return to 'western' Europe. Andre Spark, adviser, Ministry of Privatisation, Warsaw, Poland 
ID: 3358
HEADLINE: FT  25 APR 91 / Letter: Britain's march from a social market economy 
TEXT: Sir, David Marsh ('A hard act for Britain to follow', April 15) is surely right in identifying a gulf between the German reality of a 'social market economy' and present arrangements in Britain. It is a pity that he didn't emphasise the size of that gulf. The Thatcher era has not only left us with a battlefield of broken 'social' institutions but with brigades of enterprise warriors force-marching human and capital resources in the opposite direction from the social market towards the 'free market'. For example, in the field of vocational training, David Marsh is wrong to say that Britain is already actively trying to imitate the German 'dual system'. The core of the latter is the industrial craft apprenticeships for Facharbeiter (skilled workers), as in the metal-working sectors. British training has been, and is still being, pushed away from the Facharbeiter/craft principle of training for broad-based potential capacities, towards much narrower train-as-you-need-them 'competencies'; a trend that the government's National Council for Vocational Qualifications is actively endorsing. When a British government has to turn social market rhetoric into reality - if only to keep up with the probable institutional harmonisation for common EC standards in training and other employment relations - the necessary U-turn will be on a scale to match the retreat from Moscow. Bryn Jones, INSPIRE, School of Social Sciences, University of Bath, Claverton Down, Bath 
ID: 3359
HEADLINE: FT  25 APR 91 / Leading Article: Days of hope in Moscow 
TEXT: SUDDENLY, there is hope in Moscow. The statement agreed between the leaders of nine republics - crucially including Mr Boris Yeltsin of Russia - and Mr Mikhail Gorbachev, the Soviet president, offers the best possibility in months for ending the zero-sum games which have been the stock-in-trade of Soviet politicians. They have agreed that they must, as soon as possible, sign a new union agreement, adopt a new union constitution and then hold elections for the union parliaments and perhaps the union presidency. But with that, they have explicitly said that those six republics which appear determined to pursue an independent course and not sign a union agreement, and which did not send their leaders to Tuesday's meeting, have the right to do so. At the same time, they warn that those which sign will establish a common economic space, within which 'most favoured nation' status will prevail. The implication is that non-signers will be on the same footing as former fraternal allies in eastern Europe: that is, they can go, but they must then pay hard currency for Soviet oil, gas and other products. This will be hard, but it looks like freedom: an end to the 'internal Brezhnev doctrine'. They have agreed, too, that the anti-crisis programme which Mr Valentin Pavlov, the prime minister, laid before the Supreme Soviet on Monday will be supported and that the strikes now paralysing important parts of the Soviet economy should end. Mr Yeltsin seems ready to lend his authority to the restoration of industrial peace. Step forward This is a big step forward. Most of these republican leaders are increasingly powerful figures, so the deal, if it sticks, marks both a further coup for Mr Gorbachev's political skills and an indication of their own sober sense that they must, in these hardest of times, hang together if they do not wish to choke separately. But it is Mr Yeltsin's signature on the document with Mr Gorbachev's which represents the main political breakthrough. The Russian leader will, in seven weeks' time, run for the presidency of Russia. His previous calculation, that his popularity would increase in inverse proportion to the fall in Mr Gorbachev's seems to have yielded to an appreciation that if he blows too hard, down will come Gorby, Boris and all. If the two most powerful politicians in the Soviet Union can suppress their personal dislike in favour of a political accord with clearly stated aims, the Soviet Union may have a period in which it can peacefully dis-unite. Western aid Such an accord is essential if the country is to receive any of the western aid, investment and technical assistance it must have. There is, however, another large question: is the reform which the republican leaders have agreed to support - the anti-crisis plan - actually serious? Mr Pavlov says he wants to use the power of the state to effect necessary sacrifices, steady the currency, balance the budget and increase production. He has recognised explicitly that a socialist economy with no fear factor cannot work. But he also plans (small) privatisations this year and larger ones next. He urges entrepreneurial behaviour. He has already pushed through price rises, and has even freed some from state control. There is much room for doubt. Many - not all - of the radical economists associated with a more rapid dash for the market distrust Mr Pavlov deeply: after all, as finance minister, he was responsible for debauching the currency. He talks too easily of coercion, of states of emergency and of force. But if, in the fleshing out of his programme, he really is prepared to bequeath decision making to the market-oriented republics and, more importantly, to the enterprises; if he really can provide some space for market behaviour and not simultaneously woo it and beat it, as Mr Nikolai Ryzhkov, his predecessor, did; if he can keep the apparatus at bay - then he may prove to be a reformer after all. And then the Soviet economy may have a chance, even if it is a slim one. 
ID: 3360
HEADLINE: FT  25 APR 91 / Book Review: To the best of his belief 
TEXT: GLOBAL RESPONSIBILITY: IN SEARCH OF A NEW WORLD ETHIC By Hans Kung SCM Press Pounds 12.95, 158 pages This is a small mountain of a book. Its sides are steep and climbed only with frequent pauses for breath, but the view from the top is worth the exertion. The difficulty of the climb stems from the author's ambition. Hans Kung, the prolific Catholic theologian whose teaching licence was withdrawn by the Vatican in 1979, uses this short work to outline his plan to spend the coming years examining the history and theology of Christianity, Judaism and Islam in pursuit of a secure, ethical basis for world peace. The spirit of the enterprise is captured in the book's German title: Projekt Weltethos. What a project] But this is not a book for a closed theological fraternity. Dedicated to a former Bundesbank president, one chunk of the thesis was shared with a momentous meeting of the Davos World Economic Forum in February 1990. In style, the book swerves between brilliantly compressed summaries of, for example, theories of world history (Hegel to Toynbee) and slideshow slogans. Its final words read: no human life together without a world ethic for the nations; no peace among the nations without peace among the religions; no peace among the religions without dialogue among the religions. Kung's thesis states that 'our new, post-colonialist, polycentric age, in post-modernity' needs an agreed ethos which only religion can provide; post-modernism, in his view, set in about 1918. Among its identifying features are technologies capable both of drawing people together (telecommunications) and destroying the planet (nuclear weapons and environmental mis-management). And yet in this world of information overload, there is a simultaneous tendency for old individualisms, cultures, nationalisms and religions to re-assert themselves, most powerfully and obviously in the Islamic world. Kung accepts that 'those who have no religion can also lead a life which is authentically human and in this sense moral', but he argues that without religion there is no absolute or unconditional reason to adhere to or to require adherence to religion's essential tenets: don't kill, don't lie, don't steal, respect parents, love children and avoid immorality. Only religion, he says, has shown itself capable of leading and influencing whole populations, regardless of background and education. Although Kung's unmistakably central European timbre betrays a hint of the evangelist, he makes a specific pitch for unbelievers to join this great dialogue on the grounds that even if you resist the claims of belief, you cannot deny the political and social importance of the fact that millions do believe. Kung thus seeks at once to be open-minded, but loyal to his own creed: steadfastness and self-criticism are the essential qualities he identifies for the task ahead. What, though, is the common threat which binds the great religions? For Kung, the answer is 'the humanum', or basic human values. 'Religion,' he writes, 'is true and good to the degree that it serves humanity, to the degree that . . . it advances men and women in their identity, sense of meaning and sense of dignity, and allows them to attain a meaningful and fruitful existence.' The thread is thus clearly aspiration rather than achievement, and perhaps even as aspiration it is too much the work of a post-Englightenment European mind to carry the weight the author gives it. It would be wrong, however, to imply that Kung is unaware of the Eurocentricity of his intellectual heritage. He rejects both Hegel's and Spengler's seminal theories of history partly on the grounds that they ignore or marginalise Judaism and Islam. Arnold Toynbee, the British historian, is viewed more favourably, but still found wanting in his groping for some synthesised 'world religion'. Kung is surely right to recognise that religions will remain stubbornly factional; the best that can be hoped is that they learn to love dialogue more than they enjoy militancy. As we look from Prof Kung's mountain top, it is not surprising to see patches of haze. In his opening survey of the state of the world, for example, he dismisses Japanese moral and spiritual life with a superficiality which seems over-influenced by newspaper stories about recent scandals in politics and business. But mostly, we should be thankful for Hans Kung and his motivating judgment, that religion remains decisive in human affairs and that peace, if it is to be found anywhere, lies along the road of intelligent and well-researched dialogue. Kung, an antidote to the conservatism of the current Vatican, is the kind of intellectual the late 20th century needs; thorough, engaged and with a global perspective. Towards the end of the book, he mentions in passing the great protestant theologian, Paul Tillich, who gave a lecture in Chicago in 1965, recognising the need to re-work a lifetime of systematic theology in the light of his emerging understanding of world religion. Ten days later, he died. As Kung approaches his mid-sixties, with Projekt Weltethos before him, we can only wish him a long and active old age. 
ID: 3361
HEADLINE: FT  25 APR 91 / Arts: Ten new productions for Covent Garden 
TEXT: A new principal conductor and ten new productions for 1991-92 were announced yesterday by the newly ebullient Royal Opera House, Covent Garden. Edward Downes is taking over on September 1 as principal conductor from Jeffrey Tate. He will also function as associate music director, making life easier for Bernard Haitink. These days 'new' productions tend to have started life in some foreign opera house, but five of next season's repertoire will actually have been created in the House. They are Verdi's Simon Boccanegra, conducted for the first time by Georg Solti and directed by Elijah Moshinsky; a very early Mozart, Mitrodate, re di Ponti, which opens on the actual centenary of his death in December, and a very established Mozart, Don Giovanni; a new production of Wagner's Die Fliegende Hollander to replace the one recently booed off the stage; and the first British professional staging of Rossini's comic opera Il viaggio a Reims. The five 'bought in' productions are Prokofiev's The Fiery Angel, never previously staged at Covent Garden; Das Rheingold, to complete the new Ring cycle; Meyerbeer's Les Huguenots; Bellini's I Puritani (the WNO production); and Britten's last opera, Death in Venice. The general director of Covent Garden, Jeremy Isaacs, also placated his critics by announcing that he was asking many of the members of the chorus aged over 50 to take early retirement. The Minister for the Arts, Timothy Renton, has asked the Arts Council to come up with savings of Pounds 1m on its devolution programme by May 17. He is unhappy with the few savings that have accrued so far from the policy of creating Regional Arts Boards with enhanced responsibilities. So far out of a total Arts Council and RAB payroll of around 500 only 35 jobs are to be lost through the rationalisation. The Minister wants a 10 per cent cut in the payroll bill. Mr Renton has approved the first Arts Council list of 28 devolved arts organisations but it is remarkable for the general unimportance of the companies involved. It includes Aldeburgh, going to Eastern Arts, and Northern Sinfonia, to Northern Arts. There is no mention of the big four London orchestras, the ICA, the Royal Court, or Manchester Exchange, all once earmarked for devolution. It could well be that Tim Renton is not so keen as the Arts Council on devolution. The new Boards are being recruited but they start life, on October 1, not knowing whether they will handle the really major arts companies. 
ID: 3362
HEADLINE: FT  25 APR 91 / Arts: Slippage - Riverside Studios 
TEXT: Vaut le voyage, says the guidebook; or vaut le detour. Not for Rambert's new programme when you have to negotiate the horrors of Hammersmith Broadway. And not, alas, for the way the troupe is performing this season. It may be that the adjustment to an open space from a routine of proscenium appearances has thrown the dancers off balance, but the company style looks to me less polished and purposeful than of late years. A notable exception on Tuesday night was Amanda Britton, who appeared in Richard Alston's Soda Lake. This solo in silence is inspired by Nigel Hall's sculpture, which in turn was inspired by the austere and isolated forms of a dry lake in the Mojave desert. Miss Britton, with her wonderful linear qualities and clear, fluent phrasing, makes a very fine impression in a piece that has previously been danced by men. She reveals the watchful stillness of the piece in movement that is beautifully poised, responding to the two austere metal forms that are the sculpture (like a telegraph pole and a skeletal tree) with images no less pure and controlled. The novelty of the evening was the first performance of William Tuckett's Slippage, fruit of funding from the Ashton Memorial Commission. Tuckett is just starting to make his way as a choreographer with creations for both halves of the Royal Ballet. He is still young, and I am not persuaded that the chance to compose for a modern dance troupe is the best means of extending his skills. For Slippage he has chosen a score of minimalist chatter by Dan Jones, music that provides nothing to sustain choreographic invention save the dubious merit of continuing to do what it has already done at interminable length. The chief incidents of the piece amount to the dancers peeling off layers of clothes - dull, and by Candida Cook - to reveal themselves in dreary underwear (one chap looks like Captain Webb about to embark upon the English Channel). The dance, like the score, goes on. Four couples leap and walk, droop and race over the stage, and part of the choreography has the innocent springiness I associate with revivals of the sacred texts of early Denishawn dance of 60 years ago. It is decent, and unmemorable, and Tuckett has already shown us that he can do better things than this. The problems of the Riverside space were very apparent in the revival of Richard Alston's Dealing with Shadows. It is a piece altogether too sprightly about a Mozart piano sonata, but when it was first seen at Sadler's Wells last year, ebullient performance gave it a superficial charm. In its present setting it looks diffuse and garrulous, and the choice of printed tops and beach trunks as costume makes the dancers seem like gigantic babies. The visual record of this season has not been happy. 
ID: 3363
HEADLINE: FT  25 APR 91 / Arts: Frederick Douglass - New Jersey State Opera 
TEXT: Newark is a romantic and vital place, easily reached from New York by overground or underground train, architecturally explorable, ethnically diverse. The biggest Portuguese community outside Lisbon lives there. Italians abound. And opera in Newark is attended by an eager audience in which English is the last language overheard. The only big new opera to have been staged in or around New York this season is Ulysses Kay's Frederick Douglass, which was put on by the New Jersey State Opera for a single performance in Newark's Town Hall. It's a grand Roman theatre, seating 2,700. One of the company's specialities is verismo - Iris, Lodoletta, Zanetto, L'amico Fritz - performed under a conductor, Alfredo Silipigni, who knows the traditions. Another is loyalty to singers abandoned by the Met: it was in Newark that I heard Birgit Nilsson sing her last Turandot, with Licia Albanese as Liu; and an Attila with Jerome Hines. This season a Carmen with Fiorenza Cossotto was billed, but it fell through. So did the second performance of a star-cast Lombardi, Bergonzi the tenor; I made the trek to Newark only to find a 'Performance cancelled' sign on the door. Money had run out, as in this country it is running out for musical enterprise of all kinds. But Frederick Douglass reached the stage, if only for a single performance. The Mayor of Newark, Sharpe James,appeared as a super. I wish I could write that it was a triumph; instead, I can find nothing to praise. I thought it an incompetent opera. Douglass - a hundred years ago this identifying would not be necessary - was an escaped slave whose oratory and whose published Narrative (Penguin keeps it in print) stirred both the US and Europe. The Narrative tells of a youth whose free, active mind rejected the notion that he and his fellows should be lifelong a white man's owned chattels. William Garrison, the great abolitionist, wrote truly that 'he who can peruse it without a tearful eye, a heaving breast, an afflicted spirit, must have a flinty heart.' David Blake's Toussaint, Thea Musgrave's Harriet, and Anthony Davis's X have given differing examples of how such matter can be more worthily treated. By comparison with those operas, Frederick Douglass seems cheap and unworthy. Kay and his librettist, Donald Dorr, concocted a clumsy, long-winded drama - untrue to history, crudely and conventionally 'operatic', wholly unconvincing - about how Douglass in his last years, ambassador to Haiti, was brought low by a conspiracy of Washingtonians resentful of a black man's eminence. Donizetti and Verdi would had have rejected it as ineffectual. The libretto is poetastry, and Kay's music drones on and on in Puccinian arioso without Puccini's command of melodic gesture. Kevin Maynor sang the title role, and the veteran dramatic soprano Klara Barlow was Mrs Douglass. Should we hail the show as homage to an elderly black composer (Kay was born in 1917), or deplore it as time, money and talent spent on something artistically worthless and unworthy? 
ID: 3364
HEADLINE: FT  25 APR 91 / Arts: Today's Television 
TEXT: It is five years since the Chernobyl disaster and in the second part of its report This Week (8.30 ITV) hears more revelations from Vladimir Chernousenko, scientific director of the exclusion zone around the ruined nuclear reactor. He takes the film crew to a vast nuclear waste dump, radioactivity from which is now threatening to contaminate the water supply of 40 million Soviet citizens. In LA Law Rosalind Shays sues McKenzie Brackman for forcing her to resign and Markowitz has a heart attack (9.00 ITV). 40 Minutes (9.30 BBC2) tells the story of America's special relationship with Dunoon by concentrating on Suzanne Bonner, a Scot, daughter of a local beauty queen and a GI who was posted to the nuclear submarine base at Holy Loch. Suzanne, a jazz singer, returned to Dunoon in March for a concert. In the same week the Americans announced their withdrawal. C4's 'Banned' season continues with Censorship By Death, (9.30) which reveals the mortal danger of being a journalist in Mexico. 
ID: 3365
HEADLINE: FT  25 APR 91 / Arts: The Seagull - Lilian Baylis Theatre 
TEXT: The most obvious feature of Mike Alfreds' version of The Seagull for the Oxford Stage Company is that it looks extraordinary, not because of any design-led flight of fancy but because of its conception of the people involved. The members of Chekhov's country house party appear like a cross between the background interest in a Renoir painting and a convention of Lithuanian nationalists. The men sport big-bottomed beards; the women are simply big-bottomed. Even the luckless seagull, bagged by the fretful Konstantin, is an albatross in all but name. Biggest and brashest of all is Pam Ferris, whose Arkadina is no elegant Muscovite, bestowing her refined presence on her country estate, but a corpulent diva with an all-engulfing presence, who erupts into unconfined temper tantrums and as quickly erupts out of them again. When she steps on to her son's rickety little stage, after ridiculing his play off it, the structure shakes under her weight, its little proscenium arch no match for her voluminous coiffure. One can well imagine her appeal to a restless spirit like Trigorin, who could simply bury his sense of inadequacy in her massive bulk; likewise, she makes it woefully clear why her son, Konstantin, has never grown up. Michael Mueller presents a man spiritually and materially squashed by a mother who bandages his head one minute and hurls insults at him the next. 'While I'm away, you won't go click-click again,' she beseeches him. It is the nearest she gets to acknowledging his desperation, her choice of childish euphemism underlining her childlike refusal to face his attempted suicide. The refusal is so complete that it makes a charade of her attempt to prevent Trigorin from leaving her for the younger Nina. This central scene, which anchors the characterisation of Arkadina to a sense that her day is past, loses its meaning when it is played by an emotional illiterate. She weeps, bullies and finally, having reduced Trigorin to hopeless tears, bustles off with a smug smile on her face, her sense of her own importance confirmed. Alfreds' preoccupation with grandiloquence of emotion and gesture creates a sore problem for Irena Brook, whose visually lovely Nina - a gift for the declamation of Konstantin's sweet nothings - signally fails to gather the required stature along the way. Her reappearance, a fallen woman, in the final act is certainly not the stuff of tragedy as Arkadina would know it; this haggard little slip is merely pathetic - and rather less so than Caroline Quentin's slatternly Masha, whose capacity for melodramatising her misery gives her a sombre momentum. So what of the men? One is tempted to leave them till last because they are so entirely dwarfed by the women. Nicholas Clay builds the character of the usually urbane Trigorin around a sphynx-like smile into his beard, as if the successful writer is lost for the appropriate words. It is as hard to imagine him indulging a casual amour as it is to envisage Roger Frost's skinny schoolmaster fathering Masha's family, or Ric Morgan's brusque doctor sustaining a 20-year liaison with Dawn Keeler's fluttery Polina. It is all interesting and different enough, until one starts to look for the Chekhovian heart. 
ID: 3366
HEADLINE: FT  25 APR 91 / Arts: In search of martyrdom - Cinema 
TEXT: THE DOORS (18) Odeon Marble Arch WHITE PALACE (18) Plaza QUICK CHANGE (15) Cannons West End SCENES FROM A MALL (15) Cannons West End WINGS OF FAME (15) Curzon Phoenix 'If the doors of perception were cleansed everything would appear as it is, infinite.' It was astute of William Blake, a film critic before his time, to associate the notion 'doors' with the notion 'infinite.' Oliver Stone's film The Doors seems infinite, though it lasts a mere 141 minutes. Yet it shows not the remotest perception of what was 'infinite' in the Blake-ian sense about The Doors' music. Even I, a non-rockomane, recognise in Jim Morrison's broody-thunderous songs a power born of some pyromaniac vision in the soul. Stone's vision is the same as the one he brought to Platoon and Born On The Fourth Of July. Well-upholstered hyperbole drives on the story, with a few tinny morals attached like cans to a wedding car. Drug-prone composer-vocalist Morrison, though played and sung with spitting-image similitude by Val Kilmer, is presented as a messiah in search of martyrdom. Society is out to get him, but who in this film is 'him'? No human being dwells inside the mad eyes and the marijuana'd wisecracks. ('I don't remember being born,' he tells a reporter, 'it must have been during one of my blackouts'). This Morrison was a bio-pic legend even before he was born. The whole film starts with the assumption of immortality then tries to climb higher into Rock Era inspirationalism. Socking on through concert after concert (mixing real and staged footage), traversing ever dottier sexual skirmishes with girlfriend Meg Ryan or groupie Kathleen Quinlan ('Have you ever tried drinking blood?'), the story's ascent is interrupted only by the odd dutiful attempt to 'explain' Morrison. He may have been traumatised as a child by the sight of a roadside accident (cue surreally bleached flashback). Or he may have been a free soul spurred to revolt by society's moral pressures or the Vietnam war or . . . What the hell. Suffice it that he is a genius and the film is two hours of designer idolatry. Stone's Steadicam powers on through rock stadiums and hotel corridors, tracking after its hero like a mad lepidopterist chasing a butterfly. Occasionally the headlong chase yields a glimpse of some Elysian possibility. The film could have been a pop-world mockumentary in the style of This Is Spinal Tap, but its funny lines are strictly unintentional. ('I had enough of this shit with Janis,' screams a studio manager at a misbehaving Morrison). It could have confined itself to what it does best: re-constructing the concerts via fact and fiction. Stone comes into his barnstorming own here: the thousands of extras are whipped into a plausible frenzy, as the air crackles to 'Come on, baby, light my fire' or 'This is the end.' At these moments Morrison-fever means something. Elsewhere in The Doors it means only Hollywood's latest bid to be with it by jumping on a bandwagon that vanished 20 years ago. White Palace starts out as a steamy slice of erotic life only to end up a soggy May-December romance. Max (James Spader) is an effete Yuppie adman who is emotionally scarred by the accidental death of his wife. He seems destined for a life of tortured celibacy until he meets Nora (Susan Sarandon), a brassy hamburger waitress 16 years his senior. Against all the odds, the two fall madly in love, bonded not only by intense sexual desire but also by shared tragedy - Nora lost her teenage son to drugs. Their first few dates see them proceeding all the way from the sofa to the waterbed, with Nora using her considerable skills and experience to draw Max out of his cocoon of impotent self-pity. So fa so good. In these opening scenes director Lius Mandoki elicits the film's erotic tension with a steady, stylish hand. Spader's unctuous self-containment, reminiscent of his fine performance in sex, lies and videotape, is perfect for his character, while Sarandon is eminently believable as a woman determined to keep middle age at bay by sheer sensual will. Unfortunately, their energy flags about a half-hour into the film, transforming it into a quirky love story far less engrossing than the initial pyrotechnics promised. There's a squabble over a vacuum cleaner, an embarrassing visit by Nora's clairvoyant sister (Eileen Brennan), and the inevitable confrontation when Max brings his older, declasse girl home to meet family and friends. Sarandon is much less convincing making impassioned pleas for the working class to Spader's smug relations than she is showing him the sensual ropes. After all this soppy domesticity, it comes as little surprise that heir final reconciliation is sealed with a chaste, public kiss, in which eroticism is joked about rather than explored. It also comes as little surprise that Bill Murray plays a robber in Quick Change. There can be few more apt roles for one of modern cinema's most adept scene stealers. In fact, everything about this light, engaging comedy suits Murray perfectly, lending him a perfect vehicle for his wry asides and deadpan double-takes. He plays an ambitious thief who, with the help of a clown suit, a sexy girlfriend (Geena Davis) and a doltish sidekick (Randy Quaid), pulls off what just might be the perfect bank heist. Unfortunately, the one thing that he doesn't take into account is making his getaway through New York City, portrayed here as a thoroughly moronic inferno. Maniacal bus drivers, lovelorn Mafia wiseguys and urban jousters conspire to turn a simple trip to Kennedy Airport into a tortuous adventure. Murray deadpans his way through it all with consummate skill, particularly in the opening scenes when he takes over the bank. Despite attempts at broadening his character with hints of a traumatic Vietnam past and a romantic entanglement with Davis, he never stops being Bill Murray, even when hidden behind a fright wig and white face. Everybody else - including New York - plays off him with varying degrees of success. His fans will not be disappointed. Fans of the triumvirate headlining Scenes from a Mall - Paul Mazursky, Woody Allen and Bette Midler - will be less satisfied. Everything is in place here for a wonderful comedy, with the veteran satirist Mazursky directing Allen and Midler as a successful Beverly Hills couple (she's a best-selling author of psychobabble, he's a sports lawyer) publicly feuding their way through their 16th wedding anniversary. The movie is strangely flat, however, despite an occasionally trenchant script by the director and Roger L. Simon. The problem, surprisingly, is with the leads, who suffer from a disappointing lack of chemistry. When mixed, these two potent and precious elements fizzle out rather than ignite. Allen bravely plays against his usual screen persona, sporting a pony tail and singing the praises of Los Angeles, but is never altogether convincing. Nor is Midler, whose frenetic mastery is only sometimes glimpsed, such as when she publicly pelts her wayward husband with sushi. For the most part, she's as subdued and aimless as the picture itself. It's a shame that Wings of Fame isn't a bit more subdued. In it, Peter O'Toole plays a pompous actor who is gunned down by a deranged fan (Colin Firth). When the assassin perishes as well, their spirits are barged to the netherworld, depicted here as a posh island hotel inhabited by famously dead souls. It is a last resort of sumptuous comfort and profound ennui - Hemingway shoots clay pigeons, Einstein saws away at his fiddle, even Lassie makes an appearance, lurking in the bushes. All wait in dread of the moment when their earthly fame runs out and they will be consigned to the much less cozy mists of oblivion. Despite the overblown symbolism of hooded boatmen, cadaverous bellhops and blindfolded archers, writer/director Otakar Votocek has a simple point to make - in a godless world, fame is the only form of immortality going. He would have fared far better to ease up on the skewered allegory and focus on the complex relationship between O'Toole and Firth, who both labour heroically to salvage the film from its pretensions. O'Toole is characteristically dissolute and charming, maintaining his legendary poise even in a film that sends him to Hell and back. 
ID: 3367
HEADLINE: FT  25 APR 91 / Management (Marketing and Advertising): Jockeying for position - The battle in the TV listings market 
TEXT: Until March 1 this year the market for television listings magazines in the UK was a market like few others, quaint even by British standards. All over the rest of Europe a diversity of listings magazines, some countries with as many as 30, is normal. Yet in Britain there was only the Radio Times for BBC programmes and later on TV Times for commercial television. Each jealously guarded its monopoly and sued any publisher which broke it. The only limited exception was for newspapers - they could print weekday schedules 24 hours in advance, 48 hours at weekends. The listings duopoly was nearly overturned by the Monopolies Commission in 1985. The commission found that the listings duopoly was anti-competitive but, on the casting vote of the chairman, Sir Godfray Le Quesne, strangely it found that it was not against the public interest. A suggestion by the commission that other publishers should be able to get the information under licence was ignored. The drama intensified in December 1988 when the European Commission ruled that the titles of programmes should be freely available. A year later the then Home Secretary Douglas Hurd denounced 'the dotty duopoly' and set the beginning of last month as the date for opening up the market. Partly because of the government's own Copyright Act which strengthened the concept of intellectual property, the 'dotty duopoly' could not be overturned entirely. In future, however, the broadcasters had to make the listings available to any other legitimate publisher under licence - a licence they could charge for. For the first time the British viewing public is able to get all its programme schedules - BBC, commercial television, satellite and cable - under one cover. The controversy is, however, far from over. Companies such as ITP, publishers of TV Times and What's On TV, are threatening to take the BBC to court in the UK and to Brussels for abusing its dominant position by using its own airtime to promote its magazines such as Radio Times. Newspapers are also angry because they now have to pay for listings material that once was free - some weekly papers are even boycotting programme listings because they cannot afford them. Formal complaints have been made to the Copyright Tribunal, the body that will adjudicate on fair rates for listings. It's all a long way from the hopes of the original campaigners who argued that publicity for television programmes benefited broadcasters and that programme details should simply be available for free. 
ID: 3368
HEADLINE: FT  25 APR 91 / Management (Marketing and Advertising): Of hard hats and brownie points - A government/commerce approach to road safety 
TEXT: When Malcolm Rifkind, the UK's transport minister, launched a campaign this week aimed at improving safety for child cyclists, Halfords basked in the glow of its public-spiritedness. The motor accessories retailer is one of several companies to take advantage of the opportunities offered by the Department of Transport to enhance their corporate image by helping to promote road safety. This year the DoT is raising the amount spent on road safety publicity from Pounds 4.75m to Pounds 6m. Since last year, campaigns on subjects ranging from drink-driving to aircraft security have all come under the Safety on the Move umbrella. An important element is the initiative on child safety which concentrates on two big campaigns a year. The first of these last autumn featured Texaco's 'Children should be seen and not hurt' campaign. For the companies involved, the return on their investment - which typically includes disseminating literature and providing equipment at cost - cannot be measured in terms of profit on the promoted item promoted. It could, however, be argued that the products resemble loss leaders and win it more customers. Instead, they count on a boost to their image. 'We get the benefit of being associated with a government campaign. We are seen to be responsible retailers,' says Hugh Birley, a spokesman for Halfords. The DoT is not shy in extracting some benefit for consumers in return for the companies' public earning of brownie points. In Halfords' case it suggested that the retailer might supply helmets for child cyclists at a more accessible price than the usual Pounds 23 to Pounds 24. For the offer period, the helmet will be sold for Pounds 14.99, the wholesale price. There are, however, limits to the closeness of the relationship between government and the commercial concern. The department is keen to dispell any impression that it is using taxpayers' money to help a company's advertising campaign. No product is endorsed - 'we don't say buy this or buy that' - nor are there any exclusive arrangements. For instance, Mothercare and Elastoplast are also involved in the child cyclist campaign. Because of the delicacy of the relationship, Miller &amp; Leeves WAHT, the advertising agency used by the DoT, is careful which companies are invited to take part. Peter Jones, the director responsible, says: 'Part of our remit is to find companies interested in the marketing of road safety.' One company Jones describes as having a suitable track record is Kwik-Fit, the tyre and exhaust company. It is contributing to publicity about new legislation which, from July 1, will make it compulsory for adult back-seat car passengers to wear safety belts. The law applying to children came into force in 1989, when Kwik-Fit mounted its original 'Belt up in the Back' campaign. Peter Holmes, marketing director of the Edinburgh-based company, says it first ventured into the safety area in 1987 when it launched its offer to fit toddler safety seats for Pounds 34.90, with the promise to take back the seat and refund the money once the child had reached the age of four. The rear seat-belt legislation, however, can only go so far; it can only be enforced if the belts are already fitted and the DoT estimates that a third of the UK's 19m cars do not have them. Part of Kwik-Fit's role will be to offer a fitting service. 
ID: 3369
HEADLINE: FT  25 APR 91 / Management (Marketing and Advertising): TV schedules publishing wars 
TEXT: The fiercest marketing battle for 30 years has broken out in the once sedate world of publishing television programme schedules. This has been generated by the British government's decision to end the duopoly of programme listings held by TV Times and the BBC's Radio Times. The market, at least in theory, is now open to any publisher willing to pay for the information under licence. As a result, the established titles and the new entrants are jockeying for position and market share; as much as Pounds 20m has been spent on advertising and promotion. There has even been the first casualty - one of the new entrants, TV Plus, collapsed after only three issues. Some potential players didn't even make it to the starting line; the Daily Telegraph closed its television magazine 7 Days before deregulation and Rupert Murdoch's candidate, the British version of the US TV Guide veered off to concentrate on satellite TV programmes. 'This market is not for the faint-hearted,' says John Matthews, managing director of Independent Television Publications - with more than a touch of understatement. ITP is the publisher of TV Times and a cheaper entrant to the market, What's On TV. Until March 1 viewers who wanted advanced listings had to pay 50p each for TV Times and the Radio Times. Just over 3m households regularly bought a programme journal; about 88 per cent of them bought both. This amounted to only 15 per cent of households with a television compared with 80 per cent in the Netherlands, 30 per cent in France and 28 per cent in Italy. In the UK now there are four paid-for magazines giving all the programmes including those on satellite; at least two more are under consideration. Britain's two leading popular newspapers, The Sun and the Daily Mirror, now include special listings supplements in Saturday's editions which cover the whole week's programmes. But this has potentially tricky consequences; circulation on Saturdays has increased but sales for the rest of the week have gone down. Robert Maxwell, the publisher of Mirror Group Newspapers, says that he will review the situation in two months. Time Out magazine has seen a significant increase in circulation since it has been carrying full TV listings. The full week's listings are also available in the popular celebrity magazine, Hello. But the publication to have made the most significant entry to the scene comes from the German publisher, H Bauer. Having scored two successes in the UK women's weekly market with Bella and Take A Break, and planned its move for nearly two years, Bauer then sat out the first four weeks of the liberalised market before launching TV Quick with all guns blazing. 'We really wanted to be sure that the product was absolutely right before we launched,' says Alan Urry, managing director of Bauer in the UK, who explains that the company had wanted to allow a little of the dust to settle. Some of that dust settled on TV Plus which, after an estimated initial sale of 500,000, sank to 220,000 and closed; Hamfield Publications, the company behind it, went into receivership before TV Quick even appeared. Bauer aimed TV Quick unashamedly at the mass market with a cut-throat cover price of 10p for its first four weeks and backed it with a saturation television advertising campaign. The strategy behind the pricing policy was to get as many people as possible to sample the magazine; it seems to have achieved its objective. Between 1.85m and 1.9m were sold of the first two issues, giving TV Quick an early lead over both TV Times and Radio Times. According to Urry, between Pounds 5m and Pounds 6m was spent on the launch. For its first four weeks, Bauer gave the 10p straight to the newsagents, paid the wholesalers a distribution fee and shouldered the entire production costs without revenue. The true test of its circulation will come when TV Quick charges an economic price that Urry says will be between 35p and 45p. Over at ITP, Matthews has also placed considerable emphasis on price-cutting as a device to draw attention to the fact that TV Times now has news of all TV programmes. For the first three weeks of the new competitive era TV Times halved its cover price to 25p. Radio Times was forced to respond - but John Thomas, managing director of BBC Publications did not cut the magazine's cover price - although the effect for the consumer was similar. The BBC seized on the fact that the second week after deregulation coincided with Comic Relief, when comedians and the public raise money for charity. The Corporation announced that during the last two weeks of the special offer at TV Times the BBC would donate half its 50p cover price to Comic Relief. 'We were absolutely appalled that TV Times cut its price - thus devaluing a very well established brand in the marketplace,' Thomas argues. But TV Times's Matthews says the price reduction was both planned and necessary and was a strategy that worked. The second string to ITP's bow grew out of research which showed that while many consumers wanted detailed programme information, others wanted their listings in a more concentrated form. To meet this latter market and to try to extend the company's market share, What's On TV, complete with a free TV planner board with the first issue, was launched. What's on TV began at a discount price of 25p and had a single week at 35p before having to match TV Quick's 10p cover price. After a total ITP promotional spend of Pounds 10m by week six What's on TV had a circulation of around 600,000 and TV Times claims its circulation was 1.7m, down from 3.1m before deregulation. Falls in circulation of both TV Times and Radio Times were expected as double buying of the titles fell away; the BBC says Radio Times sales fell from 2.16m to 1.72m. The Corporation's promotional costs were about Pounds 5m including more than Pounds 1m spent on commercial television. It also had considerable support on BBC television channels. Thomas believes deregulation is leading to a polarisation of the market. The BBC claims that more than 50 per cent of Radio Times readers are ABCIs, the professional and managerial classes, compared with a TV Times figure in the mid-30s. 'We think the UK public is realising what this is all about; there is now an opportunity to increase the market not through pyrotechnics but through careful promotion to distinct segments,' says Thomas. He has researched a new listings title which could be launched later this year, but refuses to say at which sector of the market it would be aimed. ITP, too, has plans for a third title - a glossy upmarket magazine - but no decision has yet been taken on whether to bring them to fruition. Thomas says he would be amazed if another mainstream British publisher were to enter the market now 'with the blood still drying on the wall', although further interest from non-UK publishers could not be ruled out. In two or three years' time when the market has settled down, Matthews forecasts there will be five paid-for listings magazines in the UK with total sales of more than 6m, 1m more than at present - a far cry from the last time all Britain's broadcasting listings were available in a single magazine: the Radio Times of the 1950s sold more than 10m copies a week. 
ID: 3370
HEADLINE: FT  25 APR 91 / Technology: A crackdown on originality - Beginning a series on innovation in the recession, Charles Leadbeater looks at how the economic climate has affected investment in research and development 
TEXT: Bombarded by the pressures of recession British managers might be forgiven for putting plans for innovation to one side. But they would be gambling with their company's future. As the director of one of the UK's leading electronics companies puts it: 'We cut back research and development for 1988. We are still reaping the harvest of this decision, which has left us 1.5 product generations behind the competition. We are faced with the choice of leapfrogging generations or getting out of the business.' Innovation is becoming increasingly central to competition. It is no longer enough to produce low-cost, high-quality items. Product ranges must be renewed constantly to take advantage of the quickening pace of technological change and create distinctive products which can command a niche in international markets. The Confederation of British Industry's Innovation Trends survey* published on Monday showed that UK companies have had little success in reducing the time it takes them to develop new products. Yet the need for new products is becoming more pressing. Companies reporting that the lifespan for their products had shortened outweighed those who said it had lengthened by almost 10 to one. About 40 per cent said they needed to replace their product ranges within three years. The innovative capacity of an economy is a key index of its strength. The impact of the recession upon the UK's innovative potential will have implications for the health of the economy long after the recession is formally declared over. Cuts in investment in 1990-91 might allow dividends to be maintained in the teeth of recession. But by the mid-1990s companies may find their product development pipelines have run dangerously dry. Britain entered the recession with a record for innovation which was at best mixed. The main source of industry's renewed competitiveness in the last decade was a leap in productivity. Between 1980 and 1987 output per person employed in the UK rose in real terms by 24 per cent, compared with 22 per cent in Japan, between 12 per cent and 14 per cent in Germany, Italy and France and about 7 per cent in the US. But have British manufacturers become more efficient at developing new products? A House of Lords select committee report** published earlier this year says that many UK manufacturers invest too little in new or improved products, plants or systems. 'They rely on doing what they have done in the past and fail to seize new opportunities created by changing customer demand. As a result their competitiveness declines.' Gross domestic expenditure on research and development fell in the UK between 1981 and 1988, but rose in France, Germany, Italy, Japan and the US. Public spending on R&amp;D fell markedly while industry spending rose from about 1.2 per cent of GDP to about 1.25 per cent. This compares with a rise in German industry's expenditure from 1.4 per cent of GDP to 1.8 per cent. British electronics groups such as GEC have been criticised for avoiding technologically important areas such as the mass production of semiconductors. In retrospect this looks like a sensible decision as all the big European semiconductor manufacturers - Siemens of Germany, Philips of the Netherlands and SGS-Thomson, the Franco-Italian joint venture - are losing money hand over fist on chips. At best Britain's relative technological decline may have been arrested. It has definitely not been reversed and there are signs that it has continued. Is the British innovation system strong enough to withstand the battering of recession? Over the last 15 months the outlook for innovation has deteriorated in line with the fall in confidence among manufacturers, according to the CBI. In October 1989 a balance of about 35 per cent of manufacturers expected to increase their expenditure upon innovation in the year ahead. By January of this year the balance had turned negative - more companies expected to reduce their expenditure than those expecting to increase it. Yet it seems possible that innovation may not be cut back as far as other costs and the cuts will fall unevenly across the economy. Throughout last year manufacturers remained quite bullish about their spending on innovation even though they had become deeply pessimistic about the business outlook. This may mean that innovation spending could get away with a shave rather than a cut, as long as confidence recovers soon (see graph). Moreover cuts in innovation are likely to be spread unevenly across the economy. The recession will widen the gap between those sectors where Britain has well-established strengths, built upon heavy research and development spending, and those where it is weak because it has underinvested in the past. The recession will amplify the difference between these two sectors. Chemical and pharmaceutical manufacturers are the most buoyant about the outlook for innovation. A positive balance of 20 per cent of companies in the chemicals sector still expect to spend more on innovation in the coming year. Only 18 per cent think their spending is less than adequate. The UK entered the recession with a strong position in chemicals and pharmaceuticals and is likely to retain it. In contrast the mechanical engineering sector is among the weakest in manufacturing, with one of the poorest investment records in the 1980s. In this sector the outlook for innovation is poor. A negative balance of 10 per cent of companies expect to spend less on innovation. About 44 per cent of companies believe their innovation spending is inadequate. This sector will be made weaker by the recession. Yet it would be complacent to assume that areas of traditional strength will escape unscathed. The defence-related areas of aerospace and electronics are cases in point. Within the overall recession is a specific defence recession brought on by cuts in military expenditure. Defence accounts for 51 per cent of UK government spending on research and development and 20 per cent of total UK research and development. Defence is one of Britain's specialisms. Military research feeds much of the civil aerospace and electronics industries. Thus the British innovation system will be particularly hit by cuts in defence-related research. A development which may counterbalance the decline in defence is the increase in foreign investment in innovation in the UK. The share of British R&amp;D accounted for by foreign companies rose from 4 per cent in 1967 to 13 per cent in 1986. In areas such as consumer electronics and automobile assembly the UK has become almost wholly dependent upon foreign groups. In the long run the prospects for innovation in the UK will increasingly turn upon whether large foreign groups choose to complement their UK manufacturing plants with research facilities. Small companies may fare worse than larger groups. The CBI survey found that 45 per cent of companies which employ fewer than 50 people felt their spending on innovation was inadequate, compared with 30 per cent of companies employing between 1,000 and 5,000. Innovation is the product of a complex process involving a range of ingredients. It seems likely that companies will cut back on some elements of innovation, while continuing to invest in others. According to the CBI, in manufacturing as a whole investment in formal R&amp;D will fall this year. Yet there could be an expansion in the resources devoted to other elements of innovation such as training. David Lees, chairman and chief executive of GKN, the automotive and industrial services group, says: 'In 1980 we cut back on training. This time we will not do that.' Joint ventures with foreign companies are set to expand. About 50 per cent of manufacturers are planning to put more effort into joint ventures which bring access to technology, according to the CBI. Some groups such as Smiths Industries in aerospace and John Brown in engineering pride themselves upon being highly skilled buyers, integrators and appliers of technology to specific markets rather than inventing it in house. Perhaps most importantly the best British companies have developed a management culture of continuous, incremental improvement to products and processes which will continue through the recession. Indeed one beneficial side-effect of this recession may be to expose the relative fragility of the British approach to innovation. In the wake of the 1980-81 recession government policy and management effort was directed at improving labour productivity, through trade union reform, de-manning and the introduction of reformed working practices. The recession of 1990-91 may well yield a different, and altogether more complicated, task - to shore up and strengthen the British capacity to innovate. * CBI Innovation Trends Survey, Issue Number 2, available from Centre Point, New Oxford Street, London WC1A 1DU. Price Pounds 40. ** House of Lords Select Committee on Science and Technology, Innovation in Manufacturing Industry, Volume 1, HMSO. Price Pounds 11.40. The series will continue next Thursday with a look at the chemicals industry. 
ID: 3371
HEADLINE: FT  25 APR 91 / Parliament and Politics: Fears over warheads discounted - Defence 
TEXT: FEARS that the nuclear warheads to be fitted to Britain's Trident missiles could be unsafe were discounted by Mr Kenneth Carlisle, junior defence procurement minister, in the Commons last night. He gave an assurance that the warheads would be designed and manufactured in the UK and would not be affected by the problems which led to the closure of the plant at Rocky Flatts, near Denver, which produced missiles for the US Trident force. Concern over the warheads was raised by a US Congress armed services committee report warning of the risk of 'unintended detonations'. Mr Carlisle said the British made warheads would be subject to a series of trials and independent assessments to ensure safety before and during operational service. He rejected opposition criticism of the Atomic Weapons Establishment Bill which provides for private contractors to undertake the management of the atomic weapons establishments at Aldermaston, Burghfield, Cardiff and Foulness. 
ID: 3372
HEADLINE: FT  25 APR 91 / Parliament and Politics: Hurd to press Kuwaitis on human rights - Foreign Office Questions 
TEXT: MR DOUGLAS HURD, the foreign secretary, will raise concerns over human rights abuses when he visits Kuwait at the beginning of next month. Mr Hurd will be also be going to Egypt, Saudi Arabia and Jordan between May 1st and 5th. In the Commons yesterday he said the government was taking seriously the recent report by Amnesty International on the torture of Palestinians and others in Kuwait. 'We take the Amnesty report seriously, because it's been made clear by us to Kuwaiti ministers before the liberation, that we believe this should be a new and hopeful chapter in the history of Kuwait,' said Mr Hurd. While some retaliation and disorder was understandable, Mr Hurd said he would reinforce the message he had given the government in exile. During foreign office questions, MPs from both sides urged Mr Hurd to give an assurance that foreign policy would remain the concern of individual countries within the EC. Mr Peter Shore (Lab Bethnal Green and Stepney) said divisions within the European Community over the Gulf were 'very worrying indeed'. He said the government should 'oppose the extension of majority voting to any aspect of foreign policy'. Mr David Wilshire, (Con Spelthorne) said it was possible to be a good European by supporting economic aspects of the EC while questioning the wisdom of a common foreign policy. The advantage to Britain of joint action within the community should not be under-rated, said Mr Hurd who pointed to the relief effort for the Kurds as a good example of the twelve member countries working together effectively. Later Mr Hurd defended the presence of British troops in Iraq after warnings from a backbench MP about getting involved in the internal politics of Iraq. 'The purpose of the presence of our troops in northern Iraq is purely humanitarian,' said Mr Hurd. That did not prevent the government, when asked, from saying it believed the Kurds should have autonomy within the boundaries of Iraq, he said. Mr Douglas Hogg, the foreign office minister, insisted yesterday that full diplomatic links with Iran would not be restored until the three British hostages held in Lebanon were released. 'We believe Iran has a decisive influence over their future,' he said. 
ID: 3373
HEADLINE: FT  25 APR 91 / Parliament and Politics: Concern for tenants of breweries - Corporate Affairs 
TEXT: MR John Redwood, corporate affairs minister, told the Commons yesterday the Government was 'concerned' about threats made by certain national brewers to serve their tenants with notices to quit. He said the tenants involved were not yet protected by the Landlord and Tenant Act 1990 extending to pub tenants the same protection as other business tenants. The Act requires brewers, for the first time, to pay statutory compensation to tenants whose pubs are taken back into management, but does not become fully effective until July 1992. Mr Redwood said it was understood that most of the notices to quit had been served for the purpose of renegotiating the terms of tenancy agreements and would not ultimately lead to evictions. The Government has begun appointing advisers for the flotation of part or all of its remaining 48 per cent holding in British Telecom. In the Commons yesterday Mr Francis Maude, financial secretary to the Treasury, said no decisions had been taken about the timing and number of shares to be sold. 
ID: 3374
HEADLINE: FT  25 APR 91 / Parliament and Politics: Party set to discipline councillors -Lambeth Council 
TEXT: THE LABOUR Party's national executive is intending to bring disciplinary charges against thirteen suspended Lambeth councillors. At a meeting yesterday the NEC committee reaffirmed its decision to suspend members of the south London borough for 'continual breaches of the rules of the party' and agreed to consider drawing up charges to go to the party's national constitutional committee. At this stage the councillors could face expulsion from the party. Mr Neil Kinnock, the Labour leader, said at the meeting: 'Who is going to be convinced by people who say they are going to change the world and can't even collect the garbage.' The suspension of the councillors, which included Ms Joan Twelves, leader of the council, followed council meetings which, in one case, voted against the Labour leadership's policy by condemning Britain's role in the Gulf war and, in the other, refused to allow bailiffs to be used to collect poll tax. The meetings were deemed highly damaging to the national party. Also suspended along with the councillors were Mr Steve Nally, secretary of the All Britain Anti-Poll Tax Federation, which Labour judges to be a Militant front group, and Mr Kevin Fernandez, a prominent member. With the campaign for next week's local elections well under way, the Labour Party's national leadership is anxious to distance itself from hard-left councils like Lambeth which is considered by some to be an electoral liability. The remaining 27 Labour councillors in Lambeth have been told to write to the council's chief executive stating that they are members of the Labour group. The NEC has also instructed them to elect new officers at their next council meeting on May 13th. Until then Ms Twelves, one of those who has been suspended, is technically still the leader of the council. 
ID: 3375
HEADLINE: FT  25 APR 91 / The Guinness Appeals: Saunders said to be suffering dementia 
TEXT: MR Ernest Saunders, the former chairman and chief executive of Guinness, is suffering from incurable pre-senile dementia, the appeal court was told yesterday. A scan has disclosed evidence of abnormalities of his brain. Three doctors called to give evidence on Mr Saunders' appeal against the five-year jail sentence he is serving for his part in the Guinness affair said they had diagnosed pre-senile dementia and believed he would have been suffering from it during his trial. A doctor called by the Serious Fraud Office did not agree with that 'unequivocal diagnosis'. He said there was no definite correlation between an abnormal brain scan and pre-senile dementia. Mr Saunders, serving his sentence in Ford open prison in West Sussex, was sentenced on August 28. He will become eligible for parole after a third of his sentence, at the end of next April. Mr Saunders; Mr Anthony Parnes, a City stockbroker; and Mr Gerald Ronson, head of the Heron group, are appealing against their convictions and sentences. Mr Antony Shaw, Mr Saunders' counsel, said the brain scan had been part of an investigation carried out into possible organic causes for headaches from which Mr Saunders had suffered for some time. Mr John Chadwick, QC, for the SFO, said the Crown had been advised the diagnosis was 'not impossible' but was not capable of being confirmed by reference to the observations and tests so far carried out. Dr Patrick Gallwey , a consultant with Devon and Cornwall Forensic Psychiatric Services, said he had treated Mr Saunders in 1988. When he had seen him earlier this month the change in Mr Saunders' symptoms, coupled with the scan evidence, had been sufficient to diagnose pre-senile dementia of the Alzheimer type. Dr George Perkin, consultant neurologist at Charing Cross Hospital, called by the SFO, said the 'bedside tests' carried out on Saunders would raise 'a suspicion' of pre-senile dementia, but he would want further, and much more structured, data. He said that undoubtedly if Mr Saunders did have pre-senile dementia it would be a progressive disorder and it should be easier month by month to make a diagnosis based on psychometric tests, because changes would become much more evident. The appeals continue today. 
ID: 3376
HEADLINE: FT  25 APR 91 / IBM to shed 400 jobs at two sites 
TEXT: INTERNATIONAL Business Machines, the world's largest computer maker, is rationalising its manufacturing activities in the UK with the loss of 400 jobs over three years at its plants in the south of England and in Scotland. IBM manufactures magnetic disc files, the memory systems used in large mainframe computers, at Havant in Hampshire, and personal computers at its Greenock plant near Glasgow. The company said it remained committed to a policy of full employment and there would be no redundancies. The rationalisation measures are designed to eliminate duplication in services to the two plants. They will involve creating a single structure for planning, finance, information processing and site services under Mr John Holmes, director of manufacturing for IBM UK. IBM plants worldwide compete against each other to manufacture particular computer systems. The performance of plants making comparable equipment in the US, Europe and Asia is closely monitored. The company said yesterday that the chief aim of the rationalisation was to improve the cost-effectiveness and competitiveness of the UK manufacturing operations with the intention of winning more manufacturing 'missions' for the UK plants. That did not imply that Havant and Greenock were less efficient than their counterparts in the US or Japan. Over the past three years, IBM has moved thousands of employees worldwide from administrative positions into line jobs. Many other workers have been encouraged to leave through voluntary redundancy schemes as part of a restructuring operation designed to match overheads to a market that has slowed from growth rates of more than 20 per cent to 10 per cent or less. 
ID: 3377
HEADLINE: FT  25 APR 91 / Public entry to police cases urged 
TEXT: SERIOUS allegations against police officers should be heard at tribunals open to the public, Judge Francis Petre, chairman of the police complaints authority, said yesterday. The authority, an independent government-appointed body, oversees investigations into serious complaints against the police. Its annual report published yesterday shows that it is supervising 60 per cent more cases now than in 1987. Judge Petre, introducing the report, said that the proposed tribunals hearing serious cases would include independent representatives and recommend punishments to chief constables. Less serious allegations would still be handed by police forces internally, but with lower standards of proof than at present. The authority believes that the standard of proof in complaints against police officers is unnecessarily high. He also criticised the level of secrecy surrounding the handling of complaints. At present, those making complaints are not informed of disciplinary decisions made by chief constables. Last year the authority received 7,156 new cases for consideration - 16 per cent more than in 1989. The authority's report expresses concern at the length of time taken to complete investigations into complaints. 
ID: 3378
HEADLINE: FT  25 APR 91 / Society receipts fall 
TEXT: BUILDING SOCIETY receipts fell to Pounds 543m in March from Pounds 608m in February, mainly because investors withdrew funds to apply for electricity shares. However, mortgage advances rose sharply to Pounds 3.356bn from Pounds 2.681bn in February as falling interest rates spurred homebuying. Mr Mark Boleat, director-general of the Building Societies Association, predicted that lending would continue to pick up in the coming months. 
ID: 3379
HEADLINE: FT  25 APR 91 / Engineering slide expected to last into 1992 
TEXT: BRITAIN'S engineering industry is unlikely to see any real recovery from the recession until at least mid 1992 and has not yet reached the bottom of the current downturn, according to a gloomy forecast by the Engineering Employers' Federation. Output, productivity, employment and exports are all still dropping, the EEF said yesterday in its spring 1991 trends report. Employment is forecast to fall a further 90,000 by this time next year to 1.9m, making a total reduction of 210,000 over three years. Mr Peter Brighton, director general, said the EEF's forecasts 'obviously differed' from those of Mr Norman Lamont, the chancellor, who this week forecast a slow recovery in output in the second half of this year. Mr Brighton said he disagreed with the view of some in industry that the upturn is already happening. 'The rate of decline is decreasing, but we haven't reached the bottom' in manufacturing industry, he said. He ger-term effects of a further decline in British manufacturing. 'The simple thing is that our manufacturing base is now down at a level where it will not be able to cope with the upturn,' he said. That was the main reason why the EEF was relatively pessimistic about the mid-term outlook for engineering exports. In the more immediate future, it sees the decline in engineering exports, which began in the second half of last year, continuing this year, before recovering slowly in the first half of 1992. The one relatively bright spot was in motor vehicle exports, which rose sharply at the end of last year and are expected to stay high. In contrast, domestic demand for vehicles is very weak. The EEF has 5,000 member companies in electronics, computers, electrical and mechanical engineering, motor vehicles, aerospace and shipbuilding. It said the recession was affecting virtually the entire industry. Engineering output is estimated to have fallen about 8 per cent between the first halves of 1990 and 1991 and a further decline of 2 per cent is forecast between the first six months of 1991 and 1992. Sales by the engineering sector this year are forecast at about Pounds 128bn -of which Pounds 50bn are for export - compared with Pounds 136bn in 1990, and Pounds 117bn 10 years earlier . All figures are at 1991 prices. The EEF said productivity - output volume per person - had dropped in spite of falling employment, but further job cuts this year and next would prevent productivity from falling below early-1991 levels. Engineering Economic Trends, Spring 1991. EEF, Broadway House, Tothill Street, London, SW1H 9NQ. 
ID: 3380
HEADLINE: FT  25 APR 91 / Toll of cuts in media staff mounts 
TEXT: THE TOLL of media job losses is mounting. The BBC yesterday announced 364 redundancies among its national radio staff while News International is to cut 185 jobs from its newspaper printing workforce. The BBC redundancies will affect cleaning, catering and security staff at Broadcasting House in London, where its national radio operation is located. The losses, which involve one in eight employees at Broadcasting House, are the result of the BBC's decision to contract out those services. Yesterday's announcement means the BBC has called for more than 1,000 redundancies this week, after Tuesday's 720 job losses at its network television operation in west London. The BBC is cutting costs across all activities as part of the Funding the Future financial restructuring programme intended to save Pounds 75m a year by 1993. Yesterday's cuts will reduce Broadcasting House overheads by at least Pounds 1m a year. Those redundancies bring the total of jobs lost as a result of Funding the Future to 2,818. The job cuts at Mr Rupert Murdoch's News International are among the printing workers who produce its national newspapers, including The Sun and The Times. Most of the job losses will be at Wapping, its main newspaper production plant in east London. The company also plans to shed 56 staff at its regional printing plants in Glasgow and near Liverpool. The redundancies follow News International's decision to restructure printing operations by changing shift patterns. They also form part of general cost-cutting after the completion of Mr Murdoch's Dollars 7.4bn (Pounds 4.4bn) debt restructuring measures. Century Newspapers of Belfast, publishers of the News Letter, the UK's oldest morning newspaper, is to cut 45 jobs at the end of the month, nearly a fifth of its workforce. 
ID: 3381
HEADLINE: FT  25 APR 91 / Big Apple apartment workers' strike bites 
TEXT: THE streamlined city lifestyle of thousands of New Yorkers has been thrown into turmoil this week. From the most high-toned Park Avenue apartment blocks to hovels in Hell's Kitchen, residents are confronting a strike by 30,000 building service workers. This is no joking matter. Jobs done by striking employees - members of Local 32B-32J of the Service Employees International - range from internal rubbish collection to building maintenance. Many doormen, security guards, lift operators and caretakers have joined the strike. At issue is a new wage contract. Neither side has been forthcoming about the negotiations, but at the weekend, when the strike began, the union claimed that the building owners, represented by the Realty Advisory Board on Labour Relations, were offering wage increases of only 2 per cent a year over three years. Even so, the strike seemed to take some union members by surprise. 'The first I knew about it was when we were called out on Sunday,' said one doorman. To date, the dispute seems to have been largely good-humoured. Good doormen are a valuable commodity in New York, and those residents inclined to whinge are careful to do so out of the strikers' earshot. Many apartment blocks, meanwhile, quickly instigated temporary arrangements, asking residents to take out their own rubbish. Even in extreme situations, it seems commonsense prevails: two striking Fifth Avenue doormen were reported to have abandoned their picket-line yesterday to rescue a maid who had set fire to her wealthy employer's apartment with an overheated iron. How the dispute will be resolved is unclear. The union claims that many building owners are settling individually, saying that these numbers now run into three figures. The owners claim that this trend is being over-played and that the number of individual settlements is much less. In the meantime, New Yorkers can only grit their teeth and put out the rubbish. 
ID: 3382
HEADLINE: FT  25 APR 91 / Loans to Nicaragua clear way for arrears payment 
TEXT: NICARAGUA expects to settle Dollars 360m in overdue payments to the World Bank and the Inter-American Development Bank (IADB) by the middle of this year, following the approval of Dollars 225m in bridging loan finance by the Mexican, Venezuelan and Spanish governments. Mr Antonio Lacayo, Nicaragua's Minister for the Presidency, said on Tuesday night that Mexico and Spain had confirmed in the past week their support for the financial package. He said that Venezuelan support was to be ratified during the state visit of President Carlos Andres Perez to Nicaragua today, to mark celebrations of the first year in office of President Violeta Barrios de Chamorro of Nicaragua. Between Dollars 100m and Dollars 150m has been pledged by other countries on longer-term finance. A special meeting is to be held in mid-May in Paris to finalise the entire package. Settlement of the overdue payments to the multilateral institutions is considered to be a central pillar of the government's economic stabilisation plan, as it would unlock new foreign credit for the country. 
ID: 3383
HEADLINE: FT  25 APR 91 / Kurdish leaders meet Saddam: Meeting angers other opposition groups 
TEXT: PRESIDENT Saddam Hussein of Iraq held talks yesterday with Kurdish guerrilla leaders who want internationally-guaranteed autonomy from Baghdad and the safe return of Kurdish refugees to their homes. Iraqi government officials have been negotiating with the Kurds since last Friday, but the state-run Iraqi media mentioned the discussions for the first time yesterday. Kurdish organisations have expressed optimism that President Saddam will make concessions to the Kurds, although many Kurds hate and distrust him and some non-Kurdish opposition groups are angry about the negotiations. President Saddam met Mr Jalal Talabani, leader of the Patriotic Union of Kurdistan, and representatives of other Kurdish parties, the Iraqi news agency said. 'The meeting means there was agreement on the basic points and that a breakthrough was achieved in the talks,' a Kurdish official in Damascus was quoted as saying. Both sides need a deal. President Saddam's army is weakened by the Gulf war and he could not use chemical weapons against the Kurds without incurring the wrath of the international community. The Kurdish guerrillas are still a force to be reckoned with in the mountains, but they are fighting for an empty political cause if nearly 2m Kurdish refugees - half the Kurds of Iraq - do not return home from the borders of Iran and Turkey. It remains to be seen if Mr Saddam will accept Kurdish demands for a genuinely autonomous region within a democratic Iraq, for control over oil revenue from Kurdish areas, and for international guarantees to bolster any agreement. A loose ceasefire is in force in the Kurdish areas of northern Iraq, but Shia Moslem rebels in the south continue to announce guerrilla attacks on government targets. The Voice of the Iraqi Opposition radio station recently described Mr Talabani's discussions with the government as 'a stab in the back for all the Iraqis'. 
ID: 3384
HEADLINE: FT  25 APR 91 / World Trade News: Tokyo and US split on wording of chip pact 
TEXT: TOKYO has agreed that a 20 per cent target figure can be included in a new pact with the US on its foreign semiconductor market share in Japan, but the two countries were divided last night over final wording of the agreement. Japanese officials suggested they had made a significant concession in accepting the figure, although it has been clear that the US would not conclude the negotiations unless a target was set. The two countries have argued for five years over whether a target figure was set for the first semiconductor agreement, which began in 1986 and will expire at the end of July, with Washington insisting that the commitment was contained in a side-letter and Tokyo arguing that no such commitment was made. Japanese officials want the 20 per cent to be seen as a general goal rather than a specific target, and are aiming for a final wording of the agreement to be vague enough for it not to be a precedent for market share targets in other trade areas. The foreign-market share in Japan at the end of last year was 13.2 per cent and, under the US interpretation of the present agreement, was supposed to be 20 per cent in July, a target that is now out of reach. The latest round of negotiations for a new pact began here on Tuesday and continued late last night. While there were hopes that the agreement would be settled, officials of Japan's Ministry of International Trade and the office of the US Trade Representative are likely to have to meet again. Other important issues have been Japan's insistence that sanctions imposed under the present agreement be lifted, and the choice of a measurement standard for the market share. Japanese officials have argued that Japanese companies are making efforts to increase their use of foreign chips and these efforts should be recognised in the new agreement. 
ID: 3385
HEADLINE: FT  25 APR 91 / World Trade News: Statoil awards N Sea orders 
TEXT: STATOIL, Norway's state oil company, yesterday announced the award of NKr1.4bn (Pounds 121m)-worth of contracts for two satellite structures to the Statfjord oil field, Karen Fossli reports from Amsterdam. The Statfjord North and East satellite contracts are the biggest awarded this year in the North Sea for this type of equipment. Kongsberg Offshore will make and test six underwater templates and associated equipment. British FMC UK will supply wellheads in a subcontract worth NKr250m. The templates, on which the wellheads rest, will be made at Kaldnes de Groot, a Norwegian yard, in a subcontract worth NKr310m. Control lines will be supplied by Alcatel STK, in a subcontract worth NKr190m. 
ID: 3386
HEADLINE: FT  25 APR 91 / World Trade News: Dutch group in Korean venture 
TEXT: DSM, the Dutch chemicals group, and two South Korean companies plan to build a Dollars 200m (Pounds 117m) plant in South Korea to make caprolactum, the raw material for nylon, Ronald van de Krol reports from Amsterdam. The Korean companies, Kolon Industries and Nahmae Chemical, will hold a combined 50 per cent stake in the joint venture, with DSM owning the rest. The venture, Hanhwa Lactam, will be based in South Korea's Yeochun region. Commercial output is due to begin in 1994, with an initial annual capacity of 70,000 tonnes, doubling to 140,000 tonnes. Korean companies used about 240,000 tonnes of caprolactum last year. At present, two-thirds of the country's caprolactum is imported from Japan and Europe. 
ID: 3387
HEADLINE: FT  25 APR 91 / World Trade News: Caricom slow to put common into market - Agreed uniform external tariffs look like being held up a year 
TEXT: THE EFFORTS of the Caribbean Economic Community (Caricom) to create a customs union are being set back by reservations by some member governments over the impact of a new common external tariff. The new tariff should have been implemented by all 13 members at the start of this year. In the event, several were unable to meet the deadline, with trade ministers saying they were concerned about the impact on national economies. Government officials and representatives of the Community's secretariat appear confident that the common tariff will be in place by the end of this year. They suggested that, despite the delay, the implementation of the common tariff would be significant for the Community, not least because it was written into the treaty establishing Caricom 18 years ago. While the Community is moving with equal uncertainty towards the reduction of barriers to trade among its members - the aim is to have a common market in place by 1993 and monetary union the following year - the level of success with which the common external tariff is implemented could determine the viability of any attempt to increase economic integration. Efforts at integration have been bedevilled by parochial concerns and the tendency of some governments to implement significant changes in economic policy without consulting partners. 'We have to get our act together in view of what is happening in Europe and other parts of the world,' said Mr John Compton, prime minister of St Lucia. 'All of these things show we must have a common market, and we must have the common external tariff.' The community is made up of the English-speaking countries in the region, including Belize in central America and Guyana in South America. It has a combined market of 5.5m people. All members, except the Bahamas which is not a signatory of the trading agreements, have said they will implement the common tariff. The proposed tariff structure promises low rates of duty on imports which do not compete with goods produced within the community, but sets high rates on any imports likely to injure domestic industry. Under the new tariff the highest rate of duty will be 45 per cent and the lowest 5 per cent. This replaces a structure where tariffs range from 5 per cent to 70 per cent. The new measures will streamline the three different tariff structures used in the community. Rates will differ where imports are raw materials or finished products, and agricultural products will be given protection while inputs for agriculture will be subject to low tariffs. 'There is need for the common external tariff to stimulate production in the community,' said Mr Hayden Blades, director of trade and agriculture for the Community secretariat. 'But the tariff structure must not encourage inefficient production. The tariffs have to be set at levels which will allow regional industry to be competitive,' he said. In effect, however, most of the smaller Community members, in particular the smaller islands of the eastern Caribbean, and Belize on mainland central America, will have to raise their import duties, while the more developed countries (Jamaica, Trinidad and Tobago, Barbados and Guyana) will be lowering theirs. This has led some government officials in the smaller states to be concerned about the inflationary impact of the common tariff. Mr Charles Maynard, trade minister of Dominica, says the the new arrangements will have to be constantly monitored to determine the impact on the cost of living 'so we can decide, at the level of the Community's Ministerial Council whether we need to revise it upwards of downwards'. Several governments have become dependent on revenues from import duties, and have moved to cushion the expected loss of income with the lowering of tariffs. The Jamaican government has imposed a sales tax on some imports on which duties have been reduced. The new tariff offers greater protection to the fledgling industries of the smaller community members, while presenting increased competition to businesses in the larger countries. The community's industrial sector is based on light manufacturing and the assembly and re-export of consumer durables. The changes caused by the new arrangements have unsettled some manufacturers. Mr Anthony Robinson, president of the Jamaica Manufacturers Association, has complained that the implementation of the common external tariff has exacerbated differences in the level of competitiveness among the Caribbean Community members. Mr Robinson said Jamaican manufacturers may be forced to close or reduce operations because '. . . our Community competitors pay no duty on raw materials, and having made the products, ship them here at between 14 per cent and 21 per cent less than it costs Jamaican manufacturers to ship products to other parts of the Community.' Mr Compton argued that the Caribbean Community has no option but to implement measures such as the common external tariff. 'It will take some sacrifice, there might be short-term adjustments and we must be prepared to bear these sacrifices if the Caribbean is to adjust itself economically to meet the challenges of the outside world.' 
ID: 3388
HEADLINE: FT  25 APR 91 / World Trade News: Suzuki to set up car assembly plant in Hungary 
TEXT: SUZUKI is to become the first Japanese car maker to assemble cars in eastern Europe. It is to take a 40 per cent stake in a joint venture in Hungary, Magyar Suzuki, to produce up to 60,000 cars a year. Its partners in the venture are C Itoh, the Japanese trading group, with an 11 per cent stake, Autokonszern, a Hungarian consortium (40 per cent), and International Finance Corporation, a World Bank affiliate (9 per cent). The total project cost of more than Y32bn (Pounds 136m) makes it Hungary's largest joint venture undertaking to date. Magyar Suzuki will have an equity capital of Y10bn. Production is due to start at end-1992, Mr Osamu Suzuki, Suzuki Motor president, said. Viability depended on promoting local production of components and improving quality, he added. The company said output would be about 15,000 in the first year, rising to 50,000 after the third. The workforce will total some 1,100 when production reaches 50,000 a year. Suzuki aims to reach a target of 60,000 cars a year by 1997. The venture will be located at Esztergom, north of Budapest. Suzuki said it would assemble its small 1- and 1.3-litre Suzuki Swift hatch-back range at the plant. The Japanese car maker is giving local parts suppliers a stake in the success of the project by taking them on as equity-holding partners. It is encouraging them to link up with its own suppliers in Japan through joint venture or licensing agreements. Up to 1997, it aims to increase local content to some 70 per cent. Suzuki seeks to sell about 60 per cent of output in the Hungarian market, with some 40 per cent exported mainly to western Europe. Like Fiat's small-car production at FSM in Poland, Suzuki will seek to export from its Hungarian plant to the whole of the European market. Hungary was chosen because it had the most market-oriented economy in eastern Europe and a home market free of domestic competitors, Mr Istvan Lepsenyi, Magyar Suzuki president, said. The Suzuki investment in Hungary follows moves by General Motors and Ford of the US to set up manufacturing operations in Hungary. General Motors has formed a joint venture with Raba, the Hungarian state-owned maker of trucks, diesel engines, and tractors, to build Opel car engines and to assemble Opel cars with an investment of around Dollars 150m (Pounds 88m). It has a 67 per cent stake and management control. It aims to produce up to 30,000 Opel Kadett/Vauxhall Astra cars and 200,000 engines a year at a plant at Szentgotthard, close to the Austrian border. Ford plans an investment of Dollars 80m in a wholly-owned plant in Szekesfehervar producing ignitions. Plans by western car makers are now advanced for moving into eastern Europe, with Volkswagen investing heavily in Czechoslovakia and eastern Germany, and General Motors establishing operations in eastern Germany and Hungary. Fiat is still the dominant force in Poland but GM is also expected to begin negotiations shortly for an assembly venture in Warsaw with FSO. Fiat has led western car makers' moves in Yugoslavia and the Soviet Union. Hungary has granted favourable tax and customs duty treatment for the the Suzuki project. Yesterday's signing marked the belated end of a six-year gestation for the venture. Suzuki's insistence on a 10-year tax holiday had postponed agreement. Analysts also said the delay and the scaling down of the Japanese car maker's earlier ambitions had followed a change of strategy. Previously, the company had intended to use Hungary as a base for deliveries to the rest of the region. After the disintegration of the Comecon system of trade between east European countries, Hungary has no preferential access, however. 
ID: 3389
HEADLINE: FT  25 APR 91 / Brussels crackdown on Italian state aid 
TEXT: THE European Commission has told Italy to explain why it has prolonged an Ecu292m (Pounds 200m) aid scheme for the consumer electronics industry, approved by Brussels in 1984-85 for only five years. The move is part of a widening crackdown by the EC on illegal state aid. The action is intended as much to forestall further aid it believes Rome is planning, as to hold Italy to the agreement. This put strict time limits on the aid, channelled through the state's Ristrutturazione Elettronica SpA (REL), set up by the Italian industry ministry in 1982 to restructure the sector by taking minority stakes in, and providing soft loans for, consumer electronics manufacturers and components suppliers. The stakes were supposed to be sold to the private sector after five years; the Commission says state holdings in six companies have not been. Furthermore, Brussels says, three companies in receipt of the subsidised loans have missed their repayments schedule. This 'illegal application' of the agreed aid regime constitutes a distortion of competition, the Commission says, and it has asked Rome for a reply within one month. Yesterday's decision follows the announcement of four state aid inquiries this month. These are into French plans to pump more than Dollars 1bn into Bull, the computer maker, and Thomson, the defence and electronics group; into France's use of its main state enterprises to funnel money into smaller companies in industrially declining areas; into a Dollars 230m Italian plan to restructure the road haulage sector; and into Belgium's plans to recapitalise Sabena, its ailing flag airline, to the tune of Dollars 1bn. The Commission also intends to investigate France's plans to inject around Dollars 400m into Air France. By contrast, the Commission yesterday approved eight separate state aid schemes allowed by EC law: for research and development and for backward regions in Italy and Spain; for small to medium-sized industry in Italy and for Dutch shipbuilders; and a UK undertaking on future industrial aid to assisted areas. 
ID: 3390
HEADLINE: FT  25 APR 91 / East Germany faces big rise in unemployment 
TEXT: THE German government is bracing itself for a dramatic increase in east German unemployment in July, when several hundred thousand public servants will lose their jobs and the one year ban on redundancies in the engineering industry ends. Mr Thomas Geitz, an official at the BDA, one of the main employers' organisations, said that the engineering industry agreement had been reluctantly respected but employers were hoping to shed many workers in July. IG Metall, the industry union, is seeking talks to extend the agreement. Many engineering workers in east Germany are on government supported short-time working so the effect of ending the no-redundancies agreement will be to transfer many short-time workers (currently about 2m) to the unemployed total (now about 1m). Most of the several hundred thousand public servants who have been suspended on 70 per cent of their pay since the end of last year will also lose their jobs in July. The public servants worked for organs of the former communist state which have now been dissolved. Yesterday the German constitutional court in Karlsruhe ruled that the suspension of the workers had not been unconstitutional, except in the case of pregnant women whose suspension contravened their job security arrangements. Early signs of upswing in the east German economy were detected yesterday by two economic research institutes, the IFO in Munich and the DIW in west Berlin. The IFO business confidence report said that in February the business climate had improved for the first time since August last year. DIW said incomes in east Germany rose by a fifth from the middle of 1989 to the end of 1990, reaching about 60 per cent of the west German level. 
ID: 3391
HEADLINE: FT  25 APR 91 / French trade gap widens 
TEXT: FRANCE'S foreign trade deficit widened slightly in March, according to provisional figures published yesterday, writes Ian Davidson in Paris. The slowdown in demand in France and abroad led to unchanged levels of exports, while imports increased very slightly. The underlying trend points to a further gentle deterioration ahead. The seasonally adjusted deficit in March grew to FFr4.7bn (Pounds 460m), compared with FFr3.5bn in February and FFr5.7bn in January. The deficit in industrial goods grew to FFr4.5bn, compared with FFr1.9bn in February. 
ID: 3392
HEADLINE: FT  25 APR 91 / World Bank approves Dollars 120m telecom loan for Poland 
TEXT: THE World Bank has approved a Dollars 120m loan aimed at improving Poland's inefficient telecommunications system. The loan will help finance the installation of a new digital system including new switches, fibre optic cables and the construction of a satellite ground station to improve international links. The World Bank is also considering a Dollars 300m loan to aid privatisation and industrial restructuring, as well as another Dollars 300m loan for heat supply and conservation projects. A further Dollars 500m of loans devoted to developing financial institutions, employment promotion, agriculture and health services are also being considered. The telecommunications project is primarily aimed at providing an improvement for 70,000 new business subscribers and will be part of Poland's telephone modernisation programme which is set to cost Dollars 1.5bn over the next ten years. Next week PPTT,the country's telecommunications authority, is to announce a shortlist of western companies which are bidding to supply a separate cellular telephone network costing Dollars 150m, which should provide 100,000 lines over five years. The World Bank loan, to be repaid over 17 years, is to be accompanied by an Ecu70m (Pounds 48m) loan from the European Investment Bank. The project includes the installation of 12 digital switches and should improve communications between 17 towns as well as calls abroad. Poland's Finance Ministry has decided to suspend sales of bonds which gave holders a 20 per cent discount when used to buy shares in privatised companies. The issue was to have run till 1994. The decision, which will be implemented early next month, comes after a parliamentary declaration in February criticised the scheme for overly favouring investors. The bonds, with an interest rate index-linked to the monthly inflation rate, have been on sale since December 1989. Zl 196.7bn of the bonds had been sold by the end of February. 
ID: 3393
HEADLINE: FT  25 APR 91 / EC Council settles row over research 
TEXT: THE EC Council of Ministers yesterday settled a institutional row with other Community bodies and approved Ecu3.83bn (Pounds 2.62bn) for ten research projects over the next two and a half years. The row, which threatened further to delay the EC's already tardy framework programme for 1990-94, was a by-product of the sparring between EC institutions in the negotiations on political union. The Council had earlier changed five programmes - on marine and life sciences, the environment, communications and electronic data transmission - to the extent that the parliament persuaded the Commission to withdraw them altogether. Pulling these programmes off the table and then resubmitting would have delayed them months. So,in the end, the EC executive and parliament settled for a few vague and minor changes, such as promises to weigh the socio-economic impact of EC research, which were adopted by EC ministers yesterday and are expected to win parliamentary approval next month. In addition to these five programmes, ministers also reached basic political agreement on information technology (worth Ecu1.33bn alone), medical research, industrial materials, and non-nuclear energy and the agro-industrial programme. 
ID: 3394
HEADLINE: FT  25 APR 91 / World News in Brief: Pledge to Poland 
TEXT: Prime minister John Major pledged Britain would give Poland practical help. The promise was given to visiting Polish president Lech Walesa in Downing Street. 
ID: 3395
HEADLINE: FT  25 APR 91 / Survey of Greece (15): 'Birds can mean good business' - Environmental Tourism 
TEXT: MOST TOURISTS take one look at the Gouves estuary with its shallow, brackish lagoons and tufts of spiky grass and head further down the beach. But birdwatchers are fascinated: this 30-acre wetland near Heraklion on the northern coast of Crete is a stop-over for dozens of exotic species migrating to and from the rest of Europe. With a little luck, Gouves should become the first organised centre for environmental tourism in Greece. Next to it is a 680-bed hotel belonging to Grechotel, the country's largest hotel management group, which is backing the project. The problem until recently was opposition from local residents, who wanted to fill in the river delta and take advantage of soaring prices for property close to the sea. In fact, one part of the delta is now covered by a soccer pitch. But the remaining lagoons are still frequented by such rarities as the giant flamingo, the glossy ibis, the pallid harrier and the booted eagle. More than 170 species have been logged on spring visits by British birdwatching groups. Mr Nikos Daskalantonakis, Grechotel's chairman, who owns a sizeable part of the delta, is ready to see his property included in a nature reserve planned for Gouves. 'Green tourism could be very successful on Crete,' he says. 'Why shouldn't Gouves set the trend?' Many Greek wetlands have disappeared in the past 20 years as long stretches of sandy coastline were swallowed up by hotels and bungalow complexes. Though specialised bird and flower tours to Crete have been operating for years, environmental awareness was slow to develop in the rush to exploit traditional sea and sun tourism. But members of the Royal Society for the Conservation of Nature have been taking an interest in Gouves for several years. Now the Greek tourism ministry is also involved. A scheme to develop Gouves along the lines of the highly successful Minsmere nature reserve in Suffolk is being considered for European Community funding, as one of four green tourism projects in Crete. If accepted, the Community would contribute 50 per cent of the costs initially estimated at about Dr48m (Dollars 250,000). In the meantime, the bird enthusiasts have been trying to persuade people in Gouves that their lagoons will be worth more in the long run if they are not filled in and sold off as building plots. Mrs Anne Cryer, who runs a travel business for the Wildlife Trust in Britain, argued the case with the villagers with the help of videotapes from Minsmere dubbed into Greek. 'I think there's now a growing realisation that Gouves actually has a natural resource that will help it catch up with other tourist areas. Birds can mean very good business,' she says. 
ID: 3396
HEADLINE: FT  25 APR 91 / Survey of Greece (14): Foreign visitors set to fall at least 10% - How the country's tourist bodies and hoteliers are trying to win back lost trade 
TEXT: ZEUS XENIOS, the ancient Greek god in charge of offering hospitality to strangers, seems to have turned his back on the tourist industry. For the third time in six years, a disastrous plunge in bookings threatens to wreck a promising year for earnings. Once again, a US travel warning to its nationals to avoid the eastern Mediterranean because of the risk of terrorist attacks following the Gulf war is scaring off the high-spending sector of the Greek market: Japanese honeymooners, incentive groups and conference organisers as well as the older Americans who like cruising in the Aegean. Similar advice in 1985 was blamed for two unfavourable seasons that followed. Then came a terrorist attack aboard a cruise ship in 1988. This year a series of bomb explosions damaged foreign bank branches and tourist buses and a badly aimed rocket narrowly missed a luxury hotel. There were no injuries but concerns over visitors' safety have revived. As in the past, the Greek Tourist Organisation (EOT) is trying to win back lost trade through heavier advertising. This year's campaign will cost Dr6bn (Dollars 33m). It is being co-ordinated for the first time by a group of Athens advertising agencies with international affiliations. This, it is hoped, will prove more effective than relying on haphazard media-buying by EOT offices abroad. Senior Greek tourism officials have visited the big tour operators in Britain and Germany, their two main markets, as well as the US, offering reassurances about airport security and the government's determination to crack down on terrorism. 'We constantly point out that Athens is still one of the safest cities in Europe for visitors, in spite of what has been going on,' says Mr Nikos Iatrakos, EOT's secretary-general. 'However, we still face a considerable drop in numbers this year, 10 per cent at minimum but perhaps as much as 20 per cent.' In 1990, tourist arrivals reached a record 9.3m, a 9 per cent increase over the previous year's 8.5m, the average figure for most of the past decade. Official foreign exchange inflows totalled Dollars 2.57bn, up from Dollars 1.89bn in 1989. But if credit card purchases, cruise earnings and tour operators' commissions paid abroad are counted in, overall tourist earnings rose to Dollars 4.1bn, almost 6 per cent of GDP. Income for 1991 was expected to be well over Dollars 5bn but 'now we'll be lucky to maintain last year's levels,' says Mr Iatrakos. The worst-affected region this year will undoubtedly be Athens. Despite its chronic traffic and pollution problems it remains the focus for most conferences and incentive tours and a starting point for the classical tours favoured by the Americans and Japanese. Hopes of substantially boosting tourism in the capital during the 1990s suffered a setback last autumn with the failure of Athens' bid to stage the 1996 Olympic Games. Advance bookings for the Mediterranean Games in July, one of several major sports events planned as dress rehearsals for an Athens Olympics, are disappointing, according to the organisers. But amid the general gloom, tourist officials note one optimistic pointer for the future: the sale of the 100-year-old Grande Bretagne Hotel, to a Dutch-based investment company which has transferred management to Ciga, the international hotel group. As a family-run establishment, Athens' best-known luxury hotel could barely make ends meet, with occupancy averaging only 55 per cent in recent years. Ciga is expected to invest considerably in refurbishing to bring the Grande Bretagne's facilities up to the standard of its other traditional luxury hotels around Europe. 'The presence of a really top-quality hotel in Athens will upgrade the surrounding area and encourage other hotels to try harder,' says Mr Iatrakos. The government is already trying to ensure that older first-class hotels around Greece, including some in spectacular settings, are upgraded to the standards of increasingly demanding guests. It is breaking up a state-controlled hotel chain and offering individual units to private operators on long-term leases. Improving hotel facilities is one of the easier ways of attracting more older, wealthier tourists, something Greece has been trying to do for years but without conspicuous success. With 433,000 hotel beds, Greece has no shortage of accommodation. But many large island resort hotels built in the boom years of the 1970s have not been maintained to international tour operators' standards. Occupancy levels in Corfu and Rhodes have slipped in recent years. It is no coincidence that the one area where bookings picked up sharply once the Gulf war ended was Crete, which boasts some of the best-run hotels in Greece. Last year the island drew over 1.7m tourists, close to 25 per cent of total arrivals. 'Large-scale tourism didn't start in Crete till the early 1980s. The resort hotels are newer and better managed and many of the mistakes made elsewhere were avoided. As a result, we get a very high proportion of return visitors,' says Mr Thanos Habipis, chairman of the Cretan Hoteliers' Federation. 
ID: 3397
HEADLINE: FT  25 APR 91 / Survey of Greece (16): Manos tackles the car fumes - Athens Pollution 
TEXT: MR Stefanos Manos is fed up with discussing the problems of Athens. The minister of environment and public works, an energetic - some would say impatient - technocrat, he blames 'endless talking and delays in decision-making' for the continuing presence of the nefos, the brown pollution cloud that hangs over the city in still weather. Car exhaust fumes are the major source of atmospheric pollution in Athens, now that industrial emissions are more strictly controlled and householders banned from using heavy diesel oil for heating. Last summer Mr Manos proposed a tax break for Athenians who bought a new car equipped with a catalytic converter, provided that their old model was turned in. Less than six months later, a short space of time by the standards of Greek bureaucracy, the measure was fully in operation. Car buyers, who normally pay import tariffs of over 100 per cent on new vehicles, rushed to the showrooms. Within weeks, the main graveyard for superannuated cars near Mount Parnes outside the city was almost overflowing. Over the past decade the number of private cars in Athens has risen from 550,000 to 880,000. This was partly the result of government attempts to cut pollution levels in the city centre by permitting cars to circulate only on alternate days, according to the final digit of their number-plate. Athenians got around the odd-even driving ban by acquiring a second car. But since many new purchases were of second-hand vehicles, the city's car fleet grew visibly older and dirtier. At the beginning of 1990, 40 per cent of private cars were more than 10 years old, compared with 15-20 per cent in other European Community capitals. 'The incentives are very successful. At the present rate, 30 per cent of the Athens car fleet will be replaced in three years. Then from 1993, only clean cars will be allowed into the city centre,' Mr Manos says. The next stage of his plan to banish the nefos is to build a network of underground garages across the city to provide 25,000 new parking spaces by 1994. They would be privately operated for 25 years and then turned over to the Athens municipality. 'On any weekday, there are 45,000 cars illegally parked around Athens and 60 per cent of the city's road surfaces are taken up by stationary vehicles. If we get parked cars off the streets, traffic will start flowing faster and there'll be fewer fumes,' Mr Manos says. The third stage is to revive a highway project first proposed over 40 years ago by building about 50 kilometres of highway across northern Athens to relieve pressures on central traffic arteries. It will cost about Dr150bn (Dollars 850m) and be operated 'by the constructor as a toll road, a fast highway where you pay to save time.' Mr Manos says he is sticking to 'quite simple projects, because you have so little time to make anything happen before people start thinking in terms of the next election.' The biggest project of all, a Dr250bn extension of the Athens underground, should finally get under way by the end of the year. Its start is already two years behind schedule because of politically inspired delays and a dispute over contract terms. An international consortium led by Siemens of Germany is to build two new lines across the city centre, totalling 18 kilometres in length, and nine stations including one beneath Constitution Square. The extension will take six years to complete and should carry 1bn passengers a year. 
ID: 3398
HEADLINE: FT  25 APR 91 / Survey of Greece (11): Athens roof for the arts - Classical Music 
TEXT: CLASSICAL MUSIC lovers, long a beleaguered minority in a country whose best-known composers are associated with the bouzouki, now have a concert hall to be proud of. The Megaro Mousikis, a white marble cube overlooking a main Athens avenue, has taken almost 40 years to complete, and its German-designed acoustics are said to compete with any symphony hall in northern Europe. All the same, last month's opening was a modest affair. Almost nothing was done to mark the occasion. The Moscow Soloists, a chamber-sized ensemble led by Yuri Bashmet, a viola player, launched into Bach's Brandenburg Concerto No. 6 without a trace of inauguration night nerves. It was the audience who looked awed, as much by the surroundings as the music. Until now, concert-going in Greece has required stoic dedication. It usually means perching in the precipitous tiers of an ancient theatre on a hot summer night with someone's knees pressing into the small of your back. Moonlight and history do not necessarily compensate for the thin quality of sound wafted from far below. 'Modern Athens never had a roof for the arts. This is what the Megaro will provide,' says Mr Christos Lambrakis, the owner of Greece's largest newspaper group. As chairman of the Friends of Music, which persuaded the state to provide a site for the Megaro but repeatedly ran out of funds for construction, he convinced the former socialist government to come up with most of the Dr19bn (Dollars 10.5m) needed to complete the project. Music is one of the areas where Greek cultural tradition has kept its distance from the west. Folk music followed eastern rhythms; in cities the equally oriental sound of the bouzouki held sway. The bouzouki used to be inextricably linked with rebetika, harsh songs about drugs and violence in the Greek underworld. It was made respectable by composers Mikis Theodorakis and Manos Hadjidakis, whose scores for the films 'Zorba the Greek' and 'Never on Sunday' brought a softened version of rebetika to a much bigger audience. Yet Greece occasionally produced classical musicians of the stature of Maria Callas or Dimitri Mitropoulos, the conductor, who became household names like the bouzouki singers. In recent years classical music has gained ground rapidly, helped by the success of a new generation of performers with an international reputation. But would the potential Greek audience be large enough to support a concert hall seating 2,000? Mr Lambrakis suspected not, so the Megaro was redesigned as a multi-purpose building when work on its concrete skeleton resumed in 1986 after a seven-year gap. 'Greece is obviously not the kind of country that can provide large subsidies for the arts. We have to try to ensure that we can pay our way,' he says. The original design by a German architect, Heinrich Keilholz, was radically overhauled to provide additional facilities for staging opera and theatre and to accommodate advances in acoustic technology. The acoustics were designed by Prof Helmut Muller, whose research was used in construction of the Opera de la Bastille in Paris. 'It would have been too expensive to demolish the concrete shell, so we had to work within the constraints of the original frame of a building which had a much less ambitious purpose. This presented a great challenge to the civil engineers,' says Mr Rolf Krogmeyer, an architect who worked on the Megaro at the start of his career and found himself unexpectedly recalled years later. The result is a hexagonal shaped hall with tiered boxes rising from both sides of the stage. Behind the stage is a huge organ, concealed by a wooden screen. The organ is a gift from Siemens and the Greek and German governments. The suspended ceiling, panelled in American red oak, can be set in four separate positions to accommodate the variations in sound reflection that are needed for the full enjoyment of different kinds of performance: opera, theatre, chamber and symphony music. 'Nowadays, acoustics dictate the shape of a concert hall. To achieve clarity of speech you must be able to shrink the space but for the sound of a symphony orchestra to be appreciated, it must be enlarged again,' Mr Krogmeyer says. For theatre and opera, two towers rise from the basement and a lighting grid descends to form a conventional proscenium arch. The front of the apron stage drops away to make room for an orchestra pit. The basement contains an asymmetrical chamber music hall, not yet finished, which will seat an audience of 500. Beside it is a self-contained recording studio with thick concrete walls set on steel springs to eliminate vibrations from passing traffic. The main hall is also equipped to serve as a conference centre with translation booths for 10 languages. 'It's designed so that you can hold a congress into the afternoon and then be able to set up for a concert in the space of three hours,' Mr Lambrakis says. Looking further ahead, the aim is to encourage young Athenians to become regular concert-goers. As a start, Mr Lambrakis intends to fit the courtyard outside the Megaro with a giant screen for simultaneous projection of performances going on inside. 'There would be no entrance charge. We'll be helping young people to experience classical music through a medium they're familiar with.' 
ID: 3399
HEADLINE: FT  25 APR 91 / Survey of Greece (12): Tribal feelings strained - The pressure of immigrants from Albania and the Soviet Union 
TEXT: DOWN AMONG the newspaper booths and merchant stalls in Omonia Square in central Athens, clusters of thin, weather-beaten men chat quietly. Any time of the day and much of the night they are there, dressed in old-fashioned jackets and ragged bell-bottomed trousers. These are the Albanians, some of the many thousands who have crossed over into Greece in recent months. The Greek authorities say that to date more than 20,00 Albanians have arrived in Greece. Some have returned but at least 12,000 look like becoming permanent residents. Most of the new arrivals are members of the Greek minority in southern Albania - a region that for long has been claimed by Greece and that is referred to as north Epirus in the political textbooks. For years, Greece had expressed its concern about the Greek minority in Albania. Now, with the government in Tirana no longer capable of, or willing to, implement rigid border controls, the minority is flooding out. To the Greeks, their arrival is something of a mixed blessing. However, Greece cannot turn back its north Epirot brethren. Athens is also aware that the new immigrants will at least bolster the Greek population. That is now a little over 10m. The birth rate is declining and there is much concern about what is called 'the shrinking of Hellenism'. But the immigrants from Albania arrive with only the clothes they wear and with few skills. Most are farm workers in their early 20s. Greece faces enormous economic problems and is ill-equipped to deal with an immigrant influx. Athens estimates the Greek minority in Albania to be more than 350,000 though the government in Tirana says it is 57,000. Mr Constantine Mitsotakis, the Greek Prime Minister, has appealed to the Greek minority to stay at home and await the outcome of political reforms. Greece also faces pressures in dealing with other immigrants, both legal and illegal. Thousands of Bulgarians have entered Greece from the north. There are numbers of Poles living for the most part illegally in various parts of the country. Members of Turkey's Kurdish community regularly ask for political asylum. The Pontians are one of the more intriguing groups to arrive on Greek soil in recent months. Pontians are an ethnic minority of Greek origin who once inhabited an area on the southern coast of the Black Sea - referred to as 'Pontos' in ancient Greek. According to the Greek government up to 500,000 Pontians are now dispersed through the southern Soviet Union. With the freeing of Soviet emigration controls, more than 25,000 Pontians have already arrived in Greece. Few speak modern Greek but this group is unlikely to be a heavy burden on the state. Pontians are the butt of Greek jokes in much the same way as the Irish are to the English or the Poles in some parts of the US. But the Pontians are a resourceful group who through even the toughest times in the Soviet Union survived and often prospered. In many parts of Athens, Pontians have set up stalls selling goods brought from the Soviet Union. As new residents of Greece, they have taken advantage of entitlements on car imports, buying luxury models and selling them for handsome profits. To cope with these new immigrant groups, the government has set up a special bureau to co-ordinate educational and resettlement activities. It is a formidable task, fraught with social and political dangers. Already, some concern has been raised about government plans to settle several thousand Pontians in Thrace - a region where Muslims predominate and one of the poorest in the country. Greece wants to welcome its 'returnees'. But it is fully aware that its resources are severely limited. In some ways the homecoming could not have come at a worse time. 
ID: 3400
HEADLINE: FT  25 APR 91 / Survey of Greece (13): The other brand names are dead - Profile, METAXA 
TEXT: MR Dennis Malamatinas, chief executive of Metaxa, says that his company boasts one of only three successful Greek brand names: 'The others are Onassis and Maria Callas.' Tankers and arias are easier to identify than the contents of a bottle of Metaxa. In Greece it is 'koniak,' but to the rest of the European Community it is brandy. Ask a member of the Metaxas family which invented it a century ago and you are firmly told: 'Metaxa is a unique spirit.' It is also very varied. Three-star Metaxa is something you gulp down in the village cafeneion on a winter morning before setting out to prune the vines. The five-star version is found in Athenian bars at a fraction of the price of cognac, though few fashionable Greeks are seen drinking it. But seven-star Metaxa is the top-selling brandy in international duty free shops, with sales of 1.5m cases a year. Nevertheless, duty-free sales account for only 13 per cent of Metaxa turnover, though more than 50 per cent of production is exported. Most is drunk in Germany and Austria, 'by expatriate Greeks and people who like to keep up with things Greek between holidays,' Mr Malamatinas says. He joined Metaxa after the owners sold out in 1988 to Grand Metropolitan, the drinks, food and retailing group, with a brief to 'transform a flourishing traditional Greek family business into a dynamic part of a multinational group.' Mr Malamatinas has the kind of background to make the transition go smoothly: a Greek born in Zimbabwe, he worked for Procter and Gamble in the US and headed Pepsico's operations in Italy before moving to Metaxa. His management team was picked, he says, on the basis of 'being internationally oriented with an awareness of Greek business culture' and asked to carve out a niche for Metaxa in the international fashion and luxury goods sector. The Metaxa distillery outside Athens has been modernised and capacity doubled, at a cost of Dollars 4.6m. Last year packaging and advertising for seven-star Metaxa was redesigned. The amphora-shaped bottle was relaunched as 'the Greek spirit'. Sales in 1990 improved by 10 per cent. Unlike most Greek businessmen bought out by foreign companies in the past few years, the Metaxas family still keeps an interest in the spirits business. Mr Elias Metaxas, who used to be the company's chief taster, owns a distillery in central Greece where he experiments with liqueurs and produces a brandy to match any Metaxa. 'I am still fascinated,' he says, 'by anything to do with alcohol.' 
ID: 3401
HEADLINE: FT  25 APR 91 / Survey of Greece (9): Why the timetable is slipping - The progress towards privatisation 
TEXT: A RECENT survey of Greek industry caused a stir by pointing out something the Finance Ministry knows only too well: the total amount of tax paid each year by private sector companies falls considerably short of the overall figure for losses incurred by public sector corporations. It is not just the state-owned transport and utilities companies whose payrolls are swelled by political appointees with little interest in boosting productivity. The public sector also has a dominant role in manufacturing though that is less visible, since many larger companies are controlled indirectly through the state-owned banks. Others belong to the Industrial Reconstruction Organisation, a state umbrella for a group of debt-burdened companies nationalised in the early 1980s by the former socialist government. While the socialists were held responsible for weakening Greek industry through selective nationalisations in sectors they considered strategic, the seeds of today's crippling deficits were undoubtedly sown by the statist policies of their right-wing predecessors. However, Mr Constantine Mitsotakis is determined to reverse past attitudes. The prime minister himself supervises a wide-ranging privatisation programme launched immediately the conservatives came to power last April. The companies to be privatised form a profile of Greek industry: among them are shipyards, mineral processing units, a textile group, several paper mills, a leading construction company and a group of co-operative dairies that belong to the Agricultural Bank. The original aim was to dispose of the 20-odd companies controlled by the IRO as quickly as possible and encourage the banks to shed another 70 companies. As a parallel measure, legislation was passed permitting the sale of up to 49 per cent of public sector corporations through the Athens Stock Exchange. To co-ordinate the process, the government issued official guidelines for handling sales and appointed NM Rothschild, the British merchant banker, as its privatisation consultant. But the timetable has slipped badly and it now seems unlikely that this year's budget forecast of Dr200bn (Dollars 1.2bn) in privatisation revenues will be met. Only two small IRO companies have been disposed of, a yachtbuilder and a plastics manufacturer. One partial privatisation has taken place with the sale of a 49 per cent stake in Olympic Airways' catering subsidiary to Abela, an international industrial caterer. Valuations and appointments of financial advisers took longer than expected, while potential buyers were fewer than anticipated given the surge in acquisitions of Greek manufacturing units by both local and foreign companies over the past two years. Mr Yiannis Piperoglou, an independent consultant serving as secretary to the government's privatisation committee, says: 'When we started, I was looking forward to putting some deals together. But we all underestimated the legal complexities of privatisation. The process will take years and getting rid of the IRO companies is only a small part of it.' Government officials admit that chairmen and managing directors of some companies on the privatisation list have resorted to delaying tactics to keep their jobs for as long as possible. Last year the IRO companies' losses totalled Dr45bn and their accumulated debts reached Dr215bn. Mr Mitsotakis remains adamant that the IRO must shut down at the end of the year. This means in effect that a number of companies will be have to liquidated since the IRO will be unable to continue its current practice of extending deadlines in the hope of attracting better offers. Further delays may be caused by a European Court of Justice decision in a case brought by the former owner of an IRO company. The court is expected to rule that the socialists' method of nationalisation, through a compulsory increase of share capital, flouted Community directives on company law because shareholders were not consulted. Such a ruling could bring a spate of lawsuits against the IRO as other former owners see a chance to recover control of their companies, or at least to demand compensation from the government. At the same time, Greek officials are having to stay in close touch with the European Commission to make sure that terms of sale for larger industrial companies, such as the heavily subsidised shipyards, do not run foul of directives on fair competition. Much attention is being focused on the upcoming sale of Heracles General Cement, by far the best buy among the IRO's holdings and one of the few companies slated for privatisation that has posted operating profits in recent years. While Heracles was being valued, the statist faction in the government argued in favour of keeping it in the public sector. The company was nationalised in 1983 with a capitalisation of debts totalling Dr27bn. The move later allowed the IRO to gain control of 70 per cent of its shares. Even before the government committed itself to selling Heracles, the Commission had decided that this method of writing off debt violated competition rules. Despite the legal complications, there is no shortage of interest in Heracles, said to be Europe's largest single cement exporter, among international producers. The company's pre-tax profits totalled Dr11.9bn last year on Dr41.6bn turnover. The recent appointment as chairman of Mr Stelios Stavridis, a former Heracles executive who left shortly after its nationalisation, is seen as underlining the government's intention to speed up its sale. 'The company has deteriorated while under state control, but it is still in reasonably sound shape. My job is not to get involved in running Heracles but to accelerate the pace of privatisation. I don't intend to have to stay here longer than nine months,' he says. 
ID: 3402
HEADLINE: FT  25 APR 91 / Survey of Greece (10): A family business - The country's political dynasties 
TEXT: A QUICK glance at the list of members of Parliament suggests that Greek politics is still very much a family business. The present and former prime ministers, Mr Constantine Mitsotakis and Mr Andreas Papandreou, have a daughter and a son respectively in the House. This is not really a coincidence considering that both leaders launched their own political careers from similarly privileged backgrounds. Mr Papandreou's father was a centrist prime minister. Mr Mitsotakis's great-uncle, Eleftherios Venizelos, was Greece's leading modern statesman. Descendants of the old tzakia, prominent political families whose influence stretches back a century in some cases, are scattered around the front benches in Parliament. On the other hand, a political dynasty can be founded by present head of state, Mr Constantine Karamanlis, a schoolmaster's son from Macedonia who served as prime minister for 15 years. His youngest brother is a cabinet minister and two of his nephews are up-and-coming deputies. But the rumbles of complaint from members of Mr Mitsotakis's conservative New Democracy party when he gave his daughter, Mrs Dora Bakoyannis, a junior ministerial post, were an indication of how attitudes are changing. As under-secretary to the prime minister's office, Mrs Bakoyannis is responsible for co-ordinating government activities. She took over her husband's parliamentary seat after he was killed by a local terrorist group in 1989. 'I've been working for Mitsotakis for years. Now I represent one of the poorest constituencies in Greece where a lot needs to be done,' she says. 'Politics is my life, and I'd like another cabinet job when I've got more experience.' Greek political parties have rarely outlived their founders, but both ND, established by Mr Karamanlis, and Mr Papandreou's Panhellenic Socialist Movement (Pasok) may have put down strong enough roots over the past 17 years to survive changes that are inevitable in the next few years. Following Pasok's earlier example, ND constructed a more effective grassroots organisation during its years in opposition. More younger members of Parliament were selected originally as candidates on the basis of local popularity rather than connections with the party hierarchy in Athens. The frontrunner to succeed Mr Mitsotakis as ND leader, Mr Miltiades Evert, is a seasoned Athenian politician but not from one of the old families. As minister to the prime minister's office, he looks after civil service reform and makes a point of keeping a distance from the party machine. A year in opposition has taken its toll on Pasok. Funds are low and the old populist enthusiasm is gone, especially in the countryside where the party built its power base. Mr Papandreou's personal grip on Pasok has slackened, but there has been no attempt to unseat him. On the contrary, the start of his trial - in absentia -for alleged corruption while in office brought a closing of socialist ranks. The succession battle could turn out to be a long drawn-out affair, given the doubts about Mr Papandreou's health since he underwent major heart surgery in 1988 and the number of potential candidates. Half a dozen former cabinet ministers are frequently mentioned, but it is not at all clear which of them would appeal to both radical and social democrat wings of the party. Potential contenders are keeping a low profile until the court reaches its decision, which may be several months away. 'The outcome of the trial will decide Mr Papandreou's political future,' says Mr Costas Simitis, a former economy minister and the leader of Pasok's social democrat faction. 
ID: 3403
HEADLINE: FT  25 APR 91 / Survey of Greece (8): A new look emerges on the Piraeus waterfront - There is something of a revival in shipping 
TEXT: SOMETHING OF a 'new look' has emerged on the Piraeus waterfront in the year since the conservative New Democracy party came to power. It started with a decision by Mr Constantine Mitsotakis, the prime minister, to take on the shipping portfolio himself, a move seen by the community as long overdue recognition for its contribution to the economy, as major employers and earners of foreign exchange. Day-to-day running of the Merchant Marine Ministry was left to Mr Aristotle Pavlides, who eventually took over as minister six months later. By that time, the prime minister's promise to address the shipping industry's problems with 'imagination and daring' had resulted in new measures intended to boost the competitiveness of Greek flag vessels in the international market. Tonnage tax on vessels of 80,000 gross tons was slashed by 75 per cent, while ships from 40,000 to 80,000 gt were granted a 50 per cent reduction. An extension of the tax breaks to smaller vessels is now under consideration by the ministry. The crew reductions removed up to five members from the complements required on Greek flag vessels. To counter the outcry from seafarers' unions, Mr Pavlides made it clear that this was mainly a paper exercise to normalise a situation in which companies applied individually to use reduced 'experimental' crews. The government has also acted on shipowners' long- standing complaints about the dismal state of telecommunications in Piraeus. Efforts by the Greek PTT to upgrade the system include a pilot project giving the port priority. By June an extra 17,000 lines should become available, together with other improvements. Maritime education, another nagging problem in the eyes of owners, is also being tackled. Some training schools that were expensive to maintain and not fully used have been closed. Now the British sandwich-course training system is being adopted and the ministry is consulting owners on further reforms to be implemented in the 1991-92 academic year. Though the government's moves were favourably received by the shipping community, the number of vessels attracted to the national flag has remained relatively small. This is largely because of factors over which the government has little control. Just as the tax and crew cuts were announced, a wave of strikes paralysed banks, communications and power supplies for a three-week period. The walk-outs underlined all too clearly the kind of problems that owners had been pointing out for years. Piraeus shipping offices were forced to relocate staff abroad temporarily, to keep in contact with their vessels. In addition, a weak freight market and an uncertain outlook worldwide following Iraq's invasion of Kuwait were more than enough to induce hesitation about changing office location or flag. Nonetheless, figures have improved. At the end of 1990, the Greek flag fleet stood at 2,031 vessels totalling 22.53m gross tons, compared with 2,003 vessels of 21m gt at the end of December 1989. Foreign exchange earnings from shipping soared by 29.3 per cent over the same period to Dollars 1.79bn, the highest total since a 1981 peak of Dollars 1.82bn. The trend continued in January this year with earnings increasing by 21.1 per cent to Dollars 139m, against Dollars 111.5m in the same month last year. The fleet's accident record also improved, with incidents involving Greek ships falling in 1990 to 54 from 58 the previous year. However, 51 lives were lost compared with only nine in 1989, principally because of two disasters. Mr Pavlides stresses the need to rebuild a climate of trust between owners, seafarers and the government. Unquestionably, the government's efforts have made a difference. But Greek owners will continue to be market-oriented on the whole. Unless it makes sound business sense, they will not opt for the home flag or a Piraeus office. Still, one indication of a revised perception of the situation in Greece came with the announcement by the London-based Papachristides Ship Management Services that it would transfer its ship management operation to Piraeus this spring. The shipowners' associations continue to emphasise their stated aim of attracting new shipping and financial activities to Piraeus. But Greek owners, individualists to the last, always look at the bottom line where their own business is concerned. One of the major issues, especially for smaller owners, is fleet replacement. By the end of 1990 Piraeus banks were offering new types of facilities to clients such as standby lines of credit for future vessel purchases. As ship values dropped in the second half of the year, Greek owners, with their traditional knack for spotting a good buy, began to inspect vessels with a view to purchasing. The Gulf war put a temporary brake on plans, but since late February, owners have come strongly into the second-hand market again, showing interest in a wide range of vessels. At the same time, two Piraeus-based companies have revealed new building orders for products carriers. One, Eletson Corporation, is already the largest dedicated products shipping company in the world. The other, Forum Maritime, is only now preparing to enter the wet trades. Both new building contracts are for modern, highly sophisticated tonnage in line with standards required for trading with the US. They are an indication of the moves being made in the Greek shipping industry to slough off an unflattering image of operating an elderly fleet, kept under tight family control. 
ID: 3404
HEADLINE: FT  25 APR 91 / Survey of Greece (7): Ending the nightmare - Investing in the country 
TEXT: BANKING IN Greece is not an easy business. One of the main hiccups is communications. The telephone network, starved of investment for the last two decades, is overloaded and outdated. Banks in the state sector are chronically overstaffed. Labour problems are a common occurrence. For the customer, even the simplest transaction can take a great deal of time as tellers wrestle with telephones that don't work and piles of paperwork. Mr Panagis Vourloumis is the managing director of Alpha Finance, 'the closest thing to a merchant bank in Greece', as he puts it. 'Our communications technology is years out of date. People cannot get in touch with us so we lose business,' Mr Vourloumis says. He feels that if there is not substantial investment and reform in the banking sector soon, Greece risks being left behind not only by the more advanced countries in the European Community but also by Spain and Portugal which are already putting into place new banking systems. He believes that Greece has expertise in many areas and could develop a proper financial services industry. 'At the moment financial services are only an appendage of the banks. But they could develop independently, for instance if offering banking expertise and services to countries like Bulgaria and Romania - places where Greek banks, more than the more developed institutions in Germany or the UK, have a knowledge and feel for the way business is done.' Alpha Finance has been approached by various east European countries but, Mr Vourloumis says, it already has more than enough business in the home market. 'Even with our communications problems, we can compete with the foreign banks.' Set up two years ago, Alpha Finance belongs to a group of financial services companies founded by Credit Bank, Greece's largest private bank, which include stockbroking, leasing, insurance and financial information services. Credit Bank is the largest shareholder. Samuel Montagu also has a small stake, with the rest of the institution's equity held by employees - an innovation in the Greek banking sector. In the past two years, with a dramatic rise in business on the Athens Stock Exchange, Alpha Finance has been closely involved in helping several companies go public. Together with Credit Bank, it launched two mutual funds, a diversified equity and a fixed income fund, the first of its kind in Greece. The two funds manage more than Dr20bn (Dollars 110m) in assets. Alpha Finance is also involved in the government's privatisation process, carrying out valuations and acting as financial adviser on the sale of several companies. 'Privatisation is a revolution in Greece. If it's successful, and for the future of the country it has to be, then the whole economic outlook will change,' Mr Vourloumis says. He points out that as the recession bites deeper, 'some foreign institutions have come to pick the crumbs from the Greek table - something we welcome because it broadens the market.' But Mr Vourloumis and other bankers accept that Greece is still viewed as a bureaucratic nightmare for some foreign institutions. While profit repatriation is permitted, bureaucratic stipulations result in tortuous hold-ups. A combination of labour problems and telecommunications difficulties has held up progress on automated banking. Cheques are almost as rare as a free taxi in the Athens rush hour. The black economy encourages cash transactions. It is not uncommon to see customers carrying briefcases bulging with drachma in and out of banks. 'Setting up Alpha Finance was an expression of our faith in the future,' says Mr Vourloumis. 'I am an optimist - things are going to change.' 
ID: 3405
HEADLINE: FT  25 APR 91 / Survey of Greece (5): Wealthy uncle becomes less indulgent - The economy, Kerin Hope says it will be hard to avoid a revenue shortfall 
TEXT: WHEN A Greek is in dire financial straits, he remembers his barba stin Koroni - a wealthy uncle in a distant town. Twice in the past six years, the government has done much the same thing, seeking assistance from Brussels in the form of an emergency balance of payments loan. But the European Community, which granted Greece an Ecu2.2bn (Dollars 2.7bn) loan in February, is much less indulgent than it used to be. Stringent conditions were attached before the first tranche of Ecu1bn was paid. If Greece is to participate in the next phase of European monetary union, it must meet ambitious targets for reducing a chronically high inflation rate and public sector borrowing requirement in the next three years. Mr Efthymios Christodoulou, the economy minister, says: 'It's a basic choice. Either you follow the other 11 (EC members) and make an effort to submit to painful measures, or you stay on the periphery and see what happens.' To ensure the drachma can enter the Exchange Rate Mechanism of the EMS by the end of 1993, inflation must come down to 9.5 per cent that year, from 22.8 per cent in 1990. This year's target is 17.5 per cent. Central administration borrowing, which totalled 13.1 per cent of GNP last year, is expected to shrink to 10.5 per cent this year and reach a minimal 1.5 per cent in 1993. The current account deficit must be limited to 3 per cent of GNP, compared with an average of over 4 per cent for the past two years. Other conditions call for the kind of reforms that Greek economic analysts have advocated for years but governments were always reluctant to apply because of the political cost. They include a 10 per cent cut in civil service staffing levels by 1993, a broadening of the tax base to include more farmers and an effective crackdown on tax evasion by restructuring revenue collection. Such strict conditionality is the result of the former socialist government's failure to keep the terms of an Ecu1.5bn Community loan in the mid-1980s. Structural reform was largely ignored but the government managed to cut the PSBR from 18 to 13 per cent of GDP and bring inflation down from 22 to 12 per cent before yielding to pressure for substantial wage increases. These, together with an extravagant campaign to find public sector jobs for socialist supporters in the run-up to the June 1989 election, quickly dissipated the gains from two years of tight austerity. Crucial economic decisions were postponed during almost a year of political stalemate before the conservatives' narrow election victory last spring. Now the government cannot afford any delay at all in implementing reforms if it wants to benefit from a recovery forecast for 1993. By that time, another election will be imminent. One encouraging sign has been union willingness to accept pay rises well below the inflation rate, following the abolition of automatic index-linking of wages at the end of 1990. This year public sector employees will receive nominal increases of 8 per cent. In the private sector, a landmark agreement was struck that seems to guarantee smooth labour relations for the next two years. The unions agreed to a basic 12 per cent increase for this year and 9 per cent in 1992, when inflation of 14 per cent is forecast. In fact, inflation could drop below 17 per cent this year. 'Underlying inflation, especially labour costs, is below the consumer price index, and this year's target was set when the outlook for oil prices was much gloomier,' said one analyst. Growth this year will be restricted to less than 1 per cent, but even that would be an improvement. Revised estimates for 1990 show negative growth of minus 0.4 per cent, largely as a result of a sharp drop in agricultural production after a disastrous drought. The main challenge for the government is to meet its budget targets for curbing public sector expenditure and increasing revenues. There has been little sign so far that the deficit-plagued public sector enterprises have reined in spending, though a new scheme requiring them to submit monthly accounts to the Economy Ministry should impose more discipline. About 35 per cent of budget revenues are already earmarked for serving the public debt. Even if the stabilisation programme meets all its targets, overall debt will still total more than 90 per cent of GDP in 1993. On the revenue side, the Finance Ministry is confident of maintaining last year's growth in tax income of more than 30 per cent. But tax evasion deprived the government of Dr350bn in revenues last year (Dollars 1.9bn), equivalent to about 3 per cent of GDP. Mr Yiannis Palaiocrassas, the finance minister, says: 'Much of the present evil in the tax system stems from apparently contradictory provisions and regulations that make it hard to determine when an enterprise is outside the law. But it's true there is a lot of corruption everywhere.' The black economy, estimated at 30-40 per cent of GDP, is under attack. Buoyed by the success of its raids on night clubs and restaurants, the ministry is setting up a 'tax commando unit' to frighten more proprietors into producing correct receipts on their newly installed cash registers. But the new income tax structure will not come into effect until 1993. In the meantime, tax returns will be systematically cross-checked this year for the first time. It is becoming increasingly clear that the government is unlikely to collect the expected income from its privatisation programme. The Industrial Reconstruction Organisation was expected to sell about 20 companies under its control this year. Due to lack of interest from buyers, it seems that all but half a dozen may have to be liquidated instead. Another important potential source of revenue, sales of land bonds redeemable as building plots, is lagging behind schedule. If, as seems likely, they are not introduced until late in the year, it will be hard to avoid a revenue shortfall. 
ID: 3406
HEADLINE: FT  25 APR 91 / Survey of Greece (6): Out go curbs, out go funds? - Banking 
TEXT: BANK OF Greece officials are professing confidence that when restrictions on long-term capital outflows are finally lifted next month, there will be no large-scale flight of funds. But if a note of trepidation creeps into their voices, it is hardly surprising. The liberalisation, which will bring Greece into line with its European Community partners by permitting individual Greek investors to buy property and securities abroad, is already more than a year overdue. Successive governments obtained an extension, citing a steadily worsening current account deficit that reached Dollars 3.6bn last year, over 5 per cent of GDP. The deficit is shrinking only slowly, but a commitment was made to freeing outward capital movement this spring under the terms of the EC emergency balance of payments loan to Greece. Mr Dimitris Chalikias, the governor of the Bank of Greece, belives the benefits of liberalisation will quickly outweigh any adverse effects on the balance of payments. 'We're not very worried about the effect on the current account deficit. It won't be so large. The important factor is the confidence it brings, which will encourage capital inflows as well.' There are no longer any restrictions on inward capital movement, or on direct investment abroad. Greek companies are already allowed to borrow from foreign banks, in foreign currency if they wish. But until last year, total Greek purchases of foreign securities were limited to Ecu50m (Dollars 60m) yearly in EC and European Investment Bank issues. At present, Greek mutual funds can place no more than 25 per cent of their portfolios in foreign stocks. The average Greek businessman still aspires to owning property in England or Switzerland and a portfolio of Wall Street stocks, though the flourishing equity and property markets in Athens mean such investments may be as much a status symbol as a hedge against the spectre of political or economic turmoil at home. The Bank of Greece view is that the serious money has already left because wealthy Greeks have little difficulty in bypassing regulations in order to transfer capital abroad. Mr Chalikias says: 'If we consider the structure of foreign exchange receipts, invisibles are the most important item and private capital inflow is a very large item. This structure makes it relatively easy for capital to be exported unofficially.' Nonetheless, a steady trickle of funds abroad can be expected as smaller Greek investors experiment with purchases of foreign securities or buy second homes in parts of western Europe where prices compare favourably with those in Greece. On a lesser scale, lifting the current yearly ceiling of Dollars 300 on credit card purchases abroad, also included in the liberalisation, will add to the outflow. Once the initial shock is absorbed, 'this move will prove a catalyst for changing the entire Greek financial landscape,' according to Mr George Zavvos, European Parliament member who chairs the recently established committee for the reform of the Greek financial system. The committee's aim is to implement EC policy on banking and securities as swiftly as possible. This involves preparing a considerable amount of new legislation. While the Bank of Greece has been steadily deregulating the banking system over the past five years, little has been done to overhaul its legal framework. Mr Zavvos, who used to work for the European Commission, should be the ideal person for the job: he was responsible for drafting the Community's Second Banking Directive. 'We have one of the most antiquated banking systems in Europe, so we needed a mechanism for change. The image of Greek regulatory institutions needs to be reformed. Integrity and efficiency are terribly necessary if we are to start competing with the rest of the Community.' The committee has already prepared legislative decrees on solvency ratios and capital adequacy arrangements that will bring Greece into line with standards worldwide. A law is being drafted on banks' accounting plans; a much-delayed scheme for guaranteeing deposits is nearly complete. Improvements in prudential supervision are also high on the agenda. Testimony in recent weeks by Mr Chalikias and other Bank of Greece officials at the trial of several former cabinet ministers accused of involvement in a Dollars 200m embezzlement scandal at the privately owned Bank of Crete revealed that, without government support, the central bank was unable to mount an effective investigation of its own. Once the new legislation is in place, the state-owned Greek banks, which still control more than 70 per cent of deposits but have largely failed to grasp the opportunities offered by deregulation, will come under much stronger pressure to modernise, Mr Zavvos says. 'The state banks have a competitive advantage in their proximity to the client plus their networks all over Greece. Their unions are weaker than they used to be, so there is a chance to improve efficiency. But they need up-to-date technology and management.' For the 22 foreign banks, the reforms will mean 'a more level playing field,' according to one foreign manager. Though the foreign banks complain about the vagueness of existing legislation, it has not deterred them from expanding their retail banking operations or from becoming the leading players in handling mergers and acquisitions. The revised framework will also reinforce the position of the two leading private Greek banks, which between them hold 14 per cent of deposits. Both have carved out profitable niches, expanding into leasing and brokerage activities in recent years, while avoiding involvement with the loss-making public sector corporations. 'The private banks have already done well out of deregulation. We're more flexible. It's a question of quality of services. Our bank is modelled on the kind of helpful high street bank that doesn't exist any more,' says Mr Constantine Capsaskis, chairman of Ergobank, which looks after small businessmen and is one of the most profitable banks in Europe. 
ID: 3407
HEADLINE: FT  25 APR 91 / Survey of Greece (3): The piper calls the tune - Relations with Europe 
TEXT: IN THE wealthier parts of Athens, the mink coats come out during the short spells of winter weather. The children of the wealthy - there are plenty of them - while away their time in coffee bars or parade round the city in expensive cars. House buyers still carry suitcases full of drachma to complete cash purchases for properties which have recently risen to London-style prices. At times it is hard to reconcile life in Greece with the official statistics: on a wealth per head basis Greece is now the poorest country in the EC. It also has the worst economic health record in the Community. It has been saved from financial pneumonia only by emergency treatment from Brussels, in the form of a recently approved Ecu2.2bn loan - granted on the strictest terms yet imposed on a member state. 1990 was the year when the EC finally ran out of patience with Greek governments which seemed either unwilling or unable to put the country's financial affairs in some sort of order. Early last year Mr Jacques Delors, president of the European Commission, wrote a terse letter to the then 'ecumenical' government. He said the deteriorating economic situation in Greece threatened the future not only of the country but also jeopardised future developments within the EC. Greece, said Mr Delors, was lagging behind the Community to the point where the EC's 'course towards the single market, monetary union and European unification is in danger of being permanently undermined.' Greece's creditworthiness was increasingly at risk due to a rapidly rising public debt and other imbalances in the economy. 'We think it indispensable that drastic measures be quickly taken to make clear the country's willingness to reduce these imbalances for good,' said Mr Delors. The direct language of the communication broke the delicate protocol the Commission employs in its dealings with sovereign EC governments. The EC was angry that Greece had failed to abide by the terms of a Dollars 1.7bn EC emergency loan made in 1985. The message this time was clear: if Greece did not put its economy in order, then the country risked being left behind by the rest of the Community. The new EC loan - finally approved in February this year - sets the parameters of Greek economic policy for the next three years. The loan is in three tranches and is set on what the Commission describes as 'strict and comprehensive' conditions. These include bringing inflation down from 17 to 7 per cent, cutting central government borrowing from 17 per cent of GDP to 1.5 per cent in the 1990-93 period, a 10 per cent reduction in public sector employment, curbs on public sector pay rises and a radical broadening of the tax base. The government is in desperate need of the loan to cover a current account deficit which totalled Dollars 3.2bn in 1990. The loan is also necessary to ensure Greece's continuing creditworthiness as it goes to the market for an estimated Dollars 3.6bn of foreign borrowing this year. Mr Constantine Mitsotakis, the Prime Minister, denies that the terms of the loan constitute an infringement of Greek sovereignty. 'What appears to have been a set of conditions imposed from outside was in fact our policy,' says Mr Mitsotakis. 'We told Brussels to tell us these things. Our economic policy is a very courageous one and has various political and social risks attached to it. But we are determined to carry out these vital reforms.' Some Greek officials admit that the fact that Brussels is seen to be imposing its terms on the future course of the economy has made life easier for the government. In the divisive world of Greek politics it would have found it hard to act alone. There could have been a series of damaging strikes and social chaos. There was some disquiet within EC ranks about the loan. Mr Mitsotakis says agreement was reached only after consultations 'at a very high level'. At a meeting of EC finance ministers in Milan last December it was suggested that Greece should turn to the IMF for help. But Mr Delors and others have argued that a solution to Greece's problems should be found 'within the family' of the EC. If Brussels shows signs of impatience with Athens, then many Greeks also feel that the rich, well-developed countries of the EC do not have sufficient regard for their country's particular problems - whether they are ones of geography, politics or culture. 'We Greeks have been slow to learn the intricacies of dealing with Brussels and have had difficulty in co-ordinating our policies,' says one official. 'For that we are penalised.' Like other countries on the EC's periphery, Greece feels it must be granted some special treatment if, in the words of the Brussels bureaucrats, there is to be 'a level playing pitch' between EC members. On the macroeconomic level, Greece cannot be said to have made the most of the opportunities offered by its 10-year EC membership. In 1981 Greek per capita GDP was 58 per cent of the EC average: it is now 51 per cent. Large inflows of EC money in the early 1980s were not used to make the fundamental readjustments necessary in the economy. Rather than modernise the agricultural sector by investing in agribusiness industries, funds were used to import new cars or buy videos. As happened in several other EC member countries, there was no proper supervision of spending. EC monies helped the former socialist government of Mr Andreas Papandreou to carry on the tradition of making political appointments to the civil service and give electorally beneficial pay rises. Mr Costas Simitis was national economy minister during the middle years of the Papandreou era but resigned in 1987 when the former government, faced with an election, abandoned its austerity programme. He admits that mistakes have been made and that as a result Greece only has 'a weak voice' within the EC. 'The trouble now is that the government does not have any specific plan as to how it will bring about the reforms Brussels is asking for. For instance, it has no idea about how to levy taxes on farmers,' says Mr Simitis. There is little talk of the unified market and 1992 in Greece. Ecu7bn of EC structural funds covering the 1989-93 period may not be fully utilised due to the lack of public and private matching investment. Of more immediate concern are the implementation of wage agreements and bringing down inflation. Greek attitudes have changed. Greeks are firmly in favour of EC membership, even if many still refer to Europe as 'over there'. 'We must make sacrifices and fight hard to play our full part in Europe,' says a Greek official. 'If we fail now, we risk being permanently marginalised.' 
ID: 3408
HEADLINE: FT  25 APR 91 / Survey of Greece (2): The old feuds, the old troubles - Kieran Cooke looks for changes in the country's foreign policy 
TEXT: OPEN THE history books. Dust off the old maps. There is trouble again in the Balkans. The priorities of Greece's foreign policy have traditionally been Turkey, Turkey again and then the US. Things are changing. Turkey is still top of the list. But now the Balkans, a l o n g with the European Community, have assumed greater importance. In recent months foreign policy debate within the EC has been dominated by the break-up of eastern Europe and the consequences of German unification. But for Greece, problems in the Balkans are of far more concern. 'Our geographical position has always meant that we have special worries about the Balkans,' says Mr Constantine Mitsotakis, the Prime Minister. 'Now the problems in the region are acute.' There is great concern about the possible break-up of Yugoslavia. Macedonia, perched on Greece's northern borders, might become a break-away republic and try to pursue what Athens terms as irredentist claims on Greek territory. Turmoil in Yugoslavia would also have serious economic consequences. It could put in jeopardy Greece's vital road links with the rest of the EC. Mr Mitsotakis's government has worked hard to promote good relations with the new regimes in Bulgaria and Romania. But Greece has been in something of a quandary over recent events in Albania. Earlier this year Mr Mitsotakis became the first Greek premier to visit Tirana. A breakdown of Stalinist-type controls in Albania has meant a partial opening of frontiers. Greece has suddenly found itself the rather reluctant host to thousands of members of the Greek minority in southern Albania. Having talked for years about the plight of this group in what is known in Athens as North Epirus, the government cannot very well turn the refugees back: Mr Mitsotakis has instead pleaded with them to stay in Albania and await political changes. But, as ever, Turkey remains at the centre of Greek foreign policy. 'The problems between Greece and Turkey are still in the same old rancid state,' says Mr Thanos Veremis of the Hellenic Foundation for Defence and Foreign Policy. 'After Mr Papandreou (the former Greek premier) and Mr Ozal (the then Turkish Prime Minister, now president) met in Davos in 1988 there was talk of a rapprochement between the two sides, but nothing has come of it,' Mr Veremis adds. Greek a r g u m e n t s with Turkey focus on two issues. One is the continuing Turkish presence in northern Cyprus, dating from the 1974 invasion. The other concerns various territorial claims - on the delineation of the Aegean continental shelf, the extent of territorial waters and flight controls in Aegean air space. While the arguments might appear somewhat stale, they still have the potential to erupt into open conflict. As recently as 1987, Greece and Turkey were brought to the brink of war over rival oil exploration claims. Suggestions that Greece has lessened its resolve in any way on the Cyprus question are firmly dismissed by Mr Mitsotakis. He draws parallels between recent events in the Gulf and the Cyprus question. 'I feel now that conditions are better than ever for a settlement. The world reacted strongly to the occupation of Kuwait. There is a foreign occupation in Cyprus. The Security Council resolutions on the issue m u s t be i m p l e m e n t e d,' says Mr Mitsotakis. This view is unlikely to be echoed in Ankara. There are fears in Greece that Turkish attitudes are hardening. The theory is that Turkish self-confidence has been bolstered by its role as a vital support base for the allied forces during the Gulf conflict. Mr Antonis Samaras, the Greek foreign minister, has lobbied energetically in western capitals to try to ensure that Greek interests are not forgotten. At the same time, Mr Samaras has sought to reinforce relations with many governments in the Middle East. Greek officials admit that foreign policy, with the exception of attitudes to Turkey, has lacked consistency. Mr Papandreou sought to weave a complex set of relationships with the third world, with the countries of the Middle East and with some of the now disgraced governments of eastern Europe. During his term of office, there was much anti-US talk but behind the scenes Athens remained close to Washington. In the middle of last year Mr Mitsotakis became the first Greek premier to make an official visit to the US in 27 years. He describes relations now as 'excellent'. A new agreement on US bases in Greece has been signed. Out of the four bases one has already been closed through Pentagon cost-cutting measures, while another is due to stop operating later this year. But there are still some political difficulties between Athens and Washington. Greece was angry about a State Department directive issued during the Gulf war advising US nationals not to visit Athens. More broadly, Greece is concerned that a Washington which is now more well- disposed towards Turkey might try to upset the seven-to-10 ratio in military aid given to Greece and Turkey. However, this ratio is more myth than fact - for some time more US aid has been flowing to Turkey. American officials in Athens say it is clear that the EC is now seen as 'big brother' in Athens, rather than the US. Greece is among the most ardent integrationists in the EC. It wants a common defence network and to become a full member of the Western European Union (WEU). Some officials in Athens say Turkey has been actively lobbying against the latter move. Greece has been heartened by what it s e e s as increased EC interest in the Cyprus question. Luxembourg, the present holder of the EC presidency, has proposed some form of initiative on the issue: however, some EC members clearly do not want the Community to be dragged into what is seen as an argument between Greece and Turkey. Last month Greece again used its veto within the Community to block Ecu600m worth of EC aid to Turkey. The aid had been linked to progress on the Cyprus issue. Greece said that if Turkey were to receive the funds, it would be seen as 'a reward for Turkish intransigence.' Again, some EC members were unhappy at this development. Greece recognises that its interests are best served within the EC. But it is also beginning to realise that there are limits to EC patience when it comes to old and seemingly intractable arguments between Athens and Ankara. 
ID: 3409
HEADLINE: FT  25 APR 91 / Survey of Greece (1): Awkward, but essential - After a year in office, the Mitsotakis government is still trying to restructure the economy and modernise public institutions. The challenge it faces is to keep up the pace of reform without endangering the prevailing political consensus 
TEXT: AT AN age when most politicians are putting the finishing touches to their memoirs, Mr Constantine Mitsotakis, the 72-year-old Greek prime minister, has undertaken the awkward task of making Greece more like other European Community countries. To succeed, he will need all the tenacity acquired during a career in which the highest office always seemed to remain just beyond his grasp. Though the socialists who ran Greece during the 1980s were mired in scandal and clearly running out of steam, it was only after three elections and almost a year of political uncertainty that the conservative New Democracy party managed to scrape a one-seat parliamentary majority last April. Mr Mitsotakis' chances of heading a stable government improved soon afterwards when Mr Constantine Karamanlis, the veteran conservative statesman who led Greece into the European Community a decade ago, was elected president by parliament. Mr Karamanlis has no executive powers as president - they were abolished by the socialists - but as the founder of New Democracy, he wields considerable influence in the party, especially among potential contenders for the leadership. He would almost certainly try to dissuade anyone who felt tempted to lead a party rebellion aimed at forcing Mr Mitsotakis to retire and provoking a fresh election. But given the magnitude of the country's economic problems and the unpopular choices necessary to solve them, this is not likely to happen in the near future. Nor are the socialists putting up any serious opposition to the government's three-year stabilisation programme. Indeed, Mr Andreas Papandreou, the former prime minister, who was a keen advocate of state ownership while in office, complained recently that the government was dragging its heels over privatisation. Mr Papandreou, also 72 and in uncertain health, has had some ups and downs with his Panhellenic Socialist Movement (Pasok) in recent months as would-be successors started manoeuvring for position. There are several strong candidates but, like their conservative counterparts, they seem prepared to play a waiting game. In any case, the start of Mr Papandreou's long-awaited trial, together with three former cabinet ministers, on charges of involvement in the Dollars 200m Bank of Crete embezzlement scandal rallied the party behind him. Mr Papandreou's refusal to take part in the proceedings, which he claims are the outcome of a political conspiracy against him, have taken much of the drama out of the case. The vengeful mood of two summers ago, when the conservatives joined forces with the communist-led Left Alliance in a short-lived coalition government for the exclusive purpose of prosecuting Mr Papandreou and his closest associates, has faded away. Mr Mitsotakis has nothing to gain from reviving past bitterness if he wants to keep austerity on track and at the same time project an image abroad of responsible leadership. Were it not for a recent shake-up in the Left Alliance, Greek political life would almost be dull. After a contentious Communist Party congress where he helped the Stalinist old guard re-establish control, Mr Harilaos Florakis, the elderly communist leader, finally stepped down. Even more surprising in a country with only a handful of female politicians, both Communists and the Left Alliance elected women leaders who have scarcely turned 40. However, continuing internal battles suggest the Alliance is now more likely to split than to play a more significant role. In foreign policy, relations with the United States, always unpredictable in the Papandreou era, have shown a marked improvement. The signing of new agreement for the US military bases, once a focus for acrimonious political debate, was barely commented on. After contributing a frigate to the multinational force in the Gulf war, Greece is participating for the first time in a UN peacekeeping force, on the Iraq-Kuwait border. But Turkey's increased regional importance following the war is causing concern, while long-buried Balkan issues have resurfaced amid increasing instability along Greece's northern borders. Criticism of the government's performance during its first year in office centres on the sluggish pace of reform. At the political level, Mr Mitsotakis had little difficulty in obtaining a special European Community loan to avert an impending balance of payments crisis and also provide some seed money for long-overdue infrastructure projects. But fulfilling the terms of the EC loan, essential if Greece is to participate in the next stage of European economic and monetary union, does not just mean improving the economic indicators - though this is hard enough after a decade marked by stagnating industrial output, runaway deficit growth and a growing black economy. As a former economy minister, Mr Mitsotakis knows that cutting civil service payrolls, being less generous with state pensions, broadening the tax base and curbing tax evasion will require a radical overhaul of the public administration - and of attitudes among its employees. The price of failure, the government is beginning to fear, could be Greece's relegation to satellite status within the Community. Mr Mitsotakis says: 'We have to apply these policies. I'm prepared to lose the next election if I have to, but this is the only way forward.' In fact, the fiercest opposition to change comes from within the conservative party. New Democracy supporters, together with a number of MPs and party officials, feel resentful that their leader is trying to break with the traditional rousfeti system by which public sector positions, from cleaners to bank governors, were redistributed by the winning party after each election. After eight years in opposition, and with unemployment rising, they want a share of the cake. But if Greece is to bring the economy in line with single market requirements, let alone catch up with Portugal and Ireland, old habits will have to be cast aside. A new class of efficient, non-partisan administrators must be found. Improving the state education system is crucial: state schools are ill-equipped and badly-paid teachers take out their grievances in prolonged strikes. Last winter high school students around the country staged a three-week sit-in. The protests flared into disturbingly violent street protests in Athens after a teacher was killed in a riot. As a short-term solution, the government is trying to attract younger Greek bankers and economists back from abroad with a fair degree of success. But only a limited number of talented diaspora Greeks can be expected to put their careers on hold for the sake of helping out at home. It will be much harder, for example, to train several thousand tax inspectors and motivate them to remain honest in a system where superiors often turn a blind eye to corruption. And just in the year since the conservatives took over, a new generation of kareklokentavroi, administrators who cling to their jobs at all costs, has sprung up among the temporary managers appointed to oversee the privatisation programme. Still, Greek businessmen are feeling more cheerful. There is persistent grumbling about interest rates that hover just below 30 per cent, but the more efficient companies in the private sector are busy positioning themselves for an expected surge in growth after 1992. Deregulation of the labour market, with the introduction of flexible hours and part-time work is also making life easier. 'There are problems in co-ordinating policy, between the public sector, the private sector and local government for instance. The government lacks management skills. But it's moving in the right direction,' says Mr Stelios Argyros, president of the Federation of Greek Industries. 
ID: 3410
HEADLINE: FT  25 APR 91 / Survey of the Electricity Industry (9): Pressures mounting - The US 
TEXT: IT SOUNDS like the antithesis of capitalism: in several US states electricity supply companies can now raise their profits by persuading customers not to buy their product. The move is part of an energy conservation effort that underlines the severe economic and environmental pressures facing the US supply industry in an era of increasing competition, rising anti-pollution costs and huge capital spending demands. A combination of all these forces has started to produce a merger wave in the highly fragmented industry. Since the early 1970s, US electric power utilities have been battered by a combination of rising costs and increasing regulation on pricing, new plant construction and other issues. Many are still paying for the nuclear power plants ordered in the 1970s but then, abandoned or not, built on time or to cost. According to the Edison Electric Institute, an industry body, the companies are producing an average return on equity of about 10 per cent, compared with the 13 per cent that state regulatory commissions usually allow. Foremost among the new challenges facing them now is the cost of complying with last year's Clean Air Act which mandates that sulphur dioxide emissions, a key component of acid rain, be reduced at coal-fired power stations by about half by the end of the decade. Utilities make some 60 per cent of their power from coal and they have two choices in complying with the legislation. They can switch from burning soft, high sulphur coal to hard coal, but this will push up transport costs. Alternatively, they can install expensive flue gas desulphurisation systems, otherwise known as scrubbers, or experiment with newer technologies such as fluidised bed combustion. The Edison Institute says that meeting the demands of the act will cost the industry up to Dollars 105bn (Pounds 58.60bn) by 2010. In addition to modifying old plant, the industry is going to have to build much new capacity over the next 10 to 20 years to replace old plant and meet new demand. It is expected to add more than 90,000 net megawatts of new capacity by the end of the 1990s. Several factors have made the business climate more helpful to non-utility companies which wish to generate power. The Bush administration, keen to foster competition in the wholesale power market, has proposed in its recently unveiled energy strategy to remove 55-year-old restrictions on companies owning independent power stations. The Public Utility Holding Act of 1935 has kept industrial companies out of the power business and prevented utilities from building generating plant outside their territories and then selling that power on the open market. Other groups have been free to jump into this market: the Public Utility Regulatory Policy Act of 1978 opened the door for small producers of alternative energy to sell power on the open market. Repeal of the 1935 law has stirred up controversy within the utility industry, with some wanting the freedom to build stations around the country and others unhappy at the presence of independents in their areas. Federal regulators also want changes in control of utilities' transmission lines. At present, while the utilities are required by law to buy power from independents, they control the electricity after that. The regulators would like to allow the independents to find their own customers. That has brought howls of outrage from the industry, which argues that the interlopers will simply steal their best clients. All these factors are forcing some radical changes on the industry. The more far-sighted utilities have been slashing costs and many have set up their own independent power ventures. They have also turned to management of the demand side through energy saving, prompted by changes in the regulatory climate: regulators have begun to offer the companies a return on their energy savings outlays which is broadly the same as the investment they have been making in power plants. The rule changes - instituted in states such as Massachusetts, New York and California - have turned conservation from a costly chore for the utilities into some of their most profitable operations. The so-called 'megawatt' business involves handing out to customers efficient new equipment and sharing in the savings by charging higher rates. The trend has brought together some unusual bedfellows, with conservationists pleased that this means less power station construction and utilities pleased that they are spared the capital costs of new facilities. The new competitive pressures are forcing the utilities to consider the once-outrageous suggestion that they should get together in mergers. There has been a rash of bids over the past year, including the industry's first important hostile offer, when Kansas City Power &amp; Light made a run at neighbouring Kansas Gas and Electric. Behind the merger wave lies a drive for greater efficiency. Mr Edward Tirello, an analyst at Smith, Barney Harris Upham, and a long-time merger advocate, estimates that about Dollars 3.6bn of annual cost savings for the industry could be generated through more economic and efficient operation of plant. The largest economies from consolidation would come from pooling - the ability to use a more economic generating plant mix in the consolidated service area during periods of low demand. The long hand of the regulators could slow down this movement. Only last month officials of the California Public Utilities Commission dealt a heavy, though not yet fatal, blow to the 1988 proposed merger of South California Edison and San Diego Gas and Electric, which would create the largest utility in the nation. The officials agreed that the deal would provide about Dollars 1bn of benefits to customers but complained that its anti-competitive impact outweighed this. 
ID: 3411
HEADLINE: FT  25 APR 91 / Survey of the Electricity Industry (8): Investment will cut the bills - Demand for energy efficiency is focusing on the generators 
TEXT: SOME 20 per cent of the UK's energy bill could be saved by investing in 'cost-effective energy efficiency measures', according to Mr William Rickett, director-general of the UK Energy Efficiency Office. The scope for reducing energy use is not in doubt. Nor is the need to do it. Carbon dioxide (CO), the main 'greenhouse' gas causing global warming, can only be tackled by reducing energy consumption. Rather than meeting increasing energy demand with increasing supply, existing supplies must be used more efficiently. Demand for change will focus on the electricity industry, an important contributor to CO emissions. The UK has radically re-structured its electricity industry over the past two years in preparation for the private sector. The restructuring arguably offered a unique opportunity to incorporate incentives for energy efficiency into the licences and the regulation of the new companies. The opportunity was not taken. Under the system in England and Wales, it is in everyone's interests to sell electricity, and in no one's to save. The profits of the generators depend on maintaining their market share. The profits of the 12 regional electricity companies (RECs) depend on the amount of electricity they distribute and sell. The duty to 'promote', not enforce, energy efficiency lies with the regulator, Professor Littlechild. So far this regulation consists of ensuring the RECs provide their customers with adequate information on ways to cut consumption. What privatisation may do is open up the generation side of the market for new, more efficient technologies. Nearly all of the plant being built or proposed today is based on combined cycle gas-fired turbines (CCGT) which achieve greater efficiency levels than conventional coal-fired plant. It has also raised the profile of combined heat and power (CHP), which has potential efficiency levels of more than 80 per cent. Critics point out that by splitting generation and distribution, and by the regulatory formula used, the government has removed the potential to introduce measures to curb demand, such as least-cost planning. This involves a utility considering whether improving the end-use efficiency of its customers is more cost-effective than building new generating plant. Least-cost planning is being 'aggressively pursued' in about 20 US states, according to Mr Mike Foley of the US National Association of Regulatory Utility Commissioners (NARUC). Some state regulators require utilities to explore both demand and supply-side options before licensing new capacity. In most cases, utilities are then allowed to claim back a rate of return on their investments in energy efficiency. The employment of demand-side management is due to be expanded as part of the new US National Energy Strategy (NES). Although the power industry at first resisted this approach, many utilities are now finding it profitable. These include New England Electric, Boston Edison and Pacific Gas and Electric, three large, privately-owned utilities. According to Mr Mike Monahan of Boston Edison, such demand-side management is Edison's main focus because at 'the bottom line it is more cost-effective to buy back electricity than it is to build new generating plant'. Boston Edison will spend Dollars 250m (Pounds 139.6m) to 1995 on energy conservation measures for its customers, including distributing compact fluorescent lightbulbs, and offering free energy audits. In this way, it shaved some 130MW off its peak demand growth in 1990; by 2000, it expects the figure to be closer to 300MW-400MW. One of the reasons this strategy works is that most US utilities are vertically integrated and have a mandate to serve a particular area. They therefore have an incentive to cut demand. The UK RECs, on the other hand, are distributors and suppliers whose franchise market is due to disappear over the next eight years. An attempt by the House of Lords to enable the regulator, under the Electricity Bill, to enforce energy efficiency measures before approving tariff increases was overturned in the Commons. The structure of the European electricity supply industry is diverse, and consequently the potential for least-cost planning patchy. Swedish state-owned utility Vattenfall believes it could cut 12TWh-19TWh out of a commercial and residential demand of 70TWh a year. The next phase, due this autumn, is to discover how much of this potential can be realised. According to Mr Morgan Andersson, project manager, the recent decision by the Swedish government to delay the phase-out of nuclear power means that 'it is still vital to keep conservation measures going, but the commercial incentive has changed'. Vattenfall now has no need for new generation until 2000. Other Swedish utilities, notably Stockholm Energi, and some German utilities have implemented demand-side management measures. Italy's state-owned utility ENEL is a vertically-integrated monopoly supplier faced with growing demand and increasingly unable to site new plant due to environmental opposition. It has started to look at how to cut domestic demand by working with manufacturers to promote more efficient electrical appliances. A recent study for the UK Energy Department by the March Consulting Group estimates that in the UK alone, replacing appliances with the best available on the world market could save 24,000GWh of electricity. The MCG report, along with the recently released Energy Select Committee report on energy efficiency, comes to the now familiar conclusion that improvements are unlikely to happen without government intervention. Schemes to label appliances according to their efficiency have been introduced by France, Denmark, and Germany with varying degrees of success, but no European country has implemented labelling fully. Again, the US record is impressive, with the 1987 National Appliance Energy Conservation Act setting minimum standards for domestic appliances. The recent NES is set to expand this. A number of US utilities also offer customer rebates for buying efficient electrical appliances. Meanwhile it may be left to international legislative moves to take energy efficiency to the top of the agenda. Movement may be slow, but environmental legislation is set to grow increasingly stringent. The European Commission has already issued a directive setting standards for SOx and NOx emissions from power plants. An EC draft directive calls for compulsory labelling for most domestic appliances in member states from July 1992. Minimum standards are set to follow. Future pressure from the Intergovernmental Panel for Climatic Change to cut global CO emissions may force utilities and governments to try a little harder. 
ID: 3412
HEADLINE: FT  25 APR 91 / Survey of the Electricity Industry (6): Energy policy divided - Japan is torn between nuclear commitment and green issues 
TEXT: CAUGHT BETWEEN surging demand for electricity and the government's commitment to environmental protection, Japan's electric power producers and the ministry that rules them can see only one panacea: nuclear power. Japan lacks energy resources, so nuclear power generation is vital because otherwise the nation depends on foreign sources and is vulnerable to unpredictable fuel costs. In late February, in Niigata prefecture, the No 2 reactor of Tokyo's regional electric power supplier was shut for six days and restarted at the end of the month after an accident attributed to human failure. Earlier that month, a nasty contretemps at the Mihama Nuclear Power Plant occurred when the day after a minor accident at the plant, local residents received leaflets from the power company declaring the facility accident-proof. While neither incident seems to have caused injuries or contamination outside the plant itself, they may help to revive the agendas of anti-nuclear groups. It has been nearly five years since the Ministry of International Trade and Industry (Miti) began reducing power companies' rates, to pass to consumers the benefits of soaring profits ushered in by the strong yen and cheap oil prices. But then the price of oil went up. In the year ending March 31 1990, pre-tax profits at Tokyo Electric Power Company (Tepco) fell to Y185bn (Pounds 770.83m) from the previous year's Y275bn-plus, a far cry from 1987, when the company raked in more than Y444bn. Pre-tax profits for the year ending March 31 are estimated at a dismal Y95bn. Add to that the likelihood that the government will slap a tax on petroleum products to cover around 10 per cent of the Dollars 9bn to be provided in support of the allied forces campaign in the Gulf, and things could get even worse. An industry report from Jardine Fleming Securities in late January said: 'Doubling the tax rate could plunge EP (electric power) companies into the red and necessitate a rate hike.' Rate negotiations between the government and the companies occur annually. An increase could be approved this spring, depending on the direction of interest rates and oil prices, the report added. According to Tepco, the company can still make 'reasonable profits' without a rate increase, thanks to Japan's continuing economic expansion and enormous demand from the Tokyo region. Underscoring its long-term resilience are the triple-A ratings assigned to the company's outstanding foreign and domestic bonds (total: around Dollars 11bn), and the high rating of its Y300bn in commercial paper. The Jardine Fleming report noted Tepco's high 71.5 per cent ratio of interest-bearing debt to capitalisation, but added that 'interest rate movements cannot justify all the changes over time in EP company profitability'. Tepco says it will 'overcome' and 'survive' the risks ahead. The company is reducing dependence on oil, while capital outlays for nuclear power plant construction since the 1970s are claimed to have made it less vulnerable to fossil fuel price vagaries. The biggest private sector electric power concern in the world, Tepco is one of nine Japanese regional publicly-held electric power companies which together produced almost 75 per cent of the country's 798,756m kWh of total electric power output in 1989-90. All the regional power companies are dealing with intensifying competition by diversification into such fields as heat supply services, telecommunications and urban development. Tepco used nuclear fuel sources for nearly 30 per cent of its total generation (205bn kWh) in 1989. The company relied on LNG-based generation for 36 per cent of output, while oil dependence was 28 per cent. In the electric power industry as a whole, nuclear powered electricity output accounted for around 23 per cent of total electricity generated in Japan in 1989. The government's fixation on nuclear power generation is not new. The country revved up its first commercially operated nuclear power station in July 1966. The 1970s oil shocks were something of an apocalypse: construction started on no fewer than 22 nuclear plants during the 1980s. At present the country has 38 nuclear power plants with another 13 under construction and several more on the drawing board. Already three other regional electric power companies - Kansai, Kyushu and Hokuriku - generate more than 40 per cent of their total outputs from nuclear sources, while Shikoku Electric Power generates 38 per cent from nuclear. The heavy reliance by the regionals on nuclear-sourced power has made them prime targets for anti-nuclear protesters, who have successfully stalled construction of several new reactors. By 2010, Miti, which regulates and sets strategy for the power companies, intends to double the number of reactors to 78 and boost nuclear power supply to 43 per cent of total electric power generation. While Miti officials claim the anti-nuclear movement has lost momentum since the Chernobyl disaster, the ministry is not taking the opposition threat lightly. It plans a nationwide three-year PR project later this year directed at specific groups, including housewives, teenagers and company employees. The ministry's strategy is to target the moderates, instead of reacting directly to the anti-nuclear movement. The project includes a personal computer-style network that provides information and news on nuclear power in public places and at nuclear plant sites. PC-owners can dial a phone number to access the network and the ministry will monitor public opinion through questionnaires and by telephone. As part of its effort, the ministry is also distributing free about half a million copies of a glossy, 100-page brochure crammed with pictures, diagrams and flow charts. In spite of having to close a reactor at its plant in Fukushima, north of Tokyo, for nearly two years after a breakdown in January 1989, Tepco's current nuclear construction schedule has 'no symptom of delay,' the company says. A shift in Japanese political balance appears to brighten the future of nuclear power generation. The Social Democratic Party of Japan (formerly the Socialist Party), a strong foe of all things nuclear, seems to have squandered the opportunity it gained in elections last year. Amid its disarray, the SDPJ looks incapable of mounting public support to counter the government's nuclear power commitment. But short-term difficulties persist. If this summer is as hot as the last, the industry could blow a fuse. Last July, Tepco met a record surge in power demand by reportedly getting a big kilowatt injection from other regionals and by urging consumption restraints to ward off power cuts. Miti says it is boosting needed transfers of AC from one generating plant to another when shortages occur. In a further effort to take the heat off electric power companies, Miti says it is expanding its policy of offering discounts to big industrial consumers, such as steel, car and chemicals producers, that agree to cut power use during peak demand times. A recent Credit Suisse industry report said 65.7 per cent of the country's total electric power demand (including supplies from independent generators) in 1989 was for commercial and industrial use. The ministry is also trying to curb residential demand that has rocketed owing to the rapid proliferation of home air conditioners. 
ID: 3413
HEADLINE: FT  25 APR 91 / Survey of the Electricity Industry (7): New image for state monolith - France, EdF 
TEXT: THE FRENCH state-owned power utility, Electricite de France is striving to break away from its past as a relic of central industrial control. The group's independent-minded managers are acutely conscious that EdF stands out in a world where governments are tending to withdraw from public utilities. They want to change that image, to help EdF advance in the export markets it sorely needs. After the privatisation and break-up of Britain's electricity industry, EdF is left as the only electricity monopoly in Europe responsible for all of its system, from power generation through to the distribution to customers. It is this strong central organisation, under the continued control of the Industry Ministry, which has allowed EdF to pursue a consistent pro-nuclear investment policy since France's decision to build its own nuclear energy source in the wake of the 1973 oil price crisis. This has left France today more dependent on nuclear power than any country in the world. EdF draws more than 80 per cent of its electricity from its 57 reactors, providing the cheapest electrical power of any European Community country apart from Denmark, a significant advantage for French industry. Yet the French nuclear power programme has been criticised as over-ambitious, having produced a surplus of seven to eight reactors, according to one official report. It attracts sporadic criticism from France's vocal but surprisingly disorganised environmental lobby, although not enough to cast serious doubt on France's nuclear consensus. For these and purely technical reasons, EdF does not plan to increase its proportional dependence on this source of energy, say officials. While the state has reduced its influence on EdF's decisions, as it has across France's nationalised industries, the utility's top managers are beginning to see government control - especially on pricing - as a hindrance to their bid to strengthen EdF as the EC's biggest energy exporter. EdF's cross-border energy sales rose 8 per cent last year to 46.5bn kWh or 12 per cent of the total and the group wishes to raise exports to near 20 per cent of the total by the end of the decade. At the same time, the group aims to play a significant part in the replacement of ageing reactors in the Soviet Union and eastern Europe. Over the past two years, EdF has delivered a computerised reactor safety monitoring system to the Soviet Union and opened negotiations for joint ventures to build reactors in Hungary and Czechoslovakia. It also looks set to emerge in the next few months as the main foreign company to be allocated a stake in eastern Germany's electricity supply industry. The export drive is partly designed to help mop up EdF's nuclear surplus, but also to help run down the FFr226.1bn (Pounds 22.3bn) debt load that EdF has built up as a result of the nuclear programme, and to earn the cash needed to update some of the older reactors. Already, the French utility's international ambitions have caused anxiety in politically influential German coal-producing regions, worried about the threat of cheap imported nuclear electricity accelerating job losses in the mines. And in Britain, EdF's attempts to sell excess power at advantageous rates to industrial customers in France have attracted competitors' suspicion. Mr Jean Bergougnoux, EdF's managing director, points out that it is hard to persuade EC competition authorities that he is not dumping electricity when his government runs a pricing policy that squeezes EdF's profits. 'A company like EdF must have balanced accounts if it is to be perceived as a fair competitor,' he says. In theory, EdF's contract with the Paris government obliges it to hold price rises at 1.5 percentage points below the rate of inflation. Yet in practice, the government has, until recently, tended to hold rates lower than that, with the result that EdF has made losses for six out of the past 11 years. The powerful Finance Ministry argues that cheap power helps curb inflation and so supports the value of the franc, an idea which provokes the derision of Mr Pierre Delaporte, EdF's sometimes outspoken chairman. 'If we were convinced that the delay in allowing us to raise our tariffs was necessary to keep the franc safe on the international foreign exchange markets, we would gladly sacrifice on the altar of the fatherland, but we do not believe it for a moment,' he said recently. However, in February, EdF received the go-ahead to increase prices by 2.2 per cent, as against the 2.8 per cent general inflation rate forecast for 1991 - a rise greeted as 'moderate' by Mr Delaporte. Certainly, EdF is gradually beginning to look more like a commercially fair competitor than a state monolith. It is now 10 years since it last received a subsidy from the government. EdF even managed to produce a profit in 1990, partly thanks to an increase in exports and also reflecting the first fruits of a plan to cut costs by FFr1bn. Mr Bergougnoux believes that it is only a matter of time before the rigours of EC competition law force the government to give him a freer hand on prices. As he pointed out in a recent interview: 'European competition will in the end have its effect. Brussels will remind the government that the electricity market will conform to competition rules.' 
ID: 3414
HEADLINE: FT  25 APR 91 / Survey of the Electricity Industry (4): Moulding a management culture - The UK's privatisation process puts it at the forefront of changes in the industry: FT writers look at aspects of the new structure 
TEXT: IN THE run-up to its privatisation last month, National Power, the largest electricity company in the UK, issued its managers with a little blue book. 'Transforming National Power' was a hymn of praise to change. It was written by a management consultant who had been appointed as the personal adviser on new working practices to Mr John Baker, National Power's chief executive. 'Lean', 'flexible', 'open', 'entrepreneurial' and 'commercial' are the buzzwords running through the booklet. 'Committee Rule was the old philosophy,' it enthuses. 'Now the ability to take individual management decisions must become accepted behaviour - in fact, people who respond quickly and effectively without going through the hierarchy will be encouraged.' It would be easy to poke fun at the often over-simplied homilies which make up much of its 65 pages. Yet the message it contains would come as a shock to most managers in many of the state-owned, monopoly-protected utilities which still characterise much of the electricity industry worldwide. Changing the management culture was one of the most important tasks that National Power's top executives set themselves in preparation for privatisation. Mr Baker and his immediate lieutenants have been stung by frequent taunts, not least from the City, that National Power was slower moving and more bureaucratic than PowerGen, its smaller rival. If that were not bad enough, the lessons of previous privatisations, such as those of British Gas and British Telecom, spoke volumes about the difficulties facing utilities in adjusting to the cold wind of the private sector. Each of the company's 35 power stations has been turned into a profit centre, with the station manager held clearly responsible for financial performance. A sharper system of financial reporting links power station and head office. And ramming the message home is a new performance pay scheme which can determine up to 30 per cent of a manager's salary. Such initiatives will inevitably take time to work through. Meanwhile, National Power has articulated a range of other strategies for improving its performance in the private sector. Top of the agenda is cost cutting. National Power has already shed about 1,000 jobs, reducing its workforce to just over 15,000. That leaves its stated target of losing another 4,000 jobs over the next five years, although industry observers will not be surprised if that target is exceeded. Two thirds of the job losses are likely to come from power station closures, with the rest from more efficient working across the company. In the past year, National Power has shut five of its coal-fired stations, contributing just over 1,000MW towards its stated goal of closing 3,000MW of capacity by the middle of the decade - a target which the prospectus warns might be exceeded. Not only does closure help cut costs; it is also central to National Power's fuel strategy. The company wants to reduce its dependence on fuel from British Coal, switching instead to gas, because gas-fired stations using combined cycle technology are quicker to build, cheaper to run and more environmentally friendly. The other plank in National Power's fuel strategy is an increase in coal imports, which are typically cheaper than supplies from British Coal. Overall, Mr Baker plans to cut National Power's fuel bill by about Pounds 250m, or 10 per cent, within about five years. But National Power is bound to remain heavily dependent in the medium term on British Coal, which will supply National Power with about 43.6m tonnes of coal this year. Indeed, National Power's directors were only prepared to commit themselves in the privatisation prospectus to 'a progressive dividend policy' until 1993, the expiry date for the coal contract and the other arrangements nailed in place by the government to give the industry stability in its early years in the private sector. After 1993, the prospectus warned, 'National Power will be operating in a more competitive market, and revenues will be sensitive to the balance between demand and available capacity and to other market conditions.' 
ID: 3415
HEADLINE: FT  25 APR 91 / Survey of the Electricity Industry (5): A small but fierce competitor - The UK's privatisation process puts it at the forefront of changes in the industry: FT writers look at aspects of the new structure 
TEXT: BEING SMALL has its advantages. As Napoleon, Tamburlaine, and countless famous others have found, it can strengthen the resolve. PowerGen, the smaller of the two electricity generating companies, has already proven both shrewd and assertive. Since the early days of its privatisation, it has come across as the friendly face of generation. But within the velvet glove the management is keeping a firm, if not an iron, grip on the newly created electricity market. There are few signs of a public sector mentality at PowerGen. Chief executive Mr Ed Wallis, who has been in the industry since he was fifteen, is no bureaucrat, but a sharp and direct, hands-on manager. Having got over the fracas when Mr Robert Malpas, the company's chairman, left the company just before its privatisation, the board is now a close-knit team. Although smaller than National Power, PowerGen is by no means small. It supplies around 9mMW hours of electricity, to 100 customers - on average slightly smaller customers than National Power - and has 21 power stations. It will make a pro forma profit before tax of Pounds 264m in the year ending 31st March 1991, and expects to pay dividends of Pounds 43m, according to the flotation prospectus. But it has done its best to capitalise on seeming small and approachable. 'The customer is king,' says Mr Wallis, and the company made a point of offering the regional electricity companies, its largest customers, customised packages of electricity. It has won other customers like this: Toyota was seduced with a tailor-made contract and was the first large industrial customer to sign to take electricity directly from a generator. But this accommodating philosophy did not stop PowerGen from competing fiercely with the regional companies to supply large customers, during recent bargaining rounds. PowerGen had been very aggressive, several regional companies reported, and was undercutting their offers. Not so, says Mr Roberts. 'We offered the same prices to the regional companies as we did to direct customers.' But PowerGen does not deny it is keenly interested in winning more large customers. The company's attitude to price is, similarly, hardheaded. Electricity is, Mr Wallis says, a commodity, and despite all the talk of customer relations there is no chance the company will forget the importance of competitive pricing. PowerGen has been equally vigorous in its approach to fuel purchasing and particularly in diversification away from traditional coal-fired generation. It was the first generator to commission a new combined cycle gas turbine power station, and has secured gas supplies for a 680MW station at Rye House in Hertfordshire, as well as the 900MW Killingholme station on Humberside - which will take all the gas from the North Sea Pickerill field in the first such single field deal. PowerGen's commitment to new gas technology is matched by its interest in the latest coal technology. It has invested in a British Coal project at Grimethorpe in Yorkshire, which is developing combustion technology to burn coal more cleanly, and has joined the US electrical power research institute, EPRI, which has made considerable investment in clean coal technology. The company has already invested Pounds 250m in flue gas desulphurisation (FGD) technology which scrubs the gases that leave coal-fired stations for its Ratcliffe-on-Soar power station in Nottingham. But PowerGen is also looking hard at importing foreign, low sulphur coal. Four out of its five large coal-fired power stations have easy access to coastal terminals, making it easy to import, as the company has pointed out. It is pursuing a policy of diversification away from UK coal. Whether innovation will actually help PowerGen compensate for its size is another question. It is already true that National Power has more control over the bidding which sets the electricity price in the pool, or spot market, simply because it has more power stations than PowerGen. This, however, may begin to change as more independent power stations come onstream. 
ID: 3416
HEADLINE: FT  25 APR 91 / Survey of the Electricity Industry (3): Flotation not without headaches - The UK's privatisation process puts it at the forefront of changes in the industry: FT writers look at aspects of the new structure 
TEXT: 'LIKE A system of outdoor relief for the City,' is how Mr Frank Dobson, shadow energy secretary, has scornfully described the long list of advisers involved in the complex privatisation of the electricity industry. Certainly the number of people who have been drafted in is large. Last autumn, one estimate put the total on the government's side at about 700, and that was excluding those working on the Scottish sale. Yet the merchant bankers, solicitors, accountants, stockbrokers and printers involved in the privatisation process hotly deny they are overly rewarded. 'It has tied up lots of our people and frankly we could have made more money out of doing something else.' said one merchant banker. It is not surprising that advisers have found it irksome. The telephone directory-sized prospectus for the 12 regional electricity companies (Recs) had advisers working a seven-day week from last August to the start of November. But while in the run-up to the Recs' Pounds 5.2bn flotation there were no conflicts of interest between government advisers and those looking after the companies, during negotiations over the generators, relations between the Department of Energy and Lazard, representing National Power and SG Warburg for PowerGen, became ever more fraught. This was partly because the government kept changing its mind about how to sell the companies, before they were eventually floated jointly on the market in February. Mr John Wakeham, energy secretary, sprung a nasty surprise on PowerGen last summer when he flirted with the idea of selling it in a trade auction, underwritten by Hanson, the industrial conglomerate. SG Warburg had found itself in the complicated position of being told to erect a Chinese wall inside its corporate finance department, between those people advising the independent directors of PowerGen and those advising the managers on a mooted MBO. Then in August Mr Wakeham executed an about-turn and reverted to the idea of floating the company. Another surprise came in January when the Department of Energy decided to sell 60 per cent instead of 100 per cent of the shares in the companies' combined flotation. The companies' advisers complained that they had not been properly consulted on the decision. Many felt the decision had been taken against the advice of Kleinwort, the government's financial adviser. But despite all the bitterness that had arisen, the department still believed it could congratulate itself on its handling of the City during the sale because it managed to introduced a number of unusual features into the flotation structure. These altered the relationship between the government and the underwriting institutions, marking a departure from the traditional underwriting method, whereby investors were allocated shares simply in relation to their weighting in the London equity market. However, this would not encourage institutions - who know they would get a certain amount whatever ludicrous level they suggested - to be forthcoming in discussions about how the shares ought to be priced. Instead, Kleinwort carried out a bookbuilding operation based on practice in the Euro-equity market. Here, institutions were asked to say precisely how much stock they would take within a range of prices. Those prepared to buy at the keenest prices were favoured when allocations were made. There was a further reshuffling of shares between underwriters, just before stock market dealings started. This so-called 'back-end tender' was designed to ensure that at least part of the sale - 16 per cent - would be sold at a price reflecting that at which the shares would start trading, some two weeks after the 100p partly-paid issue price had been struck. In the tender, underwriters were invited to rebid for shares at levels above 100p, being required to pay the price they bid. The tender added Pounds 42m to the Pounds 2.16bn flotation proceeds. Despite initial concerns that the City would not stomach these ideas, Mr Wakeham was sufficiently encouraged by the results to declare the flotation a 'text-book exercise'. But another surprise was to come. Nomura, the Japanese securities house, which had not bid aggressively in the back-end tender, began buying large amounts of stock in the market. This for a short time, pushed the shares to premiums as high as 140p compared with their 100p partly-paid price - just what the department and Kleinwort had gone to such trouble to avoid. Nomura's reasons are still not entirely clear, but it has said it was unable to bid heavily in the tender to satisfy strong demand at home because of a Ministry of Finance rule covering offers for sale - the method by which the shares were being distributed in Japan while the tender was going on. This would have prevented Nomura offloading shares acquired in the tender at prices above 100p. Daiwa, lead manager for Japan in the Scottish companies' sale, is currently in discussions with the Ministry of Finance to find a way round this problem. 
ID: 3417
HEADLINE: FT  25 APR 91 / Survey of the Electricity Industry (2): Greens urge sales reduction - The Environment 
TEXT: DRAW YOUR curtains at dusk. Use a toaster to make toast. Dust your lightbulbs frequently. They may sound like commonsense, but these household hints are a central plank - although some say a shaky one - of the UK government's environmental strategy for the electricity industry. They come from Yorkshire Electricity's recently published Code of Practice on the efficient use of electricity. Under the regulations of the new electricity industry, each regional electricity company must publish such a code, helping the public get more value from each unit of electricity. The industry rarely talks about using less electricity, environmental lobbyists such as Friends of the Earth point out. 'A reduction in electricity sales is needed to reduce the threat of global warming,' the group insisted in a document published in October last year. Electricity is, Friends of the Earth says, 'Britain's number one contributor' to both global warming and acid rain. Every unit of electricity (kWh) used, the group points out, means the emission of nearly 1kg of carbon dioxide (CO), one of the 'greenhouse' gases. The UK electricity industry is responsible for around 33 per cent of the CO released into the atmosphere every year. It is also a leading producer of the gases that cause acid rain - nitrogen oxides (NOx) and sulphur dioxides (SOx), annually releasing around 0.8m tonnes of NOx - 71 per cent of the UK total - and 2.6m tonnes of SOx - 29 per cent of the national total. There are two basic ways to deal with the problem - developing technology to generate electricity more cleanly and efficiently; and using less of it, or energy efficiency. Japan is often held up as a model - its energy ratio is 2.7 compared with the UK's 4.2, undeniably helped by the fact that energy is expensive. It also has a package of stringent regulations enforcing energy efficiency such as labelling for electrical appliances, setting building standards and giving incentives for energy saving measures. The UK government has begun to go the same way - although not far enough, its critics say. It will spend Pounds 26m this year on grants to help low income households use less energy, and will probably introduce a voluntary appliance labelling scheme next year. In addition, under the new electricity industry regulations, all users pay a levy on electricity generated from fossil fuels which then goes to fund more environmentally friendly methods of producing electricity. All the regional electricity companies, moreover, must take a certain percentage of their electricity from these 'renewable' sources, such as wind or wave power. The government's white paper on the environment sets a target of 1,000MW to be generated from renewables by the year 2000, and has further said they could provide 24 per cent of UK energy by 2025. But from the electricity industry's point of view, what really matters is finding ways to make fossil fuel production of electricity cleaner. The industry is under pressure - new UK legislation, under the auspices of the EC, will require power stations to cut SOx emissions to 60 per cent below 1980 levels by 2003, while NOx must be 30 per cent lower than in 1980 by 1998. And the International Panel for Climate Change (IPCC), has set a target of stabilising CO at 1990 levels by 2005, with which the UK has conditionally complied. There are three main options for the industry. First, it can clean up after combustion of coal or oil, notably by fitting scrubbers known as 'flue gas desulphurisation' or FGD units to the power station chimneys, which clean the gas as it leaves. This is the route the UK has so far adopted - 8,000MW of FGD are being fitted at present. However, few people regard this as an adequate long-term solution: FGD does not deal with NOx and critics point out that 8,000MW is a negligible amount compared with continental FGD installations. The second option is to switch into another fuel. Natural gas is the frontrunner. It releases very little sulphur or nitrogen, and burnt efficiently in a new 'combined cycle gas turbine' station (CCGT) which recovers waste heat from combustion to drive a steam turbine, it is around 50 per cent efficient compared with 37 per cent at best for a conventional coal fired station. This means less CO is released per unit of electricity produced. Most of the new power stations due to come onstream in the mid-90s in Europe will be CCGT. The third option is to devise technology that burns coal more cleanly. In Europe and the US a new generation of coal-fired power stations is being developed. By the 1990s they will be up and running - and green enough, their creators say, to compete with gas. There are other variants: in the UK British Coal has masterminded a process -known as 'the topping cycle' which combines partial gasification with the new combustion technology. These clean coal technologies can cut emissions of sulphur by up to 99 per cent, and nitrogen by between 80 and 90 per cent. By improving efficiency from 35 per cent to up to 46 per cent they also cut CO emissions. The UK has no plans for any clean coal plant. The government has invested around Pounds 20m in clean coal research, and is currently conducting a review of the area, which may result in further investment later this year. So far the money to fund a clean coal plant - a new technology that involves commercial risk so cannot win City backing - is just not there. Ultimately, however, it will only be built when the two electricity generators order it, and while gas continues to be cheap and available, they are very unlikely to do so. But environmentalists should take heart. A quiet revolution in industry's use of electricity is taking place. CHP or combined heat and power systems, which generate electricity and heat from a single source, are slowly catching on. These systems can be twice as efficient as conventional boilers and can cut CO emissions by 70 per cent. If CHP capacity reaches 30,000MW by 2020, as the government hopes, national CO emissions could fall by 15 per cent. 
ID: 3418
HEADLINE: FT  25 APR 91 / Survey of the Electricity Industry (1): New market pressures -In addition to the rigours of recession, the electricity industry is having to meet new demands. Growing competition in the market and the pressure to protect the environment mean that utilities are being forced to reshape their strategies 
TEXT: SLOWLY but surely, competitive forces are beginning to prise open the monopolistic and nationalistic world of electricity generation. Utilities around the world are beginning to feel the cold winds of commercial pressures. 'The old watchwords of 'obligation to serve' and 'build new capacity to meet future demand well in advance' are being replaced by an industry built on contractual relations and commercial orientation,' a recent report on the European industry concluded.* Governments are cutting back their funding support for the industry and large industrial customers are increasingly chafing at high electricity prices. Meanwhile, recession is forcing the industry to pare back its projections of future demand: in western Europe, annual growth over the next few years is unlikely to reach the 3.2 per cent recorded in the second half of the 1980s, let alone the 7.2 per cent of the golden years in the 1960s. The European Commission is casting an increasingly jaundiced eye over the gamut of arrangements which hinder free trade in electricity within the EC. Last month, the Commission gave Britain, Belgium, Denmark, France, Greece, Ireland, Italy, the Netherlands, Portugal and Spain two months to show that they were not impeding the free flow of electricity across their national boundaries. Failure to do so could result in legal action by Brussels. 'Competition and the freedom to import and export are essential components of the policies needed to create an internal energy market,' argued Sir Leon Brittan, European commissioner for competition. The moves are widely seen as an opening shot in what is likely to prove a long battle with the utilities to create 'open access' in electricity supply, thereby allowing large business customers to shop around for cheaper power. The UK industry has seen the greatest changes over the past year, as the government's privatisation programme has come to fruition. The flotation of the 12 regional electricity companies, together with National Power and PowerGen, the conventional generators, completed the process in England and Wales. They will shortly be joined in the private sector by Scottish Power and Scottish Hydro-Electric, the two Scottish companies due to make their stock market debut in June. That will leave only the industry in Northern Ireland, which is scheduled for sale next year. Radical though these privatisations are, perhaps even more innovative has been the UK's attempt to create a new trading market in electricity known as the pool. It is still too early to judge the success of this new market, the heart of the government's attempt to inject competition into the industry. Pessimists fear that the electricity regulator will find the new structure inadequate for fostering full competition in the industry, just as his counterparts in gas and telecommunications have found in their domains. Yet the electricity companies have already begun to forge new strategies to meet the demands of the private sector, notably by switching their power plant ordering programme away from large coal stations towards gas. The switch towards gas-fired generation has become a notable trend throughout the industrialised world. Gas stations are quicker to build and cheaper to operate than large coal or nuclear plants. Crucially, they also have environmental benefits, emitting less sulphur dioxide (which causes acid rain) and carbon dioxide (which causes global warming) for an equivalent amount of energy as coal stations. Indeed, green pressures are now the number one concern of many utilities, as public awareness of the environment, the flow of eco-regulations and the cost of cleaning up plant mount in almost equal measures. Nowhere is this more true than in eastern Europe, where the newly democratic countries face the twin task of reducing their dependence on inefficient coal-fired stations and dealing with the aftermath of inadequate safety standards in Soviet-designed nuclear plant. Collaboration between the two formerly divided halves of Europe is likely to mount. Czechoslovakia has already signed a technical accord with France, whereby Europe's premier nuclear nation will help the Czechs to upgrade their eight Soviet-designed reactors to EC standards. Germany has been putting together a powerful consortium of west German utilities, leavened by some non-German firms led by Electricite de France, to modernise east Germany's industry. One estimate suggests that investment of DM30bn-DM50bn (Pounds 10bn-Pounds 16.6bn) will be needed in east Germany's industry over the next six years. While prospects are good for gas-fired and combined heat and power plants, the nuclear industry worldwide remains in the doldrums. Having braced itself for a burst of bad publicity to coincide with the fifth anniversary of the Chernobyl nuclear disaster, the industry has to cope with an even more intractable problem: a continuing dearth of orders over the next decade. Those countries, such as France where public acceptance of nuclear power remains high, tend to have a surplus of capacity; whereas in others, notably the US, there is no sign of the public distrust of the nuclear option waning. * European Electric Power Trends. Cambridge Energy Research Associates, 2 Rue Duphot, 75001. Paris. Dollars 95 
ID: 3419
HEADLINE: FT  25 APR 91 / Survey of Greece (3): Key Facts 
TEXT: --------------------------------------------------------------- Area                              131,957 sq km Population          10.2 million (1990 estimate) Head of State   President Constantine Karamanlis Currency                            Drachma (Dr) Average Exch Rate          1989 Dollars1=Dr162.4 1990 Dollars1=Dr158.5 --------------------------------------------------------------- ECONOMY 1989          1990 Total GDP (Dollarsbn)                54.4          67.3 Real GDP growth (%)                   2.8           1.3 GDP per capita (Dollars)             5429          6600 Components of GDP (%) Private Consumption                 71.5          70.0 Gross Investment                    18.7          18.7 Government Consumption              17.0          20.5 Exports                             26.7          22.8 Imports                            -33.9         -32.0 Consumer prices (% change)          13.7          20.4 Unemployed (% of lab force)          7.5           7.5 Reserves minus gold (Dollarsbn)       3.2           3.4 Narrow Money growth (% pa)           31.9           na Broad Money growth (% pa)            24.2           na Discount rate (% pa, Dec)            19.0          19.0 Total external debt (Dollarsbn)      18.7          20.7 Current Account Balance (Dollarsbn)  -2.6          -3.6 Exports (Dollarsbn)                   6.0           6.4 Imports (Dollarsbn)                  15.1          18.7 Trade Balance (Dollarsbn)            -9.1         -12.3 Main Trading Partners (1989, % by value)                Exports       Imports West Germany                         21.5          19.7 Italy                                18.1          13.5 France                                8.1           7.5 Total EC                             61.5          59.4 --------------------------------------------------------------- Source: IMF, Datastream, Economist Intelligence Unit. --------------------------------------------------------------- 
ID: 3420
HEADLINE: FT  25 APR 91 / Setback to insurance tax reduction policy 
TEXT: THE DRIVE in the US Congress to reduce taxes for the US old-age insurance system yesterday suffered a jolting setback on a 60-38 vote in the Senate to shelve the proposal. Senator Daniel Moynihan, the New York Democrat who is the leading proponent of the Social Security tax reduction, said the movement for lower social security taxes had gained ground because the other side had admitted that the tax funds were being used inappropriately. However, support for the measure has apparently diminished since last year, when 54 senators voted in its favour. Senator Moynihan will try again later in the session but he will have to get the votes of 60 senators instead of a simple majority. The vote was a victory for President George Bush, who along with Republican and most Democratic leaders, contended that a reduction in social security taxes would jeopardise the entire system. A majority of the Democrats supported Senator Moynihan, agreeing with his contention that regressive social security tax is being used to mask the size of the federal budget deficit. They propose to make the system more progressive by increasing total payments by wealthier citizens. 
ID: 3421
HEADLINE: FT  25 APR 91 / Israelis remanded in Cyprus 
TEXT: FOUR Israelis, two men and two women, arrested on suspicion of tampering with a telephone junction box serving the Iranian embassy were remanded in custody for eight days by a Nicosia court yesterday. There were no formal charges but a police officer told the court they were investigating conspiracy to commit a felony, possession of burglary tools by night, fraudulent appropriation of power (meaning the electric current in a telephone) and violation of a prohibitive order. The two men, Debi Dave, 40 and Faf Souf 33, and the two women, Anna Dolgin and Amit Litvin, both 28, looked quite relaxed as they were brought to court in handcuffs. Police said the four had arrived in Cyprus on Sunday and were due to leave tomorrow, Friday. The two couples were staying in two luxury hotels in the coastal town of Limassol. The four Israelis were apprehended late on Tuesday night when police making a routine security check on the building housing the Iranian Embassy (which adjoins a central Nicosia police station) found them 'interfering' with the telephone junction at the entrance to the building. They allegedly had with them burglary tools that included a pair of pliers, a tiny torch, a screwdriver, a battery-operated welding tool used for fixing cables and several cables with connectors. They told police they were 'looking for a toilet'. The four suspects appeared in court without a lawyer and one of them, Dave, said they did not accept the facts presented by the police. Legal sources say there is no specific law in Cyprus against telephone tapping. An Israeli embassy official met the four suspects before yesterday's hearing. The Iranian embassy in Nicosia, set up two years ago, is headed by a charge d'affaires and has about 10 staff. Iranian diplomats have said they plan to expand. But, unlike some foreign missions on Cyrpus, the embassy is not a major Middle East listening post. It occupies the top three floors of a five-storey office building next to a police station on Santa Rosa Street. 
ID: 3422
HEADLINE: FT  25 APR 91 / World Trade News: South Korean trade plans fail to impress 
TEXT: SOUTH KOREA met a frosty reception from its fellow-Gatt members yesterday when it launched a programme to liberalise trade in a further 133 products, mostly agricultural, as part of a phased move to unwind curbs allowed to developing countries with balance-of-payments problems. Mr Lee Bong-suh, minister for agriculture, said that South Korea would give more priority to expanding world commerce than to protecting its farmers in revived global trade talks. South Korea was blamed as one of the culprits when the multilateral Gatt talks collapsed on the question of farm subsidies last December, but in renewed talks 'you will notice that Korea's position . . . even in the agriculture sector will have changed considerably,' Mr Lee said. Mr Young Woo Park, Seoul's deputy ambassador to Gatt, said his government faced opposition from farmers to the liberalisation. The US joined other countries including Canada, the EC and New Zealand in calling the offer disappointing. Mr Lee said he intended to pledge cooperation toward a successful conclusion of the Uruguay Round, in meetings with Ambassador Carla Hills, the US trade representative. Besides the Uruguay Round, they also discussed trade issues involving the sale of US cigarettes, current negotiations involving South Korean shipbuilding, and South Korea's recent austerity campaign, which has drawn US accusations of import exclusion. South Korea, which returned to current-account deficit last year for the first time since the mid-1980s, has resisted attempts to open its farm imports in the Round. 
ID: 3423
HEADLINE: FT  25 APR 91 / World News in Brief: Garlic raises stink 
TEXT: Four Indonesian warships gave chase to a Thai vessel caught trying to smuggle 40 tonnes of garlic into east Java. Indonesia bans imports of garlic to protect its farmers. 
ID: 3424
HEADLINE: FT  25 APR 91 / World News in Brief: South Korean uproar 
TEXT: Hundreds of South Korean students tossing stones and petrol bombs repelled riot police trying to storm their Seoul campus to prevent screening of a banned anti-government film. 
ID: 3425
HEADLINE: FT  25 APR 91 / World News in Brief: Tornadoes hit NZ 
TEXT: Tornadoes swept across New Zealand's far north, reducing a historic church and other buildings to matchwood. Sixteen people were injured. 
ID: 3426
HEADLINE: FT  25 APR 91 / World News in Brief: Bus crash kills 19 
TEXT: Nineteen people died and 50 injured when a bus negotiating a narrow bend near the hill country town of Haputale, Sri Lanka, plunged down a 180m (600ft) precipice. 
ID: 3427
HEADLINE: FT  25 APR 91 / World News in Brief: Zaire rally crushed 
TEXT: Zairean security forces broke up a protest march in Kinshasa by about 1,000 opponents of President Mobutu Sese Seko. The march celebrated the first anniversary of a Mobutu speech bowing to demands for multi-party politics. 
ID: 3428
HEADLINE: FT  25 APR 91 / World News in Brief: Ozal airline vow 
TEXT: President Turgut Ozal vowed to close down the national carrier, Turkish Airlines, if no deal was reached within days that would end a 23-day strike. 
ID: 3429
HEADLINE: FT  25 APR 91 / World News in Brief: China rights probe 
TEXT: Peking agreed to receive a six-person Australian team to examine human rights conditions in China and Tibet, Australia's foreign minister, Gareth Evans, announced. 
ID: 3430
HEADLINE: FT  25 APR 91 / World News in Brief: Quake death toll 
TEXT: At least 69 people were killed and 800 injured in Monday's earthquake in Panama and Costa Rica, which authorities fear could open Central America's doors to the South American cholera epidemic. 
ID: 3431
HEADLINE: FT  25 APR 91 / Sinclair Research: Correction 
TEXT: IN TUESDAY'S computer industry survey, we suggested incorrectly that Sinclair Research was part of the Amstrad organisation. In 1986, Amstrad purchased the right to use the Sinclair trade name together with Sinclair's intellectual property rights, patents and stocks of home computers. Sir Clive Sinclair, however, retained ownership of Sinclair Research. 
ID: 3432
HEADLINE: FT  24 APR 91 / Survey of China (17): Peking distrust of UK may hit Hong Kong's prosperity - Political sniping accompanies countdown to 1997 handover 
TEXT: CHINA has turned the tables on Hong Kong since the Tiananmen Square crisis in June 1989 when tens of thousands of local ethnic Chinese marched through the streets in support of the Peking students' demands for democracy on the mainland. That support made China fear that the colony would develop into a centre for subversion before the UK handed over sovereignty in 1997. Consequently, Peking has become much more sensitive about developments in the colony and about plans and policies drawn up by the British and Hong Kong governments, which it distrusts. It has launched outspoken and threatening criticisms of Hong Kong's pro-democracy movement and it has also attacked three measures announced late in 1989 to boost Hong Kong's confidence in the wake of the crushing of the Tiananmen Square student movement - a Bill of Rights, the provision of British passports for up to 225,000 people, and a massive HKDollars 127bn (at 1988 prices) port and airport development scheme. During the past 16 months, this approach has escalated into a crisis over plans for the airport which is now costed at HKDollars 100bn in 1990 prices, excluding port developments included in the original 1989 plans. In particular, China has criticised the size and cost of the project and its impact on Hong Kong's post-1997 financial reserves and debt. But behind the detailed airport arguments, China has been establishing a precedent to exert increasing influence over Hong Kong government decisions in the run-up to 1997. It has won a say over the use of the government's HKDollars 73bn financial reserves for funding the airport, and it has demanded consultations leading to consensus on a wide range of other issues connected with the project, which it would want to scrutinise. This is causing considerable concern in Hong Kong because it has demonstrated how easy it is for China to interfere in the colony's affairs and slow down free-market developments before and after 1997. After initial resistance, Hong Kong has accepted the need for consultation on issues such as the airport which straddle 1997, but it has been reluctant to concede demands for anything approaching consensus which could give Peking an effective veto. China and Britain agreed in 1984 that Hong Kong would enjoy a 'high degree of autonomy' as a Special Administrative Region for 50 years after 1997 under a formula called 'one country two systems'. This was intended to leave economic and political traditions intact. There has always been concern that China would try to fudge this agreement and interfere for a mixture of political and bureaucratic reasons after (1997, and that this would probably slow down the growth and effectiveness of Hong Kong's economy. But few people expected China to show its hand so early. China claims it has a right to a say because the 1984 Sino-British agreement requires increased consultation in the second half of the 1984-97 transition period, which is just beginning. It also says that it has a duty to the 6m population to ensure that Britain leaves the colony and its economy in good order. Basically, China does not trust Britain, and senior officials suspect that the UK will behave like other departing colonial powers and cream off the riches before it goes. Similar suspicions are attached to the nearby Portuguese enclave of Macao, which goes back to China in 1999, and which is also running into problems with an airport project. In the Hong Kong scenario, the UK is suspected of organising the airport so that the colony's financial reserves could be drained to pay British companies' for money-spinning construction contracts. There is also a lack of understanding in China about capitalism and wheeler-dealing traditions. Peking officials are concerned that Hong Kong and Macao might be behaving like other Chinese provinces which launch over-ambitious projects that cannot be completed prof itably and could then land Peking with the debt. Peking is widely acknowledged to be justified in its demands for consultation and increasing involvement in Hong Kong's affairs as 1997 approaches. But the way it has pursued this target since the Tiananmen Square crisis has seriously knocked confidence in Hong Kong's chances of survival as a thriving international entrepot and financial centre after the sovereignty handover. 
ID: 3433
HEADLINE: FT  24 APR 91 / Survey of China (18): Things to do and avoid - Trading in China is not for the light-hearted 
TEXT: CHINA is a difficult place to do business. It has a lot of idiosyncrasies and doing business here takes a lot of time and effort. That is why to deal in it successfully, it is often not a place for a small company. However, to ignore China can be a serious mistake. For experienced business people there is money to be made here. What follows are some guidelines from veteran China traders and from Peking-based diplomats about how to do business in this complex market. Trips should be well planned. Visas are necessary. Business visas can be obtained from any Chinese embassy, but travellers need a letter of invitation from a Chinese host organisation. For those lacking a Chinese sponsor, some embassies will help their nationals obtain one. Most, however, will not get involved. Yet a business visa is not always necessary. For those who are coming to China for their first or second time, a tourist visa will suffice and is readily obtainable in Hong Kong. Travelling around the country used to be a nightmare for anyone with a fixed schedule. That has begun to change as the Civil Aviation Administration of China (CAAC), China's national airline, has gradually computerised its operations. It is now possible to buy round trip tickets to a handful of major cities in China. Interpreters are vital for those who cannot speak Chinese. The Chinese host will always supply an interpreter, but it is better to bring their own to any business meeting. One way to find an interpreter is for the business traveller to ask at his or her country's business trade council in Peking. For British citizens, the China Britain Trade Group in Peking and Shanghai will help at minimal cost. Newcomers to China should be aware of significant cultural differences in the Chinese and Western ways of doing business. Patience, determination and strong financial backing are essential, but equally important is recognition of the fact that the Chinese concept of time differs dramatically from that of the west. Negotiations with the Chinese take time and time is only occasionally important to the Chinese, a western diplomat says. First or even second time business people should not expect to conclude a deal. During the first visit, the businessman needs to obtain from the relevant commercial sections of embassies or from the Ministry of Foreign Economic Relations and Trade (MOFERT) some idea of the official policy towards his product. If the products are in a priority sector that is part of the government's eighth Five-Year Plan, significant opportunities may be developed. However, some products fall in a grey area or are actively discouraged by the government and banned from being imported. There are many ways of blocking imports. China has a complex system of tariff and non-tariff controls to restrict foreign companies' access to its domestic market. Some of the barriers include: import bans; import licenses (which can be denied if domestic alternatives are available, or if the goods are considered incompatible with China's goals); a strict import substitution policy that restricts competition; foreign exchange allocation; testing and certification of foreign products to specifications not applied to domestically-produced goods. Once a businessman has decided to be in the China market, he should remember a few basic rules: never sign a loss leader. The Chinese are tough, organised negotiators who know the real value of any product. don't begin the first sale on the basis of losing money in order to gain access. know your end user's needs well. Rely on multiple channels for information and never use only one source. build a coalition of relationships with people involved in making the decision. For those serious about being in the China market, but who cannot afford to staff it with their own representative, there are various alternatives. China's telecommunication links with the rest of the world have improved dramatically in the last decade, and calling or sending a fax is now simple. But there is no substitute for a good agent in a country where personal relationships are extremely important. Agents provide contacts. Just as selecting an agent is important for those exporting to China, choosing a partner in a joint venture operation is perhaps the single most important decision a foreign company will make. Finding a suitable partner takes time and knowing where to start can be a daunting process, but much depends on the foreigner's line of business and whether the goal is to export or manufacture. Generally, big cities, the coastal provinces, and the south are favourite areas of business for foreign trade. 'Anywhere but Peking, and the farther south you go the better,' a western businessman says. Other points to consider in selecting a partner include the organisation's proximity to raw materials, electrical supply and shipping facilities. Finally, don't let the system wear down your mental and professional faculties, as happened to a French businessman who had been negotiating with the Chinese over a problem for a year and a half. When he believed he had finally resolved the matter and was preparing to board his aircraft for home,the Chinese came to him at the airport, saying another organisation had not agreed to the terms and problems remained. This was too much. The Frenchman was subsequently found running naked around Tiananmen square and was taken out of China in a straitjacket. 
ID: 3434
HEADLINE: FT  24 APR 91 / Survey of China (14): Where the papers come three days late -Wuhan is China's natural crossroads, but is cut off by poor communications 
TEXT: IF WUHAN, the capital of Hubei province, is set to become one of China's main communications hubs - as local officials claim, and a glimpse at any map would endorse - how is it that Peking newspapers take three or four days to arrive? 'We are the Chicago of the Orient,' Zhao Baojiang, the mayor of Wuhan, claims in a grand hyperbolic sweep. Wuhan is also at a critical midpoint on the Yangtze river, and sits abreast China's main north-south railway, linking Hong Kong and Guangdong in the south with Peking and the land-bridge to Europe in the north. In a country with normal communications, Wuhan's pivotal location would project it to the commercial and industrial centre-stage. Peking papers would be available on the day of publication. But in China, it stands as a monument to the awful impoverishment of the nation's communications. The city's time may indeed come. But it will take considerable improvements in the national transport infrastructure to transform its prospects. It will also require the creation in China of a true national market. At present, a labyrinth of bureaucratic obstacles to trade across provincial boundaries - which amount to nothing less than provincial protectionism - make Wuhan's central location in China a commercial irrelevance. This perhaps explains why Hubei province has slipped in the past five years from China's ninth most important exporter to its 13th. It also explains why a province that is among the best endowed in China in terms of agricultural and mineral resources, and in terms of industrial and commercial capacity, has failed to make a more powerful mark among the country's magnets for foreign investment. Hubei's endowments are prolific: the Jianghan plain which straddles the Yangtze in the heart of the province is among the most fertile in China. Its red alluvial soils grow about one fifth of the country's cotton and makes Hubei China's fifth largest grain producer. Lakes spread across the south of the province - some of them more like inland seas - provide a living for almost a quarter of a million fish farmers, and underpin an industry in aquatic products that ranks third in China. These together make Hubei one of China's leading textile manufacturers and a leader in food processing. Rich supplies of iron, copper and an array of rarer minerals mainly in the east of the province around Huangshi supply one of China's largest steel complexes and a leading special steels manufacturer. These in turn underpin the country's second largest automotive manufacturer, in Shiyan in Hubei's north-west. A combination of these resource-riches, and Hubei's pivotal location at the heart of China, make it clear that few provinces would stand to gain so much from the dismantling of centralised controls over China's economy, and the loosening of the domestic market. Local officials may not yet be fully aware of the riches liberalisation can bring but in the meanwhile are committed to infrastructural improvements over the decade ahead that will be of significant help when the virtues of Hubei's prime location at the heart of China's market are allowed to come into play. A new RMB Yuan 600m international airport will be opening in 1993. A second Yangtze road bridge joining Hankou and Wuchang will enhance north-south communications in the province and ease traffic congestion in Wuhan itself. Railway electrification is planned. A new 50,000-line telephone exchange is being installed. Massive investment in both thermal and hydro power stations is being made. Economic zones are being established in Wuhan and in Yichang and Huangshi along the banks of the Yangtze. They are intended to capitalise on the creation of Shanghai's Pudong special economic zone over the coming decade. This development underlies one of the most exciting changes now underway: the re-establishment of the Yangtze, after half a century of neglect, as a critically important commercial artery in central China. A new foreign trade port is under construction, a companion to Baihushan completed just east of Wuhan six years ago. New local shippers like Datong and Qingchuan are vying with former state monopolies and the fast-growing private shipper, Minsheng, to provide competitive services along the length of the Yangtze for the first time since 1949. While Hubei has until recently had only modest success in attracting foreign investment, lagging in particular behind coastal provinces, recent deals provide encouraging signs. A joint venture with Citroen, agreed last year, will lead to the production of 300,000 cars a year in Wuhan and Shiyan, further enhancing the province's importance as a supplier to the national automobile market. An optical fibre plant, to be built with help from Philips, will also be important in enhancing China's domestic telecommunications capacity. Foreign capital used for new equipment at the Wuhan Iron and Steel works is intended to boost annual output from 5m tonnes of rolled steel to 7m tonnes by the year 2000, boosting the company's role as one of China's four main suppliers of high-quality steel. If approval is given to the environmentally controversial Sanxia hydroelectric project, which would be built across the Yangtze in the Three Gorges on Hubei's western border with Sichuan, Hubei would become a critical supplier of power to all of central China. The 13,000MW generated by Sanxia would dwarf the recently-completed Gezhouba dam in Yichang, which generates 2,700MW and is already a critically important supplier to the Yangtze region. All these developments point to Wuhan's preparedness for the larger role which would result from the creation of a nationwide market economy. Local leaders pay lip service to the need for less central control of the economy and more market freedoms. But behind the brave rhetoric, the provincial authorities are not yet willing to end subsidies to bankrupt factories. In Wuhan, the leadership appears to have taken the first significant steps towards unleashing market forces, and lifting the burden of company subsidies from the shoulders of the government. Mayor Zhao Baojiang, who estimates that one in 10 Wuhan workers is employed in a loss-making factory, says: 'We are asking workers to move into the individual enterprise sector if their factory is a 'losing money factory'.' Chinese historians say that Wuhan has often been fortunate - but only in unfortunate times. With the ground now being well laid, a significant opening up of China's economy to market forces could bring fortune in fortunate times. Yet Wuhan would still have a long haul to become Mayor Zhao's 'Chicago of the Orient'. 
ID: 3435
HEADLINE: FT  24 APR 91 / Survey of China (15): Natural magnet for Taiwan - John Elliott visits Xiamen, a buoyant city with its face to the sea 
TEXT: THE old foreign trade and fishing port of Amoy in the south eastern province of Fujian could develop during the next decade into one of China's most important coastal industrial cities. Now called Xiamen, it is a special economic zone and has become a focal point for investment from Taiwan, 156 nautical miles away across the South China Sea. More than 400 Taiwanese companies have received approval during the past three years to set up light industrial labour intensive factories involving investment of more than Dollars 1bn. Goods ranging from Prince and Slazenger tennis racquets and Phillips coffee pots to folding umbrellas, electronic gadgets and textiles are being turned out in about 100 factories which have started production. Fujian and Taiwan have had close links for centuries. More than 70 per cent of Taiwan's total 20m population originate from southern Fujian and the dialects are similar. So the area is a natural choice for Taiwan's businessmen who want to tap China's cheap labour and land, thus escaping from Taiwan's escalating costs and restrictive environmental controls. But the investment take-up has been slow, partly because Taiwan only allows its businessmen to deal indirectly with China. This adds to costs because it involves transporting goods through Hong Kong and channelling money through New York and other financial centres. The local economic growth rate has been between 16 and 17 per cent annually for the past two years, according to officials, with industry growing by 20 per cent - despite China's economic and political problems. Targets for the next five years have been set at the same levels. This reflects the sudden entry of the Taiwanese, but the breakthrough that Xiamen is waiting for is an investment decision from Taiwan on a Dollars 7bn petrochemical plant which would dramatically change the city's fortunes. It would provide a primary industrial base and would make Taiwanese involvement take off with extensive down-stream industries. The decision rests with the Taiwan government and with the industrialist involved, Mr Wang Yung-ching, head of Formosa Plastics which is one of Taiwan's largest companies. Mr Wang, whose family comes from the area, is in negotiations with Peking and Taipei and has also talked about developing ventures in banking, shipping and transport. Taiwan, which regards itself as the rightful government of all China, is softening its policies but seems unlikely to permit full and direct investment, transport and communications for a year or so. It wants to use Mr Wang's and other possible investments as a lever to persuade China to provide some sort of overall investment protection agreement and to reduce problems of bureaucratic corruption and scarcity of raw materials. Meanwhile, Mr Wang is in negotiations on the extent and ownership of the petrochemical plant, and Xiamen's government has started preparatory ground works on the site, financed according to some reports by Mr Wang. The centre of Xiamen, which consists of a series of islands adjacent to the mainland with a population of 1.12m, was made a special economic zone in 1980. But it failed to develop significantly until Taiwan started to allow the indirect industrial investment in 1987-88. According to local government figures, a total of 980 projects, initially mostly from Hong Kong and Macao, have been approved since 1980 for projects costing Dollars 2.92bn. They include Dollars 2.12bn foreign investment, and Taiwan accounts for 410 projects worth Dollars 1.07bn. But only Dollars 500m foreign investment has actually gone ahead and this includes Dollars 200m on a single project - a Taiwanese chemical fibre plant. An unusually high proportion of the projects are wholly foreign owned - 309 out of the 410 - indicating that the Taiwanese want to control the businesses and do not want to delay investments while joint ventures are negotiated. Most of the production is for export, supplementing the factory owners' operations in Taiwan which often continue producing high-quality ranges. Factory managers say that labour costs are 75 to 90 per cent lower than in Taiwan but that there is only an overall production cost saving of around 10 per cent after transport, lower levels of productivity, and other problems are taken into account. Keen Find Sporting Goods, for example, employs 400 people to turn out 2,000 tennis racquets a day using frames imported from Taiwan via Hong Kong - international trade rules ban the import of the raw material into China. Mr Golden Ehang, th general manager, says wages are 12 per cent of Taiwan's, but he makes only 8 per cent on overall costs. 'I have come here only because the costings will improve when Taiwan's rules are eased - it's not worth it otherwise.' One of Xiamen's strengths is that there are 350,000 overseas Chinese for whom the city is an ancestral home. They include members of such famous families as Mr Lee Quan Yew of Singapore and Mrs Cory Acquino of the Philippines. It has ambitions as a tourist destination, primarily based on the attractions of a small island adjacent to the city centre called Gulang yu which is full of colonial villas built for foreign consulates and companies 100 years ago. To help attract investment, urgently needed infrastructure projects are now being planned. They include a Yuan 1.5bn 600 megawatt power station which is to be partly funded by Hong Kong Macao International Investment, a part-China owned Hong Kong company. Other projects include: a Yuan 340m water supply plant, supported with loans from Japan that will cover 35 per cent of the cost; a Yuan 350m harbour development financed domestically; a Yuan 320m airport extension which is now seeking fresh finance after losing loans of at least Yuan 100m from Kuwait; and a Yuan 350m telecommunications expansion which has yet to be financed. The real breakthrough, however, will only come when, eventually, Taiwan permits direct investment, air flights and other links with China. In the meantime, Taiwan adopts a confrontational diplomatic offensive against China. The real breakthrough will come only when Taiwan permits direct investment, flights and other links 
ID: 3436
HEADLINE: FT  24 APR 91 / Survey of China (16): Revival of a 70 year-old dream - Plan to dam the mighty Yangtse stirs environmental fears 
TEXT: ONE of the most beautiful and romantic stretches of water in the world is the Yangtse river where it flows through three massive gorges below Chongqing, in the south-west province of Sichuan. The misty cliffs which overhang it have figured in many a famous Chinese painting and the trees and wild life up the side valleys are increasingly precious in a country near-devastated by industrial pollution. The Yangtse, or Changjiang, as the Chinese call it, is the third longest river in the world with a mean annual runoff of 9.8bn cubic metres. Flooding is a perennial threat to the tens of millions who live downstream, and in a country short of energy its waters are keenly viewed as a source of hydropower. In 1923, Sun Yat Sen, China's first president, proposed a huge dam across the lowest gorge to control the floods. Since then the project has been endlessly debated and researched by politicians, engineers and hydro-electric specialists. The scheme surfaced again last year, though subject to further approval by the rubber-stamp National People's Congress. Now Han Hongshu, vice-governor of Hubei province, speaks as if work is about to begin. Hubei has already done well out of the Gezhouba dam at Yichang, downstream of the gorges, which created new jobs and now provides power. In Sichuan, they are not so sure: 'Of course the central government must decide, but we here think it would be better to spend the money on dams and hydropower projects upstream on the Yangtse tributaries", says Ma Lin, the Vice-governor. Advocates of the dam point to the reduction in flood risks, the 18bn units of electricity a year that the scheme would generate and the improved navigability of the river, enabling ocean-going ships to reach Chongqing. The Ministry of Water Resources and Power set up a committee of 412 experts, of whom more than 400 supported it, while a detailed Canadian feasibility study also found in favour. Opponents stress the enormous cost (yuan 36 bn), the number of people to be resettled (a million or so), the risk of earthquake or (in the event of a war) bomb damage and unpredictable environmental consequences. They also point to illogicalities in the concept: for power generation the reservoir upstream must be full, for flood retention empty. In 1989, the year of the Tiananmen demonstrations, the dam became a political issue. A group of writers led by Dai Qing, later put under house arrest as a dissident, published a book opposing it as a 'Stalinist folly'. They accused Li Peng, the premier, a Moscow-trained electrical engineer (and a one-time head of the ministry in charge of hydro-power) of trying to bolster his own prestige by linking his name with a project once favoured by Chairman Mao. These intellectuals are silenced now, but the questions remain. Where will the resettled population go? ('Further up the mountains' said Ministry of Water Resources officials). Could silting gradually fill the 500 km reservoir behind the dam, leaving Chongqing literally high and dry? Wouldn't it be better for Peking to spend the money on installing equipment nationwide to save electricity rather than providing more? One look at China shows how little care is given to the environment. The builders of the Gezhouba dam seem not to have known of the existence of the Yangtse sturgeon (now proudly displayed at the Yichang breeding station ) until they bumped their noses on the new barrier going upstream to spawn. It seems unlikely enough research has been done on river and marine life, climatic consequences, loss of land fertility or the greater scouring effects caused by a less silt-burdened river. While China seems unlikely on grounds of cost to build the dam in the near future, it remains a threat as long as a totalitarian government in Peking can in the last resort overrule opposition. 
ID: 3437
HEADLINE: FT  24 APR 91 / Survey of China (10): Central planners who cannot let go - State industries losses spiral out of control / David Dodwell examines the parlous state of Chinese industry and its continuing decline 
TEXT: CHINA'S state industry is in a parlous condition. Everyone from premier Li Peng, through finance minister Wang Bingqian to the State Statistical Bureau is in agreement on this. But the narrow gap between listing industry's failings to formulating solutions seems to be unbreachable since the leap involves espousing market forces and dismantling control over giant industrial machines that have for decades been the focus of political power and patronage. According to the State Statistical Bureau (SSB), more than one third of China's state enterprises - which employ 50m of the country's 150m urban workers - are making losses. Wang Bingqian, finance minister, noted in the recent National People's Congress that the government spent the equivalent of Dollars 11bn in 1990 subsidising state factories, with another Dollars 7.3bn spent on price subsidies for workers. Noting that more than one third of the government's budget is now consumed by subsidy payments, Wang admitted that enterprise losses 'have already reached the point where the state treasury cannot sustain them.' Urgent needs to improve housing, medical care and the country's rudimentary welfare system - not to mention modernising industry - are being preempted by the political imperative of keeping state factories on life support machines. While the gross value of industrial output (GVIO) rose 7.6 per cent in 1990, the impetus for growth came from light industry (+9.1 per cent), private industry (+21.6 per cent) and joint ventures (+56 per cent). State industry lifted output by 2.9 per cent, according to the SSB. Even these figures mislead, since much of the rise in output was fuelled in the middle of 1990 by a bank lending spree that was intended to lift output to the level that would allow the central government to argue that state plan targets for the five year plan ending last December had been met. Much of this additional output went straight on to stockpiles - which increased by RMB 30bn in 1990, according to the SSB. While state enterprise losses doubled from 1989 to RMB 28bn, profits fell 58 per cent, and government tax receipts from state industry fell 18.5 per cent between 1989 and 1990 to RMB 127bn, the SSB said. Over the five year period from 1985-1990 the economic return on every RMB 100 of working capital fell from RMB 23.8 to RMB 16.8, while profits fell from an average of 11.8 per cent to 6.3 per cent. The present leadership talks of the need for reform, but appears unable to accept the loss of central control that would follow. Leaders are also traumatised by a fear that the upheavals inevitably associated with root-and-branch reform would foment political rebellion. Small steps have been taken: the price of basic inputs such as coal, steel and electricity is being raised closer to real market prices. A rudimentary and confused tax system has begun to give companies more independence to invest profits as they think best. A free market in most goods is beginning to grow up as companies are allowed to sell for themselves goods produced above plan commitments. Collective and private enterprises have also come to play a bigger part in the economy, particularly in the coastal provinces and southern China, reducing the political clout of state enterprises, as well as their dominant impact on the national economy. However, there is cold comfort in this growth, since many of these collective enterprises have little intrinsic economic value, thriving mainly because of the monstrous inefficiency of the state industrial machine. The World Bank, in a recent analysis of China's economy*, praises the government's success in progressively increasing production of industrial raw materials such as oil, coal and steel, but then argues that none of this massive investment in raising output would have been needed if industry used these materials more efficiently. It points to 'high energy and steel dependency' that is a result of being sheltered from external competition, being technologically backward, using obsolete capacity, and achieving very low productivof factories producing one-thirtieth of the output possible using more efficient technologies. Staff at Wuhan Iron &amp; Steel, one of the country's leading high-quality steel makers, endorse this view. They say only 25 per cent of China's 66m tonnes-per-year steel output is usable in modern industry. 'Heavy industry absorbs far too much capital,' the World Bank says: 'It provides below average returns, and its appetite for energy is one of the root causes of chronic shortages. 'By targetting machinery and metal industries for promotion, China will starve more deserving sectors of capital, perpetuate an artificial shortage of investment funds in a situation of resource availability few countries can rival, and limit its growth potential. 'The quantum of investment alone is not enough.' Rather than spend more on power generation, the government should spend on replacing old and power hungry machinery, the Bank says: rather than pay subsidies for factories to produce for stockpiles, government should spend on redeploying workers in new and more efficient factories. Enterprise reform is at the heart of this debate. For western economists, this means plant closures on a significant scale, and willingness to allow market forces to sort the survivors. Peking's central planners have preferred to investigate 'enterprise groups', where profitable companies absorb chronic loss-makers with the aim of turning them round. For example, Shanghai Vacuum, the largest of the seven companies publicly quoted on the infant Shanghai stock exchange, was forced by the municipality to take on 2,400 workers from failed local enterprises in 1989. This added RMB 7m to its annual payroll, and did nothing for profits. Yanzheng Industrial, a smaller quoted stock on the Shanghai exchange, had just 100 staff until the local Jing An district government forced it to assume responsibility for 100 workers from a failed factory nearby. Because there is no work for these people, they have to stay at home on full pay at Yanzheng's expense. A further 200 retired workers from the failed factory were put on Yanzheng's pension scheme. Chinese companies complain this practice is like 'whipping the fast ox'. In place of practical proposals aimed at resolving the crisis at the heart of China's industry, leaders in Peking have invoked the slogan of 'Quality, Variety and Efficiency' in 1991. The slogan's principal virtue is that it inflicts no damage on the icon of Marxist central planning. The longer leaders indulge in slogans rather than face head-on the problems of China's industry, the more painful the solutions are likely to be. *China: Between Plan &amp; Market. World Bank, September 1990. 
ID: 3438
HEADLINE: FT  24 APR 91 / Survey of China (11): Old tune is heard again - Stock market's quiet return in an old hotel ballroom 
TEXT: SHANGHAI'S old and distinguished Astor Hotel, located at the end of the riverside Bund which housed the city's former financial centre, has a new lease of life, writes John Elliott. With a nice touch of irony which officials insist is accidental, half of its premises (now renamed the Pujiang Hotel) have been converted to house Shanghai's fledgling stock exchange which was formally opened with much fanfare last December. A grand and renovated wood-panelled entrance hall leads to the old Astor ballroom where the tunes of foxtrots and waltzes have been replaced by the silence of numbers flickering on a large prices screen and about 25 or so computer terminals, surrounded by red-jacketed jobbers. Poorly dressed men and women queue on the pavement outside to place their savings, while others less well off peer uncertainly through the front door at this rather unlikely re-emergence of capitalism in Communist China. But this does not mark an imminent conversion of China's centrally planned and provincially controlled economy into a share-owning society  - and it may well be years before one can safely forecast whether this very cautious and hesitant experiment will have any significant impact on the country's economy. In a small way, however, it is a significant development - along with a more unruly stock market in the southern special economic zone of Shenzhen, adjacent to Hong Kong, and a nation-wide treasury bond trading system, called Securities Automated Quotations System (STAQ) which was launched in Peking last December, linking six cities and 18 licensed trading corporations. Guangzhou, capital of the southern province of Guangdong, is also considering a stock exchange. The significance is that there are sufficient economic reformers in Peking and elsewhere to push the experiments through, despite the ideological opposition of officials who fear both the economic and social implications, and despite the country's political uncertainty which deters bureaucratic initiative. The central government wants to try to ease its acute cash shortage by encouraging secondary markets for about yuan 114bn bonds already in circulation, and by tapping an estimated total of yuan 700bn-1,000bn personal savings. In Shanghai, there were extra reasons last December for formalising local bond and share trading which had been taking place since the mid-1980s across banking counters and on kerb-sides in seven or eight company stocks and 25 bonds issued by the government, financial institutions and companies. Peking wants to recreate Shanghai as China's financial capital and it also wants to attract funds for an ambitious Dollars 10bn industrial and commercial development planned in an area of Shanghai called Pudong. 'The securities market is a long term aim to develop a financial market which will help to finance Pudong and will introduce market mechanisms into resource allocation and company management,' says Mr He Gaosheng, director of the Office of Shanghai Economic System Reform. 'But public ownership will remain the mainstay, and the share system will not become very important - it is only on trial at present and that will last for perhaps five or ten years or more.' At least some claim of the quoted companies say they have new managerial freedom, even though the government is still effectively in control. 'We have more autonomy in our management and less direct intervention by the government so we make quicker decisions on investment and other issues,' says Mr Liang Zhengsheng, vice general manager of Shanghai Vacuum Electron Device, an amalgamation of six factories producing television tubes and other electrical goods which in 1987 became the first government-owned enterprise to have shareholders. Shanghai's Developments were held up by China's economic rectification policy of the past two years, but the potential has been demonstrated since December. Trading, which is dominated by the bond market, has rocketed from an average of yuan 6m a day in December to yuan 42m a day last month. Mr Wei Wenyuan, general manager of the exchange, forecasts that it could reach yuan 6bn this year, up from yuan 2.4bn last year and yuan 800m in 1989. An estimated 1m people out of Shanghai's 13m population are believed to have participated in securities transactions. Institutions such as insurance companies, labour unions and workers retirement funds are estimated to account for about 40 per cent of the trading, and the rest is by individuals. There are various forecasts about how fast the market will grow. The bond business might double in a year or so but the speed of the introduction of new companies is less clear. Plans are being drawn up - but could take some time to come into force  - to allow foreign investors to buy a special designation of B shares in certain companies and at least one foreign joint venture has applied to be quoted. In Shenzhen, where trading began in 1987, transactions last year totalled yuan 1.77bn, mainly in equities. There are only five listed companies and there was such rampant speculation last year, much on a kerb-side black market and involving local officials, that government restrictions were imposed and formal approval for the opening of a new stock exchange headquarters and trading floor was delayed. Such problems underline why there is deep suspicion and concern about allowing any rapid expansion. 
ID: 3439
HEADLINE: FT  24 APR 91 / Survey of China (12): Determined to go its own way - Colina MacDougall takes the pulse of Sichuan province 
TEXT: 'SICHUAN is the poorest province in China', says bouncy and fast-talking Ma Lin, the vice-governor in charge of the economy. 'We're worse off even than Tibet - our yearly per capita income is only yuan 104. Tibet gets yuan 1bn a year in aid from Peking, and we're given nothing, although our population of minorities is twice that of Tibet's' His solution is more reform. Sichuan was famous as the launching pad for the successful rural reforms of the late 1970s, under its then leader, the now-disgraced former party boss, Zhao Ziyang. Vice-governor Ma, who hails from one of China's richest east-coast provinces, Jiangsu, wants a greater 'opening to the outside world' - more foreign trade and investment. Exports are already doing well. Mainly agriculture-based, they rose from around Dollars 300m in 1985 to Dollars 1.1bn in 1990. Foreign investment has made a start, despite Sichuan's inadequate rail links and limited use of its main east-west artery, the Yangtse. The provincial government still has the wrong idea about foreign investors. 'Pepsi is eager to set up a factory in Sichuan as the population is huge and it's the centre of south-western China', said Mr Wang Chongming, vice-director of the province's commission of foreign economic relations and trade. 'We've offered them a package - if they want to come, they must renovate a steel plant and build us a TV tower with a revolving restaurant'. Conditions like these seem unlikely to tempt westerners. Most of Sichaun's existing joint ventures are with Hong Kong companies who can usually make a profitable deal. A dozen or so apiece are with the US and Taiwan, and a handful with Japan. On the agenda for the future is a zinc plant, currently under discussion with Australia's BHP. Despite the poverty, emphasised by vice-governor Ma, to the casual foreign eye Sichuan seems prosperous. Markets in Chengdu, the provincial capital, are overflowing with food, flowers, pet song-birds, fluffy jumpers and hi-fis. Guanghan county, 35 kms away and the site of a new reform experiment, is bursting with smart-looking busy shoppers. On the other hand, Chongqing (wartime capital of Chiang Kaishek and now, at a population of 14m, China's largest city) and the neighbouring towns along the Yangtse are dilapidated and filthy. Sichuan has been officially ranked as fourth poorest province and may have slipped further. It has serious problems such as a huge population (now 107m) and limited arable land. Half its area is mountainous, inhabited by only 6m or 7m, mainly ethnic non-Chinese, and the remaining 101m, 80 per cent of whom live off the land, are crammed into the rest. 'Our farmers are getting poorer', says Ma. 'We must get on with reform.' Commented one westerner with business connections in Chengdu, 'Sichuan is determined to go its own way, though unlike Guangdong (where powerful Governor Ye Xuanping has ignored central government directives to cut back on reform) it hasn't openly defied Peking.' Officials are discreet, but hint at their differences with the centre. For instance, they were critical of the reflation applied to the economy last year after a massive slowdown resulting from a loan freeze. 'The new credit came too late and it didn't solve the problem', said an economist with the provincial economic commission. As in the rest of China, Sichuan's industry suffered in 1990. Adding to the burden are the hundreds of old heavy industry factories moved there under Mao Zedong's dispersal strategy of the 1960s. These are many miles from raw materials sources and markets and lose money at the best of times. The farming population has also been hit this year, ironically by the excellent harvest. In 1990, Sichuan produced an all-time high of 42.5m tonnes of grain compared with 40.8m tonnes in 1989, but in the free-market prices fell and the state commercial departments would not buy more than agreed quotas. This means financial loss for farmers who had already bought diesel and fertiliser. But this plenty has given the provincial government the opportunity to experiment with freeing grain prices, currently subsidised at huge cost to the central government. In Guanghan County, 35 kms from Chengdu with a population of half a million, from April 1 this year all grain was to be sold at market prices. This meant an end to farm quotas and ration tickets. Guanghan's wage-earners will receive a subsidy to make this more palatable: it means a price-rise to around 50 fen (Chinese cents), from around 13 fen per half-kilo. Little protest is expected - in Guanghan city in mid-March shoppers at the grain store were unconcerned. 'We'll get an idea straight away of whether it induces farmers to plant more grain or less', said Mr Zhou Jiapei, director of Guanghan's Economic Restructuring Office. 'Then in a few months we can see what the urban customers think.' This experiment might then be applied in other parts of the country. Sichuan's reform principles are reflected in one of China's most successful private businesses. The Minsheng Shipping Co. in Chongqing, which ran Yangtse and mainly coastal shipping before the communist victory in 1949, re-emerged after 1978 to resume its business. Now managed by 68-year-old Lu Guoji, son of the founder, this family business jumped from a turnover of Dollars 1.2m in 1985 to Dollars 40m in 1989. The registered capital is yuan 50m, of which employees hold yuan 2m. and the rest is in family hands. Mr Lu has put his son in charge of the Hong Kong office and a cousin (a former researcher at the Chinese Academy of Sciences) into one of his light-industrial joint ventures. Now handling about 50 containers a month, he plans to build his own container wharf and raise the number to 3,000 a month. HIs other businesses are multiplying. He is making piles of money where the three other (state-run) shipping companies in Chongqing are losing it. It is a pity Sichuan is not free to apply Mr Lu's private enterprise principles in other areas. 
ID: 3440
HEADLINE: FT  24 APR 91 / Survey of China (13): Front line for reformers - Shanghai 
TEXT: A NEW and bleak 30-storey hotel extension to the old Jingjiang Hotel in China's former commercial capital of Shanghai is said to epitomise a flashy version of the country's four economic modernisations - it has a steel structure, a multi-storey design, a revolving restaurant, and lifts going up the outside of the building. As China struggles forward with its economic reforms, Shanghai also has two other fashionable modernisations - a proposed yuan 12bn special economic development zone called Pudong, and a new stock exchange. Whether any of them will succeed is open to question. The Jingjiang's revolving restaurant, like those in many of Shanghai's half empty hotels, has scarcely any customers and it jerks between revolving too quickly and not moving at all. External lifts in China tend to break down. The fledgling stock exchange has taken off in a small way since it was officially launched last December, trading on the Chinese love of gambling, but little has happened yet in Pudong. Nevertheless Shanghai, with its population of more than 12m, is the place to watch in the next few years because it has been picked out for special treatment by Peking. The idea is to use the Pudong plan as a catalyst to restore the city to its old position as the financial and business heart of China, and to start a new modernisation drive inland up the Yangtse River. This is backed both by economic reformers, who want to breathe new life into the 1980s opening-up policies, and by older conservatives who support Shanghai's emerging mixture of limited free enterprise in a planned economy. It therefore provides an alternative focus to the highly prosperous free-wheeling southern province of Guangdong, of which Peking traditionalists disapprove - and it might in the distant future even challenge Hong Kong. It has been led since April 1988 by Mr Zhu Rongji, a charismatic and strong-minded 62-year old mayor, who was promoted early this month to Peking to be one of China's five vice premiers. He is a reformist and is expected to continue to be involved in the development of Shanghai, especially Pudong, but will probably be succeeded as mayor by Mr Huang Ju, a vice mayor who has been in charge of financial policy including foreign investment. His support in Peking is assumed to be based on firm backing from Mr Deng Xiaoping, China's veteran leader, supported by Mr Jiang Zemin, the Communist Party general secretary who used to be in Shanghai. This has helped him to: shake up the bureaucracy (making marginal inroads into entrenched inertia); begin to tackle creaking infrastructural problems with major projects; encourage foreign loans and investment; pave the way for six new foreign banks; improve the lot of foreign joint ventures; open the stock exchange; and launch Pudong as a symbol of a new future. The main reform now being finalised is for housing. The aim is to tap private savings and create more funds for housebuilding, improve maintenance, and encourage expansion of private housing which now accounts for 20 per cent of the total. People renting or buying accommodation will have to contribute to a central provident fund which they can then draw on later, and rents are being raised. But, despite all this, Mr Zhu has only scratched at the surface of an old industrial city which almost defies modernisation. Economic performance is hit by antiquated over-manned factories, and Peking drains the city of much of its surplus funds. While GNP grew by 3.1 per cent last year (down from 5.3 per cent in 1989), according to government figures, the output from state sector enterprises declined by 0.6 per cent. It was pulled down by municipally owned factories which dropped 1.6 per cent, while those controlled and favoured by Peking grew by 9 per cent. Mr Zhu has not managed to in push through a policy of closing old loss-making factories - there are some 10,000 old run-down enterprises - though a little progress has been made by merging manufacturers of similar products into about 30-40 enterprise groups. But he has begun to change the climate for foreign joint ventures and two of the country's most successful (rated by a government newspaper) are in Shanghai producing Volkswagen cars and Pilkington glass. Foreign managers say that, despite all the problems, Shanghai has definite benefits, including an industrial base for component manufacture. For nearly 40 years after the Communists came to power, Shanghai was used by Peking as a cash cow for Peking's coffers. This was arrested three years ago and a new 50-50 formula for sharing payments with the capital was introduced. But Peking has continued to make extra demands and a total of around yuan 13bn has been handed over in each of the past two years, leaving only about 25 per cent of yuan 16-17bn total revenues for local spending. This is however partly offset by Peking aid for Pudong which, in every way, is Shanghai's main hope for the future. 
ID: 3441
HEADLINE: FT  24 APR 91 / Survey of China (7): US Congress holds the key - David Dodwell on China's need to guard its trade and investment 
TEXT: MENTION MFN to Peking's trade officials and you get a beneficent smile and a glib 'No problem'. Mention MFN in Hong Kong or Guangdong, and you see sweat on the temples. By June 3, President Bush must agree to renew for another year the Most Favoured Nation status that assures China low-tariff exports to the US. Signs are that in spite of deep reservations, President Bush will agree. But within the following 60 days, it is likely that the US Congress will summon the two thirds majority it needs to veto the renewal. All will then hang on a Senate vote. In spite of complacency in Peking, the consequences of losing MFN status would be grave for China. Exports to the US would fall by at least 50 per cent, according to the American Chamber of Commerce in Hong Kong. Guangdong province, with most at stake, would lose about Dollars 2bn in exports, with over 1m workers losing their jobs. Guangdong's GDP would slump by 10 per cent. Describing the 'deadly impact' of losing MFN privileges, Mr John Kamm, then President of Hong Kong's American Chamber of Commerce, told Congressional hearings last year: 'The open coastal provinces and cities - the China of reform - will be hard hit. Their leaders - supporters of the deposed party secretary Zhao Ziyang - severely undermined by rapid falls in living standards which owe much to export earnings.' This evidence, which played an important part last year in persuading US congressional critics of China to renew MFN status, is about to be replayed in Washington. If anything, the mood is even more grim. Regrets in the wake of the Gulf war over the price paid for supporting Saddam Hussein over past decades have prompted US leaders to toughen their stance against regimes they regard as tyrannical. Protectionist sentiment in the US has also hardened. China admits a trade surplus with the US, even though it does not acknowledge that a large proportion of China's re-exports through Hong Kong are in fact exports to the US. An array of administrative measures in China to trim imports have also aroused Washington's anger. They were introduced to tackle rampant inflation inside China, as well as to shore up foreign exchange reserves ahead of a debt-repayment peak in 1992-93. The result has been to give China its first visible trade surplus since 1984. Exports rose 18.1 per cent in 1990 to Dollars 62bn, while imports fell 9.8 per cent to Dollars 53bn. A surplus on invisibles boosted the current account surplus to Dollars 13.1bn. While textile exports have struggled against competition particularly from Pakistan, and petroleum exports have slipped because of mounting domestic demand, China is expected to retain a strong competitive advantage in coming years in the export of consumer electronics - including TVs, radios, microwaves and computers - and in pharmaceuticals and machine tools. Tourism has also begun to recover after Tiananmen. After a 23 per cent slump between 1988 and 1989, more than 27m tourists visited China last year, a 12 per cent improvement on the year. Tourism revenues have recovered to the 1988 level of Dollars 2.2bn after a 20 per cent fall in 1989. Perhaps to the alarm of Peking's more conservative economic planners, international trade has risen in importance to assume a considerable significance in the domestic economy. Foreign investment flows have played a parallel role to trade. Peking says foreign investment amounted to a record Dollars 6.57bn in 1990, a leap of 17.3 per cent from 1989. Since both Japan and the US say their investment was down, the impetus came largely from Hong Kong and Taiwan. Even more encouraging from Peking's point of view is that hotel and property deals - which accounted for a large share of investment through the 1980s - have slumped. According to the Ministry of Foreign Economic Relations and Trade, about 90 per cent of investment last year was in manufacturing, regarded as being of much greater intrinsic benefit to the economy. In a bid to attract more high technology investment, China has set up 27 new high-tech zones across the country, lifting the total to 38. Foreign investors in the zones will pay just 15 per cent income tax - compared with the standard rate of 33 per cent. If they export 70 per cent of their output, tax falls still further to 10 per cent. The government's aim is to boost high-tech output value from the current level of RMB7bn to RMB25bn by 1996. Prospective investors nevertheless continue to complain that doing business in China remains testing. Many fail to anticipate how many years it can take to conclude a deal. Equally commonly, 'cheap' labour can become expensive when undisclosed bonuses and subsidies are added. A lack of control over land-use fees, energy costs, or provisions for infrastructure can also provide nightmares for financial controllers back at company headquarters. These and more general factors point towards a bleaker investment climate in the early part of the 1990s: the higher priorities of reconstruction in the Gulf, forging links in eastern Europe, or simply battening down against domestic recession, mean that many traditional western investors will not be running hotfoot to China. However, strong and ongoing investor interest from Hong Kong and Taiwan in China's south, and perhaps from Japan and South Korea in the north, may help to insulate the country from an otherwise more difficult foreign investment climate. Either way, whether Peking's conservative leaders like it or not, China's doors to the outside world have been firmly opened. The importance of trade and investment to the national economy is now so great that the price of closing the doors is probably too high to contemplate. This in the longer term has to provide reformers with confidence that economic trends will eventually play into their hands. 
ID: 3442
HEADLINE: FT  24 APR 91 / Survey of China (8): Pudong - gamble for growth 
TEXT: A NEW word has appeared on the lips of almost every Chinese official discussing the country's hopes for the future - Pudong, writes John Elliott. It is the name of a 350 sq km area of Shanghai, China's second city, which is to be developed over the next 20-30 years with a series of special industrial and trade zones. But Pudong - or Pudong New Area as it is called - is not just for Shanghai. Backed by the country's top leaders, it is the symbol of China's plans for economic development into the next century. Dong means east and Pu is an abbreviation for Shanghai's Huangpu River, so Pudong lies on the eastern bank of the river across from the current city centre. Mr Zhu Rongji, the city's mayor who has just been promoted to be a vice premier in Peking, is the driving force behind the development which was announced last year. Some yuan 12bn projects are planned but total expenditure could reach yuan 30bn. 'Pudong will be a place for experimenting in new policies which maybe we can later apply elsewhere in China,' says Mr He Gaosheng, director of the Shanghai Office of Economic System Reform. 'It will not be capitalism but we will bring market mechanisms into a planned economy, with public ownership remaining the mainstay. With Pudong we can develop the whole of Shanghai and promote development throughout the country.' But it is difficult to envisage the plans materialising. At present Pudong, which lies between the Huangpu and Yangtze rivers, is an uninspiring area of broken roads, 2,000 (mostly small) factories, ramshackle chemical and gas plants, shabby flats, and traditional-style houses. The aim is to double the present population of 1m. The yuan 12bn expenditure will be spread over five years or longer on a free trade zone and 10 infrastructure projects, some already started, including a four-berth deep water port, two major river bridges, an 8km inner ring road, and new plants for water, electricity, gas and sewage treatment. Officials say yuan 5bn will come from Peking, yuan 4bn from domestic bank loans, and yuan 3bn from the Shanghai government. They are looking for foreign finance - for example from the Asian Development Bank - but do not expect substantial international investment until the infrastructure projects are completed. Currently there are about 40 factories with foreign investment. They include one of China's most successful joint ventures - a float glass plant started with Pilkington of the UK four years ago when Pudong had no special significance - and a Dollars 25m agricultural chemical plant planned by Du Pont. A showpiece multi-storey financial and trade centre is to be built across the Huangpu River from the old Bund (or promenade). This is intended to help Shanghai's drive to boost its service sector from 30 per cent of GNP. China's first foreign-owned wholesale and retail businesses are also to be admitted - Yaohan, a Hong Kong-based Japanese department store group, plans a HKDollars 780m joint venture to open in 1995. An area has been designated for an international airport. It is difficult at this stage to assess how much of the grand Pudong scheme will actually materialise. But whatever happens in the longer term, Shanghai will at least benefit from the infrastructure projects. 
ID: 3443
HEADLINE: FT  24 APR 91 / Survey of China (6): Time bomb ticks - Concern rises over state of economy 
TEXT: CHINA could face economic disaster in a year or two, even though, in contrast with the tired old economies of the former Soviet bloc, it is superficially prospering. Wang Bingqian, the finance minister, speaking at the National People's Congress in March, for the third year running called the financial situation 'extremely grim'. Unless Peking can work a near-miracle, inflation will take off, workers will demonstrate on the streets and the house of cards built on subsidies that is China's current economic structure will collapse. Since even Peking's conservatives recognise the dangers, the leadership is moving with reluctance towards cautious reform. Small experimental reforms are springing up all over China on a strictly local basis, such as the introduction of stock exchanges in Shanghai and Shenzhen. Officials such as vice-governor Ma Lin of Sichuan province enthuse about the 'ideal way' a stock exchange raises investment funds. Secondary markets for state bonds, previously confined to Shanghai and Chongqing, have been successfully launched elsewhere. Deregulation of grain prices, as in Guanghan near Chengdu, capital of Sichuan, is happening on a trial basis. This follows price rises last year in previously tightly controlled items such as cooking oil and cotton cloth. The yuan was devalued on April 10 for the third time in 16 months, bringing it to yuan 5.26 to the dollar from the late-1989 figure of yuan 3.72. Foreign bankers in Peking were expecting a further cut of about 10 per cent. A kind of convertibility increasingly functions through the Foreign Exchange Adjustment Centres, where joint ventures can trade foreign exchange freely at a market rate. Some housing reform, which either encourages tenants to buy their apartments or permits enterprises, the main providers, to set up separate self-financing corporations, is already under way, though this is proving easier with new housing than apartment blocks inhabited through several generations at peppercorn rent. Insurance-based pensions, health services and social security payments are also on the agenda as devices to lessen the load of the over-burdened state enterprises which currently provide them. This would allow enterprises to sack workers and focus on the profitability of their core activities. But there is no sign yet that Peking will bite the bullet of abolishing subsidies which featherbed the industrial worker and cripple state finances. Nor will it adopt a true price reform, adopting a market system which would help to allocate resources correctly and cut waste. Yet an apocalyptic scenario is hard to believe when the streets are orderly, markets appear to be booming, new office blocks and hotels adorn Peking and provincial capitals and the shops are full of the latest electronic goodies. Last year, China turned in a creditable economic performance with a record harvest of 435m tonnes and a respectable GNP and industrial growth rates (5 and 6 per cent respectively). Foreign trade was up, with exports performing well. But, said one westerner in Peking, 'China is still living on the impetus of the mid-1980s. While major reforms have not been rolled back, the innovations are minor. Two years of good harvests have given economists a chance to push for small reforms, but this year's weather is less promising.' When Li Peng, the hard-line premier, took over economic management from Zhao Ziyang, the now-disgraced former party leader, in late 1988, fundamental reform was effectively shelved. But the policies then applied (mainly an administrative price freeze and credit controls) did nothing to solve China's huge underlying problems of suppressed demand and inefficiency. Potential inflation is still ticking away under the surface, fuelled by China's growing deficit financing and subsidy policy. In 1990, Wang Bingqian told the recent Congress that the budget deficit was, according to Chinese accounting (which reckons government borrowing as revenue), yuan 15bn. This was bad enough by Chinese standards, but when adjusted to reflect normal practice was much worse at yuan 48bn. On top of that, nearly a third of the yuan 340bn budget expenditure went on subsidies. The central government forked out nearly yuan 58bn to the loss-making state sector plus another yuan 38bn in individual subsidies to compensate for price rises. Peking is short of money anyway because of its revenue sharing system. Under the existing semi-reformed fiscal structure, a fixed tax amount is paid by enterprises to local authorities who then hand only a percentage to Peking. Not only is Peking's slice relatively small (a source of serious dispute with provincial leaders) but the fall in state enterprise profits last year (58 per cent) meant less for everyone. This is likely to get worse since more inflation is on the cards for this year. In 1990, credit estimated at yuan 250-290bn was pumped into the economy to fuel industry after Li Peng's inexpert 1988-89 freeze caused near-collapse. This enabled the government to meet its industrial growth target for the year, but bodes ill for the future. Meanwhile, subsidies paid to workers continue to rise. This is seen as essential by the unpopular leadership, which is deeply concerned to keep the urban workforce happy and loss-making factories open. Wages are also rising -up by over 18 per cent in the last quarter of 1990 compared with the same period of 1989. Protected by Peking's reluctance to implement its bankruptcy laws, state-run industry is growing more inefficient by the hour. Mostly old and badly run, it is responsible for what Li Peng, in his report to the NPC, called the 'high consumption in production, low product quality, enormous waste in construction, slow capital turnover, low labour productivity and serious losses'. Attempts at change are hampered by the post-Tiananmen commitment to ideology. At the top are leaders determined to avoid the fate of the Ceausescus by exerting party dominance. Li Peng made a special point of stressing Marxist-Leninism in his report, though he had to signal for applause during his three-hour speech by shouting his words to the dozing delegates. Still, a kind of compromise has been reached between the hard-liners and reformists which is evident in China's new plans. Five-year programmes (1991-95) and ten-year plans to cover the years to the end of the century set out Peking's intentions in traditionally imprecise style. The main focus is to be a move to give state managers more powers to deal with inefficiencies, the improvement of infrastructure and some expenditure on new special economic zones such as Pudong in Shanghai. But the unhappy history of Chinese five year plans (most have been overtaken by political upheavals before completion), inspires little confidence. If this one avoids that fate (unlikely, in view of the extreme age of Peking's key leaders), inflation may destroy it. 
ID: 3444
HEADLINE: FT  24 APR 91 / Survey of China (9): Weather has the last say - Farmers prepare for a year of lower harvests 
TEXT: 'CHINA'S harvest last year was the best in history, but it won't be so good this year', says Mr Zhang Shaogong, of Peking's agriculture ministry. A serious drought gripped north China through last winter, and though snow fell in March the year's total may fall short of last year's. Drought has affected areas in the south, too, and these will need heavy spring rains to replenish water supplies. As a result, the summer-harvested crops - which make up a third of the annual total - will definitely not reach last year's peak, and the autumn harvest is unlikely to fill the gap. This can only aggravate China's other economic difficulties. Unpredictable weather explains why Peking's leadership is permanently concerned over agriculture. 'Last year, the rains came when the crops needed it. We dare not count on such weather again', comments Mr Zhang. 'Experience shows we only get two good years in five.' All agricultural sectors shone in 1990. Cotton output rose by more than 18 per cent to 4.47m tonnes, and oilseeds, which in the form of cooking oil provide an indispensable part of Chinese cuisine, by nearly 25 per cent to 16.2 m tonnes. Meat, milk, fruit and sugar crops, increasingly adding protein and diversity to the diet, were up substantially. But all this plenty, especially of grain (435m tonnes), brought serious headaches. At the end of last year, tens of millions of tonnes were being kept in the open air, twice the amount lying outdoors at the end of 1989, said Bai Meiqing, vice-minister of commerce, last month. Damp and pest-ridden grains were up by a quarter and a third respectively, he noted. Because of cash shortages last year (the consequence of China's nationwide financial difficulties), Peking's commercial departments could not afford to buy more than the set quotas for storage, and the peasants were left with grain they could not sell. This surplus is a strong disincentive to growing more this year. Currently the state makes contracts with the peasants to buy 50m tonnes of grain yearly at a fixed price and in return supplies subsidised farm chemicals and fuel. But since 1988 official policy has put pressure on peasants to grow as much as they can, though without providing the cheap inputs to facilitate it. Disappointed, many are now out of pocket. As a result, said vice-premier Tian Jiyun at a conference in March, the peasants last year won no extra income and some even sustained a loss. 'Our farmers are getting poorer', says Ma Lin, vice-governor of Sichuan province. Peking is right to be concerned over feeding its huge population. The question is whether this concern is being demonstrated in the right way. The return to individual farming (the so-called 'household responsibility system') brought the enormous surge in farm production in the early 1980s, but, in tune with the post-Tiananmen stress on control and ideology, the collective is now back in vogue. In any case, some western diplomats argue, China is worrying about the wrong things. There is no need to stress higher grain output since enough other foods are now produced to keep the country reasonably nourished. Allowing market forces to operate more instead of less would bring better returns. At least the central government is taking one sensible new approach. There is a fresh emphasis on purchase and marketing which may enable China to distribute grain more effectively. Peking has set a production target of 450m tonnes of grain by 1995 and 500m tonnes by the year 2000. This will be achieved by 'improving' (how is unspecified) the household responsibility system, upgrading services to farmers, stepping up the collective element in rural management, streamlining food distribution and increasing agricultural investment. The quality of the land itself is under scrutiny. China has many hectares of marginal land which will be the target of investment over the current five year plan. 'Production bases' in which Peking will invest yuan 10 bn are being set up for grain and cotton, and more grain markets will be established. Some scepticism is in order here since, from the 1950s onward, in its more apocalyptic moods Peking has urged the development of marsh and mountainside. Similarly, grain markets have been on the agenda ever since the mid-1980s, but without so far performing. Today, however, there is hope since China is more aware of the environmental damage which may result from unwise cultivation. But optimism is not reinforced by the statement of Song Ping, one of China's top six leaders on the Politbureau Standing Committee and its chief Marxist-Leninist guru, at a recent agricultural conference, that 'Using socialist ideology to arm the cadres and people of rural areas and guiding the 800m peasants to firmly take the socialist road are the basic assurance for doing a good job in rural work.' This old-fashioned hard-line policy is reflected in the Central Committee's recent order that the grassroots bureaucracy be improved, first and foremost the party branches. Socialist ideology and spiritual construction should take the lead. This is a far cry from Deng Xiaoping's slogan 'it is glorious to get rich]' promulgated just a few years ago. China would do better to forego attempts to organise its vast rural territories and simply free the prices paid for farm products, argue some western diplomats. The market principle would soon beget a higher output and a better distribution system. But this seems unlikely to happen in the present political climate. Minor experiments in freeing the price of grain are in progress, for instance in Guanghan county in Sichuan province, but transfer to wider arenas does not seem likely yet. The big success of rural China is the town and village enterprise sector. This grew up in the heady days of the economic freedoms of the early 1980s, when farmers were encouraged to set up small businesses. The total value of rural output last year reached yuan 1.625 bn, of which nearly 55 per cent was generated by local enterprise. This is recognised nationally as the single most important factor in raising the standard of living and even the hardest-liner has so far shown no sign of trying to roll it back. It is a pity Peking cannot apply the same successful principles to food production and sales, which would obviate the need for the new stress on village control. 
ID: 3445
HEADLINE: FT  24 APR 91 / Survey of China (4): Two economies that overlap - Guangdong eyes Hong Kong 
TEXT: WHEN Mr Ye Xuanping vacates his post as the liberal governor of the southern province of Guangdong to take up a less powerful post in Peking during the next few months, an almost revolutionary dream which he is believed to have wanted to write into the eighth five-year plan may go with him, or at least be diluted. It is to merge the economies of Guangdong and Hong Kong. There is, however, strong opposition from hardliners in Peking who disapprove of Guangdong's independently free-wheeling market-oriented ways. Hong Kong also has serious reservations, partly because it does not want to endanger its current autonomy, nor make it easy for China to renege on its promise of a 'high degree of autonomy' after 1997. 'There are, of course, problems of our different economic and social systems and I would not talk about merging the economies, but we would like to have some sort of planned development,' says Mr Yi Zhenqiu, director of the Guangdong Office of Economic Systems Reform. He envisages the creation of a Hong Kong-Guangdong economic and trade promotion committee to act as an industrial investment 'match-maker'. In the past decade, Guangdong, which has a population of 64m, has become China's most open and prosperous province, thriving on close economic links between its Pearl River Delta area with Hong Kong. About 1.5m-2m workers in the province are employed in factories processing partially-manufactured foreign goods (mostly from Hong Kong) for re-export, and another 1m are in associated activities. As many as 50,000 technical and managerial staff from Hong Kong work regularly in China, a lot of them in Guangdong, and 15,000 vehicles cross the land border every day, four times as many as six years ago. Economists estimate that 20 per cent or more of Hong Kong's currency is openly circulating in Guangdong tourist and business outlets. This co-operation has been good for both areas. Hong Kong companies have gained access to cheap labour and factory premises. Guangdong has benefited because of the consequential wealth and economic expansion. Foreign investment totalled some Dollars 7bn during the 1980s, 90 per cent via Hong Kong. It went into more than 10,000 joint ventures and other enterprises, mostly involving labour intensive light industry, plus thousands of the processing factories. The productive end of this investment has suddenly come on stream during the past two years, so that between 25 and 30 per cent of both Guangdong's yuan 189bn industrial output and its yuan 43.29bn industrial exports last year were generated by factories with foreign involvement. But there has been a price to pay in social terms because hundreds of thousands of people regularly pour into the province looking for work. Some make up a floating labour population of more than 1m in the processing factories; others cannot find work and fuel a crime wave of armed robberies and prostitution. Guangdong is also frustrated that most Hong Kong businessmen only cash in on the cheap unskilled processing factory labour. They rarely lay down significant long-term industrial investment and look to other countries for high technology. Some labour processing factories do develop into joint ventures and so become more permanent investments. But relatively little progress has been made on the creation of a technological and industrial base in relation to overall economic growth, which last year amounted to 16 per cent. The new five year plan includes projects which should help by improving both electricity power supplies and road and rail transport and by creating three petro-chemical plants. The capital of Guangzhou also wants to boost its service sector by admitting two new foreign banks and by setting up a stock exchange. Problems such as these prompted the idea of somehow merging the economies so that Guangdong would benefit more, and Mr Ye also talked about relaxing restrictions on the entry of goods from the colony into Guangdong's most successful special economic zone of Shenzhen. 'We have not yet put forward any firm policies to Peking, but we would like to consider using Hong Kong money to help finance raw materials plants. We also have scientific ability which could be used to help Hong Kong industries develop high technological products,' says Mr Yi, floating an idea which has yet to catch on in Hong Kong. 
ID: 3446
HEADLINE: FT  24 APR 91 / Survey of China (3): Rivals wait as the Old Guard slowly crumbles - While crushing all dissent, the regime is split on many issues 
TEXT: AS the second anniversary of the crackdown at Tiananmen Square approaches, the Chinese leadership has reasserted its authority over a sullen but subdued population. However, the government faces many intractable problems, compounded by acute factional infighting which has produced a deadlock on important decisions about policies and personnel. Adding to the uncertainty is the advanced age and frail health of the country's most powerful leaders, 86-year-old Deng Xiaoping, 83-year-old economic theorist Chen Yun, and 84-year-old president Yang Shangkun. Because of their age, many observers believe a succession struggle is already underway. 'There is nobody in the younger leadership who has a decisive say on policy decisions,' says a western diplomat. 'All are jockeying for position , but they are holding back. The active phase - when Deng is dead or incapacitated - hasn't arrived.' The Chinese leadership is a collection of interlocking, overlapping, yet distinct factions, now uneasily balanced, but prone to frequent conflicts, depending on long term interests, connections and personal relationships. Dominating the leadership today are octogenarians Deng, Chen, and Yang. Long-time comrades and rivals, each has independent power networks stretching back 50 years. Deng's relationship-building dates from his early associating with Mao Zedong in the 1930s and 1940s. Chen's connections stem from his role as the central architect of economic planning in post-liberation China. Yang has strong ties to the military, from the years he served as vice chairman of the central military commission under Deng. These powerful relationships have been further enhanced by those of his half-brother Yang Baibing, who is head of the general political department of the People's Liberation Army. Today, each of these aged revolutionaries has younger proteges whom they are cultivating for the future. The most significant at the moment is Premier Li Peng, whose patron is Chen Yun. Since the massacre in Tiananmen Square, with which he is closely associated, Li's stature has as a consensus maker, an economic thinker, and politician. Although he is not Deng's chosen man, observers say Li is a leader with whom Deng can work. The premier has identified himself with improving the country's economy and can take credit for reducing inflation and turning around China's balance of payments. But he has not addressed the country's basic structural problems, and if the economy falters, he could become the scapegoat. Moreover, he is still tarnished by his association with the Tiananmen Square massacre. Jiang Zemin, secretary-general of the Communist Party, is widely seen as Deng's protege. Formerly Communist Party secretary in Shanghai, he was promoted by Deng to head the party after Zhao Ziyang was ousted in May 1989. 'He's got the titular crown - all he has to do is maintain it,' a western diplomat says. Others to watch are Shanghai mayor Zhu Rongji, Ye Xuanping, the governor of Guangdong province, both considered reformists and Li Ruihuan, former mayor of Tianjin and now a politburo member, who is a middle of the road figure. At a meeting of the Chinese parliament in late March and in early April, both Zhu and Ye were given new posts in the central government in Beijing, with Zhu approved vice premier and Ye as vice-chairman the Chinese people's consultative conference, an advisory council to the government. While they may differ on many policy issues, virtually the entire leadership is said to have agreed on the need to put the massacre of June 1989 behind them. Closing the book on Tiananmen Square is thought to be the reason for a series of trials this past winter in which about two dozen prominent activists were sentenced to terms of up to 13 years on charges ranging from counterrevolutionary propaganda and incitement to sedition. The trials and the muted public reaction to them demonstrated the effectiveness of the government's campaign of repression. With nearly all of the student leaders who participated in the demonstrations of spring 1989 having fled abroad, here in China the dissidents lack a broad based movement. So few are in prison that they are unlikely to become lightning rods of dissent. However, should opposition erupt again, these proceedings will be used as ammunition by those voicing discontent. United as the leadership may be on the need to quell dissent, it remains divided on many other issues, such as disputes over price reform, the power balance between the central government and the provinces, and the question of whether to emphasise coastal development rather than channelling investment towards the more backward interior. The most critical problem is economic reform. The party recognises that staying power rests upon its ability to provide a higher standard of living and more consumer goods. However, that requires correcting the economy's structural problems, such as eliminating inefficient, overstaffed and money-losing state enterprises, stimulating a largely unmotivated work force, and preventing the waste of precious raw materials. But any meaningful effort to deal with these problems could erode the party's authority and eventually lead to its downfall. While the power of the 45m-50m member communist party is still strong, public enthusiasm for orthodox Marxism-Leninism has already been seriously eroded by a decade of market-oriented reforms. With traditional Chinese social values having also been destroyed by the communists, many Chinese have been put off by the attempt to revive ideological indoctrination after the Tiananmen Square massacre. Some have even turned to religion. Although the party has sanctioned this to a limited degree, the authorities are thought to fear that the revival of religion creates a competitive world view. Those who now join the party now are primarily opportunists. Apart from this battle for hearts and minds, the role of the military will also be critical in the succession struggle. The composition of the various factions within the armed forces is not entirely clear, but certain issues have emerged that are challenging it to its core. Foremost is the debate over whether military modernisation should take priority over ideological indoctrination. There is a generational split over this issue, and divisions already present before the Gulf war are believed to have widened. For the younger generation, some of whom have travelled outside China, the overwhelming American technological superiority in the Gulf war is thought to have made a deep impact. For them, professional competence and acquiring more modern equipment are more important than ideological purity. Moreover, most of the funds from a recently announced 12 per cent increase in the defence budget are believed to be earmarked for acquiring more modern equipment for the air force and navy. But the PLA's older generation still believes in Mao's doctrine of a 'people's war', with its superior numbers and greater morale being more important than technology. Yang Baibing, the secretary general of the central military commission, is believed to have spearheaded the drive toward s re-politicising the PLA. Apart from modernisation, questions have been raised about the military's role in internal security. Some feel the army should have been a last resort in the crackdown at Tiananmen Square. After the massacre, the army was reorganised and regional commanders loyal to the forces of Yang Shangkun were put in charge. However, it remains unclear which group the military will support once the octogenarians begin to die. Both western and east European diplomats foresee a situation comparable to 1976 when Deng Xiaoping and senior military leaders staged a coup d'etat by arresting chairman Mao's widow and the Gang of Four shortly after Mao's death. Until Deng leaves the scene, the leadership remains in a political gridlock, unwilling to take risks to face the future. 
ID: 3447
HEADLINE: FT  24 APR 91 / Survey of China (5): US complains China has dollars 10.4bn visible surplus on trade 
TEXT: The US complains that China has a Dollars 10.4bn visible surplus on its trade with the US. It says that only Japan and Taiwan maintain larger surpluses. As a result, US officials are pressing China to import more from the US. However, China claims that trade is more or less in balance, with a Dollars 1.4bn surplus in the US's favour in 1990. One must look to Hong Kong to understand this startling difference. The US trade figures include imports that transit the colony en route from China to the US, and vice versa. But China regards its sales to the US via Hong Kong as exports to Hong Kong. US products entering China from the colony are seen as imports from Hong Kong, not the US. Neither side is ready to alter its trade accounting practices. 
ID: 3448
HEADLINE: FT  24 APR 91 / Survey of China (2): Quest for allies in an uncertain world -Foreign policy is in turmoil 
TEXT: FOR China, as for many other countries who have for decades preyed on the superpower conflict between the Soviet Union and the US, these are distressing times. Where is the counterweight to 'American hegemony', so amply and effectively demonstrated, from Peking's point of view, in the Gulf War? Is Japan about to rise afresh, encouraged by the US, as a military force in the Pacific? How are the European powers, obsessed with upheavals in eastern Europe, altering their perceptions of Asia? And how will demands for independence by Soviet republics in central Asia upset Peking's grip on Tibet, Xinjiang and Mongolia? China's first instinctive response has been to offer succour to President Gorbachev. Peking cannot feel comfortable as the sole remaining torchbearer for international socialism. Whatever the differences with Moscow over the correct path for the development of a socialist state, the wholesale discrediting of the socialist model is of as little comfort to China as it is to Moscow. Aggravating Gorbachev's misfortunes would only increase the risk that chaos inside a disintegrating Soviet Union would spread up to, and across, China's central Asian borders, perhaps fomenting unrest in its own minority areas. By standing firmly for stronger central control, and by resorting to the military for help, Gorbachev has struck a resonant chord among China's leadership. There is, therefore, powerful symbolism in China's recent SFr1.5bn 'commodity loans' to Moscow - the first made to the Soviet Union by its one-time protege, and Peking's friendliest gesture to Moscow in decades. Next month's visit to Moscow by Jiang Zemin, China's Prime Minister, is also the first of such seniority since Mao Zedong went there in 1957. Alongside the symbolic succour, there is also powerful self interest. China is keen to acquire sophisticated Soviet military hardware, in particular Su 27 aircraft. Jiang Zemin is expected to discuss the matter while in Moscow, and a deal is expected to be signed before July. The Gulf War has also provided a sharp shock to China's foreign policy planners, but in diplomatic terms has been handled with dexterity. Support for the allied cause in the UN won support in Washington. Even when Qian Qichen, the foreign minister, opted to abstain in the UN vote authorising the use of force against Iraq, he managed to do this without antagonising the allies: President Bush agreed to see him on the day following the vote, apparently against the advice of advisers. He took the view that China could have vetoed the resolution. At the same time, Qian managed to demonstrate through its abstention that China remains committed to an independent foreign policy, and to its support for Third World countries. He also preserved China's relationship with Iraq, an important customer for Chinese arms. China is nevertheless walking a tightrope in its relations with the US, which were traumatised following the Tiananmen massacre two years ago. Qian has said that the war against Iraq was 'a big hegemonist power versus a small hegemonist'. The US in turn is harbouring anger over China's extensive arms trade with volatile countries in the Middle East. For China, the Gulf War was not just a striking demonstration of US military might: it heightened anxiety over the emergence of the US as the single dominant world superpower. There is also a nagging awareness that in the post-Cold War era, the US needs China less than it used to. American keenness to get Japan to take on a bigger peacekeeping role in the Pacific - in particular through a larger naval role - also prompts alarm. Memories of Japan as a regional military power are painful still. Closer at hand, conflict looms with the US in the improbably-linked areas of trade and human rights. Ever since the Tiananmen massacre, the US Congress has put China's poor human rights record under the microscope. The recent visit to the US by the Dalai Lama has heightened antagonism. These issues have become linked with trade ever since Congress opted to use the annual debate over extension of Most Favoured Nation (MFN) status to trading partners as a means of punishing tyrannical governments. China argues that this is an unacceptable intrusion into its internal affairs. US Congressmen argue in turn that it is an internal US affair whether it gives favourable trading status to a country or not. The fact that China now has one of the largest visible trade surpluses with the US - more than Dollars 10bn last year - only exacerbates the conflict. The MFN debate starts in earnest early in June. Betting men say that, after a bumpy ride, China will regain MFN privileges for another year. To lose them would inflict immense damage to China's external trade and would savage Sino-US relations. China's response to uncertainties in relations with both the US and the Soviet Union has been to forge new friendships where possible. A recent tour of seven European countries by Qian Qichen was part of such a strategy. Improved relations with India - which have been in deep chill since a short border war in 1962 - are likely to be symbolised by a visit to Delhi later this year by Li Peng, China's prime minister. This would be the first visit to the Indian capital by China's head of government since the late Zhou Enlai in 1960. Other significant developments include decisions over the past year by Saudi Arabia, Indonesia and Singapore to abandon diplomatic recognition of Taiwan in favour of Peking. These constitute an important breakthrough in China's long term diplomatic strategy of isolating Taipei. They also reinforce China's position at the heart of the Third World community of nations, and symbolise an easing of fears in south east Asia over expansionist communism. These improvements give much-needed solace as China nurses anxiety over the global power balance, but do nothing to alter the country's reflexes in times of uncertainty. As Li Peng emphasised only two weeks ago: when 'the old global structure has disintegrated', the priority must be to 'rely on ourselves, work hard, and build the nation through thrift and diligence'. 
ID: 3449
HEADLINE: FT  24 APR 91 / Survey of China (1): Slowly burns the fuse - Two years after the Peking massacre, democratic reform is still a potent and unresolved issue. And in the fog surrounding the demise of the Communist Old Guard the only certainty is China's growing sense of insecurity in a changing world 
TEXT: PEKING is a city with an earthquake waiting to happen. Last month, it was a-buzz with seismologists reporting that the earth's crust in north China had been immobile for too long. This portended a catastrophic tremor like that of 1976 which killed around a quarter of a million people in the nearby city of Tangshan and - as it seemed to traditionally-minded folk - foretold the death of Chairman Mao Zedong a few weeks later. As it happened, there was an earthquake this March, but it was several hundred miles from Peking and has so far not rocked the leadership. The octogenarian patriarchs who, though mostly without official posts, effectively rule China, cling grimly to life, according to Peking stories, by means of monthly blood transfusions and the attentions of China's most famous 'Qigong' (traditional deep-breathing) masters. Their relatives, retainers and vassals circle like vultures, awaiting a death which will shift the balance in the divided leadership between the aged reformist Deng Xiaoping and the conservatives headed by Chen Yun. Though the present jockeying depends more on personal ties than policy, how far to permit reform is still a potent issue. The current balance between reformers and hard-liners is nicely illustrated by the appointment at the recent National People's Congress of two new Vice-premiers, Zhu Rongji, mayor of Shanghai (reformist), and Zou Jiahua, minister in charge of the State Planning Commission (hard-liner). But it also illustrates the near-unfathomable inter-connections between personalities and policies. Zou Jiahua is brother-in-law to reformist Ye Xuanping, governor of Guangdong province. Ye, powerful son of China's now-dead head of state and Long March general, Ye Jianying, was also appointed to a post in Peking (though a purely formal one), apparently to remove him from his freewheeling fief in south China where he was resisting Peking's interference. But who is doing what to whom by these moves? Has Ye increased his power in moving to the centre or lost it now that he's away from his home support? Are Ye and Zou at daggers drawn because of politics because of family relationships? If it was a loss of power for Ye to be posted to Peking, is it not the same for Mayor Zhu Rongji? Do these appointments mean that the reformers have gained, or the hard-liners? The one certainty in the political fog is the growing stress on security, particularly in Peking. Many provincial cities are relaxed and a fair number of the reform policies of the mid-1980s continue, if sporadically. But in the Chinese capital, police and video cameras are thick on the streets. Particularly monitored, by video cameras, bugs or simple tailing, are local Chinese contacts with foreigners. In March, a new top level security committee was set up under Qiao Shi, Number Three in China's party leadership and a lifelong policeman. Its first meeting was held just two days after the People's Daily published a poem which, when read diagonally, contained this hidden message: 'Li Peng (the hard-line premier who masterminded the Tiananmen crackdown in 1989) must be removed from power to assuage popular indignation'. Reports from Hong Kong last week said the editor responsible was later arrested trying to flee the country. The leadership has reason to feel insecure. Xu Jiatun, a senior party member and, till last year the head of the Xinhua news agency in Hong Kong, China's de facto embassy, has defected to the US. Provincial leaders such as Ye Xuanping are strong enough to defy the central government over issues such as taxation. Disaffection is rife in China's border territories of Tibet, Xinjiang and Inner Mongolia. While China has no problem marshalling the force to deal with this (demonstrations have been ruthlessly put down), it fears the growing influence in the outside world of Tibet's exiled spiritual leader, the Dalai Lama, and the effects on its other minorities of Islamic fundamentalism and growing democracy in the former Soviet empire. The leadership is watching the Soviet Union anxiously, backing President Gorbachev because, unlike Boris Yeltsin, he is resisting independence for the republics. Alarmed by Washington's military might as displayed in the Gulf, Peking is looking for new weaponry and hopes to buy some of the relatively advanced Su 27 Soviet combat aircraft in the next few months. The deal is likely to figure prominently in the visit of Jiang Zemin, China's party leader, to Moscow next month. Peking has seen its relations with the US slide since it put down the student demonstrators of Tiananmen in 1989. While the economic sanctions applied thereafter were gradually repealed last year and China regained some standing by supporting Kuwait rather than Iraq in the Gulf crisis, its arms sales in the Middle East have earned it American fury. This, plus its brutal handling of Tibetan and Chinese demonstrators since and its flood of cheap exports to the US are making the re-confirmation of its access to Most Favoured Nation treatment an uncertainty for the second year running. If Washington takes MFN away, Sino-US relations will nose-dive to levels not seen for nearly two decades. Sino-British relations are cool in the wake of the dispute over Hong Kong's proposed new airport. Germany, previously in keen pursuit of trade and investment with China, is preoccupied with the problems in its eastern half. Japan, once dazzled by the size and proximity of the Chinese market, is being actively courted by the USSR as potential fairy god-mother to Siberia. China, for over a decade a favourite with western governments, is in danger of being left on the shelf as the world regroups after the collapse of Soviet communism and the Gulf war. This comes at a time when Peking faces serious domestic economic problems. Food shortages, inflation and unemployment are all possible flash points for urban unrest. In the inevitable grim comparison with the Soviet bloc, the economy is thriving, but this is probably temporary. China has had record harvests two years running, which have boosted light industry and food markets, but a harvest downturn is now threatened because of damaging drought in many parts of China. On top of that, Peking's inability to deal with serious price distortions is now coming home to roost. In industry, the collective and private sector is booming but the state sector - the backbone of China's heavy industry - is a disaster area. More than a third of state enterprises last year made a loss, and subsidies to featherbed industrial workers (by maintaining jobs and cheap food) came to nearly RMB yuan 100bn, almost a third of the state's budget expenditure. The alternative to subsidies is to close factories and raise food prices, which the party leadership believes would enrage the urban population. Reluctantly the hard-liners in the leadership have had to agree to some reform as the lesser of two evils. Two small stock exchanges, plus half a dozen centres where grain prices have been freed, a proper income tax system and a move to give state factory managers more independence are all currently on test. The most hopeful sign in China today is that many young officials (educated, they'll sometimes tell you, on courses in unlikely places like Bath, in south-west England) long to try these on a wider scale. If China can surmount its present difficulties, they might get the chance. But not a lot is likely to change until the present gruesome stalemate is resolved over who in the top leadership dies first, and when. 
ID: 3450
HEADLINE: FT  24 APR 91 / Fleet upbeat on profits at failed BNE 
TEXT: FLEET/NORSTAR Financial Group, the new proprietor of the bankrupt Bank of New England, is forecasting that BNE will generate annual earnings from operations of about Dollars 150m-Dollars 200m between 1993 and 1995. The prediction comes less than four months after BNE was declared insolvent and seized by federal regulators in one of the biggest bank failures in US history. Fleet, the Rhode Island-based bank, tempered yesterday's optimism with the warning that it expects BNE to post a loss of Dollars 10m-Dollars 15m in the first six months after the acquisition and to break even for the first 12 months. Fleet, in partnership with Kohlberg Kravis Roberts, the New York buy-out investment boutique which is one of the most powerful takeover players in the US, was awarded BNE's assets on Monday. Fleet will pay the Federal Deposit Insurance Corporation (FDIC) Dollars 125m as a premium, made up of Dollars 100m in preferred stock and Dollars 25m in cash. It will also inject Dollars 500m capital into the failed bank. In exchange, Fleet will take control of three BNE 'bridge banks', with combined assets of about Dollars 15bn. To finance the deal, Fleet will raise Dollars 683m of new capital, including Dollars 283m to be provided by investors advised by KKR. The FDIC said Fleet's offer was the least costly to the federal bank insurance fund. However, the FDIC will absorb most of the risk associated with the commercial property loan losses which drove BNE into liquidation. The FDIC will assume about Dollars 5.5bn of BNE's problem assets. Fleet will also be able to turn any additional problem assets over to the FDIC with minimal penalties during the next three years. Mr William Seidman, chairman of the FDIC, yesterday said the agency plans to borrow between Dollars 5bn and Dollars 5.5bn from the US Treasury's Federal Financing Bank (FFB) as a result of resolving the BNE collapse. This is the first time that the FDIC has taken advantage of changes last year, authorising it to borrow working capital from the FFB. Mr Seidman said about Dollars 3bn will be repaid from the sale of assets and about Dollars 2bn will be losses. The FDIC has taken great pains to stress KKR's distance from the deal. It described KKR's involvement as 'a passive investor'. But this one of the first times that a group which is not a bank has been allowed to make a significant capital infusion into a leading US bank. KKR has been thwarted before in its attempts to invest in financial institutions, including its 1989 bid for the failed Texas banks of MCorp. In the case of the Bank of New England, KKR has already met political opposition from Representative John Dingell, the formidable chairman of the House Energy and Commerce Committee. Mr Dingell warned regulators that a joint KKR-Fleet bid might violate laws which prohibit commercial companies from owning banks. Under the terms of the Fleet deal, KKR investors will buy Dollars 283m of dual convertible preferred stock. This will be convertible into 16.03m common shares of Fleet/Norstar at Dollars 17.65 a share in no less than three years. In addition, KKR has warrants to buy 6.5m Fleet common shares. On a fully-diluted basis after Fleet's common offering, KKR's investors will have about 16 per cent of Fleet's non-voting stock. A KKR spokesman said the firm was attracted to the BNE bid by the strength of Fleet/Norstar's management. Fleet, which was founded 200 years ago and has assets of Dollars 32.6bn excluding BNE, is considered one of the best-run New England banks. The BNE acquisition will transform it into the biggest player in the region. Analysts said the FDIC's choice of Fleet against competing bids from BankAmerica and Bank of Boston was a compromise decision, which would have the least ramifications for the US banking industry. 
ID: 3451
HEADLINE: FT  24 APR 91 / World News in Brief: Ban on turtles 
TEXT: Japan is to ban imports of the endangered Olive Ridley sea turtle from the end of the month. 
ID: 3452
HEADLINE: FT  24 APR 91 / World News in Brief: Bombs rock Turkey 
TEXT: Bombs rocked Istanbul's stock exchange building and a police station in the Aegean city of Izmir, causing damage but no casualties. 
ID: 3453
HEADLINE: FT  24 APR 91 / World News in Brief: Arab 'collaborators' 
TEXT: Palestinian militants in the occupied territories killed two Arabs and wounded a third on suspicion of helping Israeli security forces. 
ID: 3454
HEADLINE: FT  24 APR 91 / World News in Brief: Kenyan treason 
TEXT: A former member of parliament, Koigi wa Wamwere, and seven others charged with plotting to overthrow Kenyan President Daniel arap Moi's government are to stand trial for treason. 
ID: 3455
HEADLINE: FT  24 APR 91 / World News in Brief: Democracy protests 
TEXT: Cameroon's powerful opposition dismissed President Paul Biya's pro-democracy moves as too little and too late as reports came in of more deaths during anti-government protests. 
ID: 3456
HEADLINE: FT  24 APR 91 / World News in Brief: Scud kills 350 
TEXT: About 350 bodies have been recovered from the rubble of the north-eastern Afghan town of Asadabad after a Scud missile attack by the government at the weekend, Afghan rebels said. 
ID: 3457
HEADLINE: FT  24 APR 91 / World News in Brief: Israeli demoted 
TEXT: An Israeli military court demoted an army colonel to private for ordering his troops to smash the bones of Arab demonstrators. The judges said the lengthy trial had caused too much suffering to Colonel Yehuda Meir for him to be sent to jail. 
ID: 3458
HEADLINE: FT  24 APR 91 / London Stock Exchange: Firmer tone but volume remains thin 
TEXT: THE UK stock market turned its attention back to the domestic scene yesterday, when the FT-SE climbed painfully above 2,500 again after Mr Norman Lamont, the chancellor of the exchequer, made favourable comments on the progress of inflation. But the immediate gain of 17.5 Footsie points, following Mr Lamont's speech to the Institute of Directors, was trimmed later and trading volume remained disappointing. Equities opened lower, reacting to the further fall of 38 Dow points on Wall Street overnight. Mr Lamont's statement that UK inflation is falling fast revived hopes that the next cut in base rates may not be quite so far away as feared; the market's swift response was also fuelled by firmness in stock index futures. The stock market topped off fairly quickly, however, also discouraged by news of a widening in the UK monthly current account trade deficit to Pounds 432m in March. A further attempt to move forward when Wall Street opened higher was checked when the Dow slipped back from its early high to show a gain of about 8 points in London trading hours. The final London reading put the FT-SE Index at 2,503.8 for a net rise of 13 points. Equity dealers found the recapture of the 2,500 area unconvincing, largely because turnover was unimpressive. Equity strategists continue to take a cautious view of the near-term outlook for the equity market. However, UBS Phillips &amp; Drew said there are some grounds for mild optimism about the UK economy, in spite of 'an exceedingly grim first quarter'. It warned that political factors could unsettle sterling and hence keep real interest rates high. Seaq volume of 520.6m shares yesterday, against 403m on Monday, was inflated by turnover of 101m shares in Saatchi &amp; Saatchi, comprised largely of a deal of 45m shares in the advertising group, double-counted on Seaq. More detailed data from the London Stock Exchange indicated that retail, or customer, interest in equities continues to fall well below the Pounds 1bn daily level still seen as the target for the London securities industry to trade profitably. The revived uncertainties in the industry were revealed by the decision of Barclays de Zoete Wedd, the UK investment bank, to pull out of the US equities market; Kleinwort Benson, the London merchant bank, disclosed financial write-offs in its US arm. However, there was better news on progress at County NatWest, the securities arm of National Westminster. The stock market was also waiting for news on the proposals to merge the London Traded Options Market with Liffe, the London International Financial Futures Exchange. The market took on board two more rights issues, the most significant being a call for Pounds 162m from Taylor Woodrow, one of Britain's largest housebuilders. The construction and building sector also had to face a disappointing trading statement from Tarmac. The blue chip stocks were mostly a shade firmer on the day, responding to the more optimistic views on inflation rather than to yesterday's moves by central banks to sell the US dollar. ICI, with first-quarter trading figures due tomorrow, edged higher. There was a scattering of modest gains among the high street retailers, which continued to respond to the unexpected improvement in sales volume in March reported this week by the Confederation of British Industry. 
ID: 3459
HEADLINE: FT  24 APR 91 / London Stock Exchange: Confusion on volume in Saatchi 
TEXT: TRADING volume in Saatchi &amp; Saatchi ballooned to 101m shares, of which 90m was accounted for by Hoare Govett bringing together a seller and buyer of 45m. The Seaq ticker indicated that the transaction price was 19p. Saatchi shares firmed  1/2 to 20 1/2 p. The level of business drew attention to a 9.1 per cent stake held by a group including ESL Partners, a Dallas-based finance house, and Mr Lawrence Tisch, the chief executive of CBS, the US media company. This group underwrote part of Saatchi's rights issue, which was completed last week. Since the rights issue was not registered under US securities laws, ESL (which had a large block of Europreference stock) has entered into a private agreement with Saatchi to buy 52.6m shares at the rights price of 10p. In addition, on Monday the group acquired 90.1m Saatchi shares in exchange for 25.8m redeemable preference shares. In spite of much speculation to the contrary, traders and analysts close to the company concluded that the 45m-share block and ESL's agreement were unrelated. With over 1 1/2 bn Saatchi shares now in issue, more high levels of turnover are likely. Building news There were three big developments in the building sector: the unexpected Pounds 162.4m rights issue from Taylor Woodrow, a steep decline in profits at Tarmac, and news that Beazer, the construction and aggregates group, plans to spin off its UK and European businesses. Taylor Woodrow's rights issue, a one-for-four at 200p, came as a surprise to the market, which responded by marking the shares down to 239p. After the initial reaction, the stock staged a rally, eventually closing only 2 off at 251p. Specialists said institutions had indicated they would support the issue because Taylor Woodrow is seen to be one of the best-managed companies in the construction area. Tarmac's preliminary profits - Pounds 190.7m against Pounds 377m - were in line with expectations but did only minimal damage to the share price. What did hurt the stock was a gloomy post-figures meeting with analysts, who were told that the first half of the current year had begun badly in both the UK and the US. Big profits downgrades were instigated, with Panmure Gordon cutting its current year number from Pounds 190m to Pounds 125m. Tarmac shares were heavily traded (9.5m) and closed 16 off at 229p. Beazer settled 4 higher at 185p on 2.5m, with specialists quick to point out the company's 20 per cent market outperformance over the last month, 68 per cent over the last three months and 13 per cent over the last year. BET upgraded Business services group BET was driven higher by two reports yesterday. The one that could be confirmed was that UBS Phillips &amp; Drew had upgraded the stock to a trading buy. The broker said that with the likely sale of its Biffa waste management operation, the dividend could be held and investors should buy for the high yield. The second story suggested that a buyer had already been found for Biffa. Mr Bob Carpenter of Kleinwort Benson had expected the shares to recover as buyers were drawn by the very generous return for a FT-SE Index stock. BET shares rose to 169p before ending 7 ahead on balance at 167p on turnover of 2.2m shares. Cannon Street up The refinancing operation proposed by Cannon Street Investments (CSI), the conglomerate, received an overwhelming vote of approval and the shares responded strongly. Analysts backed the judgment, saying the raising of Pounds 46.7m net through a rights issue and placing of convertible preference stock seemed to be a very sensible move. It removes a problem, they said, by transforming gearing from 400 per cent to 82 per cent. CSI annual profits were lower, as expected, but the dividend distribution was maintained. The shares closed at a 1991 high of 124p, up 18. SmithKline Beecham continued to retreat on light profit-taking, not helped by Nikko Securities' conclusion that investors had done enough switching from Glaxo. The former slipped 5 to 817p and Glaxo added 4 at 1076p. Before yesterday's fall, SmithKline had gained more than 10 per cent in a month, making it the fourth best performer in the FT-SE 100 over that period. Fisons, down 5 at 469p, also felt the force of profit-takers in spite of news that Merck, the world's biggest drug company, had ended research on a potential rival to Fisons' asthma treatments. At its annual meeting yesterday, Merck announced the abandonment of Venzair, a drug it had once forecast would become first line therapy for asthma. The market has been concerned that Fisons was vulnerable to new developments in the field. 'Venzair would certainly have worried Fisons,' said one analyst. The prospect of first-quarter figures tomorrow from ICI continued to unsettle trading in the stock. The price slipped 5 in early trading, then recovered its composure to peak at 1089p before easing once again. It ended at 1083p, up just 3 on the day. Turnover was a solid 1.5m shares. The bullish sentiment in the oil sector - a rising crude oil price coupled with the recent strength of the dollar - continued to drive oil shares higher. Aiding the latest upward move by the oils was a sharp improvement in first-quarter earnings at Mobil, the US oil group. The heaviest turnover in the sector, 5m shares, was in BP, which moved up 5 to 354p, closely followed by Shell, 4.9m, which climbed 9 1/2 to 522 1/2 p. The latter was boosted by the oil team at Hoare Govett, whose latest Oil Monthly reiterated its positive stance on the sector, and focused especially on Shell, which it views as the prime beneficiary of record downstream margins in the Far East. The Water Package came under another barrage of selling pressure and closed around the day's lowest, down 23 at Pounds 2945, as more institutions, both in London and abroad, sold their holdings or unravelled the Package units. 'This market is still extremely vulnerable and we expect this to continue at least up until the local elections,' said one trader, in a reference to the Labour party's policy of renationalising the water industry if it wins the next general election. The electricity companies, on the other hand, responded to positive recommendations from investment analysts, with Manweb and South Wales heavily bought after being highlighted by one of the big US investment houses. Manweb advanced 13 to 248p and South Wales 10 to 240p. A late downward move by British Steel was attributed to a profits downgrading by Smith New Court. The shares held steady until the last hour of trading, when they turned off to close 2 1/2 down at 135p. J. Sainsbury recovered from an early loss to close a penny better on balance at 364p as the market pondered the company's decision to redeem a Pounds 150m bond convertible into preference shares. The rise in the share price had already prompted some bond holders to convert and so the announcement by Sainsbury did not take the market completely by surprise. Hammerson continued to benefit from last week's figures, subsequent buy recommendations from analysts and presentations to institutions. The shares were 16 stronger at one point before closing a net 9 to the good at 639p. Volume was above average for the stock at 545,000. McKechnie, the industrial components group, slipped 6 to 291p as analysts adjusted full year profits estimates in the wake of lower first-half revenue. The setback was no surprise but researchers still erred on the side of caution, with Mr Matthew Sutherland of County NatWest moving to Pounds 23m from Pounds 25m. Bad sentiment from Monday's profits downgradings continued to unsettle Gestetner, the office equipment and photographic products group, and the close was down 6 further at 207p. NEW HIGHS AND LOWS FOR 1991 NEW HIGHS (171). BRITISH FUNDS (4) Treas. 8pc '91, Treas. 3pc '92, Treas. I-L '92, Do. I-L 2pc '96, AMERICANS (23) Am. Cyanamid, Ameritech, Bankers NY, Bellsouth, Bowater, Contl. Bank, Dana, Data Gen., Dun &amp; Bradstreet, Eaton, FPL, Fluor, Honeywell, Houston Inds., Ingersoll-Rand, Lockheed, Louisiana Land, Pall, Pennzoil, Rockwell, Sun, Waste Mangemt., Whirlpool, CANADIANS (10) BC Gas, Bk. Montreal, Bk. Nova Scot., Central Capital A, Derlan Inds., Hudson's Bay, Imperial Oil, Inco, Royal Bk. Can., Tor.- Dom. Bk., BANKS (9) Dai Ichi, Espirito Santo, Kyowa, Mitsubishi, Mitsui Tst. &amp; Bnkg., Nat. Aust., Sumitomo, Toyo Tst. &amp; Bnkg., Yasuda Tst. &amp; Bk., BREWERS (4) Fosters, Greene King, Macdonald Martin A, Seagram, BUILDINGS (4) Amco, Beazer, CMW, Smart (J), CHEMICALS (4) BASF, Bayer, Engelhard, Thurgar Bardex, STORES (10) Alexon, Ashley (Laura), Cantors A, Coles Myer, Courts, Gabicci, Helene, Heritage, QS, Ritz Design, ELECTRICALS (10) CML Micro., Fujitsu, Hewlett-Packard, Learmonth &amp; Burchett, Nth. Telecom, Penny &amp; Giles, Pifco, Do. A, Sony, TDK, ELECTRICITY (4) Eastern, Manweb, Seeboard, Sth. Western, FOODS (7) Assoc. Fisheries, Farepak, Goodman Fielder Wattie, Kemp (PE), Morrison (Wm) Supermarkets, Do. 5 1/4 pc Pf., Nestle, INDUSTRIALS (22) BH Prop., BSS, Betterware, Bluebird Toys, Cannon St. Invs., China Light, Davis (Godfrey), Dolphin Pack., Dover, Elan, Faber Prest, Fletcher Challenge, Flogas, Handley-Walker, Nobo, Pacific Dunlop, Polymark Pfd. A, Powell Duffryn, Russell (A), Securicor A, Security Servs., Stocklake, INSURANCE (3) Alex. &amp; Alex., Lincoln Nat., Uslife, LEISURE (6) Campari, Classic Th'breds., Ex Lands, Hi-Tec, Metro Radio, Scot. TV, PAPERS (3) CIA, Lawson Mardon, TMD Adv., PROPERTY (2) Cap. &amp; Counties, Regalian, TEXTILES (4) Lamont, Leeds, Toray, Yorklyde, TRANSPORT (3) CSX, Dawsongroup, Mayne Nickless, TRUSTS (23) Abingworth, Archimedes, Baillie Gifford Japan, Biotech Pf., British Assets 6pc Ln '95, Derby Inc., Gartmore Amer., Genesis Chile Fd. Ptg., Greenfriar Wrrnts., Jakarta Fd., Korea-Europe, London Wrrnts., Malaysia Cap. Select, Malaysian Emrg. Wrrnts., River &amp; Merc. Amer. Inc., Scot. Asian Inv. Ptg., Scot. Cities, Do. A, Singapore SESDAQ, Sth. East Asian Wrrnts., Thai Euro Fd. Ptg., Tor, Westpool, OILS (10) Chevron, Exxon, Hamilton, Occidental, Ohio Res., Oliver Res., Ranger, Royal Dutch, Shell Trans., Woodside, PLANTATIONS (1) Highlands, MINES (5) Aztec Expln., CRA, Gencor, Northam Plat., Spargos. NEW LOWS (17). BREWERS (1) Merrydown Wine, STORES (2) Cantors, Oliver Group, ELECTRICALS (2) Sema, Synapse Comp., INDUSTRIALS (2) African Lakes, Platon, LEISURE (1) Tomorrows Leis., NEWSPAPERS (1) Gardner (DC), PROPERTY (1) Rosehaugh, TEXTILES (1) Youghal, TRUSTS (2) Drayton Eng. &amp; Intl., Do. Wrrnts., OILS (3) Cairn Energy, Clyde Petlm., Tullow, MINES (1) Harmony. 
ID: 3460
HEADLINE: FT  24 APR 91 / World Stock Markets (America): Interest rate fears offset good first-quarter results 
TEXT: Wall Street COMMENTS from the Federal Reserve chairman about interest rate policy took the shine off share prices yesterday after the market had opened firmer in the wake of some strong first-quarter company results, writes Patrick Harverson in New York. At the close the Dow Jones Industrial Average was up just 2.73 at 2,930.45, and then only thanks to a last-minute spurt of buying. In the morning the index had been almost 18 points ahead, but steadily receded to stand down 11 points on balance at 3pm. The broader-based Standard &amp; Poor's 500 moved in similar fashion, finishing a marginal 0.81 up on the day at 381.76. The Nasdaq composite of over-the-counter stocks held on to its gain more tenaciously to end 1.70 higher at 496.08. Turnover on the New York SE remained light, totalling 168m shares, while advancing issues only just kept ahead of declines by 829 to 777. News of a much larger than expected 6.2 per cent fall in factory orders of durable goods during March exerted a two-way pull on sentiment at the start of trading. While the figures illustrated the extent of industry's slump, they raised hopes that the Fed might reduce interest rates again to boost economic activity. Prices fell after Mr Alan Greenspan, the Fed chairman, outlined his view to a Senate committee that the current level of inflation did not justify further cuts in interest rates. Among a string of companies reporting good first-quarter results, RJR Nabisco put on Dollars  1/8 to Dollars 11 5/8 on turnover of 3.8m shares. The tobacco and foods group announced its first quarterly profit, of Dollars 5m, since it was taken private in 1989 in the world's largest-ever takeover, via a Dollars 25bn leveraged buy-out. The most improved results continued to come from the securities industry. Salomon rose Dollars 1 1/2 to Dollars 32 3/4 on revealing a doubling in first-quarter net income to a record Dollars 273m, and Morgan Stanley gained Dollars  7/8 to Dollars 87 3/8 on a 46 per cent climb in quarterly earnings to Dollars 120m. The banking sector featured after Fleet/Norstar, the Rhode Island banking group, won the race to buy the failed Bank of New England. The news lifted Fleet/Norstar Dollars 3 3/4 to Dollars 21 5/8 in active trading, but left Bank of Boston, which had been widely tipped as the winner, down Dollars 7/8 at Dollars 7 5/8 on turnover of 1.5m. BankAmerica, another possible buyer, put on Dollars  5/8 to Dollars 38 1/2 . Talley Industries eased Dollars  1/8 to Dollars 6 after the aerospace and consumer products company missed Dollars 1.1m in interest payments on two bond issues. Also lower was Bethlehem Steel, off Dollars  3/8 at Dollars 13 7/8 after reporting a deficit of Dollars 39m for the first quarter and warning of further losses to come. Square D advanced Dollars 2 1/2 to Dollars 81 1/8 on news that Schneider, the French group, said it was willing to discuss improving its Dollars 78 a share takeover offer. Canada TORONTO rallied in early trading but then lost momentum to leave the composite index a modest 10.8 ahead on the day at 3,502.4. Falls finally held a slight edge over rises, however, by 297 to 271. Volume amounted to a moderate 20.3m shares. Northern Telecom improved CDollars  7/8 to CDollars 38 3/4 in response to a 20 per cent rise in first-quarter earnings. Ipsco put on CDollars  3/4 to CDollars 23 3/4 on volume of 74,000 shares in anticipation of better first-quarter results, expected later that day. TransCanada Pipelines, up CDollars  1/8 at CDollars 17 1/4 , reported first-quarter earnings of 33 cents a share, little changed from the 32 cents of a year ago. 
ID: 3461
HEADLINE: FT  24 APR 91 / Foreign Exchanges: Data and bank sales hit dollar 
TEXT: THE DOLLAR fell back on weak US economic figures and co-ordinated central bank intervention yesterday. The German Bundesbank led an attack by central banks when the US currency was trading at around DM1.7540 during the European morning. It later retreated to a low of DM1.7375 in the face of unexpectedly weak US durable goods orders. Data on durable goods orders are regarded as volatile and not a reliable guide to economic trends, but dealers were still surprised that orders in March fell 6.2 per cent against expectations of a 0.2 per cent increase. It was the first time that the Bundesbank had intervened on the open market since mid-March. Other European central banks, including the Bank of England, appeared to sell dollars for D-Marks yesterday, although it was not until after the durable goods figures were announced that the dollar came under any pressure in the market. Comments by US officials also had a depressing influence on the currency, with Mr David Mullins, a Federal Reserve governor, saying the US economic recovery may not be very robust. In testimony before the Senate banking committee, Mr Alan Greenspan, Federal Reserve Board chairman, said the economy appears to be still moving modestly lower, but all indications are that the recession will bottom out within a 'reasonably short period'. He added that the Fed is keeping its options open on interest rates and is 'looking at the economy on a day by day basis'. At the close in London, the dollar had fallen to DM1.7420 from DM1.7660; to Y137.90 from Y139.40; to SFr1.4590 from SFr1.4795; and to FFr5.8750 from FFr5.9475. On Bank of England figures the dollar's index declined 0.6 to 66.5. Sterling gained ground with other European currencies against the dollar, but was replaced by the Italian lira as the second strongest member of the European exchange rate mechanism. Political risk is beginning to have a nervous effect ahead of next week's local elections in England and Wales. Recent economic news has also caused some concern. Erratic items were blamed by the authorities for yesterday's news that the UK current account deficit widened to Pounds 432m in March from the previous month's Pounds 227m, but dealers regarded the rise of 3.5 per cent in imports as worrying. Mr Nick Parsons, economist at Union Discount, said the official explanation was simply not good enough, given that the February improvement was entirely the result of the fourth largest surplus on erratic items since records began. The pound regained 1.90 cents to Dollars 1.7115, but slipped to DM2.9825 from DM2.9900; to SFr2.4975 from SFr2.5050; and to FFr10.0550 from FFr10.0650. It was unchanged at Y236.00. The sterling index improved 0.1 to 91.7. In New York the pound finished a further 15 points firmer at Dollars 1.7130. 
ID: 3462
HEADLINE: FT  24 APR 91 / Commodities and Agriculture: EC farm ministers focus on imbalances 
TEXT: EC AGRICULTURE ministers yesterday put to one side their increasingly sterile confrontation over this year's farm spending limits, and focused instead on the specific market imbalances that threaten to break the Community's agriculture budget. The 12 ministers - in their third attempt to break the deadlock over price cuts put forward by Brussels to keep spending within the mandatory farm 'guideline' - took their shopping lists to the Luxembourg presidency of the EC and Mr Ray MacSharry, agriculture commissioner. The hope is that the presidency and the European Commission can distill from this a compromise to lay before the next council of agriculture ministers in Brussels on May 21-22. However, this looks optomistic because more than synthesis will be required to resolve the central dispute - whether an increase of the Ecu32.5bn (Dollars 40bn) guideline for this year is justified by the cost of bringing east German farmers into the Common Agricultural Policy. The UK, backed by the Netherlands, say no, while their colleagues, led by France and Ireland, argue that it is. A majority of delegations felt yesterday that some sort of agreement was unlikely before June, a sentiment clear enough to become a self-fulfilling prophecy. Commission officials, although they believe that a settlement that late means the CAP could run short of funds by October, were encouraged by the sight of ministers engaging with the details of the price package for 1991. There were, however, few signs of suggestions that would reduce spending. One exception was the UK argument that milk quotas should be cut by 4-5 per cent, instead of 2 per cent as the Commission wants. Mr John Gummer, the British agriculture minister, said that farmers know a second cut will have to follow one of 2 per cent. Mr MacSharry said late on Monday that if no action was taken to reduce prices and cut overproduction, EC stockpiles of surplus food would grow by this time next year to 28m tonnes of cereals (from a record 20m now); to 1m tonnes of butter and skimmed milk (725,000 tonnes); and a record 1m tonnes of beef, from 750,000 tonnes now. 'The only limit on intervention stocks now is the lack of storage space,' one Commission official remarked. 
ID: 3463
HEADLINE: FT  24 APR 91 / Commodities and Agriculture: Botswana tries to loosen De Beers' grip - The world diamond cartel faces strong calls for change 
TEXT: NEGOTIATIONS FOR a new contract between Botswana, the world's most important diamond producer in value terms, and De Beers, the South African group which controls 80 per cent of the market for rough (uncut) diamonds, are taking much longer than expected. The previous three-year contract ended on December 31. Some Botswana politicians want to change De Beers' exclusive sales contract so that part of their country's output can be sold independently of the South African group's international cartel. This would give Botswana its own 'market window' to see what its diamonds are worth in the free market. De Beers is resisting any change. Mr Nicholas Oppenheimer, chairman of the group's Central Selling Organisation, argues that if Botswana chose not to sell its production exclusively through his organisation, the CSO's ability to regulate the distribution of rough diamonds would be compromised. He said: 'Because the major (diamond) producers freely consent to sell exclusively through one channel, the CSO is able to preserve an orderly market by matching rough diamond sales closely to consumer demand.' However, IDC (Holdings), a London-based group which claims to be the most experienced and substantial dealer in rough diamonds independent of the CSO, suggests the CSO's attitude 'is unreasonable and based on a conceptual argument with little substance in fact.' In presentations to Botswana's Minerals Policy Committee and members of parliament, IDC has been arguing that, not only was it commercially essential for Botswana to understand the real value of its diamond output, but that the country had a political responsibility to do so. 'Data accumulated independently of the CSO would put Botswana in a position to have more input into the arrangements for the sale of its diamonds,' IDC pointed out. 'On a political level this would enable the government to answer its critics or its electors with confidence and sure knowledge when questioned about arrangements for the disposal of the country's mineral assets.' If Botswana were to sell 10 per cent of its rough diamond production, worth about USDollars 100m, independently of the CSO - which sells about Dollars 4bn-worth a year from all over the world - it would represent no threat to market stability, IDC said. It claims analysts have estimated that 50 per cent of De Beers' diamond profits in 1989 came from Botswana. 'This profit is disproportionate to the sale of diamonds by Debswana (De Beers' subsidiary in Botswana) to the CSO as a percentage of the CSO's total sales profits,' IDC says. 'It is not unreasonable to reflect whether the fact that Botswana is the only major producer currently selling 100 per cent of its production to the CSO has any bearing on the substantial profits made by the CSO on the sale of its diamonds.' Other substantial producers such as the Soviet Union, Angola, Zaire and Australia do not sell all their production to the CSO and therefore have access to independent market information. IDC does have a vested interest. It already markets diamonds for producers in Guinea, Guyana, Brazil and the Central African Republic, and is offering to do some marketing for Botswana. It acknowledges that all sectors of the diamond trade welcomed the CSO's efforts to keep the diamond market stable. But 'the fact that the CSO forms part of an aggressive, profit-motivated public company with a primary responsibility to its shareholders is often lost from view.' De Beers says Botswana diamonds do not contribute half its diamond account profits - but it will not divulge the true figure. It suggests IDC's arguments are flawed because they are based on an assumption that Botswana needs more market information. However, in common with other producers selling diamonds to the CSO, Botswana has appointed independent valuers who continuously monitor diamond production and the prices paid. According to the CSO, these valuers are fully informed about market conditions and the prices received for Botswana stones. Mr Geoffrey Leggett at IDC suggests, however, the valuer only ensures that the assortment of diamonds from Botswana conforms to an agreed sample and that the agreed contract price is paid. 'He is not a trader, he does not know what the stones are worth in the market.' De Beers insists it remains on cordial terms with Botswana and says the country is still selling its diamonds through the CSO. It is not the first time that contract negotiations have gone on past the theoretical deadline. The Botswana government recently set up a diamond cutting centre with De Beers' technical help, and this, too, should further the country's understanding of the market. There has been a special relationship between the CSO and Botswana since 1987 when the country sold its diamond stockpile to De Beers in exchange for an estimated USDollars 250m and a 5.27 per cent shareholding in the South African group. Analysts suggest market conditions do not help Botswana press its case. De Beers, which itself mines about 40 per cent of the world's annual rough diamond output, markets stones from Angola, Australia, Namibia, Tanzania, Zaire and the Soviet Union, as well as South Africa and Botswana. Prices of rough diamonds, with few exceptions, have moved upwards every year since the 1930s depression. But now De Beers is steering the world's most successful cartel through depressed market conditions caused by the recession in the US (the biggest single market for diamonds), sogginess in Japan (the second-largest), and the Gulf war. To maintain price stability, the CSO is stockpiling diamonds at great expense, rather than releasing unwanted stones to the market. Its promotional budget has been lifted by 20 per cent to more than Dollars 1m a week - Dollars 53m for the year. In addition, Botswana this year faces its first budgetary deficit since 1982 and, according to De Beers' calculations, one of its diamond mines  - Orapa -needs investment of USDollars 600m. The CSO has also notched up some recent coups: bringing a big part of the Soviet Union's and Angola's rough diamond output back into the cartel - or what it calls its 'single channel marketing' - arrangements. However, the CSO is also currently involved in contract negotiations with Argyle Diamonds, the western Australian company which is the biggest individual diamond producer in volume (but only sixth in value) terms. Argyle, too, wants to stay with the CSO when its contract ends on May 1 - but on more favourable terms. A delegation from Botswana is to meet CSO representatives in London at the end of this month for another attempt to break the deadlock. The industry is betting that Botswana will give way, perhaps in return for De Beers helping to finance the Orapa mine investment. However, the 'market window' idea is unlikely to be dropped and will almost certainly be raised again when the next contract negotiations start. 
ID: 3464
HEADLINE: FT  24 APR 91 / Commodities and Agriculture: Diversification uneconomic 
TEXT: FARMERS are unlikely to be able to make money by diversifying into production of materials for use in the energy, chemical and packaging industries, according to a House of Lords select committee report out today. The report says that though there is 'great promise' there are also many technological difficulties. However, the major hurdle is the fact that 'agricultural feedstocks are not currently competitive with hydrocarbons and other feedstocks. Without some convergence in prices, industry will not make the investment necessary to enable new markets to be developed and exploited.' Non-Food Uses of Agricultural Products. Select Committee on the European Communities. HMSO. Pounds 22.75. The US Meat Export Federation estimates that it could sell between 30,000 and 50,000 tonnes of high quality beef a year to the EC if it were allowed access to the market. But, said Mr Philip Seng, chief executive officer, trying to get into the market was comparable to the myth of Sisyphus. US beef imports to the EC are hampered by the ban on growth hormones and a directive on the standard of slaughterhouses, as well as tariff and quota regulations. 'Some US traders say Europe is more protectionist than the Japanese market,' said Mr Seng, who is in London for the World Meat Congress, which opens today. 
ID: 3465
HEADLINE: FT  24 APR 91 / Commodities and Agriculture: Oil prices rise to nearly Dollars 20 then fall back sharply 
TEXT: OIL PRICES fell sharply yesterday after rising almost Dollars 1 a barrel over the last two days in line with strong prices for gas oil in Europe and gasoline in the US. The price for North Sea Brent crude to be delivered in June slipped 0.2 cents to Dollars 19.425 a barrel yesterday after touching almost Dollars 20 a barrel at mid-session. North Sea prices were depressed late yesterday by a weaker New York market where the June futures contract slipped to Dollars 20.90 a barrel. 'There's been a lot of technical buying over the last few weeks and as we go down those people will be exiting the market, which will push it even lower,' said Mr Andy Lebow at ED &amp; F. Man. Gas oil prices have been boosted by the unseasonally cold weather in Europe which has given a temporary fillip to demand, particularly from Germany. At the same time, US petrol stocks have been run down to minimum operating levels, giving rise to fears of shortages as the nation enters its peak driving season in the next few weeks. Imports of petrol to the US have been low as higher prices have sucked deliveries into Europe. But cargoes are now arriving in the north-eastern US again and are starting to relieve any tightness in the market with the attendant depressing effect on prices. North Sea Brent traders rushed to buy oil on Monday when Chevron announced it would pull one of its cargoes from the May delivery programme in the North Sea. The company will start maintenance work on the Ninian pipeline next month. But Mr Peter Gignoux at Lehman Brothers said, 'there is plenty of foreign crude around and I think traders are beginning to realise this.' Iranian tankers that were anchored off the Bay of Cadiz near Spain are understood to have set sale, prompting traders to speculate that Iran is beginning to sell its oil in floating storage. 
ID: 3466
HEADLINE: FT  24 APR 91 / International Capital Markets: Venezuela's debt reviewed by Moody's 
TEXT: VENEZUELA'S foreign debt has been placed under review for a possible upgrade by Moody's Investor Service, the US rating agency. Venezuela has outstanding debt totalling around Dollars 1bn in the Euromarkets, according to the agency. The debt is denominated in D-Marks and yen, as well as dollars. Moody's said the review was prompted by the Venezuelan government's efforts to reduce macroeconomic imbalances and to liberalise the economy. The government has also restructured its external finances with creditor banks, Moody's noted. The move marks a further step in the increasing acceptability of Latin American borrowers in the Euromarkets. For example, Petroleos de Venezuela, the Venezuelan oil company, raised DM200m last October. 
ID: 3467
HEADLINE: FT  24 APR 91 / International Capital Markets: Five Mexicans face insider deal charges 
TEXT: FIVE Mexicans were accused yesterday by the US Securities and Exchange Commission of profiting from inside information when buying shares in Anchor Glass, an American glass company bought by Vitro of Mexico in 1989. The five Mexicans include a former director of exports at Vitro, Mexico's largest industrial company, and a prominent investor Mr Ernesto Tinajero. According to the charges, the investors bought 150,000 shares of Anchor Glass for USDollars 1.7m. After the Vitro bid for Anchor Glass was announced the shares were sold netting the investors a profit of Dollars 1.2m. Insider trading is widely believed to be prevalent in the Mexican bourse, but Mexican authorities are much laxer than those in the US in enforcing rules against it. The Monterrey newspaper El Norte suggested that the Anchor Glass case should be a lesson for Mexican regulators. 
ID: 3468
HEADLINE: FT  24 APR 91 / Government Bonds: Treasuries firmer on drop in durable goods orders 
TEXT: US GOVERNMENT bond prices firmed yesterday after a large decline in monthly durable goods orders revived hopes of another interest rate cut. In late afternoon trading, the benchmark 30-year Treasury bond was up 5/16 at 95 5/8 , yielding 8.265 per cent. The two-year note was up 1/32 at 100 5/32 , to yield 7.016 per cent. The morning news which sparked the gains was the 6.2 per cent fall in new factor orders for durable goods in March, a decline well in advance of market expectations. The figures suggested that the economy remains depressed, and they add to the pressure on the Federal Reserve for another cut in interest rates to get the economy moving. However, at a Senate committee hearing yesterday, Mr Alan Greenspan, the Fed chairman, hinted that recent inflation numbers did not justify another rate cut. His comments brought prices down from their highs, as did worries about the effect on the market of the upcoming Treasury note auction. NEWS that the Dutch state will launch its first 15-year bond boosted the Dutch government bond market yesterday. The new bond is due in June, 2006, has an 8.5 per cent coupon, and is not callable. It will be sold through a series of tap sales starting on April 25. Traders said there was strong demand among domestic pension funds and insurers. Many switched out of 10-year Dutch government bonds to buy the new 15-year bond in the grey market as the longer maturity provides a better match for their liabilities. The price of the new bond rose from 99.15 to close at 99.8, yielding 8.52 per cent. In Germany, bund prices edged up in what traders described as a technical correction following Monday's fall. News that the Bundesbank left its one-month security repurchase rate unchanged at 8.60 per cent also provided some support for bunds, traders said. The unchanged security repurchase rate was taken as a sign that the official discount rate would not be raised. However, currency players interpreted this as a lack of support for the D-Mark and wondered whether it would be allowed to slide against the dollar or whether central bank intervention would support it. Several central banks intervened in the markets, selling dollars for D-Marks yesterday. IN London, gilts moved up in quiet trading ahead of today's auction for a Pounds 1.2bn tranche of 10 per cent conversion stock due 1996. Bids are due in the morning and traders expect most or all of the stock to be bought. The spread of bids is expected to be rather tight given the probable strong demand for the stock. The existing stock is already trading at around 98.2 in the market, but the auction stock has the advantage of being part-paid (investors need only pay 50 per cent of the price if their bids are accepted) with the rest of the money due at the end of May. JAPANESE government bond prices rose yesterday in quiet trading. The market expects the auction today to be for another tranche of the No 140 bond which is due in December 2001 and has a 6.6 per cent coupon. Traders expect about Y800bn of the stock to be auctioned but expressed concern over the lack of appetite for new issues. The yield on the benchmark No 129 opened in Tokyo at 6.735 per cent, moving to 6.69 per cent, and trading in London at around 6.715 per cent. 
ID: 3469
HEADLINE: FT  24 APR 91 / International Company News: Cray Research declines 
TEXT: CRAY RESEARCH, the world's leading maker of supercomputers, yesterday turned in first-quarter net income of Dollars 5.2m, or 20 cents a share, on revenues of Dollars 143m, compared with net earnings of Dollars 9.5m, or 33 cents, on revenues of Dollars 135.9m a year earlier. Mr John Rollwagen, chairman and chief executive, said the contract value of orders signed in the first three months of 1991 fell to Dollars 67m from Dollars 80m a year earlier. He attributed the decline to the limited availability of new products and to the large number of orders signed in the 1990 first quarter. The company's backlog at the end of the quarter was Dollars 315m, compared with Dollars 300m a year earlier. Mr Rollwagen said Cray's order backlog and prospect list 'continue to indicate that we can meet our growth objectives for 1991. However, most of our installation and order activity will occur in the second half of the year.' 
ID: 3470
HEADLINE: FT  24 APR 91 / International Company News: Pet food profits help 4% rise at Quaker Oats 
TEXT: HIGHER pet food profits were a key contributor to Quaker Oats' 4 per cent rise in earnings from continuing operations in the three months ended March 1991. Earnings for the period, which is the Chicago-based food processor's third fiscal quarter, rose to Dollars 63.1m, or 82 cents a share, from Dollars 60.4m, or 77 cents a share, a year earlier. Net sales climbed to Dollars 1.33bn from Dollars 1.27bn. Last year's third-quarter figures exclude a Dollars 34.8m loss suffered by Fisher-Price, the toy maker which the group plans to spin off to shareholders. Quaker said yesterday that the deal is awaiting completion of an internal audit required to transfer the business to a new corporation. Nonetheless, it hopes to complete the spin-off by June 30. Operating income dropped by 8 per cent, largely due to lower profits from Brazil. But this was more than offset by a near-halving in financing costs, due to lower interest rates in Brazil. Both North American and overseas operations were bolstered by strong sales of pet food. US sales were helped by a relaunch of a key dog food brand. Mr William Smithburg, Quaker's chief executive, said he expects 'solid' earnings growth in the current quarter and the largest percentage of quarterly earnings for the year. 
ID: 3471
HEADLINE: FT  24 APR 91 / International Company News: Saudi lifts stake in Chase 
TEXT: AN investment group controlled by Mr Suliman Olayan, the billionaire Saudi financier, has increased its holding in Chase Manhattan Bank from about 4.2 per cent to about 5.2 per cent, writes Karen Zagor. The Dollars 159m stake in Chase, the second biggest US commercial banking group, is held by Crescent Diversified, a subsidiary of Mr Olayan's US investment arm Olayan Group. The investment comes only two months after Saudi Prince Alwaleed Bin Talel bought Dollars 590m of convertible stock in Citicorp. Unlike Prince Alwaleed, who had been a private customer of Citicorp for about 10 years but only started buying Citicorp shares on the open market last year, the Olayan Group has invested in Chase for many years. 
ID: 3472
HEADLINE: FT  24 APR 91 / International Company News: Chevron sees profits rise by 18% in first quarter 
TEXT: A JUMP in Chevron's first-quarter refining and marketing income more than offset a decline in US exploration and production, resulting in an 18 per cent rise in net earnings for the San Francisco-based energy producer. Earnings climbed to Dollars 557m, or Dollars 1.59 a share, from Dollars 473m, or Dollars 1.33, a year earlier. Revenues rose to Dollars 10.8bn from Dollars 9.3bn. Despite the sharp increase for the period as a whole, Mr Ken Derr, Chevron chief executive, noted that earnings slid towards the end of the period as crude oil prices settled at lower levels, US refining margins began to erode, and prices and demand for natural gas moved down. Refining and marketing income soared to Dollars 233m from Dollars 130m. This year's profits would have been even higher without a Dollars 47m charge for environmental provisions and asset write-offs. Sales of natural gas in the US edged down to just under 3m cubic feet a day, from 3.1mcf last year. Foreign gas output rose 8 per cent. Income from chemicals dipped to Dollars 73m from Dollars 123m, but last year's figure included a Dollars 59m gain from chemicals licensing agreements. Operating earnings rose by 14 per cent. 
ID: 3473
HEADLINE: FT  24 APR 91 / International Company News: Delta in talks with Pan Am 
TEXT: DELTA, the third largest US airline, said yesterday that it was in discussions with Pan Am, the smaller carrier which earlier this year filed for Chapter 11 bankruptcy protection, about 'potential asset acquisitions in the airline business', writes Nikki Tait. But, in contrast to recent speculation, Delta fell short of saying that it was interested in a full merger of the two companies. It also emphasised that no definitive agreement had yet been reached, and said that there was no assurance that a deal would be struck. However, it seems unlikely that Pan Am - which has been disposing of assets for many years - would be willing to sell off its remaining business piecemeal. 'We're not interested in selling parts of the company,' commented the New York-based carrier yesterday, although it has previously said that its East Coast Shuttle was up for sale. There was further evidence of the turbulence which hit the airline sector earlier this year when USAir Group, one of the middle-ranking US carriers, revealed a Dollars 168.7m after-tax loss in the first three months. This compared with a Dollars 38m loss in the same period of 1990. Revenues stood at Dollars 1.58bn (Dollars 1.54bn), while the passenger load factor fell to 54.1 per cent (57.2 per cent). 
ID: 3474
HEADLINE: FT  24 APR 91 / International Company News: McDonald's advances 10.4% 
TEXT: MCDONALD'S, the world's largest fast food chain, yesterday delivered a 10.4 per cent improvement in first-quarter earnings at Dollars 168.5m after tax, write our New York staff. Sales were up 6 per cent at Dollars 4.53bn. The company said its US sales had benefited from special marketing and promotional programmes, such as its 'Grilled Steak Sandwich' and 'Happy Meals'. These had helped to more than offset the effects of a soft economy. Outside the US, sales continued to show strong growth. 
ID: 3475
HEADLINE: FT  24 APR 91 / International Company News: Whirlpool sees earnings down 17.2% 
TEXT: PROBLEMS in its difficult home market left Whirlpool, the world's largest maker of home appliances, reporting a 17.2 per cent fall in first-quarter earnings at Dollars 24m after tax, against Dollars 29m in 1990. Sales fell marginally, to Dollars 1.62bn from Dollars 1.64bn last year. Whirlpool said part of the decline reflected continuing difficulties with its Brazilian affiliates. The Michigan - based company took in a net loss of Dollars 17m from its equity interest here, and said operations were hampered by a price freeze on many consumer durable items. It added that, if the effect of the Brazilian business were excluded, underlying earnings were down by 15 per cent from the first quarter of 1990. Whirlpool distinguished between its European operations, which fared well during the quarter, and the domestic position. On the former, it said sales and earnings from its joint venture with Philips, the Dutch electrical group, improved from the previous year, helped by volume growth and favourable currency translation. In the US, Whirlpool conceded that shipments declined - although it said its own decline was less than the industry average , which showed a 16 per cent fall. Mr David Whitman, chairman, said he expected a 'gradual recovery' in this area. 
ID: 3476
HEADLINE: FT  24 APR 91 / International Company News: Schneider may lift Square D offer 
TEXT: GROUPE SCHNEIDER, the French electrical products maker, revealed yesterday it was willing to increase its offer for Square D, of Illinois, if a merger along the lines it has proposed can be agreed promptly. But, according to a trade paper report, Square D is seeking finance for a leveraged recapitalisation. In a letter to Mr Jerre Stead, Square D chairman, Mr Didier Pineau-Valencienne, Schneider's chairman, urged the Square D board not to enter into any commitment or course of action that would deny Schneider the chance to negotiate its proposal 'on an equal basis'. Square D has spurned a Schneider offer made last February of Dollars 78 per share, or Dollars 1.9bn, which it considers inadequate. The offer has, however, lead to Square D's shareholders tendering 78 per cent of the company's shares. In a March filing with the Securities and Exchange Commission, Square D said it would pursue the possibilities of a leveraged buyout or reorganisation, as well as finding another partner for a merger or alliance. According to a report yesterday in the daily trade paper, The American Banker, the US company recently asked seven US banks to consider providing more than Dollars 1bn in financing for a leveraged recapitalisation. The deal would be the largest leveraged recapitalisation in more than a year. A recapitalisation could be used to declare a special dividend which would serve as compensation for not selling to Schneider. The price of Square D's shares have appreciated some 50 per cent since the Schneider offer. Although a large percentage of shares has been tendered, their purchase by Schneider cannot be completed until the Square D board agrees to two conditions: first, that it lift its legal obligation requiring a hostile takeover bidder to acquire 85 per cent of the shares; and, second, that it remove a poison pill provision from company by-laws. The board has so far refused to do so. 
ID: 3477
HEADLINE: FT  24 APR 91 / International Company News: Northern Telecom record 
TEXT: STRONG markets, especially for central office switching equipment, and inclusion of Britain's STC's results brought record profit, revenues and orders for Northern Telecom in the first quarter. Northern, controlled by BCE, the Montreal telecommunications holding company, reported earnings of USDollars 88.1m, or 36 cents a share, up 20 per cent from USDollars 73.5m, or 30 cents, a year earlier, on revenues of USDollars 1.85bn against USDollars 1.57bn. Mr Paul Stern, chairman, said that, despite the recession, world political and economic uncertainties and tough competition, demand was good for virtually all Northern's products. STC and Northern have been integrated 'to support our strategy of growth through globalisation.' Overall expenses were up slightly to 19.8 per cent of sales, but this ratio should improve later in the year. Total research spending was USDollars 207m, against USDollars 176m, or 11 per cent of total revenues, about unchanged. 
ID: 3478
HEADLINE: FT  24 APR 91 / International Company News: Wide margins lift Texaco 26% in first quarter 
TEXT: THE WIDE refining margins prevalent throughout the oil industry lifted Texaco's earnings by 26 per cent in the first quarter. Thanks to a doubling in operating profits from refining and marketing, earnings of the US's third biggest integrated oil company rose to Dollars 415m, or Dollars 1.51 a share, from Dollars 328m, or Dollars 1.15, a year earlier. Revenues rose to Dollars 10.2bn from Dollars 9.2bn. But operating earnings from exploration and production fell to Dollars 282m from Dollars 317m. The company ascribed the drop to maintenance of UK facilities, lower heavy crude prices in the US, and the impact of the mild North American winter on natural gas volumes and prices. These negative factors were only partly offset by higher crude output in Indonesia and production from a new field in China. First-quarter capital spending jumped by a third to Dollars 791m, due largely to expanded exploration and production activity in the US and the North Sea. Phillips Petroleum suffered a sharp drop in first-quarter earnings due largely to several non-recurring and non-operational items. Net earnings fell to Dollars 160m, or 62 cents a share, from Dollars 259m, or Dollars 1.06, a year earlier. Without these items, which include a Dollars 70m gain from asset sales this year and special gains last year of Dollars 148m, earnings would have risen to Dollars 149m from Dollars 107m. Revenues rose to Dollars 3.5bn from Dollars 3.1bn. 
ID: 3479
HEADLINE: FT  24 APR 91 / International Company News: NCR eases opposition to AT&amp;T bid 
TEXT: NCR, the Ohio-based computer company which has been fighting the bid advances of AT&amp;T for the past five months, yesterday modified its lingering opposition to AT&amp;T's revised all-share offer proposal. In a letter to his counterpart at AT&amp;T, Mr Charles Exley, NCR's chairman, said that he would be willing to recommend the offer if AT&amp;T was prepared to ensure that it was worth Dollars 110 per NCR share while the AT&amp;T share price stayed at, or above, Dollars 32.50. The target company claimed yesterday that it was adjusting its position in attempt to be 'flexible'. Its earlier stance had worried some investors - in particular, the arbitrage community - who felt that its demands were 'onerous'. There was no immediate response from AT&amp;T. AT&amp;T commenced the bidding for NCR five months ago with a Dollars 90-a-share cash offer, while NCR said that it was looking for Dollars 125 a share. However, NCR subsequently dropped this request to Dollars 110 a share, and at the weekend AT&amp;T said it would meet this figure, but switched from cash terms to a paper consideration. Mr Exley then said that he was concerned about a fall in the AT&amp;T share price between now and the stage at which the offer closed. 
ID: 3480
HEADLINE: FT  24 APR 91 / UK Company News: Holmes Protection waiting on asset sale 
TEXT: HOLMES Protection, the New York-based security company which has missed several payments on a Dollars 61m (Pounds 36m) loan note, hopes to hear within days whether a crucial asset sale has received backing from bankers. Mr John Flack, joint chief executive, said Alert Centre should inform Holmes within a few days if it has secured financing to buy the New Jersey security business for Dollars 18m. The proceeds of this sale would go some way to placating institutions which were due a total Dollars 24.6m loan repayment in January and March. Mr Flack was speaking in London, where the company is quoted, after reporting pre-tax profits of Dollars 4.02m for 1990, including a Dollars 5.05m profit on the sale of assets that was taken above the line, compared to a loss of Dollars 20.31m in 1989. Auditors have classified the Dollars 61m debt as a current obligation and have qualified the accounts subject to the company's ability to continue as a going concern. Earnings rose to 5 cents (losses of 30 cents) per share. The dividend is passed. Turnover fell to Dollars 68.70m (Dollars 76.05m) and interest charges jumped to Dollars 7.29m (Dollars 5.84m). 
ID: 3481
HEADLINE: FT  24 APR 91 / UK Company News: Guidehouse plunges to loss 
TEXT: Guidehouse Group, USM-quoted finance house, made a pre-tax loss for 1990 of Pounds 224,000 on its continuing activities, plus a further Pounds 449,000 loss attributable to discontinued activities. This resulted in a loss for the year of Pounds 673,000 (Pounds 501,000 profit) before extraordinary items of Pounds 1.77m relating to the write down of interests in peripheral businesses. There is no final dividend. 
ID: 3482
HEADLINE: FT  24 APR 91 / Kleinwort Benson in Dollars 23m write-off 
TEXT: KLEINWORT Benson, the London merchant banking group, has had to write off loans totalling Dollars 23m (Pounds 13.6m) to a US development capital company founded by a former director. The loss was disclosed in the group's latest annual report released yesterday. The loans were made to companies linked to Mr Kenneth McCormick, an American banker who was hired by Kleinwort Benson in the mid-1980s to set up and run a swaps business in Los Angeles called Kleinwort Benson Cross Financing (KBCF). Mr McCormick became a director both of KBCF and Kleinwort Benson Ltd, the merchant banking arm of the group. According to the annual report, the Kleinwort group made a series of loans beginning in 1987 to Ojai Capital, a partnership founded by Mr McCormick, to finance start-ups and property investments in California. Loans were also made to Kenneth McCormick &amp; Co, a company set up by Mr McCormick to provide management services to KBCF. The loans amounted to Dollars 15m by the end of 1989. Last year further loans, plus unpaid interest and unreimbursed expenses amounted to an additional Dollars 5.81m. In May KBCF advanced Mr McCormick's company a further Dollars 1.92m. But later last year Kleinwort decided that Ojai Capital was not financially viable, and it decided to sever its connections with Mr McCormick's companies. It made a full provision against the Dollars 22.73m owed by them. It also terminated its operating agreement with Kenneth McCormick &amp; Co, incurring in the process a Dollars 2.4m payment. As part of a settlement agreement, Kleinwort has waived all claims against McCormick and Ojai, and was itself also released from any claims from Mr McCormick and his business interests. Mr McCormick resigned his Kleinwort directorships in February. He was not immediately available for comment last night. The loss comes at a difficult time for Kleinwort. The group recently reported an overall loss of Pounds 68m before tax for 1990, largely because of a Pounds 34m loss on a misjudged block trade in Premier Oil shares. Lex, Page 20 
ID: 3483
HEADLINE: FT  24 APR 91 / Time runs out for trading in the pit 
TEXT: PIT trading of equity options is to be abolished in favour of a screen-based system, under recommendations to be sent to members of the London Traded Options Market and the London International Financial Futures Exchange today. Officials said the merger of LTOM and Liffe was still planned before the end of the year. But certain issues, such as trading procedures at the new exchange, will have to be re-examined if members agree to the proposal. Only index-linked options - the FT-SE 100 contract and the FT-SE Eurotrack 100 contract due to be launched in June - will still be traded under the open-outcry system. Job losses among the 40 or so firms which trade on LTOM are expected, at least in the short term. A senior dealer said the reaction among traders when word of the proposals filtered into the market was one of shock. 'It's all happening too quickly,' he said with many dealers worrying that they could soon become redundant. The change is intended to tackle chronically low volume in the stock options market. In the US, the volume of equity derivatives is equivalent to 140 per cent of the underlying stock market, compared with just 20 per cent in London. Unreliable price quotations deter retail investors, while dealers dislike the lack of anonymity which often means revealing their trading in the stock market. 'The only practical way we can see to achieve anonymity is through a fully automated trading system,' said Mr Michael Jenkins, chief executive of Liffe. Liffe and LTOM are proposing a move to 'a fully automated market which, in addition to allowing anonymity, would also incorporate automated quotation mechanisms for all market-makers, small-order automated execution and a facility for negotiating block trades'. But some of the large institutions, which account for most of the business in the options market, were uncertain whether a screen-based system would increase turnover. Despite such reservations, changes which will promote a successful merger will be welcomed by the Bank of England. Having initially played the role of marriage broker, the Bank is keen to see the union consumated and is unlikely to be concerned by the relegation of share options to a trading screen. 
ID: 3484
HEADLINE: FT  24 APR 91 / BNE proprietor forecasts annual profit of Dollars 150m 
TEXT: FLEET/NORSTAR Financial Group, the new proprietor of the bankrupt Bank of New England, is forecasting that BNE will generate annual earnings from operations of about Dollars 150m-Dollars 200m between 1993 and 1995. The prediction comes less than four months after BNE was declared insolvent and seized by federal regulators in one of the biggest bank failures in US history. Fleet, the Rhode Island-based bank, tempered yesterday's optimism with the warning that it expects BNE to post a loss of Dollars 10m-Dollars 15m in the first six months after the acquisition and to break even for the first 12 months. Fleet, in partnership with Kohlberg Kravis Roberts, the New York buy-out investment boutique which is one of the most powerful takeover players in the US, was awarded BNE's assets on Monday. Fleet will pay the Federal Deposit Insurance Corporation (FDIC) Dollars 125m as a premium, made up of Dollars 100m in preferred stock and Dollars 25m in cash. It will also inject Dollars 500m capital into the failed bank. In exchange, Fleet will take control of three BNE 'bridge banks', with combined assets of about Dollars 15bn. To finance the deal, Fleet will raise Dollars 683m of new capital, including Dollars 283m from investors advised by KKR. The FDIC said Fleet's offer was the least costly to the federal bank insurance fund. However, the FDIC will absorb most of the risk associated with the commercial property loan losses which drove BNE into liquidation. The FDIC will assume about Dollars 5.5bn of BNE's problem assets. Fleet will also be able to turn any additional problem assets over to the FDIC with minimal penalties until 1994. Mr William Seidman, chairman of the FDIC, yesterday said the agency plans to borrow between Dollars 5bn and Dollars 5.5bn from the US Treasury's Federal Financing Bank (FFB) as a result of resolving the BNE collapse. This is the first time that the FDIC has taken advantage of changes last year authorising it to borrow working capital from the FFB. Mr Seidman said about Dollars 3bn will be repaid from the sale of assets and about Dollars 2bn will be losses. The FDIC has taken great pains to stress KKR's distance from the deal. It described KKR's involvement as 'a passive investor'. But this one of the first times that a group which is not a bank has been allowed to make a significant capital infusion into a leading US bank. Under the terms of the Fleet deal, KKR investors will buy Dollars 283m of dual convertible preferred stock. This will be convertible into 16.03m common shares of Fleet/Norstar at Dollars 17.65 a share in no less than three years. In addition, KKR has warrants to buy 6.5m Fleet common shares. On a fully-diluted basis after Fleet's common offering, KKR's investors will have about 16 per cent of Fleet's non-voting stock. KKR said the firm was attracted to the BNE bid by the strength of Fleet/Norstar's management. Fleet, which was founded 200 years ago and has assets of Dollars 32.6bn excluding BNE, is considered one of the best-run New England banks. The BNE acquisition will transform it into the region's biggest player. 
ID: 3485
HEADLINE: FT  24 APR 91 / The Lex Column: Cannon Street 
TEXT: Market reaction to the Pounds 49m cash call from Cannon Street Investments suggests the fashion for rights issues is getting out of hand. Cannon Street is a deeply unsuccessful little conglomerate whose net assets have fallen by 60 per cent in the past two years and whose earnings per share fell 29 per cent last year. Since 1986 it has raised Pounds 100m through share issues - yesterday's not included - and has spent Pounds 130m on acquisitions. In the past year, its borrowings have shot up from Pounds 29m to Pounds 107m. The net result by yesterday morning was a market value of just Pounds 80m. Then came the call, and the shares rose 17 per cent. Part of the reason may be that some of the new paper has been conditionally placed with the group's banker, Bank of Scotland. Should the issue flop, the result will therefore be a partial swap of debt for equity. Cannon Street and its chairman have been here before, when its collapse in the 1974 secondary banking crisis led to it being owned for a while by its then banker, NatWest. But the banks' problems are their own affair. There seems no reason for the equity market to throw good money after bad. 
ID: 3486
HEADLINE: FT  24 APR 91 / The Lex Column: Kleinwort Benson 
TEXT: The depressing thing about the latest news from Kleinwort Benson is the insight it gives into the board's thinking. When the bank announced its dreadful results last month, one extra item would not have greatly altered their reception. But it chose to wait until the report and accounts to disclose the embarrassing write-off of Dollars 23m of loans to an obscure US partnership controlled by one of its directors. Perhaps more embarrassingly again, it had to pay a further Dollars 2.4m to the partnership when the loan agreement was terminated. The really damning thing from the commercial banking point of view is that that the failed company invested in such areas as Californian real estate. Money was still being advanced last year when the US property market was in full retreat. Shareholders might also usefully raise the question of why Kleinwort signed a severance agreement forbidding it to sue for redress. 
ID: 3487
HEADLINE: FT  24 APR 91 / The Lex Column: Tarmac 
TEXT: Tarmac's share price ebbs and flows these days with hopes for the great recovery. It is therefore not surprising that the market took fright yesterday at the board's unexpectedly gloomy observations for the current year, even if a 6 per cent fall to 229p looked a needlessly savage reaction. However the numbers are added up, it is hard to see this year's dividend not being fully covered; and when the tide finally turns Tarmac is bound to be a major beneficiary. The big worry at the moment is the performance of Tarmac America, which is making a pitiful 4 per cent return on Dollars 1bn of capital employed. The division managed just Pounds 5m of operating profits in the second half. The deterioration in Florida and Virginia should have come as little surprise, but one wonders whether the company should grasp the opportunity to shrink the size of its US operation. Taking Pounds 100m of working capital out of UK housing, by contrast, looks a little odd at such a low point in the cycle, though the company insists it is not retreating from the business. The trouble could be reaching the desired volume of 11,000 homes this year without again resorting to discounts. Investors who have chased the shares of the housebuilding contractors this year will no doubt take note. 
ID: 3488
HEADLINE: FT  24 APR 91 / The Lex Column: Taylor Woodrow 
TEXT: There have been opportunistic rights issues aplenty this year, but Taylor Woodrow's takes the biscuit. The company has presumably looked on in wonderment as the market lapped up paper from less worthy competitors, understandably concluding that it would be silly to miss out on the market's appetite. No less than Pounds 1bn has been raised by housebuilders, property companies and building material suppliers since early January. It cannot be long before the market begins to tire of it. It may be, of course, that Taylor Woodrow is right in claiming that there are excellent opportunities to be snapped up in commercial property and housing. But if the bottom has been reached, shareholders are entitled to ask why their investment is not being geared up with borrowed money. The balance sheet may be a little less comfortable than at the end of last year, but it is hardly strained. The group can at least point to the fact that it has read the property market shrewdly in the past couple of years. It went into the downturn with most of its property let and - unlike several rivals - with little development in progress. But shareholders who take up this issue will need patience. 
ID: 3489
HEADLINE: FT  24 APR 91 / The Lex Column: Beazer beats the retreat 
TEXT: FT-SE Index: 2,503.8 (+13.0) The planned break-up of Beazer suggests that yet another grandiose folly of the late 1980s is about to be disentangled the hard way. Shareholders are to be offered shares in the original UK business, thereby being asked to pay for their old company all over again. The rest - the grand global strategy erected on the UK base - is implicitly worthless. Or perhaps not quite: if, as Beazer suggests, the original business is worth Pounds 500m, the group's present market capitalisation of Pounds 525m values the rest, including the Dollars 1.7bn Koppers acquisition, at just Pounds 25m. After the split, the old shares will consist of a half entitlement to the UK business and a punt on Koppers' future. Since US ownership of Beazer is now some 50 per cent and rising, it can be assumed that the company represented by the old shares will end up US-owned and probably US-domiciled. The new company will doubtless be UK-owned and eventually floated in its entirety. Until more details are known, the whole can scarcely be valued. Much will depend on whether the UK company will be independently run, rather than subject to fresh empire-building by the old management. Even more will depend on whether the flotation itself goes smoothly. The cash target of Pounds 250m is ambitious, but may be essential in the context of net debt still close to Pounds 800m. The snag is that the way things are going, by the third quarter of the year new equity in UK construction companies could be something of a glut on the market. 
ID: 3490
HEADLINE: FT  24 APR 91 / Gorbachev faces test at party plenum 
TEXT: SOVIET President Mikhail Gorbachev yesterday met Mr Boris Yeltsin, the Russian leader, for the first time since Mr Yeltsin announced his intention to run for the presidency of Russia. The meeting, at the end of two weeks in which both have been urged to discuss forming a coalition government, came on the eve of what promises to be the most severe test Mr Gorbachev has faced from within his Communist party. A plenum of the ruling central committee gathers in Moscow this afternoon angry and despondent at Mr Gorbachev's handling of the economy. This mood may prompt calls for his resignation from his party post as general secretary. Yesterday's meeting, on the outskirts of Moscow, was held under the framework of the Federation Council and brought together leaders of the nine Soviet republics prepared to discuss a union treaty. Mr Yeltsin has in the past routinely delegated attendance at meetings of the Federation Council to his senior deputy, Mr Ruslan Khasbulatov. His attendance, and the location of the meeting on neutral territory away from the Kremlin, suggests an effort will be made to rebuild a bridge between the two most powerful figures in a rapidly declining country. An aide to the president said the subject of round-table talks as a prelude to a coalition government would be mooted between the two leaders. Deputies in the Supreme Soviet endorsed the anti-crisis programme introduced in the on Monday by Mr Valentin Pavlov, the prime minister. Their vote, by an overwhelming 323 to 13, followed a speech by Mr Pavlov in which he called for a 'state of emergency' covering banks, tax collection, transport and power supply. He also revealed that a presidential decree had been prepared to index incomes to a basket of commodities. However, most economists - including those working on the programme - believe it will fail unless agreement is reached between the main political forces, and crucially the leaderships of the republics, on its shape and implementation. Workers in Minsk, the capital of Belorussia, left work again yesterday and demonstrated in the city centre after the breakdown of talks with the republican authorities which had temporarily ended a previous round of strikes in the capital and elsewhere. Elsewhere, the strike wave in the pits and other plants appeared to be contracting. 
ID: 3491
HEADLINE: FT  24 APR 91 / Lloyd's Names face Pounds 100m cash call 
TEXT: the wealthy individuals who back underwriting at the London insurance market -are to be asked to provide about Pounds 100m in fresh funds to cover asbestosis and pollution claims in the US. Willis Faber &amp; Dumas (Agencies) is one of several members' agencies sending letters to more than 3,000 Names on marine syndicates 406 and 448, advising them of a sharp upward revision in estimated underwriting losses for the 1988 underwriting year. Names on the two syndicates, two of the biggest in the Lloyd's market, could face bills for at least Pounds 25,000 each. There is growing concern in the market in particular about the impact of claims arising from pollution in the US, to which a large number of the market's syndicates could be exposed. Lloyd's has been hit by a series of claims arising from long-tail US liability business, in which claims can emerge many years after the policies were originally written. Hitherto most losses on US liability business have stemmed from asbestosis. Now, however, the market is having to pay out for a growing number of pollution cases, mainly reflecting the costs of cleaning up toxic waste on the orders of the US government. Mr John Rew, co-author of Chatset's Lloyd's League Tables, a market guide, said yesterday: 'For a long time we've been warning about the dangers of US long-tail liabilities. It's a treadmill for the Names.' Mr Rew said that Chatset had revised its estimates of Lloyd's result for the 1988 year (to be published in July 1991) to an overall loss. In the Willis letter, Mr James Sinclair, managing director of the agency, said Willis had been 'shocked to learn' that the Wellington Underwriting Agency, which manages syndicates 406 and 448, had revised their 'estimated loss on both syndicates.' A total of 3,022 Names on syndicate 406 will be asked to meet a cash call of about Pounds 70m following losses recorded in the 1988 underwriting year. 3,808 Names on syndicate 448 will be asked to meet a loss of about Pounds 35m. Some members may be on both syndicates. In February, Mr Sinclair had forecast losses of a little over half these amounts. Mr John Prentice, chairman of Wellington, said loss estimates had been revised upwards following an acceleration of claims in the last few months but the figures still had to be 'finalised.' Although both syndicates 406 and 448 specialise in marine business, both devote between 20 and 25 per cent of their underwriting capacity to non-marine liability insurance. Mr Sinclair said in his letter that 'these revised amounts do not reflect any of the estimates we have been told by Wellington to date and there are a significant number of questions we think will be needed to justify the calculation.' Willis Faber, now part of the international broker Willis Corroon, owned the Wellington agency before divesting it under the terms of the 1982 Lloyd's Act. 
ID: 3492
HEADLINE: FT  24 APR 91 / Trade gap may be start of recovery 
TEXT: BRITAIN'S current account deficit widened last month, a sign that the country's battered economy may soon begin a recovery. The increase in the deficit, from Pounds 227m in February to Pounds 432m in March, was announced yesterday by the Central Statistical Office. It was caused largely by a 3 per cent increase in imports between February and March, indicating renewed economic activity by Britain's consumers and industrial groups. Political opponents of the government seized on the increase in imports, to Pounds 9.4bn last month, as signalling a structural weakness in the economy, which may lead to a rapid growth in the import bill once demand improves. According to this argument, Britain suffers from a lack of ability to meet home demand by increasing domestic output rather than by buying goods from overseas. Mr Alex Carlile, the Liberal Democrats' trade and industry spokesman, said: 'After 12 years of Conservative economic policy, the fact that we still cannot export more than we import ought to be worrying the government.' The Labour party said the higher imports were linked to a weakening in Britain's industrial capacity. Last year, Britain cut its current account deficit to Pounds 12.8bn, from Pounds 19.9bn in 1989, as the recession scaled back demand for overseas goods. However, the pace of the improvement is clearly slowing. The measure favoured by government statisticians as showing the underlying trend - the value of visible trade, not counting oil and erratic items such as aircraft, ships and gems - barely altered last month. The deficit on this basis was Pounds 1.1bn in March, the same as in February, and is the smallest number for four years. The comparable figure in January was Pounds 1.2bn. In terms of quarter-on-quarter statistics, the underlying deficit declined by 7 per cent during the first three months of this year, compared to the fourth quarter of 1990. Between the third and fourth quarters of 1990 the fall was 22 per cent. Mr Peter Spencer, chief UK economist at Shearson Lehman, a US-owned investment house, said the trade figures were 'very disappointing, given the weakness in the economy'. Details, Page 10 
ID: 3493
HEADLINE: FT  24 APR 91 / Lockheed wins Dollars 65bn fighter project: Consortium secures first part of record Pentagon deal for new stealth aircraft 
TEXT: A CONSORTIUM led by Lockheed yesterday won the contract for the next generation of US stealth fighter aircraft, expected to be worth Dollars 65bn (Pounds 38bn) over the next two decades - the biggest-ever aerospace contract. The Dollars 12.1bn first part of the contract, awarded by the Pentagon, is for the development of the aircraft, of which 650 are planned to be built. It was won in the face of fierce competition from a consortium led by Northrop. Lockheed's partners in the consortium for the advanced tactical fighter (ATF), are Boeing and General Dynamics. Pratt &amp; Whitney, part of United Technologies Corporation, will build the aircraft's engines. Yesterday's announcement was a severe blow to Northrop and its partner McDonnell Douglas, the largest defence contractor in the US. The two companies had spent about Dollars 1bn and more than four years trying to secure the contract. McDonnell responded to the announcement by saying it would cut its workforce by 500 by the end of the year. Northrop said it expected to shed 200 to 400 jobs soon. Analysts believe the project may determine the future shape of the US aerospace industry. It will consolidate Boeing and Lockheed's strong position and is likely to boost the two companies' earnings. Mr Gary Reich, an analyst at Shearson Lehman Brothers, has increased his 1992 earnings estimate for Lockheed by 25 cents a share to Dollars 5.40, saying the contract should add 55 cents a share to net earnings in 1993. Last night Mr Jerry King, Boeing executive vice-president, said the contract would not result in significant earnings until the mid-1990s. Pratt &amp; Whitney also cautioned that the contract would have no impact on its production operations until the late 1990s. General Dynamics estimated that its share of the revenues would total Dollars 20bn over the programme's term. The aircraft is to be a faster version of the F-15 Eagle fighters, and will be capable of evading enemy radar. Mr Donald Rice, the US air force secretary, said Lockheed and Boeing had submitted the lowest bid. 'The ATF will balance stealth, supercruise and advanced avionics in a highly manoeuvreable fighter that will ensure that our pilots get first look and first kill,' said Mr Rice. It would ensure American air superiority well into the next century, he added. The Pentagon's decision was the second blow this year for McDonnell Douglas, which had to take a large write-off against fourth-quarter earnings after the Pentagon decided in January to cancel its A-12 stealth attack aircraft contract, a potential Dollars 50bn programme. McDonnell Douglas has already started to wean itself of its dependence on the Pentagon and has started to focus more on its commercial aircraft operations. 
ID: 3494
HEADLINE: FT  24 APR 91 / Prescription for a financial ailment: Market-based capital requirements 
TEXT: Imagine gears clashing, the engine sputtering and the car stalling. That is the picture some observers paint of the credit crunch and its impact on the US economy. 'Get credit flowing again,' would seem the remedy. If bank capital requirements stand in the way, reduce them, so that banks can lend again. Such a prescription makes no sense. It is the wrong response to the wrong issue. Less capital is not better. Nor is more capital. What is needed is a franchise that will improve banks' ability to attract capital and capital requirements that are market-based. The so-called credit crunch is no reason to reduce bank capital requirements. Borrowers with the same prospective cash flows and financial ratios as a year ago are getting credit, either from banks or in the capital markets. For them there is no credit crunch. The problem is that borrowers by and large do not have the same financial ratios as they did a year ago. The recession has reduced their cash flows. Consequently, the risk of lending has increased. Companies rated A a year ago and B today are finding it difficult to obtain the same amount of credit at the same rate as they did a year ago. This may be a 'credit crunch', but, if so, it is more a symptom than a cause of the recession. To imply that banks should be supplying credit to such borrowers as if nothing had changed is in effect a recommendation that banks should be less prudent. That is unlikely to do either the economy or the banking system any good. The remedy for recession lies elsewhere. Political uncertainty contributed to the downturn; its removal via the swift victory in the Gulf will contribute to the upturn. Further stimulus has come through monetary and fiscal policy. Most forecasters now expect the recession to end sometime this year. This should spell the end of the credit crunch. To perform their function as financial intermediaries banks need a franchise that will attract capital. Such a franchise would allow banks to branch freely and to offer customers a full range of financial services, including securities and insurance as well as deposit-taking and lending. This allows banks to diversify their sources of income, to make more efficient use of their distribution systems and to realise economies of scale. The EC has given its banks such a franchise through the Second Banking Directive. The US and Japan are lagging behind, although adoption of the recent US Treasury proposal would help close that gap. The purpose of bank capital requirements is to limit the risk that a bank will fail. To do so efficiently such requirements should be market-based. This means putting investors in debt of banks (and of companies, such as Citicorp, that own banks) at risk so that they will exercise market discipline over the bank, and it means relating required capital ratios to the market risks a bank assumes. If investors in a company's debt believe that they are at risk when the organisation becomes illiquid or insolvent, they will effectively control the level of capital that the organisation must maintain. As the perceived level of risk increases, such investors generally (and quickly) reduce the amount of funds that they are willing to provide and/or demand an increase in the rate of return. To counteract this the company must take steps to improve its equity ratios. Citicorp's own experience is a case in point. During the past year investors and rating agencies perceived that the risk of Citicorp paper had increased. As a result, Citicorp had to pay higher rates for certain types of funding and it encountered some difficulty in placing as much paper as it would have liked. We responded by initiating a programme to increase our total capital by Dollars 4bn to Dollars 5bn over the next three years. The first tranche of the capital increase has come through the issuance of Dollars 1.25bn in convertible preferred stock. A second tranche will come through the sale of non-strategic businesses. The rest should come through retained earnings; to this end we aim to pare costs by Dollars 1.5bn a year while retaining our revenue momentum. With tight control over asset growth, this capital-building programme will improve Citicorp's capital ratios. In designing capital regulation, policymakers should preserve such market discipline. This entails limiting the guarantees that the government provides to depositors or creditors of banks and companies that own banks. Fortunately, both the US and the EC seem ready to do so. The US is discussing ways to limit insurance of bank deposits, and the EC seems determined to keep coverage low. However, limiting guarantees is only the first step. Capital requirements should be imposed on the bank (but not on companies that own banks) and these requirements should be related to the bank's exposure to market risks, such as interest rate risk, exchange rate risk and credit risk. The bank's exposure to each risk is its net position (after due allowance for netting, hedging and diversification) times the likely movement in the risk factor, such as the level of interest rates. The bank's overall capital requirement would be the sum of the requirements for each risk, minus an allowance for the fact that some risks (such as interest and exchange rate risk) may themselves be negatively correlated. Elements of this market-based approach are present in the EC's proposed Capital Adequacy Directive (CAD). This directive would apply to non-bank investment firms and to the trading book of banks. For the bank's trading book, the CAD would replace the 8 per cent Basle ratio with separate requirements for credit risk, interest rate risk and exchange rate risk. The CAD holds the promise of establishing a capital regime that will protect both bank and non-bank investment firms while creating a level playing field on which the two would compete. In sum, the credit crunch will pass. Bank regulators need not act. But they must act to give banks a franchise that will attract capital. And they must act to make capital requirements market-based. The author is vice-chairman of Citicorp/Citibank 
ID: 3495
HEADLINE: FT  24 APR 91 / East Europe should learn from Asia: From central planning to a market economy 
TEXT: East European countries engaged in the heroic change-over from centrally-planned to market-driven economic systems have been getting most of their advice from the west. They would do well to look to Asia as well. Advice to eastern Europe from western experts largely follows classical economic lines: free prices, remove subsidies, open your economies to international trade, make your currencies freely convertible, privatise the state-owned companies, invite foreign investment, close inefficient plants and retire redundant workers. This, the experts acknowledge, will involve some costs - higher prices, unemployment, lost income, and more foreign debt and servicing. But these are short-term and will be more than offset by the longer-term benefits that accrue from free markets. They urge, therefore, that their recommended reform package be adopted quickly and in full, while supporters of economic change still hold the high ground. Initially, east Europe's economic reformers assumed that advice about markets from advisers schooled in market economies could not be wrong. More recently, however, the first rush of enthusiasm for a cold-turkey approach to reform is fading. Euphoria over economic emancipation is giving way to a more hard-headed assessment of the people and institutional deficits that will have to be cleared before eastern Europe's economies can survive - much less compete - in a free-market world. The deficits are formidable: most of the basic skills and institutions needed to make a system work - double-entry book-keeping, personal property rights and a commercial banking system, to name a few - do not exist. Industrial equipment and technology are, by western standards, obsolete. Few companies can estimate their net worth or unit production costs, or judge what they could produce competitively - information all serious foreign investors would insist on. Arching over these deficits are the problems of severe environmental degradation, long-neglected infrastructure and the virtual disappearance of the region's pre-war ethic. Increased awareness of their economies' internal weaknesses, together with doubts about continued public support for a reform process that involves hardships of unknown magnitude and unpredictable duration, are raising second thoughts among eastern Europe's leaders about the wisdom of exposing their still-fragile democracies to what amounts to an economic free-fall. Other factors have surfaced as well that reinforce the need for a second look. The recent rout of agricultural subsidies by the General Agreement on Tariffs and Trade and the continuing row between the US and Japan over market access, for example, suggest that the free-market approach recommended for eastern Europe is honoured as much in the breach as in the observance by the market-oriented countries of the west. A further discovery is that the path to the market being urged on east European countries is substantially different to that taken by countries that have most recently successfully navigated the course from economic backwardness to world-class competitors. These, of course, are Asia's Newly Industrialised Countries (NICs): Korea, Taiwan, Hong Kong and Singapore. Many cultural, political and social differences separate east Europe from east Asia, and comparisons should not be pushed too far. But in terms of how to go about transforming a backward economy into an efficient, competitive one, there is much common ground and many lessons to be shared. A few examples of the differences in the approach recommended to eastern Europe and the way that NICs, and earlier, Japan, went about the work of economic reform and restructuring are perhaps instructive: Industrial strategy and support: Neither Asia's NICs nor Japan entrusted to the market, or to foreign investors, responsibility for deciding which of their industries would prosper and which would fail. On the contrary, they formulated industrial strategies based on forecasts of market developments and assessments of which of their 'neo-infant industries' could be expected to carve out a competitive niche in world markets and which could not. For the first group, they provided protection from import competition as well as export incentives, tax relief and other financial help to bolster their growth and competitiveness. To ensure that the beneficiary industries would not become protection-dependent and would become internationally competitive over time, fiscal support was provided on a declining scale. At the same time, companies in uncompetitive or declining industries were helped to diversify or phase out, and workers retrained. Eastern Europe, after 40 years of disastrous economic planning, understandably eschews all forms of central planning, including Asia's market-directed, indicative type. The same attitudes carry over to the question of transitional help for industries trying to adapt to market forces. While these attitudes are consistent with a free-market philosophy, Asia's less doctrinaire approach might save some east European companies that with reasonable transitional support could adjust to a market environment, but without it would likely go under - taking jobs and income with them. Exchange rates: Asian countries have used exchange rates as an important tool of economic policy. As typified by Korea and Taiwan, exchange rates were set to encourage exports and savings and discourage imports. Only after exports had penetrated big overseas markets - and they had amassed large reserves in the process - did these countries agree (reluctantly) to a revaluation of their currencies. East European countries are being advised to do the opposite: let the market determine the volumes of imports and exports and, by default, set the market-clearing exchange rate. Foreign investment: Japan earlier, and the NICs more recently, have acquired much of their technology through licences, franchises, market-sharing arrangements and reverse engineering (Asian for 'pirating'). They wanted knowledge and technology, not foreign partners, and foreign equity investment was (and is) not actively encouraged. During Japan's first period of modernisation in the 1860s, Japan imported European bankers - but not their banks - to help create a domestic banking system. When enough Japanese had learned to be bankers, the foreign advisers were sent home. The NICs have adopted an essentially similar technique. Price liberalisation and subsidies: Prices in Asia's NICs are nominally set by market forces. But key prices may be adjusted further by fiscal means (tax rebates, tariffs, duties, subsidies) to ensure that the buy/sell, save/invest signals they emit conform to national priorities: high savings and investment rates, aggressive exporting and relative self-sufficiency in food. It is incongruous that while east European countries are being urged to let market forces determine their domestic prices, there is no market price for imported rice in Japan - because there is no imported rice; and agricultural prices in the US and Europe are influenced as much by national budgets as by market forces. A final consideration. It is axiomatic that public support for economic reform is inversely proportionate to the distress it causes. Common to both Asia's and eastern Europe's economic restructuring efforts is the need to enlist and maintain public support for the reform process. Asia's NICs have demonstrated that it is possible to achieve market-driven economic restructuring without incurring unacceptably high economic and social costs. Eastern Europe's economic reformers might find it rewarding to take a closer look at Asia's experience. The author was vice-president of the Asian Development Bank from 1978 to 1990 and is currently a consultant to the European Bank for Reconstruction and Development. 
ID: 3496
HEADLINE: FT  24 APR 91 / Leading Article: Rebuilding South Africa 
TEXT: THE LINK between South Africa's efforts to negotiate a post-apartheid constitution and the state of the country's economy is becoming increasingly important. The process of fundamental political reform is difficult enough at the best of times. It is especially hazardous when times are hard. Now that the irreversibility of change in South Africa is so clearly apparent, the least western governments can do to improve the economic climate is to hasten the end of remaining sanctions. And the African National Congress, still fighting a last-ditch battle against repeal, should instead acknowledge that sanctions have achieved their purpose, declare victory and withdraw. As President F. W. de Klerk has pointed out during his visit to London, the combination of population growth of 2.6 per cent a year, and an average annual growth rate over the last decade of 1.6 per cent, makes a grim backdrop to the constitutional process now under way in South Africa. There is a danger that this process can be derailed by the violence that wracks the country; and while political tensions are at the heart of the fighting, there is little doubt that these tensions are exacerbated by poverty and rising unemployment. Mr de Klerk is thus right to argue that economic growth and constitutional reform have to be mutually reinforcing. The lifting of sanctions combined with new investment is an essential condition to South Africa's economic recovery, which in turn is critical to growth in the whole region. Conflicting signals Unfortunately there continue to be conflicting signals from South Africa. Mr Nelson Mandela, deputy president of the African National Congress, due in London today, can be expected to persist in the ANC's view that it is too soon to lift trade and other embargoes against Pretoria, arguing that continued outside pressure is needed if Mr de Klerk is to fulfil his pledge to create a non-racial South Africa. This argument held good until Mr de Klerk so convincingly demonstrated his commitment to reform. But by the end of June the last pillars of apartheid will have been repealed - the Group Areas Act, the Land Acts, and the racial provisions of the Population Registration Act. Even if the government wanted to, it could not now rebuild apartheid. The internal pressures that brought about the system's demise - demographic changes, the growth of black trade unions, the increasing importance of black consumers, shortages of white skilled manpower - are as powerful as ever. Meanwhile the new constitution for South Africa is slowly starting to take shape. The ANC's draft constitutional principles, published earlier this month, revealed encouraging common ground with Pretoria. Both parties propose a bill of rights, proportional representation, and a bi-cameral assembly. Sticking points On the face of it, the ANC demand that the constitution be drawn up by a constituent assembly, and its call for an interim government, are sticking points in the transition process. But there are signs that a compromise may be possible. Pretoria has indicated that once the multi-party conference, expected to convene later this year, has reached agreement on the principles of the new constitution, they could be placed before a multi-party conference instead of a constituent assembly. And yesterday in London Mr de Klerk went some way towards meeting the ANC's call for an interim government, offering all main political leaders 'a voice in the formulation of important policy decisions' during the period leading to a new constitution. These developments should encourage the business community whose support Mr de Klerk has been seeking during his visit to London. Of course, Mr de Klerk must convince would-be investors that the violence that continues to scar the country will soon be brought to an end. But they can play an important part in bringing this about by taking an important role in the building of a new South Africa. 
ID: 3497
HEADLINE: FT  24 APR 91 / Observer: Big deal 
TEXT: Sign on a flower stall in a London street market: 'Buy a potted plant and we'll give you the earth.' 
ID: 3498
HEADLINE: FT  24 APR 91 / Observer: No confidence 
TEXT: What on earth is the world coming to? Britain's Inland Revenue seems to have lost faith in the integrity of the Royal Mail. The powers that be at Somerset House have felt it necessary to issue Form CPS1 on the security of cheque payments, which is an effective vote of no confidence in Britain's postal system. The Revenue notes that cheques sent by post may be stolen 'before they reach us'. It recommends tax payers to use the bank giro, electronic funds transfer, or pay by cash at the local Post Office. If you do insist on sending a cheque in the post, and it is lost, you may become involved in lengthy inquiries. Next excuse, please. 
ID: 3499
HEADLINE: FT  24 APR 91 / Observer: Goodbye Ojai 
TEXT: Kleinwort Benson must be ruing the day it ever heard of Kenneth McCormick and Ojai. Until a year or so ago, McCormick was one of the darlings of the Kleinwort Group and Ojai (pronounced O-hi) was best known as a Californian shangri-la - a small town with just one traffic light and a music festival. An American banker who rose fast up the swinging Californian banking tree, McCormick became treasurer of First Interstate of Los Angeles while only just into his 30s. There he became adept at the swaps business, and was hired by Kleinwort to set up and run their fledgling US swaps operation in 1985. A tall, soft-spoken man with a sharp eye for the market, he quickly turned it into a success. The business flourished, earning Kleinwort several million dollars a year. But like many Californians, McCormick was also interested in the venture capital business, and persuaded Kleinwort to help finance a new investment vehicle, Ojai Capital, which would specialise in funding business start-ups and real estate projects. At the time, Kleinwort said the financing 'had been negotiated on an arm's length basis' and it considered the transaction 'to be in the best interests of the group and its share- holders.' Some Dollars 23m later, McCormick is out of the door with a promise that Kleinwort will not try to sue him. It all smacks yet again of a fringe player trying to buy into a market it should never have got into in the first place. 
ID: 3500
HEADLINE: FT  24 APR 91 / Observer: Morse code 
TEXT: Sir Jeremy Morse, chairman of Lloyds Bank and host for yesterday's Wincott financial journalism awards, hates gossip. Which is all very sad, since if Sir Jeremy, fellow of All Souls, were ever to put pen to public paper he would be able to shed more light on the City than most of the distinguished Wincott award winners over the years. But Sir Jeremy, who has headed Lloyds since 1977, is one of the old school of bankers who believes in reticence. He learnt his trade at the nod and wink school of Glyn, Mills &amp; Co where no one ever seemed to write notes. He remembers being taken to see Lord Hampden at Lazards where nothing of consequence was talked about. Hence, he was quite surprised when his colleague turned to him after the meeting and said it had been 'extremely useful'. Increasing openness in the City, he said, had led to loss of status by the Bank of England compared with the Treasury, because in the old days the Bank had been able to give the impression that it knew an awful lot of important things that it could not possibly discuss. Perhaps this had something to do with the Bank having Reuters screens before the Treasury. All this has changed with the rapid growth in financial journalism and Sir Jeremy was surprisingly complimentary about the contribution of the fourth estate. But then you can afford to be when you know an awful lot more secrets than the media. 
ID: 3501
HEADLINE: FT  24 APR 91 / Observer: Moreover 
TEXT: Humphrey Harrison is a young stockbroker on the make, and good luck to him. He has just set up a consultancy called Europe Energy Environment, and managed to recruit some impressive names for its letterhead. Dr Rilwanu Lukman, immediate past-president of Opec; Tom Burke, one of Michael Heseltine's special advisers; Professor Eugene Khartukov, the Soviet energy adviser; and Silvan Robinson, an ex-Shell man and now with Chatham House, all have much more distinguished backgrounds than the 34-year-old Harrison, ex-Kitcat &amp; Aitken. Can his coup in recruiting them have anything to do with his being yet another South African? 
ID: 3502
HEADLINE: FT  24 APR 91 / Observer: Talent time-bomb 
TEXT: South Africa's President F. W. de Klerk may make many boasts about his country. But one thing that should bother him is the surprisingly large numbers of ex-South Africans now holding positions of influence and power in the City of London. Their loss to South Africa represents a time bomb that won't be defused until it properly develops the talents of its majority population. Its 5m whites compare with Australia's 17m and Canada's 25m. Yet neither of the other two anywhere near match South Africa in supplying UK institutions with senior abilities. Besides the famous Sir Michael Edwardes, they include Sir Sydney Lipworth (chairman of the Monopolies and Mergers Commission) and Sir Mark Weinberg (former chairman of Allied Dunbar). The latter pair, both lawyers, are old boys of Johannesburg's King Edward VII school. Among the next generation are Eurotunnel's Sir Alastair Morton, Morgan Grenfell's chairman John Craven, and Schroders' Win Bischoff. If one counts Zimbabweans as well, there is Andrew Tuckey, chairman of Baring Brothers. Simon, his elder brother is a QC and chairman of the the review panel of the financial reporting council, and younger brother James, is managing director of MEPC. There are numerous reasons, political besides financial, why such people come to the City. But why South Africans make better businessmen than Canadians or Australians would call for a doctoral thesis. 
ID: 3503
HEADLINE: FT  24 APR 91 / Made in Britain, Japanese-style: Car manufacturing in the UK is still set to expand, despite the immediate problems of recession 
TEXT: The 1990s was supposed to be the decade of opportunity for the motor industry in Britain. But as one crisis meeting succeeds another this week, one could be forgiven for thinking that the industry is slipping back into the dark days of the late 1970s and early 1980s. The chief executives of Rover, Ford of Britain, Vauxhall and Peugeot Talbot troop into the Treasury today to tell Mr Norman Lamont, the chancellor, of their deep concern at what they see as an attack on car manufacturing in last month's Budget. Tomorrow union leaders have been called to talks with Mr Albert Caspers, Ford of Europe's director for manufacturing operations, amid speculation - strenuously denied by Ford itself - that the future of the US car maker's British assembly plants at Halewood, Merseyside and Dagenham in Essex, is again in doubt. Yet the paradoxical fact is that more car assembly capacity is under construction in Britain than anywhere else in Europe. By the mid-1990s output is forecast to be more than double the crisis level of the early 1980s. As the Japanese car makers march in, component suppliers that have previously shunned manufacturing in the UK are buzzing towards the honey-pot. The script looked promising, but for the moment the plot appears to be going badly awry. After five successive record years from 1985 to 1989 UK new car sales have fallen ominously. Registrations last year were down by 12.7 per cent - admittedly from a record level - and have plunged by a further 21.6 per cent in the first quarter. Highly indebted car dealers - reputable groups as well as fringe operators - are collapsing into receivership and liquidation in worrying numbers. Leading component makers are suffering sharply falling profits and workforces are being cut. 'The current climate is hostile and in many of our markets customer demand is erratic and uncertain,' says Mr Colin Hope, chairman of T&amp;N, a leading UK auto components maker. Truck sales are only half the level of two years ago and the slide into recession is sharper than any UK truck maker can remember in the post-war period. 'Heaven only knows how some manufacturers are surviving,' says Mr Peter Foden, chairman of ERF, the last publicly-quoted, independent UK truck maker. Most UK truck makers are running up big losses, and short-time working and redundancies have been the order of the day for more than a year. Against a background of such immediate traumas Mr Derek Barron, chairman of Ford of Britain and president of the Society of Motor Manufacturers and Traders, Mr George Simpson, chief executive of Rover, Mr Paul Tosch, chairman of Vauxhall, and Mr Geoffrey Whalen, managing director of Peugeot Talbot, will seek to convince the chancellor that he has kicked the industry when it was already down. As the economic cycle turned down, they had been looking to the government for support and encouragement in the attempt to make the industry a driving force again in the UK economy. Instead, in a Budget principally designed to extricate the government from the poll tax debacle, the industry was hit by higher value added tax - but no relief in the discriminatory special car tax -fuel tax increases and scale charge increases for company car benefits above the level of inflation, and the imposition on employers of national insurance contributions on company cars. The motor industry worries that the government is looking to it for a quick fiscal fix. Memories run deep of the 1950s and 1960s, when the government sought to regulate the economy in part through car hire purchase controls. 'The industry wants reassurance that this is not the beginning of it being used again as an economic regulator,' says Professor Garel Rhys, professor of motor industry economics at Cardiff Business School and adviser to the Commons trade and industry select committee. Above all the car makers are seeking a cut in the 10 per cent rate of special car tax. The industry argues that no other leading vehicle producing country in Europe singles out cars for such a discriminatory levy as the special car tax. This year is probably already a lost cause for the industry - the latest forecasts suggest car sales will struggle to exceed 1.6m-1.7m units and truck sales could hit the lowest level for decades. Nevertheless, the worst fears of the industry chiefs may well turn out to be only short-term; Britain could still prove to be one of the strongest growth areas of the 1990s in the world auto industry. The current recession is certainly causing painful job losses beyond the labour force reductions of an industry seeking greater productivity and efficiency. But the deepest and most painful restructuring moves were already achieved in the 1980s. A report by the Institute of Manpower Studies showed that from 1980 to 1987 the UK vehicles and parts industry had shed 185,000 jobs, or 45 per cent of the workforce at the start of the decade. In the same period labour productivity rose 66 per cent. Profits certainly fell last year at Vauxhall, Peugeot Talbot and Rover. At Ford of Britain, they fell sharply: the company was hit by industrial action last year and is now also carrying the heavy losses of Jaguar, the UK luxury car maker it acquired at the end of 1989. But that is a far cry from the sea of red ink in which the industry fought to stay afloat a decade ago. It is altogether leaner and fitter now. 'The UK is probably top middle in productivity in Europe,' says Prof Rhys, 'way behind Germany, probably behind Spain, but perhaps ahead of France. But what saves the UK is its relatively low wages. With middling productivity and the lowest wages, the UK has one of the best cost bases in Europe.' Wage costs in the UK motor industry last year were the lowest among all the world's leading automobile-producing countries, according to statistics compiled by the German Automobile Industry Federation (VDA). Some assembly capacity in the UK still has to be closed - most notably part of Rover's Cowley, Oxford plant - but the accent in the 1990s, at least in the car and components sectors, should be firmly on expansion. According to Prof Rhys an optimistic forecast would suggest a leap in UK car assembly capacity from 1.7m in 1989 to 2.7m-2.8m by the end of the decade. It is the motor industry in Britain that will be growing, however, not the British motor industry. In terms of ownership precious little of the latter remains. What is transforming the sector's prospects is the wave of inward investment by Japanese car makers into the UK. The decisions by Nissan, Toyota and Honda to begin car production in the UK appear to guarantee that output in the second half of the 1990s will exceed 2m cars a year, more than double the level of the first half of the 1980s, and the build-up of production promises eventual relief for the sector's chronic trade deficit. To Mr Jacques Calvet, chief executive of France's Peugeot group and philosopher-king of the lobby to restrict Japanese car sales in Europe, the UK is fast becoming a 'Japanese aircraft carrier off the coast of Europe,' and 'Japan's fifth-largest island'. The alarming trend of UK car sales, imports and production in the 1970s and 1980s explains at a glance, however, why the government has welcomed Japanese car makers to Britain so enthusiastically. Since 1983 the UK balance of payments has shown a deficit on manufactured goods - and the motor industry has played a key role in the slump. The motor industry trade balance has deteriorated sharply since the end of the 1970s and been firmly in deficit since 1982. In recent years it has accounted for close to a third of the total UK visible trade deficit. The first relief came last year, as the deficit fell to Pounds 4.6bn from Pounds 6.6bn in 1989. The biggest factor in the improvement was the impact of the recession, however, which cut imports as new car sales fell. Now there are also the first signs of structural improvement, as UK car exports begin to grow appreciably. Export programmes by Vauxhall, Ford and Peugeot have been important. But for the first time exports by Nissan are also having a significant impact and this year Nissan begins to export cars to Japan from the UK. The drama of the fluctuations in the fortunes of motor manufacturing in the UK can hardly be overstated. From the early 1930s to 1955 the UK had Europe's largest motor industry. It is currently ninth in the world production league and fifth in Europe behind West Germany, France, Italy and Spain. In 1968 when the UK-owned industry combined its forces to form the British Leyland Motor Corporation, the company accounted for 40 per cent of UK new car registrations. Today the rump company that remains from British Leyland, Rover Group, is 20 per cent owned by Honda of Japan, and last year it held 14 per cent of UK new car sales. Compare that with the rise of the Japanese. Back in 1952 Nissan was producing Austin cars in Japan under licence from Austin Motor, and Honda did not even market its first car until 1963. It now appears a racing certainty that by the second half of the 1990s Japanese car makers will account directly for about a third of UK car production of about 2m units a year. Another third may be European-owned with Peugeot of France producing at Ryton, Coventry, possibly with an enhanced capacity, and Rover Group at least nominally UK-owned. Rover is already importantly dependent on Honda technology, however, in addition to its minority ownership. The remaining third of the UK car production base will be US-owned, with Ford also controlling Jaguar and Aston Martin and General Motors (Vauxhall), Lotus. With total planned investments of more than Pounds 1.8bn the Japanese are now committed to closing the yawning gap between UK car production of 1.296m last year and domestic car sales of 2.009m: Nissan will build more than 200,000 cars a year at its Pounds 700m Sunderland plant by 1992-93. Output totalled 76,000 last year and is expected to reach 120,000 this year with 80 per cent earmarked for export. Nissan is also investing in UK R&amp;D facilities. Toyota is committed to building 100,000 cars a year by late 1995 rising to 200,000 cars a year by 1997-98 at Burnaston, near Derby, but this timetable could well be brought forward. It is investing Pounds 840m in car assembly and engine plants. Honda is committed to building 100,000 cars a year by 1994 at its Pounds 350m Swindon assembly and engine plant. Rover is producing up to 40,000 Honda Concertos a year at its Longbridge Birmingham plant. Nissan has indicated its ambition to expand to a capacity of 400,000 cars a year by the late 1990s, and both Toyota and Honda are expected to expand significantly beyond their present publicly declared targets. The next time a chancellor attacks the UK motor industry, the deputation on his doorstep may well include Nissan, Toyota and Honda as well as Ford, Vauxhall, Rover and Peugeot. 
ID: 3504
HEADLINE: FT  24 APR 91 / Leading Article: New tax for councils 
TEXT: IT IS difficult to forgive the government for being engaged in a second complete overhaul of local authority finance almost 12 years after coming into power. It is not difficult to understand, however, since it made an appalling mess of the first attempt. The question is whether the second one is any better. The answer is 'yes', but only within the limited terms of reference that the government has set for itself. Bryan Gould, shadow secretary of state for the environment, complains that the government still cannot say 'sorry'. He is a little unfair. There in the consultative document on the new council tax is an apology, albeit a limp one, for the community charge: 'the public', it admits, 'have not been persuaded that the scheme is fair.' There, too, can be found something more startling still, an apology from the Treasury: 'The government', it acknowledges, 'considered the relative shares of local expenditure financed from local and central sources, and concluded that the burden on the local element had become too great.' How much more glasnost can you hope for, Mr Gould? The proposal on local taxation looks like a final plan in consultative clothing. The principal question, therefore, is whether it is a reasonable one, or at least better than either the community charge or the old rates. It looks as though it is. Sensible features Each property is to be allocated to one of seven broad tax bands, with houses and flats being placed in a band, according to how their value relates to the average for all properties in England, Scotland and Wales. Furthermore, 'couples living in properties in the same band anywhere in each country will face the same council tax bill (before any rebates or discounts) if their authorities spend at the standard level'. Both features look sensible. The detail of the proposed tax is subject to two main criticisms: first, that increases in tax bills are not proportionate to increases in the value of the properties; second, that it retains the head tax element, in the form of the 25 per cent personal discount for single adult households. But once one has abandoned the myth that each individual adult must receive an individual bill, for the sake of accountability, the latter element is hardly defensible. If broadly based discounts are to be given, it would be better to relate them to other household characteristics, such as whether or not it contains pensioners or dependent children. Nevertheless, this is not a bad tax, as domestic property taxes go. The fundamental objection is that it does not go far enough. This is to be the only tax local authorities are allowed to set and is to cover a mere 15 per cent of local authority current spending. Given this degree of gearing, the power to cap will be used extensively. Local authorities are to remain the government's poodles. They can bark, but only softly. Attractive concept This point is underlined by the consultative document on the structure of local government. It starts from the assumption that local authorities have little choice about what they are to do. 'The government is committed', it declaims, 'to develop the concept of enabling authorities.' The concept is attractive, but the lack of choice for local communities themselves is not. Equally unattractive must be the planning blight that will now afflict much of local government, as the Local Government Commission wends its weary way through the structure of local government, area by area. These proposals are, as everyone knows, about getting the government out of a hole that it dug for itself. Whether they can do so will become somewhat clearer after next week's local elections. The government is certainly in better shape on the issue than it was. While the poll tax will be around at least until 1993, the levels will be lower and a less unacceptable replacement will be on the way. Perhaps it has even escaped the political problem of its own making. If so, this is not because it deserves to, but because a year is a long time in politics. 
ID: 3505
HEADLINE: FT  24 APR 91 / Arts: Today's Television 
TEXT: When people talk about breaking up the BBC to make it more 'market oriented', and turning each channel into a separate business, have they thought about what we have, what countries such as the US have where broadcasting is already 'market oriented', and what we stand to lose? Suppose you wanted to hear some music this evening at about 8 o'clock. Radio 1 will be in the middle of a concert relay featuring the Soup Dragons Live At The Marquee. Radio 2 will just be starting Folk On 2 with Dave Swarbrick, Martin Carthy, and Fairport Convention in Birmingham. Radio 3 will be 30 minutes into a live broadcast of the BBC Welsh SO from Cardiff where they are playing a Musorgsky and Shostakovich concert - just an average evening on BBC Radio. Dispatches (8.30 C4) interviews John Major at 10 Downing Street and includes the first film of the cabinet in session. In the third episode of Sleepers (9.30 BBC2) Russia's two stroppy Anglophile agents head for Scotland pursued by the KGB, CIA, MI5. 
ID: 3506
HEADLINE: FT  24 APR 91 / North expected to recover soonest 
TEXT: THE NORTH of England, the last UK region to go into recession, is likely to be the first to come out of it, according to a survey of the region's first-quarter industrial and commercial performance published yesterday. That would reverse previous experience, when the region - which comprises the north-east and Cumbria for government statistical purposes - was always 'first in, last out' when the national economic cycle turned downwards. The survey of 800 manufacturing and service companies was carried out by local chambers of commerce and the Northern Development Company, the regional agency supported by government, local authorities and the private sector. It found that exports held up 'encouragingly well' in the first quarter. Although unemployment increased, the situation was expected to stabilise before July. The longer view of profits and turnover was encouraging. The change reflects the reconstruction of the regional economy since the early 1980s. In the 1980-82 recession, the north-east in particular suffered because a third of its workforce was in coal, steel or shipbuilding, which were immediately affected when demand fell in the south. Only 3 per cent of the workforce is now in those traditional industries and the economy is widely based, as well as having many more smaller and medium-sized businesses with which to absorb the shock of a downturn. The north-west chambers of commerce economic survey of the first quarter is more cautious about recovery. Loss of staff from computing services companies is slowing, suggesting that the UK recession may be starting to bottom out. Figures for the first quarter of the year collated by the Computing Services Association indicate that for the first time since 1989 the rate of change of staff numbers has not worsened. 
ID: 3507
HEADLINE: FT  24 APR 91 / Further increase in pupils attending independent schools 
TEXT: THE NUMBER of pupils at independent schools has risen for the eighth successive year, according to this year's annual report from the Independent Schools Information Service (ISIS), Andrew Adonis writes. Some 476,448 pupils, 7.4 per cent of all school children, currently attend 1,372 independent schools. That is up from 6.3 per cent in 1983. The number of boarders has fallen sharply, however, down some 4 per cent on last year. The number of secondary-age pupils has fallen slightly since last year but there has been strong growth at the other end of the spectrum. The number of three-year-olds in private schools is up by 7.6 per cent on last year. Pupils aged four are up by 5.4 per cent and those aged five to 11 up by 1.8 per cent. The number of boarders fell sharply, down 4 per cent on last year. School fees have risen by an average of 12.5 per cent over the last year. They now average Pounds 3,594 for day pupils and Pounds 6,672 for boarders. One in four of all pupils receives financial help with fees, mostly from the schools themselves. The government is to spend Pounds 100,000 on a work experience scheme for students considering a teaching career. After a pilot project last year Mr Michael Fallon, the schools minister, announced that 400 places will be available for a similar scheme this autumn. Government proposals issued yesterday giving parents a say in the appraisal of teachers' performance were immediately attacked by the second largest teachers union as opening the system to influence from parental 'gossip and tittle-tattle'. 
ID: 3508
HEADLINE: FT  24 APR 91 / Audit Office faults NHS local autonomy 
TEXT: THE NATIONAL Health Service's Pounds 4bn-a-year supplies operation could benefit from management techniques used by companies such as Boots and Marks and Spencer, the National Audit Office says today. An NAO study of the management of complex operations in private-sector companies showed that the NHS's approach differed 'in nearly every respect'. In particular, the report says, none of 16 private companies surveyed 'permitted local autonomy on the scale allowed throughout the NHS'. The report's conclusion - that decentralised structures have prevented the NHS from maximising its purchasing efficiency - comes when the government's health reforms are encouraging still more local autonomy in many areas of the health service. The NAO examined how Boots, Marks and Spencer and Compass Services UK, a contract caterer, handled their equivalent of the NHS supplies organisation, which provides hospitals with food, bedding and equipment. Department of Health officials said 'private-sector practice was not necessarily appropriate for adoption by the NHS'. National Health Service Supplies in England. National Audit Office. HMSO. Pounds 7.25. 
ID: 3509
HEADLINE: FT  24 APR 91 / UK News (Employment): British Rail faces increased threat of industrial action 
TEXT: THE likelihood of industrial action ballots among 95,000 British Rail workers grew last night after BR said it had made a final 7 per cent pay offer. After meeting to consider the BR offer last night, union leaders said they would not recommend the executives of their unions to accept it, but would consider later this week what action to take. The move came as separate talks to avert threats of industrial action by 76,000 workers in the electricity supply industry were continuing. Late last night the employers raised their pay offer by 0.5 percentage point to 8.5 per cent, which the unions are understood to have rejected. Electricity unions had threatened an overtime ban from midnight tonight unless the offer was increased substantially. Action by either the rail or power unions could cause considerable disruption. Mr Jimmy Knapp, RMT general secretary, said the BR offer 'seems unacceptable'. Leaders of the RMT transport union are believed to be more likely to call an industrial action ballot. Leaders of the Aslef drivers' union may take the issue to the Railway Staffs National Tribunal for arbitration instead. BR made only a small improvement to an earlier 6.5 per cent pay offer, in spite of warnings by union leaders that a vote on industrial action was likely unless they were offered a rise above the rate of inflation. Unions were meeting last night to consider a formal response. The offer would cover 95,000 employees, represented by the RMT, TSSA and Aslef transport unions, and would add Pounds 106m to BR's wages bill. It would probably be extended to cover another 20,000 employees not directly represented at yesterday's talks. Mr Paul Watkinson, BR's employee relations director, said he believed 7 per cent was a good offer because it would be above the rate of inflation for the year it covered. He said that to have offered more would have been irresponsible. Mr Watkinson said the deterioration in BR's finances this year, because of the recession, meant a higher offer would lead to cuts in services or jobs. Unions were told during the talks in London that BR faced the most severe financial difficulties for a generation. Revenue for 1991 was running 9 per cent below the expected level and profits from property sales had fallen sharply. 
ID: 3510
HEADLINE: FT  24 APR 91 / UK News (Employment): Promise by Labour on 'green rights' 
TEXT: A LABOUR government would give employees 'green rights' in the workplace, Mr Bryan Gould, shadow environment secretary, has told trade unionists. The rights would include access to information and time off for training in environmental matters. The pledge comes as unions, employers and the government prepare to discuss the environment at a National Economic Development Council meeting next month. The Trades Union Congress will present proposals for a full range of environmental rights for unions. The proposals are likely to be strongly opposed by the Confederation of British Industry, which favours a voluntary approach. Employees should have access to information on environmental hazards and the right to seek independent advice, Mr Gould told a union-organised conference on the environment. He said: 'Trade union representatives should have the right for time off to receive training in environmental matters. They should have the right to call in independent watchdogs such as the Environmental Protection Executive (the new agency proposed by Labour) if they are unhappy about a plant or process. Whistle-blowers should not be victimised.' Mr Gould also backed a National Communication Union proposal for an environmental equivalent of the Control of Substances Hazardous to Health regulations. The TUC will put forward its own 'green rights' plan at the NEDC meeting on May 20. It is due to be attended by Mr Michael Heseltine, environment secretary. The proposals conform broadly with Labour's but add the right to negotiate changes in production and work organisation and the right 'without recrimination' to refuse to undertake work with potentially harmful environmental effects. 
ID: 3511
HEADLINE: FT  24 APR 91 / Ratner comes clean on the secret of success 
TEXT: MR GERALD RATNER, the chief of Britain's biggest retail jeweller yesterday gave the secret of his company's success - it sells 'total crap'. Mr Ratner, chairman and managing director of Ratners told the Institute of Directors in London that an imitation book with curled up corners were in the worst possible taste. 'But we sold a quarter of a million last year.' He added: 'We also do cut glass sherry decanters complete with six glasses on a silver-plated tray that your butler can serve you drinks on, all for Pounds 4.95. 'People say how can you sell this for such a low price. I say because it is total crap. On Monday Ratners announced annual pre-tax profits had risen to Pounds 110.05m from Pounds 108.22m. 
ID: 3512
HEADLINE: FT  24 APR 91 / UK News (Employment): Unions in public sector urged to be flexible 
TEXT: UNIONS organising in the public sector should be prepared to be flexible about traditional bargaining structures to allow better delivery of services, a senior TUC official said yesterday, writes John Gapper. In a study of how unions can help to improve standards in public services, Mr Bill Callaghan, TUC assistant general secretary, said unions needed to take 'a bold and innovative stance' and allow devolution of power. Mr Callaghan was writing in a policy paper published by the Institute for Public Policy Research, a left-wing research group, and the TUC. The paper said unions should accept that competitive tendering could be good for services. The local government union Nalgo yesterday dropped its High Court action challenging the validity of 54 dismissal notices issued by the London Borough of Haringey in February. Meeting Needs in the 1990s. By Bill Callaghan, Anna Coote, Geoffrey Hulme and John Stewart. IPPR, 30-32 Southampton Street, London WC2E 7RA. Pounds 7.50 
ID: 3513
HEADLINE: FT  24 APR 91 / Supporters gather for Asil Nadir's third court appearance 
TEXT: ABOUT 100 supporters of Mr Asil Nadir mustered outside Bow Street magistrates court in London yesterday when the Polly Peck chairman made his third court appearance on theft and false-accounting charges totalling Pounds 25m, Raymond Hughes writes. Sir David Hopkin, the chief metropolitan magistrate, agreed that in future Mr Nadir (pictured) need report to his local police station only once a week -between 7pm and 9pm on Mondays - instead of daily. The requirement was one of the conditions on which Mr Nadir was granted Pounds 3.5m bail in December. Another was that he must live and sleep at his Mayfair home. That was varied yesterday to enable him to travel out of London overnight. Mr Simon Browne-Wilkinson, for the Serious Fraud Office, asked for the case to be adjourned until July 23. He said the case should be ready for transfer to a crown court within six months. Sir David decided that the next hearing would be on July 9 when, he said, Mr Nadir need not attend court. 
ID: 3514
HEADLINE: FT  24 APR 91 / FT telecommunications writer wins Wincott Junior Financial Journalist 
TEXT: Sir Jeremy Morse, Lloyds Bank chairman, pictured with Hugo Dixon (right), FT telecommunications writer, after presenting him with the Wincott Junior Financial Journalist of the Year Award in London yesterday. Other winners in the annual Harold Wincott Awards for Financial Journalism were Andrew Alexander, City editor of the Daily Mail (Senior Financial Journalist), the Sunday Mirror's Your Money and You (Journal), Mary Goldring (Broadcasting Journalist), and BBC Radio 4's Moneybox (Financial Broadcast Programme). Observer, Page 18 
ID: 3515
HEADLINE: FT  24 APR 91 / E Midlands companies cut training 
TEXT: COMPANIES IN the East Midlands, one of the UK's fastest-growing regions, are cutting their investment in training and fixed assets such as machinery and plant as the recession affects them more severely. That emerges from a survey of 940 companies in the region carried out by Price Waterhouse, consultants, and Nottingham Polytechnic, and published today. Investment cuts are taking place against an expectation in two thirds of the companies that business conditions will worsen over the next six months. Although the results of the survey do not reflect either the end of the Gulf war or the most recent cuts in interest rates, they offer broadly the same picture of the harsh commercial climate as other recent regional surveys. The chambers of commerce in Lincolnshire, Northamptonshire, north Derbyshire and Nottinghamshire reported in their sample that 43 per cent of companies had smaller home order books and 30 per cent were finding that the number of export orders was declining. Price Waterhouse found that the worst-performing sector in the regional economy was construction, followed by textiles and clothing. The downturn in sales and profits had been most acute among Northamptonshire companies, reflecting, Price Waterhouse said, 'the county's sensitivity to the deeper recession being experienced in the south-east' of England. In Derbyshire, where last year business confidence was higher than elsewhere in the region, sales growth forecasts are now lower than for the rest of the region. Nearly half the companies in the survey expect a reduction in their capital expenditure over the next six months. Financial difficulties are now having a knock-on effect on employment prospects. Nearly 30 per cent of companies are forecasting lay-offs. The majority of wage settlements, however, are still in excess of 7.5 per cent. East Midlands Business Survey, spring 1991. Price Waterhouse and Nottingham Business School. From Nottingham Business School, Nottingham Polytechnic, Nottingham NG1 4BU. Pounds 75. 
ID: 3516
HEADLINE: FT  24 APR 91 / Backing for conditional fees 
TEXT: THE LAW Society called on the Lord Chancellor yesterday to allow wider use of 'no win, no pay' conditional fee arrangements as a means of improving access to justice in cases where legal aid is not available, Robert Rice writes. Although the arrangements are permitted under the Courts and Legal Services Act, the Lord Chancellor has issued a consultation paper suggesting they be permitted only in personal injury cases. He has also suggested that lawyers should only be allowed to increase their normal fees by 10 per cent in such cases to compensate for the risk of getting nothing when they lose. The society says the maximum 10 per cent increase in normal fees is too low. It would mean that lawyers would only undertake cases which are virtually certain to succeed. It also argues there are cases where conditional fees could improve access to justice. 
ID: 3517
HEADLINE: FT  24 APR 91 / Imports rise by 3% in March 
TEXT: IMPORTS rose by more than 3 per cent last month to Pounds 9.4bn, providing further support for theories that the recession might be close to reaching a trough. The increase, from a seasonally adjusted Pounds 9.1bn in February, is a sign of a pick-up in demand from consumers and industrial groups. Exports rose by more than 1 per cent last month, from Pounds 8.3bn in February to Pounds 8.4bn in March. The figures for the value of imports and exports are both down by 3 per cent over the first quarter of this year, compared with the final three months of 1990. Compared with the January-March period last year, imports in the first quarter of 1991 were down 10 per cent, while exports showed a reduction of 1 per cent. The Central Statistical Office bases its judgments on longer-term trends in the balance of payments on the figures for visible trade, not counting oil and erratic items such as ships and precious stones. It said yesterday that on the basis of those statistics there were clear signs that the underlying rate of fall in imports had slackened in recent months. The CSO is assuming a surplus of Pounds 500m in each of the first three months of 1991 in invisible trade - services, financial payments and government transfers. This may be revised when the government issues new estimates for the first quarter invisibles balance. ---------------------------------------------------------------------- CURRENT ACCOUNT (Pounds bn) ---------------------------------------------------------------------- Current             Visible Trade               Invisibles Balance    Balance     Exports     Imports         Balance ---------------------------------------------------------------------- 1989           -19.9      -24.0        92.8       116.8            +4.1 1990           -12.8      -17.9       102.7       120.6            +5.1 Qtr 1           -4.8       -5.9        25.4        31.2            +1.1 Qtr 2           -4.7       -5.3        25.9        31.1            +0.6 Qtr 3           -2.4       -3.7        25.6        29.3            +1.3 Qtr 4           -0.8       -3.0        25.9        28.9            +2.1 1991 Qtr 1           -1.4       -2.9        25.1        28.0            +1.5 Jan             -0.8       -1.3         8.3         9.6            +0.5 Feb             -0.2       -0.7         8.3         9.1            +0.5 March           -0.4       -0.9         8.4         9.4            +0.5 ---------------------------------------------------------------------- Invisibles for Jan to March 1991 are projections. Figures are seasonally adjusted. They may not add up, due to rounding. ---------------------------------------------------------------------- Source: CSO ---------------------------------------------------------------------- 
ID: 3518
HEADLINE: FT  24 APR 91 / The Blue Arrow Trial: Shares bought after legal advice, executive believed 
TEXT: THE FORMER chief executive of County NatWest believed the bank's buying of Blue Arrow shares in the company's 1987 rights issue was done on the basis of proper legal advice, the Blue Arrow trial heard yesterday. Mr Peter Dale, the former managing director of County NatWest Securities, agreed with Mr Jeremy Roberts, QC, that until early 1988 his client, Mr Jonathan Cohen, the former chief executive and one of the defendants, had believed that proper legal advice had been taken. Mr Dale told Mr Roberts that in February 1988, Mr Cohen had first announced that it had become apparent that proper advice had not in fact been taken and that that seemed to come as a surprise to him. Mr Cohen was contradicted by Miss Elizabeth Brimelow, then County's compliance director, who said proper advice had been taken, Mr Dale said. Mr Dale also disputed the account given to the court by Mr Philip Rimell, the former chairman of CNWS, of how CNWS bought 31m shares from County. He agreed with Mr Roberts that Mr Rimell had willingly bought the shares while he, Mr Dale, was abroad. He could not remember Mr Rimell having telephoned him to object to the transaction and denied having instructed him to take the shares. The trial continues today. 
ID: 3519
HEADLINE: FT  24 APR 91 / Parliament and Politics: Labour denies poor would be worse off - Family policy 
TEXT: LABOUR yesterday rejected Tory charges that its commitment to increases in child benefit and pensions would not help the poorest families, as it stepped up its attempt to take over the Tories' claim to be 'the party of the family'. At the launch of Labour's document on 'family prosperity', Mr Michael Meacher, the shadow social security secretary, said that poorer families would not suffer an equivalent deduction from income support with the rise of child benefit to Pounds 9.55 a child a week. Similarly, he said pensioners on income support would not lose out on proposed increases in state pension. During the Budget debate last month, ministers claimed that Labour's calculations failed to allow for the effect of not clawing back the rise in child benefit from families on income support. The cost of Labour's proposals had been reduced, Mr Meacher added, by the Budget increases in child benefit. The child benefit and pensions commitments, costed at about Pounds 3.25bn, would broadly be met by setting a top tax rate of 50 per cent and removing the ceiling on national insurance contributions. Mr Meacher said Labour would not act retrospectively, but would ensure occupational and personal pensions provided at least as good a deal as the state scheme. 
ID: 3520
HEADLINE: FT  24 APR 91 / Seven-year statement states record number of power stations being built 
TEXT: RECORD numbers of power stations are being built in England and Wales, the seven-year statement issued by National Grid Company disclosed yesterday. Nine new stations, with a total capacity of 7,400MW, have signed agreements for connection to the national electricity grid, NGC said. New stations planned by National Power and PowerGen count for about 3,000MW of the new capacity. The rest is being built by independent power projects, notably the ICI and Enron consortium, which is planning an 1,875MW station on Teeside. 
ID: 3521
HEADLINE: FT  24 APR 91 / Mobil signs 15-year PowerGen gas deal 
TEXT: MOBIL HAS signed a deal with PowerGen to provide the UK electricity generator with gas for the next 15 years. The deal comes after last month's announcement by British Gas that it would raise its prices to power stations for new gas purchases by 35 per cent, arousing fears that many planned stations would be left without gas. It will be viewed as a welcome sign that more competition is developing in the industrial gas market previously dominated by British Gas. Mobil will provide PowerGen with 100m cu ft of gas a day from the end of 1993 as part of a 15-year contract that will start to tail off after 10 years. While the company would not indicate the price of gas included in the deal, it is understood to be at a level between British Gas's existing price schedule for power generators and its new 35 per cent higher rate for new users. Meanwhile PowerGen announced yesterday that it had awarded the Pounds 290m contract to build its 680MW power station at Rye House, Hertfordshire, to Siemens, the electronic and electrical equipment supplier. Rye House will be a modern gas-fired station like Killingholme, PowerGen's large new plant on Humberside, which is also being built by Siemens. Rye House is due to become operational in 1994. Replacing coal-fired stations with such new gas stations is a significant plank of PowerGen's strategy, Mr Ed Wallis, the company's commercial director, said. In another development, Rugby Power, a partnership between East Midlands Electricity Generation and Trafalgar House Corporate Development, is withdrawing plans for a 380MW gas-fired power station near Rugby after local people objected to the scheme. Rugby Power now plans to revise and resubmit its application taking into account the objections. 
ID: 3522
HEADLINE: FT  24 APR 91 / Development aid record said to be lagging 
TEXT: BRITAIN was criticised yesterday for continuing to let its development aid lag behind the standard set for rich industrialised countries. Although British aid is among the best managed in the world, the amount continues to fall well below the United Nations target of 0.7 per cent of gross national product (GNP). Furthermore, the gap is widening, according to a review published yesterday by the Paris-based Development Assistance Committee (DAC), which monitors industrialised countries' aid performance. The biannual study arrives asthe prime minister is under pressure to fulfil a 1983 statement that he hoped Britain would reach the UN target. British Official Development Assistance (ODA) has increased only marginally in volume since the early 1980s, to reach Dollars 2.6bn (Pounds 1.5bn) in 1989. It has fallen as a share of GNP, from 0.49 per cent in 1978-1979 to a mere 0.31 per cent in 1989, says the report. At that level, Britain is only the 13th most generous donor among the 18 countries belonging to the DAC, although the study shows that the UN target is bettered by only four of them - Norway, Sweden, the Netherlands and Denmark. France claims to spend 0.78 per cent of GNP on overseas aid, but that falls below the UN target to 0.54 per cent if its overseas territories are counted as part of France rather than overseas developing countries. In real terms, Britain's ODA rose by 1.1 per cent in the five years to 1989, slightly less than half the 2.3 per cent average rate of increase for industrialised donor governments over the same period. The DAC recognises that the British government is planning to do better by increasing the volume of aid by 17 per cent over the next three years, but feels that is not enough. 'Based on present planning, the real increase in the UK aid programme is likely to remain slight' and aid as a share of GNP might well fall further, said a communique by the DAC. The high quality of British aid, delivered by a strong administration with long experience in developing countries, makes it 'all the more desirable that the British aid efforts be increased', the DAC added. That would also help other donor governments to win more public support for a boost in aid. Britain's practice of focusing aid on the poorest countries comes in for praise, as does its policy of using aid to encourage better government, with economic and environmental reforms. 'The UK considers that good government and development are closely linked,' said the DAC. More donors should follow the same philosophy, it argued. 
ID: 3523
HEADLINE: FT  24 APR 91 / BBC to shed 720 network TV jobs 
TEXT: THE BBC is to shed 720 jobs from its network television operation in London this year as part of its cost-cutting programme and the need to source a higher proportion of programming from independent producers. The job losses, affecting nearly one in 10 network television employees, are intended to save Pounds 14.5m a year. The BBC needs a Pounds 25m cut in the costs of its network television operation by 1993. The scheme involves closing two of the BBC's best-known studios: Television Theatre, the Edwardian variety hall on Shepherd's Bush Green where the Wogan chat show is filmed; and Lime Grove, where arts and current affairs programmes, including the Late Show, are produced. The BBC plans to shed as many jobs as possible through early retirement and freezing recruitment but some redundancies will be unavoidable. The job losses will be concentrated in programme resource departments such as design and graphics, but will also affect administration. The Funding the Future plan is designed to save Pounds 75m across its operations by 1993. The BBC recently announced more than 100 job losses in news and current affairs and 114 in engineering. The cuts in network TV, one of the largest parts of the BBC employing 7,750 of its 25,000 staff, employees, are also a reflection not only of Funding the Future but of the need to satisfy government demands to commission more independent programming. The cuts also reflect a government demand that the ITV network and the BBC must source at least 25 per cent of programmes from independent producers from 1993. Mr Will Wyatt, managing director designate of BBC Network Television, said yesterday that the job losses were the result of a 'double squeeze' on the division. 
ID: 3524
HEADLINE: FT  24 APR 91 / Parliament and Politics: Poll date virtually rules out June general election - Monmouth by-election 
TEXT: A JUNE general election has been virtually ruled out by senior Conservatives, the party indicated yesterday when the government announced that the Monmouth by-election will be on May 16. By moving the writ in the Commons for a contest just two weeks after the May 2 local elections, the Conservatives signalled that they were hoping for a swift campaign with minimal political damage. The decision does not completely rule out a general election in June or July but, if the government had intended that, the by-election would probably have been delayed until the rest of the country went to the polls. The Tories have selected Mr Roger Evans, a 44-year-old barrister, to contest the poll, which follows the death of Sir John Stradling-Thomas, a former Tory deputy chief whip. Labour, which came second in the Monmouth poll in 1987, hopes to mount an effective challenge as a springboard for the general election. Mr Peter Mandelson, former director of campaigns, has been brought in as a campaign adviser and is expected to take a significant role in directing the party's campaign. A poll by BBC Wales suggests Labour is starting the contest with 41 per cent of the vote, against 39 per cent for the Tories. The party's candidate is Mr Huw Edwards, a 38-year-old lecturer. A senior Liberal Democrat official said the contest 'has all the ingredients of another Ribble Valley', but the BBC Wales poll gave the party just 16 per cent. Its candidate is Ms Frances David, a 57-year-old school teacher. 1987 election: Conservatives, 22,387. Labour, 13,037. SDP/Alliance, 11,313. Plaid Cymru, 363. Conservative majority: 9,350. 
ID: 3525
HEADLINE: FT  24 APR 91 / Parliament and Politics: Phone tax opposition grows - Finance bill 
TEXT: A SENIOR Tory MP is to attempt to reverse the government's plans for taxing portable phones when the Commons considers the Finance Bill, Ralph Atkins writes. Sir William Clark, chairman of the Tory backbench finance committee, says he will table two amendments to the proposals for taxing mobile phones provided by employers and used for personal calls as a benefit-in-kind worth Pounds 200. The first amendment would overturn the government's plans. If that fails, the second would exempt those who made only a very few personal calls on such telephones. A survey of Conservative MPs by Access Opinions, an independent research company, showed 60 per cent of Tory MPs opposed to the plans announced in the Budget. British Coal would face difficulty obtaining planning permission for opencast or surface mining in Wales if recommendations by the Welsh Affairs committee are adopted. 
ID: 3526
HEADLINE: FT  24 APR 91 / The Guinness appeals: Judges to hear medical view 
TEXT: EVIDENCE about the medical condition of Mr Ernest Saunders, the former chairman and chief executive of Guinness, serving a five-year jail sentence for his part in the Guinness affair, will be heard by the appeal court today. The three judges may decide to sit in private to hear the testimony of doctors who have examined Mr Saunders on behalf of his lawyers and the Serious Fraud Office. Yesterday Mr Anthony Shaw, Mr Saunders' counsel, asked that the evidence be heard in chambers in Mr Saunders' absence. That, he said, would enable the doctors not to be constrained by professional reticence about discussing Mr Saunders' condition in front of him or in public. He said he appreciated that the appeal was a matter of public interest being heard in public, but there were larger humanitarian considerations. The court could decide what it would be proper to make public in its judgment, Mr Shaw said. Lord Justice Neill said the court's provisional view was that the appeal should remain public but it would consider the matter again today afterthe doctors had met and discovered any disagreements between them. He said: 'This is a case where we are very reluctant, unless overriding considerations apply, to deal with it otherwise than in open court. I think we shall need to be satisfied there are particular aspects of the medical evidence that ought not to be publicly known.' Mr Saunders; Mr Anthony Parnes, a City stockbroker; and Mr Gerald Ronson, head of the Heron group, are appealing against convictions and sentences. Mr Parnes is serving 2 1/2 years. Mr Ronson, released in February after serving just under half his 12-month sentence, was also fined Pounds 5m. Mr John Chadwick, QC, for the SFO, defended the allegation made against Mr Saunders during the trial that he had intended keeping Pounds 3m of Pounds 5.2m he authorised Guinness to pay Mr Tom Ward, a US lawyer and Guinness director. Mr Saunders has complained that the allegation, and the way the trial judge dealt with it, prejudiced his defence. Mr Chadwick said the allegation had been properly made to test Mr Saunders' credibility as a witness and correctly dealt with in the judge's summing-up. 
ID: 3527
HEADLINE: FT  24 APR 91 / Parliament and Politics: SDP Duck in Drake city? - Local election diary (Plymouth) 
TEXT: PLYMOUTH'S local elections look likely to form the final chapter in the chronicle of a political death long foretold. Under the leadership of a local boy, Dr David Owen, the city of Sir Francis Drake could claim to be the principal birthplace of grassroots social democracy. Ten years on, both Labour and the Tories are promising that Social Democrats Plymouth - the P for party was redesignated to the city's name just a few months ago - will be finally laid to rest next week. As with the demise of the Alliance, Dr Owen himself is accused of having played a leading part in digging the grave. Reports that the member for Devonport is considering a shift rightward to the Tories were widely deemed the last straw. At the borough council elections in 1987, the SDP fought every seat. This time, it is contesting only 15 in Dr Owen's Devonport constituency  - three of which are even being challenged by their old Alliance partners, the Liberal Democrats. Mr Harold Luscombe, local SDP leader, admired by many but loathed by Labour, claims the party can hold the five seats it commands on the 60-seat council. Yet the impact of several defections to the Tories and a resurgent Labour party, especially in the job-depleted docklands, make that improbable. Pressed, Mr Luscombe admits that annihilation is a possibility. Until May 2 at least, the party will continue to fight on a fiercely independent platform that has something to irritate everyone in the big parties. That includes a Torier-than-Tory plan to sell off a participation in the still uncompleted Pounds 25m municipal conference and leisure centre to the private sector - opposed as unrealistic by the Conservatives. Mr Luscombe annoys Labour by castigating his old party as spendthrift. 'I look back on the last few years with a certain pride,' he says. 'Nationally, we have been the saviours of the Labour party. 'The ridiculous thing is that as the party leadership has become more moderate, the local party has been going the other way.' Three miles away in Keyham ward, the sober suits and yet more sober language of Mr Jack Cunningham, Labour's national organiser, and Mr John Ingham, the local leader, appear to tell a different story. As in the party's campaigns in Nottingham and Milton Keynes, the heavy emphasis is on a council partnership with private enterprise and the community. If Tory taunts about a hidden agenda ring hollow, local Labour economics seem firmly rooted in the wishful-thinking school. In Plymouth, the party claims it could have set a poll tax Pounds 10 below the Tories' Pounds 380 largely by persuading non-payers to do their civic duty. Nevertheless, Labour - currently with 23 seats on the council to the Tories' 31 - looks in with a real chance to take control for the first time in 25 years. Dr Colin Rallings, a psephologist at Plymouth's South West Polytechnic, calculates that the same 8 per cent swing is needed as Labour requires nationally to take power. Last year's county council elections in key Tory wards proved that was possible. But in a general election, much would depend on whether Dr Owen's fans jump left or right. The three-way split in all three parliamentary seats makes Devonport winnable for Labour. Dame Janet Fookes' Plymouth Drake is also vulnerable if the SDP vote collapses as predicted. Ironically, Mr Alan Clark, the defence minister much disparaged in Plymouth for failing to defend the city's navy interests, seems safest, with a 4,000 majority over the Liberal Democrats. Plymouth's difficulties - housing, the need to diversify from a single industry base, lack of development land - are relatively commonplace. As in the other towns visited by this diary, that creates difficulties from a political point of view, as the options are limited. Often, for little more than the satisfaction of personal ambitions, strenuous efforts are made to dress up what a broad consensus into the tribal warpaints of national politics. One missed opportunity is a curious fact that elsewhere might provoke controversy - as a security measure the entire city centre is permanently filmed by video cameras, monitored by the council's security men. In the event, that draconian measure has not only sharply reduced petty crime - it has also met approval from Tory, Labour and Democrats of both Social and Liberal tendencies. Three centuries on, the city that saw off the Armada has silently fallen to the unblinking tyranny of electronic technology. 
ID: 3528
HEADLINE: FT  24 APR 91 / The Council Tax: Local authorities split over plans for reform - Council reaction 
TEXT: The outcome of the next general election will be influenced by the electorate's acceptance or rejection of the new council tax announced yesterday. Plans have also been published for streamlining local government by introducing a single tier of authorities in place of many county and district councils. FT writers report on the proposals and their implications LOCAL authorities' opinion on the reforms was split last night. Sir Jack Layden, chairman of the Labour-dominated Association of Metropolitan Authorities, said: 'It's a Whitehall tax which gives massive control to government ministers. It's excessively complicated and unjust.' Mr John Chatfield, chairman of the Association of County Councils, said his organisation had recommended the move towards a property-based tax and a single tier of local government, which it believed would be the counties. Mr Roy Thomason, chairman of the Association of District Councils, said: 'This is just what we need.' He was convinced that the single tier of government would generally be the district councils. Mr Alan Stenning, director of finance at Islington Borough Council, London, was concerned that there would be little time to implement the new tax once the consultation period was over. Ms Margaret Hodge, leader of Islington council, said the new tax was still unfair because it was not related to ability to pay. 'The poll tax experiment has cost almost Pounds 400 per adult, so it would have been nice if the government had said 'sorry,' she said. The Institute of Revenues, Rating and Valuation, representing private valuers and council revenue officers, welcomed the new tax. 'It will unquestionably be simpler to collect and enforce than the community charge,' said Mr Colin Farrington, director. However, he warned that the timetable to introduce the tax by 1993 was very tight and estimated it would take three to five years after its introduction to return to the very high collection levels present under the old rating system. Mrs Jean McFadden, president of the Convention of Scottish Local Authorities, welcomed the government's green paper 'as the first step away from the hated poll tax.' Mr Roger Cumberland, finance director at Radnorshire District Council, said he had always been in favour of unitary local authority, but hoped the government would not introduce it until after the new financial structure was in place for at least one year. 
ID: 3529
HEADLINE: FT  24 APR 91 / The Council Tax: Easing the burden in Tory marginals - Political impact 
TEXT: The outcome of the next general election will be influenced by the electorate's acceptance or rejection of the new council tax announced yesterday. Plans have also been published for streamlining local government by introducing a single tier of authorities in place of many county and district councils. FT writers report on the proposals and their implications THE NEW local tax would benefit all two-person households in the Labour London borough of Lambeth, but in marginal Tory Bath such households in the 54 per cent of homes worth more than Pounds 88,000 would pay more. That suggests either altruism or a belief that some supporters can be taken for granted. A more complex picture emerges beyond those extreme examples of the massed ranks of figures provided by the government to illustrate how the council tax would work. The numbers themselves are subject to some caveats. They are based on bills and not on actual amounts paid, so that the real benefit to people who did well from the community charge reduction scheme, because they live in homes that had low rateable values, will be less than the headline difference suggests. The reduction scheme has been added to the central government grant, leaving a lower amount (Pounds 6.8bn) to be raised from local authorities, and the cost of collection has been assumed to be 40 per cent of the cost of collecting the poll tax. In general, however, Tory marginals will breathe a sigh of relief. Mr David Martin, the Tory MP for Portsmouth South, has a majority of just 205. With a Portsmouth city council poll tax at Pounds 179, households of two or more people in five of the seven bands - 94 per cent of homes - would pay less under the new tax. In Pendle, where Mr John Lee, the Tory MP whose majority is below 3,000, has been an outspoken critic of the poll tax, the gains for two-person households look impressive. Almost 70 per cent of homes fall within the lowest two property bands, under which two-person households would gain from the switch to the new system. With the release of the figures halfway through the local election campaign, the first test of how well they survive sustained political debate may come in the Monmouth by-election to be held in mid May. Although most single-person households would be worse off under the new system, households of two or more in the roughly three quarters of homes valued below Pounds 90,000 would benefit. Will it be enough? 
ID: 3530
HEADLINE: FT  24 APR 91 / The Council Tax: Gamble aims to end Tories' trauma 
TEXT: The outcome of the next general election will be influenced by the electorate's acceptance or rejection of the new council tax announced yesterday. Plans have also been published for streamlining local government by introducing a single tier of authorities in place of many county and district councils. FT writers report on the proposals and their implications SO FAR, so good. The poll tax is all but dead, although the extended burial service will take a full two years to complete. The initial reaction to its successor the council tax, finally announced yesterday after weeks of agonising, was a qualified welcome to a pragmatic package targeted to meet the many anxieties of Conservative supporters. However, the drastic nature of the solution, which represents the biggest political U-turn for years, shows how traumatised ministers have become over the damage inflicted by the poll tax. A return to the rates is a gamble which has no guarantee of success, but at least it gives ministers a chance to restore electoral credibility and to seek to repair some of the harm done to the Tory party by the introduction of a local tax widely perceived as regressive and unfair. Mr Heseltine's original idea was to launch an across-the-board inquiry into all aspects of local government - finance, structure and organisation. That remains the intention, but the indications from yesterday's consultation papers are that the inquiry has degenerated into a piecemeal approach because of the need to ditch the poll tax fast. Virtually all effort has been focused on that. Any changes in structure and organisation lie well in the future. In the short term, at least, the tactic might work. The figures show an estimated average household charge for two or more people in the top property band of Pounds 668 and in the lowest band of Pounds 267 - well below the last average rates bill or the average poll tax paid last year. That is clearly good news for the government, particularly as the measures have been framed to avoid the big variations under the old rating system and to ensure there are not too many losers in the prime Tory territory of the south-east. There is therefore political logic in not creating too many losers among Tory supporters, and economic logic in the restoration of a link between the size of bills and ability to pay. It looks a skilful package, although it will lay the government open to the charge of looking after its own supporters at the cost of others. Yet many difficulties remain, mainly because no real attempt has been made to link reform of finance to reform of structure. Mr Heseltine and Mr Major may ultimately pay a heavy price for such a lopsided approach. The impression remains that the shape of local government is being refashioned almost accidentally as a result of the earlier botched attempt to abolish the unpopular rating system. The establishment of a fairer, more soundly based method of local revenue-raising will not end the tensions between local and central government, stretched almost to breaking point by the bruising fiasco of the poll tax. The confusion of responsibility between town halls and Whitehall has become an increasing source of conflict over the last decade and the consultation paper on structure showed that everything remains to be decided. Battle lines are already being drawn up in the conflict that is about to start over the introduction of unitary authorities, with many counties fighting for their existence against pressures from the districts to take over their powers. Mr Heseltine has guaranteed a lengthy, messy process by emphasising that it will be largely up to local opinion to decide what form of local administration is required, including in some cases the retention of two tiers of authorities. Politically the difficulty is that the majority of both county and district councils are at present Conservative-led and the party could be badly split by the conflicts. The blight of the poll tax might not yet be over. It might continue to distort domestic politics until clear lines for local and national administrative responsibilities are finally decided, and that is still some way off. ---------------------------------------------------------------------- HOW THE NEW TAX IS CALCULATED ---------------------------------------------------------------------- Upper              Council tax limit for          for standard       Council tax bands of           spending:          for standard        Percentage property           two or more        spending            of properties value              adults (pounds)    one adult (pounds)  in band ---------------------------------------------------------------------- pounds40,000           267                 200                19 pounds52,000           311                 233                16 pounds68,000           356                 267                20 pounds88,000           400                 300                17 pounds120,000          490                 367                13 pounds160,000          579                 434                 8 pounds160,000+         668                 501                 7 ---------------------------------------------------------------------- ---------------------------------------------------------------------- EXAMPLES OF WHAT COUNCIL TAX WILL COST ---------------------------------------------------------------------- Poll tax            Council 1991/92*(pounds)     tax** (pounds) ---------------------------------------------------------------------- Inner London ---------------------------------------------------------------------- Lambeth                           450                501 Wandsworth                          0                135 Westminster                        36                136 Outer London Brent                             330                423 Haringey                          420                620 Richmond upon Thames              279                392 ---------------------------------------------------------------------- Metropolitan districts ---------------------------------------------------------------------- Barnsley                          185                502 Birmingham                        266                412 Liverpool                         334                448 Newcastle upon Tyne               316                480 Stockport                         310                475 Wakefield                         213                510 Wirral                            336                513 ---------------------------------------------------------------------- English shire districts ---------------------------------------------------------------------- Bath                              245                409 Derby                             270                445 Huntingdonshire                   196                344 Langbaurgh-on-Tees                338                581 Nottingham                        295                423 Plymouth                          240                347 Ribble Valley                     273                442 Windsor and Maidenhead            288                405 ---------------------------------------------------------------------- *Per person **Bill for two or more adults in band covering average UK house price pounds68,000-pounds88,000 ---------------------------------------------------------------------- 
ID: 3531
HEADLINE: FT  24 APR 91 / The Council Tax: Cheers and some relief from the party faithful - Commons 
TEXT: The outcome of the next general election will be influenced by the electorate's acceptance or rejection of the new council tax announced yesterday. Plans have also been published for streamlining local government by introducing a single tier of authorities in place of many county and district councils. FT writers report on the proposals and their implications GOVERNMENT supporters showered congratulations on Mr Michael Heseltine, the environment secretary, in the Commons yesterday when he promised to bury the poll tax and replace it with a council tax with a 'property and personal element'. Any lingering doubts on Tory benches about the effectiveness of the long-awaited funeral arrangements were dispelled by Mr Nigel Lawson, the former chancellor, whose objections to the introduction of the poll tax were overruled by Mrs Margaret Thatcher when prime minister. Ministers and Conservative backbenchers were clearly relieved when Mr Lawson, who recently warned of the political perils that would be associated with a replacement identifiable as 'son of poll tax', joined the welcome given to Mr Heseltine's proposals. Mr Lawson said there would be widespread relief that the government had had the courage to 'consign the poll tax to oblivion' and to take a firm decision that its successor should be property-based. Labour's relatively unsuccessful attempt to give Mr Heseltine a rough ride was led by Mr Bryan Gould, the shadow environment secretary, who emphasised that the poll tax, with all its unfairness, would continue until 1993. To cheers from Labour colleagues, Mr Gould protested that the new local tax would be 'skewed' to protect the rich from paying their fair share. Mr Heseltine repeatedly underlined the government's determination to 'intensify the capping regimes' to ensure high-spending, Labour-controlled councils could not force up the new tax to unacceptable levels. Mr Gould suggested that the allocation of properties in England to seven different valuation bands reflected the 'seven strands' of opinion in Mr John Major's divided cabinet, which was too weak to kill the poll tax outright. While deploring the government's failure to say 'sorry', he interpreted Mr Heseltine's announcement as an admission that the poll tax had been a disastrous mistake, costing the taxpayer Pounds 18m a day. Mr Gould scoffed: 'The party that brought us the head tax now offers us a stand-on-your-heads tax, but whether it is heads or tails, the British people remain the losers.' The new local tax, he said, was the outcome of a disreputable union between the poll tax and political panic. Mr Gould argued that the only consultations about the new local tax that really mattered would take place through the local government elections on May 2 and the coming general election. Amid further Labour cheers, and Tory jeers, he forecast that the voters would 'kill off this Tory tax once and for all by electing a Labour government'. Mr Heseltine contrasted the 'certainty' of the government's proposals with Labour's 'fair rates' alternative, which he claimed would involve returning to the old rating system prior to a further upheaval leading to the introduction of a different tax a year later. He also insisted that a Labour government would not act to curb spendthrift councils. Sir Norman Fowler (C, Sutton Coldfield), another former cabinet minister, provided further reassurance for government supporters by likening the reaction of Labour MPs to a recognition that 'their fox has been shot'. For the Liberal Democrats, Mr Alan Beith said the product of Mr Heseltine's announcement was not 'the son of poll tax but the son of rates'. 
ID: 3532
HEADLINE: FT  24 APR 91 / The Council Tax: Changes to be adapted to Scottish needs - Scotland/Wales 
TEXT: The outcome of the next general election will be influenced by the electorate's acceptance or rejection of the new council tax announced yesterday. Plans have also been published for streamlining local government by introducing a single tier of authorities in place of many county and district councils. FT writers report on the proposals and their implications IN SCOTLAND the new council tax will operate in the same way as planned for England and Wales, Mr Ian Lang, the Scottish secretary, announced yesterday. However, while the discount, rebate and transitional arrangements would be the same, some details of the tax might be varied to meet Scottish circumstances. Most households in Scotland were in the lowest three bands, where the average bill for a two-person household would be Pounds 380 and Pounds 280 for a one-person household, Mr Lang said. To prevent the new tax from reaching unacceptable levels, he said he was making his capping powers - not exercised in Scotland under the poll tax - equal with those of the Environment and Welsh secretaries. A new system for the payment of water and sewerage charges would also be introduced. Mr David Hunt, the Welsh secretary, told the Commons that detailed arrangements to replace the poll tax in Wales might need to differ to meet local circumstances. The taxing of second homes was one area where different provisions might be needed. 'The proposal I have brought forward today looks at Wales as a country in itself,' he said. 'There is no transposition of values from England to Wales.' Mr Donald Dewar, opposition spokesman for Scotland, said the system had been rigged to protect the better-off. 'Can it be right that the most expensive property in Newton Mearns or Morningside pays at the most only two and a half times the most battered council house in Easterhouse or Pilton?' he asked. The move to a single-tier tax was 'riding on Labour's coat-tails', according to Mr Barry Jones, the party's Welsh spokesman, who also accused the government of giving 'special treatment' to the wealthiest people in Wales. 
ID: 3533
HEADLINE: FT  24 APR 91 / The Council Tax: Proposals for the poll tax replacement set out in detail - Local funding consultation document 
TEXT: The outcome of the next general election will be influenced by the electorate's acceptance or rejection of the new council tax announced yesterday. Plans have also been published for streamlining local government by introducing a single tier of authorities in place of many county and district councils. FT writers report on the proposals and their implications THE consultation document A New Tax For Local Government sets out in some detail the government's proposals for the new council tax, to come into effect by April 1993. Basic proposals: 'The government has decided that from the earliest possible moment the community charge will be replaced by a new system of local taxation. The new 'council tax' will comprise a property and a personal element. But it will take the form of a single bill for each household, based on the value of the property and the number of adults who live in it.' Discounts: As 54 per cent of households have two adults living in them, 'the government favours a discount approach on the assumption that there are two adults in each household. Households with two or more adults would pay the basic council tax for their property. Single-adult households would pay less through a personal discount indicated on the bill. 'Under these proposals, some 38m adults in Great Britain would be taken into account directly in calculating bills. Only 4m adults would be excluded, many of whom - for example students and people on income support - would be eligible for personal discounts even if they were to be counted for the tax. 'A significant advantage of the discount approach is that there is no need for a register of council tax payers. Households simply receive a bill which assumes two adults, but pay a reduced bill through a discount where there is only one liable adult or two discounts where there are none or where the property is not a principal place of residence. 'The government favours setting the personal discount as a percentage of the basic bill of the household. It proposes that the discount should be 25 per cent of the basic bill.' Banding: Assessing the taxable value of domestic properties based on rental values, capital values or rebuilding costs . . . would pose various problems. The government therefore proposes to adopt a new approach: a banding system. 'Each property would be allocated to one of a small number of bands. Households in properties in the same band in a council's area would receive the same basic council tax bill. There would be no need for a detailed valuation of all dwellings. 'The banding system could be designed to ensure that excessive burdens did not fall on a minority of properties. Undue variations in bills arising from regional variations in property values could be avoided. Banding would reduce the administrative task involved in the introduction of the new council tax and allow it to be achieved more quickly. 'The government proposes a system by which all properties in an area would be placed in one of a small number of bands constructed around the average property value in the relevant country - England, Scotland or Wales. 'The government proposes that a couple living in the highest band would pay two thirds more than a couple living in a property in the middle band. A couple living in a property in the lowest band would pay two thirds of the bill for a middle-band property. Overall, bills for couples in the highest band would be two and a half times as much as those for couples in the lowest band.' Valuation: The Valuation Office of the Inland Revenue will supervise the assignment of properties to bands. There would be no need for regular or frequent revaluations of properties under a system of banding. Multiple occupancy: The government proposes to bring some houses within the scope of non-domestic rating when there is multiple occupancy, or where adults are joint owners or tenants, recognising that many properties of this kind are run as businesses. Second homes: Where a property is not anyone's main residence, the government proposes that the bill should then be reduced by the maximum of two personal discounts. Rebates: 'The government proposes that, for individuals or couples on income support or equivalent levels of income, rebates should meet 100 per cent of their liability to the council tax. There would be no minimum contribution. 'People on incomes above the income support level will contribute on a sliding scale.' Where non-dependants on low incomes live as the second adult in households where the occupier is not eligible for a rebate, there should be a full personal discount where the person is at or below the income support level. Students: Where the first or second adult in a property is a student, a student nurse, an apprentice or a Youth Training trainee, each will receive a full personal discount. If there are no other adults in a household of students, the household will receive two discounts. Government grants and assessments: The system of standard spending assessments by central government will remain, and under the new council tax 'grants will be paid to local authorities so that each area can finance spending at a standard level by levying the standard taxable amounts fixed by the secretary of state for the council tax. 'Local authorities would retain discretion to set their budgets above or below the standard level . . . The government's intention is that an authority's spending above or below the standard level will be reflected in its council tax bills. 'The variation in spending should fall proportionately on the bills of all council tax payers in the area, so that each household would see an equal percentage increase or reduction in their bill compared with the level for standard spending.' Two-tier authorities: 'In areas with more than one tier of authorities, the tiers should each set their own separate element of the council tax, and the separate elements should be clearly identifiable on the single bill.' Capping: The government will continue to use its powers to cap excessive local authority spending. Powers for capping Scottish authorities will be adjusted to equate with those in England and Wales. Business rates: No changes are proposed in the business rate system introduced in 1990. Room N7/20 Department of the Environment, 2 Marsham Street, London, SW1P 3EB. Free. 
ID: 3534
HEADLINE: FT  24 APR 91 / Greenspan hits at banking proposal: Treasury plan 'would encourage foreign banks to move away from the US' 
TEXT: MR Alan Greenspan, chairman of the Federal Reserve, has strongly criticised US Treasury proposals requiring foreign banks to set up separately capitalised local holding companies if they wish to take advantage of the opening up of US financial services. Mr Greenspan told the Senate banking committee yesterday such a requirement would impose additional costs on foreign banks without obvious benefits. 'It also creates an inducement for foreign banks to conduct their banking operations in less costly environments outside the US and for foreign authorities to threaten reciprocal restrictions for US financial firms abroad.' Under the plan, which has already been attacked by international bankers, any foreign bank engaged in activities other than simple banking would have to close its current American branches and agencies involved in securities and underwriting operations and conduct all of its US banking business through a US subsidiary bank. This would also apply to any expansion into these areas. In spite of reservations on a number of points, Mr Greenspan endorsed the general thrust of the Treasury's wide-ranging bank reform plan, saying it attacked 'the major root causes of the problems in the banking system'. In particular, he said a majority of the Fed board supported the proposed overhaul of deposit insurance, tightening of supervisory procedures, removal of restrictions on interstate branch banking and authorisation of new investment activities for well capitalised bank holding companies. However, the prospects for comprehensive banking reform this year have receded because of a desire, especially on the House banking committee, to concentrate on legislation to bolster the financially strained bank insurance fund. But Mr Greenspan urged Congress to 'avoid only partial solutions by separating into component parts the comprehensive proposals for reform such as those suggested by the Treasury.' He said the Fed board was troubled about the proposal that the Federal Deposit Insurance Corporation could borrow up to Dollars 25bn (Pounds 14.7bn) from Federal Reserve Banks to absorb losses sustained by the bank insurance fund in dealing with failed banks. This would involve the Fed in directly funding the government. Such funding always been severely limited because of concerns about compromising the independent conduct of monetary policy. It would be better, and have an identical financial and economic impact, if the Treasury made the necessary loans, he said. Mr Greenspan also warned against too large an increase in premiums paid by banks to support the insurance fund, which might threaten the soundness and competitiveness of the banking system. He also underlined the Fed's opposition to removing its present supervisory authority over bank holding companies and limiting it to (mainly smaller) state chartered banks. 
ID: 3535
HEADLINE: FT  24 APR 91 / Dinkins dithers as NY sinks in the quagmire: Bernard Simon on the Big Apple's big problems 
TEXT: ALMOST every city in North America is feeling a three-way squeeze these days, but New York is worse. The recession is eroding tax revenues; demands for social welfare and other costly services are spiralling; yet little help is forthcoming from governments preoccupied with balancing their own budgets. These woes are only part, however, of the economic and political quagmire in which New York finds itself. The fiscal crunch in the US's biggest city is being compounded by a mayor seemingly unable to take tough decisions, a white business community nervous about upsetting the black mayor, and bureaucrats and trade union leaders who want everyone to make sacrifices except themselves. New York's latest budget worries have not yet reached the proportions of the mid-1970s, when the city came close to financial collapse. 'It's a difficult problem, but it's not a crisis,' says Mr Quentin Spector, executive director of the Municipal Assistance Corporation, the body set up 15 years ago as banker to the city, which now acts mainly as a financial adviser. The budget impasse has so far had little more impact on New Yorkers than the prospect of a shortened season at municipal swimming pools this summer, fewer lifeguards on the beaches, and a drive for private donations to save the Central Park petting zoo. The long-term damage could be far more severe. While the budget deficit is projected at a relatively manageable Dollars 450m-500m for the fiscal year to June 30, it is expected to soar to Dollars 3bn (Pounds 1.7bn) in 1991/92. The city's borrowing ability is also at risk, at a time when it needs to raise about Dollars 3bn a year to fund new capital projects. New York bonds are already trading at a premium of about 1 percentage-point to those of issuers with a similar credit rating. Mr Don Mele, director for public issues at City Partnership, a non-profit civic group, is worried that the improvements made to New York's infrastructure over the past decade - ranging from street repairs to gleaming new subway carriages - will gradually unravel if a solution is not found to the budget problem. At the core of the problem is New York's heavy exposure to the real estate and financial services businesses, and related sectors, which have been especially hard hit by the recession. The city's economy tumbled into recession more than a year before the rest of the country, and has felt its impact far more severely. According to the New York Port Authority, construction activity fell by 28 per cent last year, compared to a national decline of only 11 per cent. With many high-income earners in the financial services and related industries out of work, retail sales dipped by 1.2 per cent last year, against a 3.9 per cent advance in the country as a whole. Matters have been made worse by the dithering of Mayor David Dinkins and the intransigence of the city's trade unions. Instead of taking the tough decisions needed to balance the budget, Mr Dinkins has gone out of his way to avoid confrontation with the city's many special interest groups. He lifted, then reimposed, a freeze on hiring municipal workers. At the same time, he has proposed hiring several thousand police officers to dampen fears about a new crime wave. Several deadlines are looming. The financial markets' opinion of New York's financial condition will become clearer within the next 10 days when the city is expected to raise about Dollars 1bn in 'revenue-anticipation' bonds -money required because the New York state budget, which will provide for transfers to the city, is itself almost a month overdue. If Mr Dinkins fails to bring the municipal budget shortfall below Dollars 100m by the end of June or if the city is shut out of the capital markets, administration of municipal finances could pass to the Financial Control Board, another agency set up in the mid-1970s to bring more discipline to New York's financial affairs. The chances are slim that the FCB, whose members include the governor, the mayor, city and state comptrollers and three private-sector nominees, will actually step in. Whether by fiscal prudence or by some sleight-of-hand accounting, Mr Dinkins is likely to pull out all the stops to avoid the humiliation of outside intervention. According to Mr Spector, 'the betting seems to be that the city will make it through 1991 intact, but partly by mortgaging 1992. The question is: Will they use that time well?' The answer depends largely on how quickly the city emerges from recession and can rebuild its eroded tax base. Ms Nancy Feldman, an analyst at Standard &amp; Poor's rating agency, asserts that 'there's no question New York will lag the rest of the country.' The danger is that a prolonged slump or very slow recovery will not give Mr Dinkins the tax revenues he needs to balance the 1991/92 budget. The city will then face far more unpleasant choices than it does today, plus the risk of more severe labour strife and political turmoil. 
ID: 3536
HEADLINE: FT  24 APR 91 / Fall in durables orders sets back recovery hopes 
TEXT: HOPES of an early end to the US recession have been undermined by an unexpectedly large drop in new orders for manufactured durable goods. Orders in March fell 6.2 per cent to the lowest level since August 1987, Peter Riddell writes from Washington. The financial markets had been expecting a small rise in new orders following declines in three of the previous four months. The sharp drop revived hopes of a possible cut in interest rates and contributed both to a rise in government bond prices and to a weakening in the dollar. Mr Alan Greenspan, chairman of the Federal Reserve, yesterday told the Senate banking committee that current conditions suggested the economy was 'still modestly moving lower,' but at a diminishing rate. He expected the recession 'to bottom out in a reasonably short period ahead'. He said the Fed continued to examine the economy on a 'day-by-day' basis and the options remained open for interest rate movement. But he warned that the current rate of inflation was 'more worrisome' than the rate in the summer of 1986, during a previous economic slowdown. Significantly, there was weakness across the board in durable goods orders, affecting nearly all big industries. New orders for non-defence capital goods equipment, generally regarded as a leading indicator for business investment, fell by 10.3 per cent in March. Excluding defence, new orders fell by 5.4 per cent. Yesterday's report runs contrary to some other recent, more positive indicators, such as in the housing sector, which suggested that the recession might be bottoming out and a recovery could start by the late summer. It raises the question of whether total output, as measured by real gross national product, will continue to drop in the current period, which would represent three successive quarters of decline. Some economists have pointed to a recent rise in stock/inventory levels as suggesting that any pick-up may be delayed and limited. 
ID: 3537
HEADLINE: FT  24 APR 91 / World Trade News: France's export claims rise 
TEXT: FRENCH exporters made FFr11.4bn (Pounds 1.13bn) of net claims on state-guaranteed contracts last year, equivalent to around 1 per cent of France's total overseas sales, said Coface, the French export credit guarantee agency. The figure, the balance between overall repayments on state-guaranteed exports handled by Coface and premium and other income, is a slight increase on the FFr10.9bn of claims on state-covered exports paid out the previous year. It does not include claims expected from unpaid bills related to the Gulf war, likely to be around FFr5bn this year, Coface officials said. Coface saw a 23 per cent rise in reimbursements it had to pay out on its own account, rather than on the export credit guarantees it manages on behalf of the government. These rose from FFr290m to FFr345m, with the worst performance coming from the recession-hit UK, plus Spain and Italy, said Mr Henri Baquiast, chairman of Coface. The group covers short-term credits of less than three years and political risks in the European Community, while it acts as an agency for the state for most non-EC political risks and medium-term credit guarantees. 
ID: 3538
HEADLINE: FT  24 APR 91 / Costa Rica earthquake kills 74 
TEXT: AT least 74 people have been killed and over 800 injured in an earthquake which shook the Caribbean coasts of Costa Rica and Panama on Monday evening. Rescuers were yesterday struggling to free more victims trapped under rubble. The epicentre of the tremor, which measured 7.5 on the Richter scale, was 40km south-east of the Costa Rican banana-exporting port of Puerto Limon. Banana production is the main economic activity in the region and is thought to have been badly disrupted. Scores of buildings in Puerto Limon were destroyed, and fires broke out at the state-run oil refinery close to the port. Communications have been disrupted, as have water and sewage systems. Tidal waves hit the islands around Bocas del Toro in Panama. The Panama-based Union Of Banana Exporting Countries (UPEB) said: 'We know there has been serious damage to the roads and infrastructure, but we do not yet know the full extent of the damage to the plantations.' The main producers in the region, United Brands, Standard Fruit and Del Monte, all have plantations in the earthquake zone. 
ID: 3539
HEADLINE: FT  24 APR 91 / Brazil takes assets freeze to court 
TEXT: THE Brazilian government will appeal to the Supreme Court this week to stop a wave of judgments allowing people to withdraw cruzados blocked in an Dollars 80bn (Pounds 47.3bn) asset freeze last year, alleging that the resulting increase in money supply could scupper its economic stabilisation plan, Christina Lamb writes from Rio. Ms Zelia Cardoso, the economy minister, said on Brazilian television: 'If the court decides that all the money should be liberated I wash my hands of all responsibility over what may happen to inflation.' The government appeal comes in response to a series of regional court decisions declaring its asset freeze, the centrepiece of a drastic anti-inflation plan, unconstitutional. This has led people to ask the courts to free their money. There are 70,000 cases pending. 
ID: 3540
HEADLINE: FT  24 APR 91 / World Trade News: GEC wins Pounds 45m Boeing contract 
TEXT: GEC AVIONICS, the aerospace subsidiary of the General Electric Company, has become the third British company this month to win a significant order to supply components for the new Boeing 777 wide-bodied aircraft. With the GEC contract, Boeing, the world's leading manufacturer of commercial aircraft, will have placed Pounds 500m of business on the 777 with British companies this month. The GEC Avionics contract, estimated at Pounds 45m initially, is for the primary flight computer system for its new twin-engined airliner. Smiths Industries and Hawker Siddeley have also won Boeing contracts this month. 
ID: 3541
HEADLINE: FT  24 APR 91 / China widens HK airport war of nerves 
TEXT: CHINA has stepped up its war of nerves with Hong Kong over the government's plans for a HKDollars 100bn (Pounds 7.53bn) airport by welcoming outline proposals from a leading local construction entrepreneur for an alternative HKDollars 60bn private sector-based project. This has emerged at a time when some international construction companies are beginning to reassess their interest in tendering for the government project because contracts are stalled by the row with China, which is refusing to give approval until it gains partial control over the project. Mr Gordon Wu, founder-chairman of Hong Kong-based Hopewell Holdings, met Lu Ping, Peking's senior official with direct responsibility for Hong Kong in Peking during the past two days. Hopewell officials reported that Mr Wu's ideas had been 'fully supported' by the officials, who said they wanted to see the project 'fully in the private sector' and would help with air traffic rights. Although there is no suggestion of any immediate contract negotiations, the move is significant because Mr Wu gained support from a number of leading Hong Kong property developers and other businessmen during a series of private conversations before he went to Peking on Sunday. It is unlikely that the Hong Kong government would be prepared to switch to Mr Wu's plans and hand over control to the private sector. It would also resist giving government land to the developers. It is believed that Mr Wu's talks covered the possibility of the businessmen starting construction in 1997, immediately after Hong Kong returns to Chinese sovereignty. Two key preliminary contracts, each worth about HKDollars 1bn-HKDollars 1.5bn, which should have been awarded this month, have not yet been signed. One is expected to go to Kumagai Gumi (Hong Kong) for reclamation work in the Kowloon area connected with approach roads, and another is slated for Shui On Construction, a local contractor, to move a nearby typhoon shelter and reclaim land. Wimpey Construction of the UK has decided not to go ahead at this stage with an application next month to be pre-qualified for one of the largest contracts, worth an estimated HKDollars 6bn-8bn, to reclaim land and build the main airport platform. Other international contractors are expected to review their interest in tendering for this and other Hong Kong projects because of the growing air of uncertainty. 
ID: 3542
HEADLINE: FT  24 APR 91 / Private sector managers shun passport offer 
TEXT: BRITAIN'S offer of up to 50,000 passports to key Hong Kong people has been poorly received by managers and administrators, the individuals the package was designed to attract, Angus Foster writes from Hong Kong. Just fewer than 15,000 passports have been allocated for public sector managers and administrators, the largest job category in the package. The quota has been under-subscribed by about 10 per cent, according to Mr Donald Tsang, director of administration. The package was introduced last year under the British Nationality Act. It was one of a series of measures designed to restore confidence in Hong Kong, severely shocked by the crackdown against pro-democracy demonstrators in Peking in June 1989. All the other job categories have been over-subscribed, some heavily. The government received 1,000 applications from legal professionals by the time the offer closed at the end of February against a quota for this category of only 185. Mr Tsang said the response by private sector managers and administrators was not surprising because they were the only people who had to disclose details about income. 
ID: 3543
HEADLINE: FT  24 APR 91 / Kashmir guerrillas flourish under iron fist: India's brutal methods have helped a small insurgency spread 
TEXT: THE handful of armed separatists Indian security forces faced in Kashmir three years ago have grown into groups of militants with a total strength running into thousands and spread across the region. They are now better armed, self-consciously revelling in the Kalashnikovs, rocket-launchers, revolvers, handgrenades and automatic weapons captured from Indian troops. Many are being trained in Pakistan and Afghanistan. In Srinagar, the militants appear to have established 'no-go' areas in parts of the city that are surrounded by Indian paramilitary forces, but into which the Indians dare not go except in strength. The most important factor boosting the militants' cause has been the harsh, repressive measures used by Indian forces. Mr Girish Saxena, the governor of the state, concedes the damage atrocities have done. 'In our efforts to keep down the level of alienation and increase confidence,' he says, 'any excess sets us back.' Though security forces are showing more restraint in Srinagar and some other towns, the governor's orders seem largely ignored in search operations carried out in villages. India's paramilitary forces in the state are overstretched, ill-disciplined and in-creasingly hardened to the use of brutality. As with most insurgency movements that have spread rapidly, the expansion of the revolution has created its own disorders. There has been a mushrooming of guerrilla factions - somewhat reminiscent of Lebanon - competing and quarrelling among themselves. What is clear is that the best armed and trained are the fundamentalist groups like the Hezb-e-Mujahideen, which backs the Pakistani claim to the valley . Militant groups impose their own system of 'taxation', levying contributions at gunpoint from traders and businessmen. They intimidate officials to ensure that taxes, telephone and electricity bills remain unpaid. Increasingly they determine what new appointments are made and how funds (made available from New Delhi) are spent. They have destroyed whatever hopes there were of reviving tourism this year by kidnapping two Swedes. Other pillars of the economy - handicrafts and the marketing of fresh fruit -have also been crippled. Wealthier Kashmiri Moslems are leaving the valley, announcing their departures as temporary. The governor, and some of his officials, see encouraging signs in growing public weariness of the tension and disruption. In Srinagar there has been a strong popular reaction against the recent wave of kidnappings. A large crowd turned out recently for the funeral of a senior police official shot in Srinagar. More people are seeking the administration's help in face of the difficulties of daily life. Intelligence reports apparently indicate that some of the militant groups are ready to respond to Prime Minister Chandra Shekhar's offer of talks. Individual militants are said to be fed up with a struggle that they - no more than the Indian forces - can win militarily, and which will probably lead to their own death. 'People now believe - and this goes for 90 per cent of the population - that this course of armed violence cannot achieve any objective. It is bound to fail,' says Mr Saxena. In these circumstances he adds: 'The (government's) objective is to give a chance to anyone who is prepared to join the mainstream and take part in the political process.' But hopes of meaningful talks with the militants that could bring about a political solution still seem to be wishful thinking. There is no government in New Delhi with the authority to make concessions. The main political parties are deeply divided over how much autonomy India is willing to grant to a Moslem-dominated area on Pakistan's borders. There are equally deep divisions between the military and the civilian leadership in Kashmire over the balance to be struck between the use of the carrot and the stick. Mr Saxena, who became governor a year ago, clearly favours more carrot. But the ill-trained and often ill-educated paramilitary forces on which he depends are more familiar with the more blunt methods of torture and brutality. That way the insurgency continues to spread. 
ID: 3544
HEADLINE: FT  24 APR 91 / India sees GDP growth at 4% 
TEXT: GROWTH in India's gross domestic product is projected to slow down this year to less than 4 per cent for the first time in six years. The Reserve Bank of India expects GDP to rise this year by 'not more than 4 per cent', against 4.5 per cent in the previous two years, reflecting uncertainties that grip the economy. Mr S. Venkitaramanan, the bank governor, said yesterday that the difficult balance of payments situation, and the consequent disruption in the flow of imported inputs, will slow industrial growth, although agriculture is expected to maintain its growth rate. Cash deposits for opening letters of credit for certain categories of imports are now fixed at a stiff 200 per cent, up by half, to ease pressure on foreign exchange reserves. The World Bank has convened a meeting of donor countries in Washington on May 1 to provide emergency aid to India. 
ID: 3545
HEADLINE: FT  24 APR 91 / The Middle East: West to build up military forces in north Iraq 
TEXT: AN INCREASING number of western governments prepared yesterday to reinforce their military presence in Iraq, Turkey and Iran as part of the international effort to save the lives of Kurdish refugees. Iraq, meanwhile, formally asked the United Nations to take control of the 'safe havens' being established by US forces in northern Iraq. Britain is to send the 29 Commando Regiment of the Royal Artillery to the Turkey-Iraq border to join other elements of 3 Commando Brigade, defence sources say. They will take 105mm guns which can be slung under a Chinook helicopter. US defence officials confirmed that the US had sent a naval battle group, including the aircraft carrier Theodore Roosevelt, from the Red Sea to the Mediterranean as a warning to Iraq not to interfere with the refugee operation. In Paris yesterday, Mr Tom King, the British defence secretary, agreed with Mr Pierre Joxe, his French counterpart to instruct their military staff to look into the possibility of extending refugee operations further east towards the border with Iran. Iraqi forces have remained in the northern Iraqi town of Zakho, defying US orders to move away and increasing tension in the area around the sites of the proposed refugee camps. 'Intimidation levels are really growing,' US Marine Staff Sergeant Lee Tibbetts told reporters at Silopi on the Turkish side of the border. 'It's a very, very tricky situation. I'm telling you, it's getting wild over there.' It is estimated that hundreds of refugees are still dying each day in the mountains despite the increased flow of international aid, and US officials are hoping to start moving people back to their homes or to the camps in Iraq in the next few days. Several armies have started to contribute to the relief effort. French paratroopers have set up an outpost near Zakho; Chancellor Helmut Kohl of Germany said yesterday that German troops would build a refugee camp in northern Iran; Spain is expected to send 500 soldiers to the area within a week, and Norway is considering a US request to send troops; Canadian, Belgian, Dutch and Italian troops are also involved. The Iraqi government, while criticising the US-led relief effort in Iraq as an infringement of the country's sovereignty, has not so far intervened militarily and continues to negotiate with Kurdish opposition leaders and to talk of political reforms. Yesterday the Iraqi news agency reported that the ruling Revolutionary Command Council had decreed that the cabinet would take on constitutional powers previously reserved for President Saddam Hussein. The decision by Kurdish organisations to begin negotiations with Mr Saddam's regime has been sharply criticised by other opposition groups which say he cannot be trusted. In the south, Shia Moslems - whose uprising in early March was crushed by government forces - continue to announce guerrilla attacks. The Iranian news agency yesterday quoted refugees arriving from southern Iraq as saying opposition forces clash nightly with Republican Guards in Shia Moslem areas. Fighting over the previous two nights took place in Basra, Tanumah and Qurnah, with a number of government soldiers killed and military equipment destroyed, the agency said. 
ID: 3546
HEADLINE: FT  24 APR 91 / De Klerk urges UK business to back economic launch pad 
TEXT: PRESIDENT F W de Klerk yesterday offered South Africa's opposition parties 'a voice' in decision-making during the transition to a new constitution and urged British businessman to help South Africa become an economic 'launching pad' for the region. In two keynote speeches Mr de Klerk vigorously proclaimed the emergence of a 'new South Africa', called for an end to economic sanctions, painted a vision of a prosperous post-apartheid southern Africa, and defended his efforts to end political violence in the country. Mr de Klerk made clear in a speech at the Royal Institute for International Affairs that the ruling National Party envisaged an important post-apartheid role for itself. 'My government is committed to the sharing of power,' he said, but added: 'and wholly opposed to surrendering it unconditionally.' Earlier in the day he also firmly rejected the African National Congress's call for an interim government. He went part of the way towards meeting their demand, however, when he said: 'We are prepared to consider certain transitional arrangements at both the legislative and the executive levels in order to give the leaders of the various negotiating parties a voice in the formulation of important policy decisions.' At a press conference at the start of the day, Mr de Klerk argued that political reform had to be be underpinned by a vibrant economy that would in part depend on the lifting of sanctions and new investment capital from abroad. 'We are now positioned for . . . an economic take-off provided that the necessary investment is made and the necessary industrialisation takes place,' he said. 'We don't ask for handouts, we don't ask for donations,' he continued: 'We ask that all impediments be removed and then we have no doubt that we will get the flow of private sector investment because of the opportunities that our economy . . . offers to them.' Mr de Klerk's economic message was taken up again later in the day during an address to the Institute of Directors. After calling for a restoration of sporting links with Britain, he spoke of the potential of southern Africa. He warned that 'economic growth and constitutional reform must be mutually reinforcing' saying that 'unless the pressing problems of poverty and the unemployed are addressed, elegant constitutional models will be of little avail.' Mr de Klerk met for the first time Mr Neil Kinnock, the Labour Party leader, who afterwards said it was still too soon to lift sanctions. Observer, Page 18 
ID: 3547
HEADLINE: FT  24 APR 91 / The Middle East: Kuwait clear-up deal for US 
TEXT: ONE of the first long-term contracts for the reconstruction of Kuwait seems set to be awarded to Waste Management, the largest waste services company in the US. Chicago-based Waste Management looks likely to be given one of the world's biggest clean-up jobs - clearing the debris left by the Iraqis from the streets of Kuwait City. So far, the Kuwaiti authorities have awarded mainly short-term emergency contracts, but Mr George Villasana, Waste Management's vice-president for the Middle East, said he was in the final stages of negotiating a one-year contract. Immediately after the defeat of Iraq, Waste Management crossed into Kuwait with 30 vehicles and 60 labourers and began to clean up a suburb of Kuwait City, even though it then had no contract from the Kuwaiti authorities. The company has since been awarded a month-long contract worth about Dollars 4m (Pounds 2.2m) to clean part of Kuwait. It has brought about 450 workers, mainly from the Indian sub-continent, into Kuwait to do this. Mr Villasana said he was now negotiating a year-long contract worth well over Dollars 10m to clean the majority of Kuwait City, including almost all the central districts. The rest of the work will be divided between five Saudi companies. The company will have to demolish pill boxes and clear away burnt-out cars. Mr Villasana said he aimed to return the streets to a semblance of normality within two months. 
ID: 3548
HEADLINE: FT  24 APR 91 / Pollution challenge for Japan's car culture 
TEXT: JAPAN'S Environment Agency has challenged the country's powerful automotive lobby by calling on citizens to review their use of cars and to place greater reliance on sea and rail transport for domestic freight haulage. The targeting of trucks and cars as a growing source of Japan's air pollution problems is a particular embarrassment for the car industry, which has recently embraced environmental themes in domestic advertising campaigns. The Japanese cabinet yesterday approved a white paper from the agency, which argued for increased use of electric and methanol cars, and concluded that carbon dioxide and nitrogen oxide problems will not improve unless there is less reliance on cars. Japan's car makers have been leaders in improving fuel efficiency and reducing emission levels, but the Environment Agency suggested that a more fundamental change needs to be made to the country's car culture. Mr Toshiro Kojima, the agency's director of planning, said said the tax structure should be revised to encourage environmentally friendly forms of transport. He said that the increased use of diesel trucks had contributed to pollution problems, and haulage companies would be reluctant to trade-in their diesels while that fuel remains about 30 per cent cheaper than petrol. 'Many trucking companies are small or medium in size, and owners don't want to discard their present trucks. We have to provide some tax incentives to change this situation,' Mr Kojima said. The proposals must be approved by the more influential Ministry of International Trade and Industry and Transport Ministry before legislation can be drafted. The latter has made clear it will oppose changes that would put haulage companies at any disadvantage 
ID: 3549
HEADLINE: FT  24 APR 91 / The Middle East: Baker seeks Soviet help on peace process 
TEXT: MR JAMES BAKER, the US secretary of state, is to make an unscheduled visit to the Soviet Union today to seek closer co-ordination in his efforts to revive the stalled Middle East peace process. Washington is looking to Moscow to help it build momentum for the peace effort. A US plan envisages Soviet co-sponsorship of a regional peace conference as an opening to direct talks between Israel and the Arabs. Mr Baker, currently in Damascus, flies to the Caucusus spa town of Kislovodsk today for a meeting tomorrow with Mr Alexander Bessmertnykh, his Soviet counterpart. Mr Baker is expected to discuss under what circumstances Moscow would be prepared to normalise relations with Israel, suspended during the 1967 six-day war. Mr Baker has been pushing for 'confidence-building' measures on both the Arab and Israeli sides pending a formal resumption of peace efforts. Moscow says it will resume full diplomatic ties with Israel once the Israelis agree to participate in an international conference on the Middle East. A spokesman for Mr Yitzhak Shamir, the Israeli prime minister, said Mr Baker had advised that he would follow up his Soviet discussions at a meeting with Mr Shamir on Friday. Mr Baker, whose latest Middle East peace shuttle - his third in six weeks - is aimed at drawing Israel and the Arabs into direct talks, has not made conspicuous progress. But neither the Arabs, including the Palestinians, nor Israel has rejected his peace conference proposal. The Arab side is urging the US to exert real pressure on Israel to co-operate in a genuine peace effort. Mr Baker has been careful to avoid publicly criticising Israel, but there may come a point in the next few weeks when Washington will be obliged to use additional leverage with the Israelis. Mr Baker is also likely to discuss the problems surrounding the holding of a US-Soviet summit - - a summit which the Nato countries have said will not be held until the Soviet Union agrees to observe clauses in the conventional forces reduction (CFE) treaty which Nato says it is presently flouting, writes John Lloyd in Moscow. This includes the redesignation of army divisions as marines to escape the terms of the treaty, and moving tanks east of the Urals. However, Mr Vitaly Churkin, the foreign ministry spokesman, said yesterday that 'the CFE problems are ones that we both want resolved before the summit will take place. A solution can be found and I don't think it is far away. As far as we are concerned a summit should be held by June.' 
ID: 3550
HEADLINE: FT  24 APR 91 / Electricity workers switch off Ireland 
TEXT: THE Irish government says there is a 'tremendous urgency' to settle a strike by electricity workers which has caused power cuts throughout the country. Much of Ireland was without electricity yesterday, writes Kieran Cooke in Dublin. Hospitals had to use generators, factories closed and many motorists were stranded, with petrol stations unable to pump fuel. More than 1,000 electricians at the state-run power company are striking for more pay and in protest about a company reorganisation. 
ID: 3551
HEADLINE: FT  24 APR 91 / Poland to keep grip on money supply 
TEXT: THE Polish government has committed itself to maintaining tight controls on money supply this year in return for credits of Dollars 1.6bn over three years, according to a letter of intent to the International Monetary Fund. The letter - accepted last week by the IMF's Board of Management - shows that Poles can expect an additional Dollars 325m loan to cover the increased costs of oil imports this year. A quarter of the Dollars 1.6bn IMF loan is to be used cover the costs of a debt reduction agreement Poland is seeking with 400 or so western banks, to which it owes Dollars 11bn. The upper limit on Poland's new foreign borrowing this year is set at Dollars 1.5bn and, despite an expected fall in the rate of growth of exports and higher import costs, foreign currency reserves are to grow by Dollars 700m. The letter also promises to keep Poland's present dollar/zloty exchange rate 'as one of the main points of' the government's anti-inflation strategy. Domestic money supply is to grow in nominal terms by 43 per cent this year against a 36 per cent forecast inflation rate. Wages in state owned industries are to be permitted to rise by no more than 60 per cent of the increase in prices. Should the inflation rate increase more than expected then these controls will be tightened. The budget deficit is to be no higher than Zl 6,000bn or 0.5 per cent of GDP, while the supply of credit to the rest of the economy is to grow in real terms by 19 per cent. Poland's stock exchange saw trading in shares from the Krosno glass works suspended yesterday when sellers exceeded buyers. Under the rules the price will be fixed 10 per cent below last week's to await the next session in seven days time. 
ID: 3552
HEADLINE: FT  24 APR 91 / Kohl lends support to Berlin as new seat of government 
TEXT: CHANCELLOR Helmut Kohl yesterday pledged his support for Berlin as Germany's future seat of government. He said a move to Berlin, already the official capital, would need 10 to 15 years to complete and Bonn should retain a number of important ministries, including defence. The chancellor's surprise decision will boost Berlin's chances of again becoming the seat of government. Before his announcement, Bonn was thought to be favoured by a slim majority of members in the Bundestag, the lower house of parliament, and by most of the west German Lander (states). It was decided yesterday that the Bundestag will conduct a free vote on the issue on June 20. The Bundesrat, the upper house, will vote the following day. Mr Kohl, trying to regain the political initiative after his party's defeat in a state election on Sunday, said a government in Berlin would be in a better position to help overcome the division between the two parts of Germany. The announcement may help to boost Mr Kohl's flagging popularity in east Germany where many voters equate a pro-Berlin view with a vote of confidence in the east. The timing of his announcement was probably determined by last Sunday's election in Rhineland-Palatinate. The state borders on Bonn, and Mr Kohl would not have wanted to make his views clear before the votes were cast. Mr Theo Waigel, the finance minister and leader of the pro-Bonn, Bavarian-based Christian Social Union, said he regretted the announcement and insisted that he had no money available to finance the move, costed at anything between DM5bn (Pounds 1.7bn) and DM100bn. Mr Waigel said he would have preferred a compromise, dividing functions between the two cities. 
ID: 3553
HEADLINE: FT  24 APR 91 / World News in Brief: Rocard in trouble 
TEXT: French premier Michel Rocard held back a parliamentary bill for the third time in a week because he was unsure of a majority. He has survived 11 no-confidence votes in nearly three years. Education minefield, Page 2 
ID: 3554
HEADLINE: FT  24 APR 91 / World News in Brief: SA university race bar 
TEXT: South African laws on racial segregation in universities will be scrapped in this session of parliament, education minister Louis Pienaar said. President F. W. de Klerk has so far refused to make desegregation of schools a mandatory part of his reforms. De Klerk urges 'launch pad' role, Page 4; Editorial comment, Page 18 
ID: 3555
HEADLINE: FT  24 APR 91 / World News in Brief: Tehran dress crackdown 
TEXT: Tehran police arrested 800 women for flouting Iran's Islamic dress code, which demands that women cover up from head to toe when in public. Crackdowns are a common feature of mid-spring, when Tehran gets hot. 
ID: 3556
HEADLINE: FT  24 APR 91 / World News in Brief: Court told of near miss 
TEXT: A jumbo jet carrying 263 people missed a hotel by feet as its pilot tried to land at Heathrow, a west London court heard. Captain William Glen Stewart, 53, denies negligence. 
ID: 3557
HEADLINE: FT  24 APR 91 / World News in Brief: IRA truce offer spurned 
TEXT: Northern Ireland protestant paramilitary groups last night rejected the IRA's offer to stop tit-for-tat killings. 
ID: 3558
HEADLINE: FT  24 APR 91 / World News in Brief: Israel jobless warning 
TEXT: Thousands of Israelis may leave the country if nothing is done to resolve its unemployment problems, the Bank of Israel warned. 
ID: 3559
HEADLINE: FT  24 APR 91 / Stock and Currency Markets 
TEXT: ----------------------------------------- STERLING ----------------------------------------- New York: dollars 1.713 (1.6955) London: dollars 1.7115 (1.6925) DM  2.9825 (2.99) FFr  10.055 (10.065) SFr  2.4975 (2.505) Y  236.0 (same) pounds index 91.7 (91.6) ----------------------------------------- GOLD ----------------------------------------- New York: Comex Jun dollars 358.9 (359.7) London: dollars 355.7 (357.3) ----------------------------------------- N SEA OIL (Argus) ----------------------------------------- Brent Jun dollars 19.425 (19.625) ----------------------------------------- DOLLAR ----------------------------------------- Tokyo open: Y137.50 New York DM  1.7435 (1.762) FFr  5.877 (5.937) SFr  1.4525 (1.4705) Y  137.665 (139.43) London: DM  1.742 (1.766) FFr  5.875 (5.9475) SFr  1.459 (1.4795) Y  137.9 (139.4) dollars index 66.5 (67.1) ----------------------------------------- US CLOSING RATES ----------------------------------------- Fed Funds   5 15/16% (6) 3-mo Treasury Bills: yield: 5.859% (5.834) Long Bond: 95 19/32 (95 5/16) yield: 8.268% (8.294) ----------------------------------------- STOCK INDICES ----------------------------------------- FT-SE 100: 2,503.8 (+13.0) FT Ordinary: 1,965.8 (+11.4) FT-A All-Share: 1,212.65 (+0.4%) FT-A World Index: 144.13 (+1.0%) New York DJ Ind. Av. 2,930.45 (+2.73) S&amp;P Comp 381.74 (+0.79) Tokyo: Nikkei 26,491.0 (+254.56) ----------------------------------------- LONDON MONEY ----------------------------------------- 3-month interbank: closing   11 13/16% (same) Liffe long gilt future: Jun 91 7/8   (91 3/4) ----------------------------------------- 
ID: 3560
HEADLINE: FT  24 APR 91 / Banks step in to stem dollar's advance 
TEXT: CONCERTED DOLLAR sales by European central banks and weak economic news from the US yesterday took some of the steam out of the dollar's rise. Eleven central banks, spearheaded by the German Bundesbank, took action to support the D-Mark with large bouts of dollar sales around midday in European trading. The German currency, stricken by domestic political shocks and economic uncertainty, has been the main victim of the dollar. The US unit's rise has quickened as signs of an emerging economic recovery have rapidly followed the end of the Gulf war. Traders reported that the central banks of Finland, Norway and Denmark as well as the UK, Italy and France were selling dollars, pushing down the US currency about 2 1/2 pfennigs in Europe. The action possessed an element of surprise. The markets had to begun to believe that the Bundesbank was against intervention while the Federal Reserve was content with the level of US interest rates. There was no apparent trigger point for the intervention but the banks were thought to have been spurred by the currency's French fixing at DM1.7580, the 16-month high it set on Monday. The attempt to cap the dollar was aided by news that there was an unexpectedly large 6.2 per cent drop in new orders for US manufactured durable goods last month. Analysts said the intervention was likely to have only a very limited effect. Further dollar strength and D-Mark weakness were in store. In New York, the dollar closed at DM1.7435, after finishing at DM1.7420 in London, where it had closed at Dollars 1.766 on Monday. On Wall Street the economic news, and comments by the Fed chairman about interest rate policy, had a damping effect on share prices after a string of strong first-quarter company results spurred a modest recovery. The Dow Jones Industrial Average closed 2.73 higher at 2,930.45. Fall in US durables, Page 6 UK trade gap, Page 20 Currencies, Page 31 Wall Street, Page 37 
ID: 3561
HEADLINE: FT  24 APR 91 / New council tax may set stage for autumn poll: Two out of three households will be better off says government 
TEXT: THE government yesterday signalled a return to the political offensive in the run up to the general election with the claim that its new property-based council tax would leave two out of three households better off. As Mr Michael Heseltine, the environment secretary, formally administered the last rites to the poll tax in the House of Commons, cabinet colleagues predicted that the stage was set for an autumn election. Mr Chris Patten, the Conservative party chairman, greeted the announcement with the pledge that: 'We now have the opportunity, which we intend to seize, to go on the attack'. Another senior minister said: 'We have not only shot the fox but we have buried it six feet under'. The details of the council tax - which will be levied on the capital value of houses and flats slotted into seven nationally-set bands - marked the final break with the policy which Mrs Margaret Thatcher had once dubbed her flagship. An avalanche of figures for every local authority in England, Scotland and Wales suggested that two out of three households would face bills of less than Pounds 400 a year if the new system were in place this year. The claims were fiercely rejected by Labour, which said the new system would be impractical and unfair. Local authority associations were split, with praise from the Conservative-controlled Association of District Councils balanced by sharp criticism from the Labour-dominated Association of Metropolitan Authorities. Mr Bryan Gould, Labour's shadow environment spokesman, said that the government's proposals meant that the poll tax would remain at least until 1993. He said that Labour's 'fair rates' plan would bring quicker and bigger savings for the voters. The Institute of Revenues, Rating and Valuation described the government's timetable as 'tight'. Mr Heseltine confirmed that properties would be classified in seven bands - from the cheapest, worth less than Pounds 40,000, to the most expensive valued at over Pounds 160,000. The valuations would be contracted out to private companies but overseen by the Inland Revenue's valuation office. Households in the lowest band would pay about two-thirds the amount of those in the the middle band - based on the average property value in England of Pounds 80,000. At the other end of the scale those in the highest band would pay about two-thirds more. The key elements of the tax would apply also to Scotland and Wales, although there might be technical differences. The illustrative figures produced by Mr Heseltine - hotly contested by Mr Gould - indicated that the new tax would bring an average bill for the cheapest property with two adults of Pounds 200 this year against Pounds 668 for one in the highest band. The environment secretary confirmed that single-person households would receive a 25 per cent discount, an element designed to reduce the burden on elderly people living alone. The decision to base the tax on the assumption of two-person properties was attacked by Labour, however, as a political fudge designed to placate supporters of the poll tax within the government's own ranks. Ministers conceded that the new system would redistribute the burden of local taxation from the north of England to more affluent areas in the south. Households in many Tory marginal constituencies in the North West will be among the main beneficiaries. The political calculation is that although Tory voters in the south will be the main losers, the ceiling on the amount that councils will be allowed to levy from each of the seven bands will cushion the impact. Mr Heseltine - who also published details of his plan to set up a local government commission to lead a move towards the creation of single-tier authorities - added that the government would retain its powers to cap high-spending authorities. While the key points of the new local tax are not negotiable in a consultation period which is due to last until June, the government is far more open to suggestions on the future structure of local government. Mr Patten will signal his determination to regain the political initiative in the run-up to the general election at a press conference early this morning. Ministers believe that the proposals may have come too late to have a decisive impact on next month's local elections, and most have all but ruled out a June general election. Most appear convinced, however, that with the poll tax behind them and further falls in inflation and mortgage rates expected over the next few months, Mr John Major should be in a position to call an election in the autumn. ----------------------------------------------------------------------- COUNCIL TAX - MAIN POINTS ----------------------------------------------------------------------- A council tax will replace the poll tax in April 1993. It will reflect the capital value of a property occupied by two adults and give a 25 per cent discount to single people. Property will be valued in seven bands based on value. Payment in the top band will be limited to 2.5 times that of the bottom band. There will be a single bill for each household. Poor people will be protected by discounts. There will be no minimum contribution. Second homes will receive a discount of 50 per cent. ----------------------------------------------------------------------- Gamble to end Tory trauma, Page 8 Editorial comment, Page 18 
ID: 3562
HEADLINE: FT  24 APR 91 / End of recession in sight chancellor tells directors 
TEXT: MR NORMAN LAMONT, the Chancellor, yesterday tried to convince a sceptical and occasionally critical audience of 3,000 executives that an end to the recession was in sight. He told the Institute of Directors' annual convention at London's Royal Albert Hall he expected a recovery in output - 'albeit relatively slowly at first' - in the second half of the year. He believed his first budget and the recent reductions in interest rates would help pave the way for an improvement in business optimism. The government, he stressed, was on course to achieve a sharp and sustained reduction in inflation, although unemployment would continue to rise after conditions began to improve. The chancellor sat down to respectable applause but immediately found himself on the defensive in a question-and-answer session. . He denied that ministers were 'going soft' on the need to control public expenditure and reaffirmed their determination to cut personal taxes in the medium-term. After Mr Lamont left, the government's handling of the economy came under heavy fire from sections of a traditionally supportive gathering which appeared still to be in mourning for Mrs Margaret Thatcher. Mr Peter Morgan, IoD director-general, led the criticism, claiming that Britain's business renaissance had been 'torpedoed by runaway inflation'. Governments, he said, should be expected to deliver zero inflation but they were too often prepared to fuel it to win elections. He added: 'This awful recession . . . is a failure of government economic management. It is a government failure, not market failure'. He attacked the government for failing to cut income tax further. The 20p target had 'moved from the realm of commitment and conviction to 'jam tomorrow' rhetoric'. Mr Robert Horton, chairman of British Petroleum, expressed surprise and regret that after 12 years in power the government still had to make the conquering of inflation its first priority. But he stressed that government alone was not to blame. Management had often 'let free enterprise down'. The tussle later transferred to the Commons, where Mr Neil Kinnock, the Labour leader, taunted Mr John Major, the prime minister, with Mr Morgan's remarks. He said the IoD also realised the recession was 'hand-made in Downing Street'. As a former chancellor, the prime minister had to bear 'a special, personal burden of guilt'. Mr Major dismissed the accusation. Far from 'flattening' the economy, the government was flattening inflation and interest rates, he said. Lamont shifts emphasis of economic monitoring, Page 10 
ID: 3563
HEADLINE: FT  24 APR 91 / Beazer plans debt cut by floating UK business 
TEXT: BEAZER, the heavily-borrowed construction and building materials group, yesterday announced plans to float its UK businesses and then sell up to half the shares in the new company for up to Pounds 250m. Mr John Matthews, chief executive, said the plan would require the approval of shareholders, the stock exchange and the group's bankers. Funds from the share issue would be used to reduce Beazer's large US borrowings - most of which were raised to finance the Dollars 1.7bn acquisition of Koppers cement and aggregates business in March 1988. If the plan went ahead, the share sale would be likely to take place between June and September of this year. The new company, to be called Beazer Europe, would include all the group's UK housing, contracting and commercial property businesses. It has not been decided whether to offer shares in the new company solely to existing shareholders or to make them available also to new investors. The UK businesses, which have an estimated net asset value of about Pounds 400m, generated Pounds 72.7m out of total group operating profits of Pounds 189.8m in the 12 months to June 30, 1990. On the stock market, Beazer's shares closed 4p higher at a new high for the year of 185p after the announcement. This gave the group a total stock market value of just under Pounds 500m compared with an implied price tag under the flotation plans of about the same amount for the UK businesses alone. Mr Matthews said the group believed its current share price substantially undervalued the group's businesses. Shareholders were likely to achieve better value by splitting the company, he said.  The proposals would leave the group owning a large US cement, concrete and aggregate business and maintaining a controlling interest in its former UK operations. Beazer's last annual accounts, for the year to June 30, 1990, showed net debts of Pounds 880.5m mostly in the US. This compared with shareholders' funds of about Pounds 1bn. The group, which last month announced a 31 per cent fall in pre-tax profits to Pounds 43.2m during the six months to the end of December, has said that net debt should be reduced to about Pounds 750m by the end of June this year following a series of disposals and joint ventures in the US. Beazer said that, at the last count, about 40 per cent of its shares were held by US investors. Analysts believe the proportion of US investors is now nearer half. Mr Matthews said the group would have to think carefully about where it would be domiciled should it end up with its core assets and the majority of its shareholders in the US. Lex, Page 20 Taylor Woodrow issue, Page 21 Tarmac results, Page 22 
ID: 3564
HEADLINE: FT  24 APR 91 / Appointments: Joining Thames TV board 
TEXT: appointed Mr Jim Fifield (pictured) to the board. He is president and chief executive officer of Thorn-EMI. He becomes the third representative of Thorn-EMI on the Thames TV board, following Thorn-EMI's acquisition of the 28% stake in Thames previously held by BET, to make a total holding of 58.8%. Mr Fifield is based at EMI Music headquarters in New York. ***** LINKLATERS &amp; PAINES has asked us to point out that when Mr James Wyness becomes senior partner in the summer he will initially share the post with the present senior partner Mr Mark Sheldon while the latter carries out official duties with The Law Society. 
ID: 3565
HEADLINE: FT  24 APR 91 / Appointments: NatWest main board director 
TEXT: Mr Derek Wanless (pictured), chief executive UK financial services, has been appointed to the main board of NATIONAL WESTMINSTER BANK from May 1. He joined NatWest in 1970 and at 43 will be the youngest executive board director in the bank's history. He is a director of National Westminster Home Loans, National Westminster Insurance Services, NatWest Personal Financial Management, and NatWest Stockbrokers; a director of Mastercard International Inc, and a vice chairman of Eurocard International. ***** Mr Geoff Clinton has been appointed general manager of ZED INSTRUMENTS. He joined last year as technical director, and assumes full control when Dr Peter Zollman, managing director, relinquishes that post in August to become a consultant to the company which makes laser engraving systems for flexography. ***** UBM OVERSEAS, Bristol, has appointed Mr Nicholas Duggan as financial director, and Mr Nigel Turner as trading director. ***** CHARTERHOUSE has brought its international development capital activities into Charterhouse Development Capital. Senior directors Mr Nigel Hamway, Mr Alex Reese and Mr Roger Pilgrim move from Charterhouse Bank to Charterhouse Development Capital. ***** INCHCAPE has appointed Mr Huw Pritchard as its European development director, motors. He was with General Motors (Europe) in Zurich. ***** ENSKILDA SECURITIES, London, a subsidiary of Skandinaviska Enskilda Banken, has appointed Mr Bert Wiegman as joint managing director of Enskilda Ventures. He will also be deputy chairman of Enskilda Securities' European private equity capital arm, European Acquisition Capital. Mr Wiegman was managing director of Security Pacific Hoare Govett Equity Ventures. ***** Mr Tim Goode has been appointed director, treasury and capital markets, at THE ROYAL BANK OF SCOTLAND. He will succeed Mr John Mather who retires early next year. Mr Goode is currently with the Midland Bank Group, and joins the Royal Bank in London in July. ***** Mr Bryan J. McGinty has been appointed vice president, fasteners and distribution, Europe, for BLACK &amp; DECKER CORPORATION, fastening systems group. He also becomes managing director of Tucker Fasteners, and will be based in Birmingham. He was president, Europe, with ACCO European Cables Controls Group. ***** ROYAL INSURANCE ASSET MANAGEMENT has appointed Mr Michael Taylor as associate director, UK equities. He was with Hill Samuel Investment Management. ***** Mr Richard Mussett has been appointed marketing director of LOVELL CONSTRUCTION. He joins from John Laing. ***** Mr Neil R. Hannah has been appointed managing director of GEC METERS from May 1. He was managing director, UK metering, at Landis &amp; Gyr. ***** LOMBARD ODIER has appointed Mr Gordon Ross to the new post of assistant director of fixed interest. He was with Manufacturers Hanover, London. 
ID: 3566
HEADLINE: FT  24 APR 91 / London Stock Exchange: Equity futures and options trading 
TEXT: THE OPTIONS market was subdued yesterday as dealers waited for an announcement from the London Traded Options Market and the London International Financial Futures Exchange on the merger of the two markets. None was immediately forthcoming, but the market was alive with speculation about its future. Floor dealers were resigned to some upheaval in the depressed traded options market, but reports of the plan to move all equity options on to a screen-based system still caused surprise. Turnover remained depressed on the options market with total business just 24,467 contracts. Analysts reckon LTOM needs 30,000 contracts traded per day to break even. Shell July 550 call options were actively traded as the shares advanced following strong figures by US oil majors. A total of 2,201 options changed hands, equivalent to 2.2m shares. Marks and Spencer traded 1,547, mostly April 260 calls. Hanson was boosted by activity in May 220 puts. On the futures market, the June FT-SE 100 index contract finished 21 points up at 2,527. But its premium to the spot index ended at just 21 points, against the 30 points brokers estimate is necessary to take account of futures dividend payments and financing cost. 
ID: 3567
HEADLINE: FT  24 APR 91 / World Stock Markets: Frankfurt waits for the dark days to pass - Andrew Fisher looks for the good news which might inspire the German stock market 
TEXT: THIS YEAR has been fairly dispiriting for the German stock market. While the west German economy remains strong, its growth is slowing down. In east Germany, the dismantling of the old communist system is causing immense industrial and social strains. And recession abroad, coupled in the case of the US with a rising dollar, has bit deeply into export earnings. On top of all this, the political climate has turned sour with the defeat of Chancellor Helmut Kohl's Christian Democratic party (CDU) in his home state of Rhineland-Palatinate. As well as demonstrating that voters had lost confidence in the government's handling of affairs after unity - they certainly disliked tax increases after promises that these could be avoided - the state election also removed its majority in the upper house of Parliament (Bundesrat). Thus the Bonn cabinet could find life tougher in the months ahead, since the Bundesrat has the power of veto over legislation, including tax. Yet the stock market outlook is by no means all gloomy. Some analysts feel the time may be ripe for foreign institutional investors to pay more attention to the German market, since it has so clearly failed to keep pace with other exchanges. 'People are underweight in a market which has underperformed,' says Ms Katrin Kandell, an analyst at the London office of Sal. Oppenheim, the German bank. 'They are starting to look at 1992. There has to be some positive news in the next six months.' What could that be? Indications of a bottoming out in the east German economic slump could be one element. Another could be evidence that the knocks which west German exporters have taken over the past year are becoming less painful. Degab, the investment analysis offshoot of Deutsche Bank, recently forecast that German corporate earnings would rise by around 8 per cent next year after declines of 5 per cent in 1990 and 1 per cent in 1991; in 1989, they grew by 13 per cent. Two sectors which have been especially buffeted by the problems on export markets, chemicals and cars, are expected to show a marked improvement next year, while the surge in retail and consumer companies' profits should ease and construction, helped by the rebuilding of east Germany, should remain strong. Germany's construction companies are currently enjoying a prolonged boom, with business in the west also vigorous. A study by the Frankfurt office of Barclays de Zoete Wedd, the UK stockbrokers, shows that seven out of the German companies with the best liquidity ratios are from this sector. They also have valuable land and property assets, which are considerably understated in their balance sheets. BZW's German Company Handbook gives a good illustration of the financial solidity of German corporations. Out of 138 companies covered, 53 have no gearing at all and only 21 have any net debt. Moreover, 58 of them finance all capital spending through cash flow. Thus those with heavy future commitments in east Germany, such as RWE and Veba, the energy concerns, have plenty of scope for internal funding. Mr Harry Christopoulos, a BZW analyst, says: 'German companies have lots of assets and low gearing.' Also, adds Ms Kandell, more of them are using their property port-folios for development projects, thus unlocking some of their value. Her hope is that German companies, prompted by the demands of east German investment or the desire to ward off unfriendly takeovers, will start to pay more attention to their share prices. At present, they can lower their tax bills by salting away profits in reserves and thus understating earnings. One day, though, EC tax harmonisation may change all that. ----------------------------------------------------------------------- ASSET ANALYSIS ----------------------------------------------------------------------- Company          *Land and       Company                *Liquidity buildings ----------------------------------------------------------------------- 1  Leffers               52.2       Hochtief                    42.1 2  Horten                43.1       Dyckerhoff &amp; Widmann        39.3 3  Hornbach              40.9       Kampa-Haus                  38.0 4  WERU                  40.1       Bilfinger+Berger            37.9 5  Harpener              39.8       Kali und Salz               35.0 6  Kaufhalle             38.2       Linotype                    32.4 7  Kampa-Haus            31.1       Hako                        30.6 8  Kaufhof               29.4       SABO                        28.4 9  Karstadt              29.1       Strabag                     28.2 10 ASKO                  28.2       Holzmann                    27.7 ----------------------------------------------------------------------- *As % of Balance Sheet total at end 1989 Source: Barclays de Zoete Wedd ----------------------------------------------------------------------- 
ID: 3568
HEADLINE: FT  24 APR 91 / World Stock Markets: South Africa 
TEXT: GOLD shares were supported by steady bullion prices. The all-gold index rose 12 to 1,044 while the industrial index closed at a new high of 3,479, up 3. The all-share index added 5 to 2,998. Vaal Reefs added R6 to R180. 
ID: 3569
HEADLINE: FT  24 APR 91 / World Stock Markets (Europe): Continent registers a progressive recovery 
TEXT: BOURSES showed a modestly progressive recovery yesterday, measured by half-hourly gains on the FT-SE Eurotrack 100 index which an improved start for Wall Street, writes Our Markets Staff. FRANKFURT recovered nearly all of Monday's losses as domestic institutions and officialdom reconsidered the implications of the CDU's Rhineland Palatinate election defeat on Sunday, and as the market digested results from Daimler and Siemens (on Monday) and Hoechst yesterday. There was also some speculation in industrials after Germany's constitutional court ruled that compensation should be paid to former owners of east German property seized under 1945-49 Soviet military occupation. Reversing the pattern of Monday's declines, a modest rise in the FAZ index, 5.73 to 676.76, was followed by a 25.14, or 1.6 per cent gain in the DAX to 1,597.05 at the close. Volume rose from DM5bn to DM6bn, reflecting domestic institutional buying. Daimler led carmakers up with a DM15 rise to DM695.50. Ms Barbara Altmann, of B Metzler in Frankfurt, said buyers were more interested in the higher dollar, and the big exporter's recovery prospects, than last year's fall in profits. Siemens rose DM14.20 to DM597.50 although some pundits were forecasting lower profits for the current year on Monday. Hoechst held its DM13 dividend, and rose DM7.80 to DM264.50. Its former parent, IG Farben, the shell of the giant which grouped Germany's chemical industry before and during World War II, rose DM3.20 or 12.4 per cent to DM29 on the land compensation court ruling. PARIS started the new account on a firm footing but turnover showed no significant improvement, which raised doubts that the recovery would persist. The CAC-40 index rose 14.63 or 0.8 per cent to close at 1,781.83 on volume estimated at around FFr2bn. Alcatel, which lost ground towards the close of the previous account, recovered FFr9 to FFr577 with 322,515 shares traded, and Peugeot added FFr7 to FFr550 with 152,925 shares exchanged. Among the second-liners, Moulinex, which is thought to have a rights issue in prospect, jumped FFr8 or 6.8 per cent to FFr125.50 with 76,400 shares traded. Carrefour went against the market, losing FFr6 to FFr3,720 following its unconvincing general meeting on Monday. MILAN had a repeat performance of the previous day, with continued profit-taking in the insurance and banking sectors and further gains in shares controlled by Mr Carlo de Benedetti. The Comit index fell 2.82 to 593.17 in volume estimated at slightly above Monday's meagre L138bn. Mediobanca fell L25 to L16,190 and Generali lost L200 to L37,900. Cir, Mr De Benedetti's holding company, gained L50 to L2,660 in spite of a one-day delay in the talks with Mr Silvio Berlusconi on resolving their dispute for control of Mondadori. Olivetti, the computer manufacturer, advanced L25 to L3,870. ZURICH moved on the Frankfurt market, the Credit Suisse index closing 4.8 higher at 554.8. There was some foreign buying but volume, overall, held at a modest level, reflecting the lack of movement in interest rates, and gyrations in the dollar after central bank intervention. Among chemicals, Ciba-Geigy registered rose SFr70 to SFr2,510. The company said that the effects of the strong dollar will not show until the second half of this year. STOCKHOLM recovered from a weak opening to close mostly unchanged after a choppy session. Share prices rose, and domestic interest rates eased, on relief that the revised national 1991/92 budget did not contain any surprises. The Affarsvarlden general index advanced 8.6 to 1,066.7 and volume rose to SKr379m from SKr264m. Ericsson was the most active share. Its free B shares rose SKr6 to SKr198 in volume of SKr55m. SKF free B's were SKr0.50 lower at SKr92.50 after the company reported a 92 per cent decline in pre-tax profit in the first quarter to SKr59m, at the low end of expectations. MADRID rose and the stronger dollar gave an extra lift to issues with ADR facilities. Repsol closed Pta45 higher at Pta2,600, Endesa gained Pta25 to Pta2,435 but Telefonica put on a mere Pta3 to Pta996. The general index closed 1.92 higher at 281.50 in low volume of Pta9.9bn, after Monday's Pta15.4bn. AMSTERDAM was led higher by Royal Dutch which briefly hit an all-time high of Fl 159.10 before closing Fl 2.30 better at Fl 158.40. The equity market was also boosted by the good reception of the new 15-year government bond. The CBS tendency index closed 1.3 or 1.4 per cent firmer at 95.4. OSLO continued its slide in moderate trading, with shipping the weakest sector as the all-share index fell 2.41 to 472.53. ----------------------------------------------------------------------- FT-SE EUROTRACK 100 - APR 23 ----------------------------------------------------------------------- Hourly changes ----------------------------------------------------------------------- Open     10 am    11 am    Noon     1 pm     2 pm     3 pm     Close 1117.75  1118.25  1120.30  1120.45  1121.82  1123.18  1123.29  1122.04 ----------------------------------------------------------------------- Day's High   1124.09         Day's Low   1117.22 ----------------------------------------------------------------------- Apr 22         Apr 19        Apr 18        Apr 17        Apr 16 1112.13        1122.00       1124.98       1126.20       1113.65 Base value 1000 (26/10/90) ----------------------------------------------------------------------- 
ID: 3570
HEADLINE: FT  24 APR 91 / World Stock Markets (Asia Pacific): Nikkei recoups losses on futures-related buying 
TEXT: SHARE PRICES fell initially on news of a leasing company in financial trouble, but staged a recovery later on futures-related buying. Activity remained dull ahead of the Golden Week holidays next week, when the market will be open only on Tuesday to Thursday, writes Emiko Terazono in Tokyo. The Nikkei 225-share average closed up 254.56 at 26,491.57 after losing 305 points on Monday. The index started on a weak note and recorded a day's low of 26,078.31 on reports that Shizushin Lease had filed for court protection under the bankruptcy law, as a result of its extensive loans to faltering real estate companies. Investment trusts came in as buyers at that level and the index reached a day's high of 26,568.89. Volume picked up to 360m shares from 250m as some investors were encouraged by expectations of Y7bn worth of cash coming into the market from new investment trust funds due to be set up at the end of the week. Declines still led gains at the close by 562 to 392, with 176 issues unchanged, but the Topix index of all first section stocks put on 6.99 to 1,982.52. In London the ISE/Nikkei 50 index eased 1.65 to 1,501.76. Mr Yoichi Kamina at SG Warburg said there was no evident change in sentiment, and buying was for technical reasons. 'We expect the market to go up after Golden Week, so it is not surprising that some investors wanted to buy at the lower levels,' he added. Mr John Courtney at WI Carr said investors were cautious, and did not expect a big market move until publication of corporate results which could give it new direction. Focus moved back to large-capital stocks, depressed recently by the interest rate uncertainty. Kobe Steel rallied Y13 to Y552 and Nippon Steel firmed Y1 to Y472. Companies which were reported to be creditors of Shizushin Lease lost ground in the morning but recovered in the afternoon. Mitsui Trust Bank opened Y20 lower at Y1,450, but closed up Y40 at Y1,510. Tokio Marine &amp; Fire, which holds a 5 per cent stake in Shizushin, lost Y20 at the opening but closed up Y10 at Y1,350. Nippon Yakin Kogyo fell Y40 to Y1,000 on profit-taking. The issue has risen recently on buy recommendations from major Japanese brokers, on the back of strong earnings for the current year. High-priced shares which had been popular on favourable earnings forecasts lost ground as interest turned to big board issues. Family Mart, the convenience store chain, receded Y200 to Y10,600, and Keyence, the measuring equipment maker, lost Y200 to Y16,500. In Osaka, the OSE average fell 287.61 to 29,269.64, its fourth decline in a row, on volume of 30.9m shares. Investors who had bought shares for the short term took profits. New Japan Chemical rose Y30 to Y1,180. The company expects sales of its additive which raises the transparency of polypropylene to double to Y3bn for the current year. Roundup MAJOR EXTERNAL influences on the Pacific Basin, Wall Street overnight and Tokyo, were in conflict yesterday and a number of markets reflected this. HONG KONG, which dipped to an intraday low of 3,549, was pushed briefly into positive territory by bargain hunting, but closed with the Hang Seng index a net 12.85 lower at 3,569.64. Turnover eased from HKDollars 1.41bn to HKDollars 1.28bn. Property shares and the commercial and industrial sector posted moderate losses, while banks and utilities were narrowly mixed. Traders were keeping an eye on the airport issue, where there is now the debate that a private sector solution to the stalemate in negotiations between the Colony and China might be bad for the Hong Kong government but good for the stock market. SEOUL, which tested its January 4 low for 1991 of 614.60 on the composite index with a 12.72 or 2 per cent fall on Monday, rebounded yesterday with a jump of 22.23 or 3.6 per cent to 637.84. Turnover climbed too, but it was still moderate after a rise from Won91.6bn to Won142.3bn. The market has suffered from tight monetary conditions, but there was an unofficial report of lower inflation from the Bank of Korea yesterday, and subsequent talk of a loosening in monetary policy. AUSTRALIA saw turnover rise from ADollars 202m to ADollars 233m as the All Ordinaries index eased 2.4 to 1,510.5; a parcel of 5.66m shares in Advance Bank Australia - 9 per cent of its share capital - was sold at ADollars 5.20 a share by ANZ Bank. Advance closed down 10 cents at ADollars 5.10. TAIWAN retreated 1.6 per cent and broke a five-day winning run, the weighted index sliding 91.91 to 5,732.09. BANGKOK followed Wall Street down, the SET index losing 15.71 to 893.19. KARACHI registered record volume of 4.8m shares, up from 3.9m last Sunday when the KSE index rose 24 to 1,675. A KSE spokesman said an additional 650,000 shares were traded after hours following news of further government initiatives to boost exports and trim red tape. 
ID: 3571
HEADLINE: FT  24 APR 91 / Money Markets: Europe rates steady 
TEXT: INTEREST RATES were steady in Europe yesterday after the German Bundesbank set an unchanged fixed rate at a one-month securities repurchase agreement tender and the Bank of Spain left its money market intervention rate unchanged. Wholesale rates in London were also stable as hopes of lower bank base rates received the second setback in two day's. Monday's news of high retail sales in March was followed yesterday by a larger than expected UK current account deficit in the same month. Call money in Frankfurt was unchanged at 8.85 per cent following the Bundesbank's offer of a securities repurchase agreement tender at a fixed rate of 8.60 per cent. Dealers expect the supply of funds to roughly match the DM10.8bn draining from the banking system today as an earlier facility expires. In Madrid the Bank of Spain supplied liquidity to the domestic money market at an unchanged 13.5 per cent at the regular thrice-monthly repurchase tender for central bank certificates. In London three-month interbank was steady at 11 7/8 -11 3/4 per cent and 12-month money was unchanged at 11 7/16 -11 5/16 per cent. On Liffe short sterling futures maintained a recent weaker trend. June delivery opened unchanged at 88.64, but closed at 88.59. Day-to-day credit remained in short supply on the cash market. The Bank of England initially forecast a shortage of Pounds 1,350m, but revised this to Pounds 1,200m at noon and to Pounds 1,250m in the afternoon. Total help of Pounds 1,172m was provided. In early operations the authorities bought Pounds 73m bank bills outright in band 2 at 11 13/16 per cent. Before lunch another Pounds 124m bills were purchased, by way of Pounds 47m bank bills in band 1 at 11 7/8 per cent and Pounds 77m bank bills in band 2 at 11 13/16 per cent. In the afternoon Pounds 975m bills were bought, via Pounds 1m Treasury bills in band 1 at 11 7/8 per cent, Pounds 545m bank bills in band 1 at 11 7/8 per cent and Pounds 429m bank bills in band 2 at 11 13/16 per cent. Bills maturing in official hands, repayment of late assistance and a take-up of Treasury bills drained Pounds 7m, with the unwinding of a repurchase agreement on bills absorbing Pounds 1,374m and bank balances below target Pounds 130m. These outweighed exchequer transactions adding Pounds 65m to liquidity and a fall in the note circulation of Pounds 95m. 
ID: 3572
HEADLINE: FT  24 APR 91 / Commodities and Agriculture: Minor metals prices 
TEXT: Prices from Metal Bulletin (last week's in brackets). ANTIMONY: European free market 99.6 per cent, Dollars per tonne, in warehouse, 1,670-1,725 (1,675 - 1,730). ***** BISMUTH: European free market, min. 99.99 per cent, Dollars per lb, tonne lots in warehouse, 2.65-2.90 (same). ***** CADMIUM: European free market, min. 99.5 per cent, Dollars per lb, in warehouse, 2.00-2.20 (1.95 - 2.20). ***** COBALT: European free market, 99.5 per cent, Dollars per lb, in warehouse, 13.50-13.90 (13.90-14.25). ***** MERCURY: European free market, min. 99.99 per cent, Dollars per 76 lb flask, in warehouse, 130-145 (135 - 145). ***** MOLYBDENUM: European free market, drummed molybdic oxide, Dollars per lb Mo, in warehouse, 2.52-2.56 (2.50-2.55). ***** SELENIUM: European free market, min 99.5 per cent, Dollars per lb, in warehouse, 4.80-5.40 (same). ***** TUNGSTEN ORE: European free market, standard min. 65 per cent, Dollars per tonne unit (10 kg) WO, cif, 50 - 57 (same). ***** VANADIUM: European free market, min. 98 per cent, Dollars a lb VO, cif, 2.55-2.65 (same). ***** URANIUM: Nuexco exchange value, Dollars per lb, UO, 9.30 (same). 
ID: 3573
HEADLINE: FT  24 APR 91 / Commodities and Agriculture: Norway's output of crude to surpass UK 
TEXT: NORWAY will overtake Britain as Europe's biggest crude oil producer this year, according to a report issued by Edinburgh-based County NatWest WoodMac (CNWM), writes Karen Fossli in Oslo. Norway's average crude oil and natural gas liquids (Ngl) production will increase by 13 per cent over last year's level to 1.94m barrels a day. By comparison, this year Britain will produce an average of 1.85m barrels a day from offshore fields, a slight increase over the 1990 average level of 1.84m barrels. Britain's production is hindered by annual maintenance shutdowns in May and June and a loss of 200,000 barrels a day from the Brent field, where installation of subsea emergency shutdown valves is taking place. In the fourth quarter of this year Norwegian crude oil/Ngl production will surge to around 2.1m barrels a day, its highest level ever, forecast CNWM. This increase will stem from the coming on stream of the Oseberg North field, which will produce 100,000 barrels a day of crude oil. 
ID: 3574
HEADLINE: FT  24 APR 91 / Commodities and Agriculture: Tin price forecast to rise by 50% 
TEXT: TIN PRICES will rise by 50 per cent in the next 12 months from the current low levels which make most of the industry unprofitable, forecasts the Economist Intelligence Unit (EIU) research group. This is a less-optimistic prediction than the Association of Tin Producing Countries (ATPC) and the EIU admits that there is 'a high probability' that its forecasts will be wrong because 'at some stage it will no longer be appropriate for consumers to keep stocks at a bare minimum. 'No one wants to anticipate that moment, but equally no one wants to be left out once it arrives. When prices do rise, they will rise very sharply,' the EIU warns in its latest World Commodity Forecasts report. It predicts that tin prices will move up from an average Dollars 2.53 a lb in the first quarter this year to Dollars 3.80 in April-June 1992. Primary tin output will fall by nearly 12 per cent to 159,000 tonnes this year because of cuts by producers. Consumption is forecast to slip by 2.7 per cent to 175,500 tonnes, which would imply a deficit in the west of 12,500 tonnes. Sales from the US strategic stockpile and imports from the eastern bloc are expected by the EIU to account for some of the deficit, leaving western stocks to be reduced by 10,000 tonnes - well below the 13,000 tonnes hoped for by the ATPC. The EIU expects next year's mine production to recover by more than consumption - to 162,300 tonnes against consumption of 177,100 tonnes. Stocks might fall again, by another 7,800 tonnes, the EIU suggests, putting an upward pressure on prices. World Commodity Forecasts. Published six times a year. Pounds 245 or USDollars 465 a year from the EIU, 40 Duke Street, London W1A 1DW. ----------------------------------------------------------------------- LME WAREHOUSE STOCKS ----------------------------------------------------------------------- (As at Monday's close) tonnes ----------------------------------------------------------------------- Aluminium        +175     to   364,600 Copper           +1,375   to   225,900 Lead             +625     to   71,850 Nickel           -822     to   5,064 Zinc             +1,200   to   103,975 Tin              -415     to   16,815 ----------------------------------------------------------------------- 
ID: 3575
HEADLINE: FT  24 APR 91 / World Commodities Prices: Cotton and Jute 
TEXT: Cotton Liverpool- Spot and shipment sales in Liverpool for the week ended April 19 amounted to 9 tonnes, against 98 tonnes in the previous week. Jute April/May C and F Dundee: BTC Dollars 490, BWC Dollars 510, BTD Dollars 465, BWD Dollars 485. C and F Antwerp: BTC Dollars 475, BWC Dollars 480, BTD Dollars 450, BWD Dollars 445. 
ID: 3576
HEADLINE: FT  24 APR 91 / International Capital Markets: Bank chief hits at settlement systems 
TEXT: SYSTEMS for settling securities transactions seldom allow for the transfer of securities only against payment, whatever they may claim, Mr Pen Kent, an executive director of the Bank of England, warned yesterday. Speaking at a conference in London, Mr Kent said that many countries had improved their settlement systems to meet the requirements laid down by the G30. Status reports on the level of development in 21 countries around the world will be produced by the G30 in the next few days, he said. However, few had succeeded in developing a true system of delivery against payment, in which cash is released only against the delivery of securities, and vice versa. This leaves a residual risk in settlement systems which appear to offer buyers and sellers full security, he said. 'Perfect synchronisation is very difficult to achieve,' Mr Kent warned. 'In practice, settlement systems may well involve intermediaries explicitly or implicitly guaranteeing the performance of the principals to overcome timing inconsistencies.' Ideally, he said, delivery versus payment should involve real-time transfer of cash at the time of the trade, with payments being made gross rather than netted out. 'More work needs to be done on delivery versus payment (DVP). I do not think most systems do achieve DVP as I have described it,' he said. 'Many systems exchange stock against some form of payment. Legal title, however, may not be guaranteed. Payment may not be in immediate good funds. The system may rely on the good name of an intermediary such as a bank or depository.' Mr Kent added that regulations which will allow the development of Taurus, the UK's long-delayed new settlement system, will be published within days. The delay in the regulations, to be produced by Department of Trade and Industry, has already meant that the introduction of Taurus has been put off from October this year to next spring at the earliest. Mr Kent warned that the regulations, when published, would be long and detailed, but that they have been designed 'to minimise the changes to existing legal rights and obligations.' 
ID: 3577
HEADLINE: FT  24 APR 91 / International Capital Markets: BZW to shut US equities operation 
TEXT: BARCLAYS de Zoete Wedd is closing its US equities operations and laying off 15 per cent of its staff, just a year after hiring a number of top-flight analysts to set up the business. The investment banking and securities arm of Britain's Barclays Bank said yesterday that a detailed review had concluded that 'the cost of building and maintaining a business in US equities wouldn't produce adequate returns in the forseeable future.' A BZW official in New York indicated that, even with the recent upturn in the securities business, the firm had found it difficult to compete against established US securities dealers with far greater resources. She described the venture as an 'opportunistic act which proved untenable'. The lay-offs affect 60 research, sales and support staff, most of them based in New York. The firm emphasised that its international equities business based in New York will not be affected. 
ID: 3578
HEADLINE: FT  24 APR 91 / International Bonds: C&amp;G steps into sterling floating rate note sector 
TEXT: CHELTENHAM &amp; Gloucester Building Society stepped into the sterling floating rate note sector of the international bond market yesterday with a Pounds 125m deal, increased from Pounds 100m, lead managed by UBS Phillips &amp; Drew. The deal follows the reopening of the sector by the Woolwich Building Society last week, after six months during which floating rate funding could not be sold. The four-year maturity of yesterday's issue was a year longer than the Woolwich deal and tested the readiness of investors to lock into this relatively illiquid market. Lead managers responded to demands for higher fees from several firms and offered eight basis points for underwriting, against four basis points last week. However, several leading houses again declined to participate, arguing that fees of around 10 basis points would be commensurate with underwriting risk. This did not appear to inhibit the progress of the deal however, with the issuer regarded as one of the few improving credits in the sector. The paper pays 15 basis points over the three month London interbank offered rate and was reoffered to investors at the fixed price of 99.69. At this level, the discounted margin is 24.5 basis points, very close to the return on the three-year Woolwich deal. The lead manager reported strong demand from UK institutional investors and some demand from continental European investors. Elsewhere, investors anticipating further appreciation of the dollar were offered two virtually identical Dollars 200m three-year deals from state-backed European financial institutions. Credit Local de France came with an issue lead managed by J. P. Morgan priced to yield 46 basis points over comparable US Treasury securities. Some hours later, LKB Baden-Wuerttenberg offered paper via Nomura International at a yield spread of 47 basis points over treasuries. J Sainsbury, the UK food retailer, is to redeem its outstanding Pounds 150m, 5 per cent convertible capital bond issue on June 24. Investors holding unconverted bonds can either switch into equity at the conversion price of Pounds 2.62 or take a redemption payment. Under the redemption clause, the bonds will be converted into preference shares, which will then be redeemed at par, plus a premium of 3 per cent. 
ID: 3579
HEADLINE: FT  24 APR 91 / International Capital Markets: Treuhand may breach borrowing limit 
TEXT: AN OFFICIAL in Bonn yesterday suggested that the Treuhand, the east German state-backed privatisation agency, was likely to breach its borrowing limit for 1991, possibly by DM3bn. The agency, originally set a limit of DM25bn, is under pressure to extend its financial safety net as the unemployment unleashed by its restructuring programme becomes more controversial in the east. The suggestion from Bonn came as the Treuhand confirmed plans to launch the largest D-Mark commercial paper programme since the market opened at the beginning of this year. The DM2bn facility, arranged by Dresdner Bank with Deutsche Bank as co-arranger, will cover the agency's short and medium-term requirements. D-Mark commercial paper has only been allowed since the beginning of this year, when the Bundesbank put aside its previous objections and a change in law removed the constraint of seeking ministry of finance approval for each issuance. In addition to the Treuhand programme, six programmes are already in place including DM500m for Daimler Benz, Germany's biggest industrial conglomerate, DM500m for BMW, the car manufacturer and DM250m for Sudzucker, the sugar company. Daimler Benz kicked off the market in mid-February and outstandings already amount to just under DM1bn. Much of the paper has been issued at the very short end of the market from seven days upwards. The Treuhand has said it will tap the market in maturities between seven days and two years. Yesterday's programme marks the first incursion of another bank as arranger into a market which to date Deutsche Bank, Germany's largest, had managed to keep to itself. On four of the other six deals Deutsche had acted as sole dealer as well as arranger. JP Morgan and Westdeutsche Landesbank are both appointed dealers for the Treuhand. 
ID: 3580
HEADLINE: FT  24 APR 91 / International Capital Markets: Intermediaries warned of tough challenges - FT Conference (European Securities Markets in the 1990s 
TEXT: MANY intermediaries operating in the European securities markets face significant challenges if they are to survive to the end of the decade, industry executives warned yesterday. Speaking on the second day of a Financial Times conference on the development of the European securities markets, Mr Herschel Post, chief operating officer of Lehman Brothers International, warned that the process of disintermediation that swept the commercial banking world during the 1980s could come to bear on many securities intermediaries in the coming years. This included stock exchanges themselves as well as brokers, he said. Partly as a result of the shifting boundaries in the securities business, large institutions have already moved to integrate a range of intermediary functions, from acting as investment managers to being brokers and principals in securities trades. This vertical integration would allow them to move resources most effectively between the different functions to meet opportunities, he said. Mr Gerhard Eberstadt, member of the board of managing directors of Dresdner Bank, listed this vertical integration as one of the indispensable components of any financial intermediary's strategy in the coming years. Others, he said, were a clear, earnings-related focus on the segments and geographical areas in which an intermediary plans to operate; a focus on earnings rather than turnover; and a modern, customer- oriented distribution system. Mr Eberstadt added that universal banks, similar to those in Germany, were best placed to take advantage of deregulation in Europe. Universal banks do not suffer the same pressures as investment or commercial banks to constantly try to overcome regulatory hurdles by developing new financial products, he said. 'These (products) do not necessarily suggest a greater emphasis of a more rigorous approach to risk management, as is often stated. 'They tie up important resources to circumvent artificially created hurdles, which are then not available for other, more productive purposes of financial intermediation.' Universal banks do not suffer these pressures, since they can switch resources between commercial and investment banking, he said. 'It is not difficult to forecast a global trend toward universal banking for the coming years,' he added. Responding to a question later, Mr Post said he did not believe investment business in Europe would concentrate into the hands of a few, large universal banks. As had already happened in the US, investors in Europe would come to understand the benefits of selecting intermediaries on the basis of performance, and this would lead to more varied choice. Mr Howard Coates, deputy chairman of BZW equities, said that the challenges facing intermediaries in Europe were greater than those they faced elsewhere in the world. This is because, in addition to the challenges posed by deregulation, intermediaries had to cope with the problems of dealing in many, often small local markets, with the same securities often being traded on more than one market. In addition, cultural and historic differences meant that different types of investor and issuer demanded a different approach from intermediaries. BZW's response to the higher costs and lower income in securities markets had been in part to focus on higher value products, and in part to pare each business so that it could survive even in difficult periods. Different equities, such as French equities, are treated as different products and given their own profit and loss account, he said. In addition, BZW now reviews its customers by the profits that the firm generates from business it does with them. 
ID: 3581
HEADLINE: FT  24 APR 91 / International Capital Markets: ICSA calls for greater international consultation in securities regulations 
TEXT: The International Councils of Securities Associations (ICSA), which represents self-regulatory authorities in the leading financial centres, closed its meeting in London with a call for greater international consultation in securities regulation, writes Simon London. The two-day meeting discussed ways of improving the efficiency of multi-national securities offerings, the detection of malpractice in cross-border dealings and licensing of securities industry professionals to work internationally. One area of concern is the delay in formulating capital adequacy guidelines for securities houses. Delays were placing securities firms at a competitive disadvantage, commented Mr Robin Hutton, director-general of the British Merchant Banking and Securities Houses Association. Capital adequacy requirements for the securities industry are being examined by the Basle group of central bank regulators, the European Commission and the US and Japanese regulatory authorities. However, no guidelines are expected to be published before the end of this year. 
ID: 3582
HEADLINE: FT  24 APR 91 / International Capital Markets: Chubb Corp's climb pierces sector gloom 
TEXT: DISPELLING some of the gloom which surrounds the US insurance sector, Chubb Corporation, the big US property - casualty insurer, yesterday reported a 15.5 per cent improvement in first-quarter profits after tax, at Dollars 128.3m. The figure included realised investment gains of Dollars 4.2m, compared with the Dollars 5.2m worth of gains included in the first quarter of 1990. During the latest quarter, the insurer made a small underwriting profit of Dollars 7m, compared with a Dollars 7.1m loss in the same period a year earlier. Net premiums written on the property and casualty side during the three months totalled Dollars 737.7m, compared with Dollars 659.4m in the first quarter of 1990. Catastrophe losses were marginally lower at Dollars 8.2m, against Dollars 9.3m, while the combined ratio (after dividends to policyholders) fell from 102.1 per cent to 98.8 per cent. Investment income, meanwhile, rose by 8.2 per cent to Dollars 100.7m, while Chubb's life and health operations contributed a Dollars 12m profit for the quarter, compared with Dollars 10.2m a year ago. The only slippage came on the property front, where the real estate operations saw profits fall from Dollars 13.1m to Dollars 7.5m. 
ID: 3583
HEADLINE: FT  24 APR 91 / International Capital Markets: Australian bank in Pakistan deal 
TEXT: ANZ, the Australian bank, has arranged a Dollars 60m one-year revolving pre-export facility for the Rice Export Corporation of Pakistan (RECP), with the State Bank of Pakistan as guarantor, writes Sara Webb. The facility has an interest margin of 90 basis points over the London interbank offered rate and maximum fees of 45 basis points for participants. Syndicate members include National Bank of Pakistan, DG Bank Luxembourg, Union Bank of Switzerland, Rabobank Nederland, Algemene Bank Nederland, Girozentrale Vienna, Habib Bank, Osterreichische Landerbank, The Arab Investment Company, and Bank of Bahrain and Kuwait. The one-year syndicated facility is the third in a series arranged by ANZ for RECP. The two previous facilities were for Dollars 50m each. 
ID: 3584
HEADLINE: FT  24 APR 91 / International Capital Markets: Hungary to launch convertible bonds 
TEXT: HUNGARY plans to launch convertible bonds on the back of its privatisation programme, according to the official news agency. The bonds could be used to buy shares in some of the companies in Hungary's First Privatisation Programme, Mr Frigyes Harshegyi, deputy president of the central bank, told the MTI wire service. The dollar bond issue would take place after companies had been introduced to the stock exchange. About 15 of the 20 companies included in the First Privatisation Programme may be floated on the stock exchange from the middle of the year, according to officials. They include Hungarhotels, Pannonia and Danubius, Hungary's three largest hotel companies, Richter Gedeon, the largest pharmaceuticals manufacturer, and Centrum, an extensive chain of department stores. The scheme would be an imaginative way of interweaving two important government aims: servicing Hungary's Dollars 21bn foreign debt, the largest per capita in eastern Europe; and fuelling investor demand for Hungary's ambitious privatisation programmes. But it is unclear how the scheme would mesh with the plans already being drawn up by advisers hired to privatise the 20 companies in the second half of 1991. Moreover, the Hungarian government is already planning to issue bonds convertible into privatised assets in compensation for property expropriated by the Communists. These, stock exchange officials fear, may flood the market and quickly trade at a discount. The idea of issuing convertible bonds is part of the Hungarian National Bank's effort to return to favour on international money markets. Hungary recently announced a DM150m bond issue after an DM200m issue last month was oversubscribed. With the latest issue, the central bank was able to narrow last month's 250 basis point spread over bund yields. Mr Harshegyi recently said that Dollars 1bn-worth of bonds would be issued this year, about three-quarters of that in Japan and Germany. 
ID: 3585
HEADLINE: FT  24 APR 91 / International Company News: Philippines to push on with airline privatisation 
TEXT: PHILIPPINE Commercial International Bank is pushing ahead with the privatisation of Philippine Airlines (PAL), but is waiting for the sale prospectus and the results of a due diligence review before making a final decision on the bidding consortium. A number of parties are known to be interested in acquiring the 60 per cent of PAL that the government is to put up for sale. They include Northwest Airlines of the US, JAL of Japan, a consortium led by a Hong Kong company, and a group headed by PAL pilots. 'Once the prospectus comes out, we will decide whether to bid, who to bid with and how much to bid,' said Mr Stephen Cu-Unjieng, PCIB managing director for investment banking. Mr Feliciano Belmonte, PAL president, said that PAL had incurred a net loss of 1.5bn pesos (Dollars 54.6m) for the year ended March 1991, mainly due to heavy foreign exchange losses and increased domestic fuel price costs. He said the foreign airlines were interested in PAL's trans-Pacific routes, rather than its current balance sheet. By the end of the year, Mr Belmonte - who also heads the government pension fund that controls 75 per cent of equity in Philippine Airlines - disclosed the airline was planning to double its Manila-US flights to 26 a week. One of the main obstacles to PAL's successful privatisation is its planned buy-back of Dollars 175m of Paris Club debts and Dollars 170m of commercial debts. The Philippines' central bank and the finance department have drafted an agreement that might resolve the debt issue, Mr Belmonte said. He said the Government Service Insurance System (GSIS), the majority stockholder in PAL and the Philippine Plaza Hotel, has asked for a guarantee from Allied Kajima (AKL) of Japan foIlowing its purchase of the hotel for 1.5bn pesos. Mr Belmonte, who is GSIS president and general manager, said AKL has been asked to pledge as security 100 per cent of the shares to be bought as well as a mortgage on the hotel, which is being bought with a long-term lease from GSIS over the land. 
ID: 3586
HEADLINE: FT  24 APR 91 / International Company News: MCI down 21% despite revenue rise 
TEXT: MCI Communications suffered a 21 per cent fall in first - quarter earnings in the highly competitive US long-distance telephone market, despite record revenues. The second largest long-distance carrier earned Dollars 123m, or 48 cents a share, down from Dollars 156m, or 62 cents, a year ago. Revenues advanced to just over Dollars 2bn from Dollars 1.8bn, but operating income fell to Dollars 265m from Dollars 283m. Mr Bert Roberts, president, blamed the decline on the recession and competitive pressures. He noted that MCI had launched an unusually large number of services in recent months, notably Friends &amp; Family, which offers discounts to residential subscribers for frequently-called numbers. MCI has a 13 per cent share of the long-distance market. Although MCI's share was boosted by last year's acquisition of Telecom USA, the fourth-biggest operator, it was expected to have garnered a larger slice of the market by now. Mr Courtney Munroe, analyst at Northern Business Information, said MCI's problems have been compounded by aggressive cost-cutting. 'In trying to improve margins they've cut corners in customer service,' he said. Recent surveys by NBI indicate that, despite a host of impressive new services, MCI's image in the marketplace has deteriorated as a result of the belt-tightening measures. 
ID: 3587
HEADLINE: FT  24 APR 91 / International Company News: Australian air sell-off due this year 
TEXT: AUSTRALIA'S two gov-ernment-owned airlines are likely to complete the sale of significant shareholdings to overseas investors before the end of the year, airline executives said yesterday. 'We should be able to come to some conclusions within the next two or three months,' said Mr Ted Harris, chairman of Australian Airlines, the government-owned domestic carrier. The government plans to sell 100 per cent of Australian Airlines, of which 40 per cent will be placed with overseas buyers, with a ceiling of 25 per cent on individual foreign shareholdings. It also wants to sell 49 per cent of Qantas, the international flag carrier, of which 35 per cent will be placed with overseas airlines. The balance of the shares will probably be floated later. Qantas and Ansett Australia, the domestic airline owned jointly by TNT and News Corporation, will be barred from buying shares in Australian Airlines. Both government-owned airlines are to be recapitalised before the sales go-ahead, probably through the assumption of debt by the government in return for shares. The detailed plans for the sales, announced in statements by Mr Ralph Willis, finance minister, and Mr Kim Beazley, transport minister, are largely in line with privatisation proposals announced in December. However, the government rejected a request from the Qantas board for permission to acquire up to 25 per cent of Australian Airlines to protect its access to domestic traffic. Officials said ministers rejected the proposal because it would have undermined the privatisation of Australian Airlines, and blurred the division between domestic and international operations. The decision angered Qantas, which said it would be placed at a competitive disadvantage to foreign airlines. 'It is difficult to understand why Qantas has been specifically excluded from participation in any form in domestic aviation in Australia while its foreign competitors are being encouraged to do just that,' said Mr Bill Dix, Qantas chairman. The government's decision to recapitalise the airlines in advance of the sale of shares will increase their attractiveness to investors by reducing the high gearing both have incurred as a result of re-equipment programmes. The extent of the recapitalisation has not been determined, but Mr Beazley said last year that repairing the airlines' balance sheets would cost around ADollars 600m (USDollars 465m) for Qantas and ADollars 300m for Australian Airlines. Qantas is understood to have had talks with British Airways, Japan Air Lines, Singapore Airlines, United Airlines, of the US, and Garuda, the Indonesian flag carrier. The same airlines head the list of potential shareholders in Australian Airlines, but the government is unlikely to allow airlines to acquire holdings in both Qantas and Australian. 
ID: 3588
HEADLINE: FT  24 APR 91 / International Company News: Israel Chemicals falls to Dollars 78.2m 
TEXT: ISRAEL Chemicals, the country's biggest and most profitable state-owned industrial group, reported a drop in net profits in 1990 to Dollars 78.2m from Dollars 86.3m in 1989, a record year for the group. Sales were up Dollars 76m to Dollars 1.23bn, but a fall in world prices for potash, Israel Chemicals' core product, a drop in phosphate sales to eastern Europe, and the shekel's relative strength against foreign currencies were blamed for the reduced earnings. Net return on capital was 14 per cent, maintaining Israel Chemicals' traditional position as the leading performer among the state's industrial holdings. The group, which exploits Israel's main natural resources from the Dead Sea area, has been slated for privatisation for some time, but a planned private placement of a majority stake with foreign investors was blocked by political objections. A partial flotation on the Tel Aviv Stock Exchange is the preferred option of most ministers, although no decision has been taken. Israel Chemicals now relies heavily on international markets. Last year, exports were up by 7 per cent at Dollars 646m, a little over half of total sales. The drop in earnings came mainly from two of the group's core Israeli production companies, Dead Sea Works and Negev Phosphates. Profits were up at Dead Sea Periclase, which makes magnesia and hydrochloric acid, Rotem-Amfert, which makes sulphuric and phosphoric acid, and at Giulini Chemie, a West German subsidiary making phosphate salts and aluminium sulphate. Israel Chemicals intends to pay a dividend to the government of Dollars 12m, after Dollars 50m in 1989. 
ID: 3589
HEADLINE: FT  24 APR 91 / International Compony News: Costs and interest hurt Rand coal arm 
TEXT: WITBANK Collieries, the coal arm of the Rand Mines group, suffered the effects of rising costs and higher finance charges to record lower earnings in the six months ended March 1991. Turnover rose by 18 per cent to R569.4m (Dollars 210m) but tighter margins saw operating profit only 4 per cent higher at R106.5m. A sharp drop in investment income and a 27 per cent rise in the interest charges to R26.3m, the result of the Middelburg mine purchase, left after-tax profits 13 per cent lower at R51.3m. The half-year dividend is being maintained at 210 cents a share but the directors expect profits for the full year to show a decline. In 1989-90, Witbank, one of South Africa's four big producers, contributed R163.2m, or 73 per cent of Rand Mines' total attributable profits. Export tonnages increased by 26 per cent, mainly as a result of the first-time inclusion of Middelburg. The effects of an economic slowdown were seen in the domestic market where sales declined by 4 per cent. Sales to Escom, the power utility, increased by 13 per cent. The directors reported that the increased turnover was mainly volume related, with margins falling because of increased rail charges while inflation-induced cost increases were not offset by export revenues which were held in check by the firmness of the rand. 
ID: 3590
HEADLINE: FT  24 APR 91 / International Company News: ITT starts year with 9.4% fall to Dollars 229m 
TEXT: ITT, the US conglomerate with interests ranging from defence to insurance, reported a 9.4 per cent fall in first-quarter profits, to Dollars 229m after tax. Earnings per share also fell, from Dollars 1.77 to Dollars 1.7, but, in both cases, comparisons were distorted by one-off items. On the one hand, the first quarter of 1991 took in portfolio gains of Dollars 35m - or 26 cents a share - mainly at ITT Hartford, the insurance arm. This contrasted with portfolio gains of Dollars 4m, or 3 cents a share, in the corresponding period a year earlier. On the other hand, the first quarter of 1990 was boosted by an after-tax gain of Dollars 47m from the sale of the stake in Alcatel Alsthom. ITT said that without this item, net income in the first quarter would have improved by 18 per cent. ITT said that its electronic components business improved on higher volumes and better efficiencies at ITT semiconductors. ITT Defence also had a better quarter due to more favourable margins on certain contracts and despite lower sales. The fluid technology business was 'slightly down' but ITT automotive and the group's forest products division both saw sharper falls. 
ID: 3591
HEADLINE: FT  24 APR 91 / International Company News: Bankers Trust suffers from weak dollar 
TEXT: BANKERS Trust, the highly- regarded US banking group, suffered a 19 per cent fall in first-quarter earnings. A strong advance in trading income was more than offset by higher non-interest expenses, lower foreign exchange revenues and write-offs on investments in highly-leveraged companies. Net earnings slipped to Dollars 160m, or Dollars 1.85 a share, from Dollars 198m, or Dollars 2.36, a year earlier. Interest income fell only slightly to Dollars 213m. The company blamed an 8.4 per cent rise in non-interest expenses partly on the weaker dollar, which accounted for about a quarter of the increase. Staff severance costs jumped by Dollars 40m. Trading revenues almost doubled to Dollars 304m, thanks largely to a strong performance by the capital markets business, which includes interest rate, currency and equity derivative products. But corporate finance fees tumbled by 23 per cent. Loans on the bank's books continue to fall sharply, reflecting the policy of the past four years of distributing a higher proportion of loans to other financial institutions, such as regional and foreign banks, insurance companies and pension funds. Its total loan portfolio stood at Dollars 19.6bn on March 31, down from Dollars 29.2bn in 1986. 
ID: 3592
HEADLINE: FT  24 APR 91 / International Company News: First Executive receives Dollars 643m tax claim 
TEXT: ATTEMPTS to rehabilitate Executive Life of California, the main operating unit of troubled Los Angeles-based insurer First Executive, have run into a serious obstacle from the Internal Revenue Service, which claims to be owed Dollars 643m. Mr John Garamendi, the Californian insurance commissioner who seized control of Executive Life earlier this month, warned that the move 'could force the company into liquidation and jeopardise the savings of hundreds of thousands of policyholders and annuitants'. The Los Angeles office of the IRS, however, said that while it was obviously concerned about policyholders' welfare, it had a duty to the US public to make sure demands for back tax were logged. The IRS claim covers tax which the authorities say the company should have paid in 1981, 1982 and 1983, together with penalties and interest due because of the non-payment. The IRS declined to split the tax sum from the penalty/interest charges, although there were reports that the actual tax claim totalled less than Dollars 250m. The IRS acknowledged that the penalties/interest element was likely to be substan-tial. The Californian regulators have recently suggested that rehabilitation efforts were centring on talks with a European consortium, led by Altus, part of Credit Lyonnais, the French bank. Officials at the Insurance Department said they did not know what the reaction of the consortium had been to the tax demand. However, Mr Garamendi said he would 'do everything in my power to stop this IRS raid on the assets needed to pay Executive Life policyholders. I plan to immediately contact both the Bush administration and Congressional leaders,' he added. 
ID: 3593
HEADLINE: FT  24 APR 91 / International Company News: RJR in the black with Dollars 5m 
TEXT: RJR NABISCO, the tobacco and food group which was subject to the biggest leveraged buyout in the US two years ago, yesterday reported a small after-tax profit of Dollars 5m in the first quarter of 1991. It is the first time RJR has made a profit after interest and tax since the massive Dollars 25bn takeover masterminded by Kohlberg, Kravis Roberts, the investment banking business. In the first quarter of 1990, RJR reported a net loss of Dollars 222m. News of the surplus seemed to surprise some Wall Street analysts, who greeted the figures warmly. 'It's positive - we were expecting a small loss,' commented one high-yield analyst at Salomon Brothers. On the stock market, RJR shares rose in morning trading in New York by 3/8 to Dollars 11 7/8 , while its junk bonds also advanced on the profit news. The company has just completed the latest in a series of refinancing exercises aimed at reducing the cost of its outstanding debt. The most recent restructuring involved the issue of 115m new shares, to raise Dollars 1.29bn, plus a Dollars 1.5bn tranche of new junk bonds. During the first quarter, RJR's operating profits rose to Dollars 647m, 7 per cent higher than the same period a year earlier, with 'cash earnings' - that is, before interest, tax, depreciation and amortisation - marginally improved at Dollars 940m against Dollars 923m. Sales overall were 8 per cent higher at Dollars 3.47bn. Of the two main business divisions, food showed the more marked advance. Sales rose from Dollars 1.34bn to Dollars 1.51bn, while operating profits (ahead of amortisation charges) were 21 per cent higher at Dollars 171m. On the tobacco side, sales rose 5 per cent to Dollars 1.96bn, while profits edged 2 per cent higher at Dollars 648m. The company reported 'significant volume gains' overseas, but said its domestic volumes were still falling by more than the market generally - the latter figure standing at around 3 per cent a year. The flow of debt refinancings has helped to push down interest costs. In the first quarter, cash interest expense was Dollars 307m from Dollars 388m. 
ID: 3594
HEADLINE: FT  24 APR 91 / International Company News: Milacron dips into the red 
TEXT: CINCINNATI Milacron, one of the world's biggest machine tool makers, slipped into the red in the first quarter on the back of weak demand and heavy price discounting. However, the company reported a pick-up in new orders, with a first-quarter inflow 6 per cent higher than a year earlier and 14 per cent up on the previous three months. The order backlog also widened during the quarter. Milacron suffered a Dollars 5.9m loss, or 22 cents a share, in the first quarter, against earnings of Dollars 2.5m, or 10 cents a share, a year earlier. Sales dipped to Dollars 181.1m from Dollars 184.2m. Mr Daniel Meyer, chief executive officer, said slack business conditions were especially evident in standard machine tool, grinding machine and plastics machinery sectors. He said stringent cost controls combined with new products and an expanded distribution network should return the company to break-even in the second quarter. 
ID: 3595
HEADLINE: FT  24 APR 91 / International Company News: Bethlehem posts loss of Dollars 39.2m 
TEXT: WEAK demand and mounting costs have lead Bethlehem Steel, the second largest US steel manufacturer, to unveil a Dollars 39.2m loss after tax in the first three months of 1991. In the same period a year ago, the company made a profit of Dollars 21.3m. Bethlehem warned it expected to report a further deficit in the second quarter of the year, despite 'a slight seasonal upturn'. 'While there are some signs of stability and potential recovery for the economy . . . the outlook remains uncertain because of high unemployment, credit constraints and the recent strengthening of the dollar,' the company said. But the Pennsylvania-based company said it was still studying the possibility of a collaborative venture with British Steel. The venture, announced in outline earlier this year, would involve the UK company in taking over and reorganising the US group's subsidiaries which make structural and rail steels. Yesterday, Bethlehem said that, as part of a feasibility study, talks were being held with the United Steel Workers Association 'concerning the joint venture's requirements for competitive labour costs'. Bethlehem had warned it would probably post a first-quarter loss, although it did not specify the extent of the expected deficit. Bethlehem said the basic steel division turned in an operating loss of Dollars 26m, against a profit of Dollars 29m a year ago. Steel-related operations made an operating loss of Dollars 7m, against a Dollars 4m deficit in the first quarter of 1990. As a result, the overall loss at the operating level reached Dollars 33.3m, compared with Dollars 25m profit last year. 
ID: 3596
HEADLINE: FT  24 APR 91 / International Company News: Securities houses reinforce revival 
TEXT: SALOMON and Morgan Stanley, two of the largest securities houses in the US, provided fresh evidence of the revival in Wall Street's fortunes yesterday when they unveiled big increases in first-quarter profits. Salomon reported record net income of Dollars 273m, or Dollars 2.30 a share, more than double the Dollars 119m earned a year earlier on revenues of Dollars 690m. Total net revenues were Dollars 1.18bn, against Dollars 690m in 1990. Morgan Stanley posted a 46 per cent rise in net income to Dollars 120.1m, or Dollars 3.07 a share, based on net revenues of Dollars 747.8m, up from Dollars 578.2m in 1990. A string of Wall Street firms has reported dramatically-improved profits for the quarter, a result of the boom in New York share prices, the big rise in trading activity, and the recovery in the underwriting of new stock and bond issues. For Salomon and Morgan Stanley, the main factor behind the improvement was the large rise in revenues from principal trading activities, especially stocks and bonds. At Salomon, income from principal transactions rose nearly 50 per cent to Dollars 968m on the back of strong earnings from proprietary trading and market-making in equities, mortgage-backed securities, corporate bonds and government issues. Overseas earnings were also healthy, especially on European fixed-income securities and Asian equities. Investment banking revenues rose by Dollars 15m to Dollars 99m at Salomon, primarily due to a doubling in business from new issues of corporate stocks and bonds, high-yield debt and mortgage-backed securities. The two areas where Salomon performed less impressively were real estate and Phibro Energy, the company's oil trading subsidiary, which posted pre-tax earnings of Dollars 5m, against Dollars 7m a year earlier. The cost of moving to a new headquarters in Manhattan, and an increase in benefits and bonuses paid out alongside higher profits, pushed Salomon's non-interest expenses up to Dollars 696m, against Dollars 489m a year earlier. The earnings picture was similar at Morgan Stanley, where a strong performance from global sales and trading activities, particularly in fixed income, equities, foreign exchange and commodities, lifted revenues from principal transactions to Dollars 392.6m, up from Dollars 277.7m in 1990. Income from investment banking business rose 14.5 per cent, with increased debt and equity underwriting volume offsetting a decline in financial advisory activity. A 33 per cent rise in compensation and benefits expenses to Dollars 373.9m accounted for the bulk of the increase in total outgoings at Morgan Stanley, which totalled Dollars 544.2m in the quarter, up from Dollars 436.6m at the same stage a year ago. 
ID: 3597
HEADLINE: FT  24 APR 91 / International Company News: Generale de Banque lifts dividend after advance 
TEXT: GENERALE de Banque, Belgium's largest bank, yesterday announced net profits for 1990 of BFr8bn (Dollars 232m) a rise of 7.8 per cent above those of 1988, the last comparable year. Generale de Banque, whose 1989 results were depressed by heavy provisions against foreign loan losses, said despite continued problems due to the economic downturn in the US, deposits in Belgian francs grew by 8 per cent following Belgium's decision to tie its franc more closely to the D-Mark. Declaring a BFr5 increase in its dividend to BFr270 a share, Mr Jacques Groothaert, the bank's chairman, said that while the bank had made certain exceptional profits last year, from the sale of its stake in European American Bancorp and in Lease International, it also had to pay out BFr2bn last year towards redundancies, aimed at shedding some 1,500 staff by the end of this year. Mr Groothaert said Generale de Banque, which recently abandoned an ambitious cross-border merger plan with Amro Bank of the Netherlands, had no intentions of linking up with any Belgian bank at home. Groupe Bruxelles Lambert, one of the largest Belgian holding companies, yesterday announced consolidated profits for 1990 of BFr5.68bn, up from BFr4.25bn the year before. The results included capital gains from the sale of GBL's stake in Wagons-Lits, the Belgian tourism and hotel company, which was offset by an exceptional BFr3bn book loss from the deconsolidation of the US assets of the group. Much of this, BFr2.5bn, was 'purely a book-keeping loss' due to the accumulated depreciation of dollar assets since 1982. GBL raised its dividend for 1990 to BFr274-a-share, up from BFr215 the year before. Barco, the Flemish electronics group, has maintained its dividend of BFr26 a share, even though pre-profit tax for 1990 fell to BFr899m, from BFr1.22bn in 1989. The poorer profits reflected mainly the cost of acquisitions in the US and Europe. 
ID: 3598
HEADLINE: FT  24 APR 91 / International Company News: NEC says it is in talks over taking stake in Bull 
TEXT: NEC, the Japanese electronics company, yesterday agreed it was taking part in negotiations with Groupe Bull of France which could lead to NEC holding a stake in the state-owned computer manufacturer and a seat on the main board. NEC's acceptance of its involvement in talks implies it approves a profound restructuring plan prepared by Mr Francis Lorentz, Bull chief executive, designed to eliminate Bull's huge losses and return the company to profitability within three years. The plan involves sweeping away the company's untidy and inefficient structure and replacing it with a global operation comprising separate operational divisions handling manufacture and marketing for different regions. The Japanese company refused to comment on speculation that the stake could be as much as 10 per cent. The Japanese manufacturer supplies the loss-making French computer maker with large mainframe computers and has extensive links with it. Groupe Bull is NEC's principal marketing conduit to the West for its large machines. Talks have been going on for some months with a view to resolving the future of NEC's 15 per cent stake in Bull HN, a company set up in 1987 in which Groupe Bull held a 72.2 stake, NEC, 15 per cent and Honeywell of the US 12.8 per cent. Honeywell recently marked its final retreat from the computer business by selling its stake in Bull HN to Groupe Bull for an undisclosed sum. The success of Mr Lorentz' strategy depends on NEC's agreement to redeploying its stake in Bull HN into Groupe Bull. Senior government officials said Groupe Bull's losses - last year they amounted to some Pounds 700m (Dollars 1.2bn) - and its need for a foreign partner were big factors behind the Paris administration's decision early this month to allow private companies to take minority stakes in state-owned ones. The government would be relieved, sources suggest, to see Bull supported by such a strong partner as NEC. Observers had long speculated that Bull's problems would be the final element to force the government to loosen President Francois Mitterrand's three-year-old freeze on nationalisations and privatisations. This relaxation in the government's hold on state industry comes in the form of a decree, which paves the way for NEC to take a shareholding in Groupe Bull, as well as easing the way for foreign alliances currently being negotiated by two state banks. 
ID: 3599
HEADLINE: FT  24 APR 91 / International Company News: SKF dives 91.8% to SKr59m 
TEXT: SKF, the world's leading roller bearings manufacturer, recorded a 91.8 per cent slide in its first-quarter profits after financial items due to falling demand for its products. The drop was to SKr59m (Dollars 9.4m) from SKr721m for the January-March period of 1990. The company's net sales fell by 2.7 per cent to SKr6.92bn from SKr7.11bn. Income per share was SKr0.90 after tax, compared with SKr3.7 last time. The return on shareholders' capital for the most recent 12-month period was 2.9 per cent, compared with 7.3. At the end of March this year, SKF's production level was 20 per cent below what it was at the same time last year, with most plants operating well below capacity. SKF said its 60,000 workforce had been cut by 1,800 over the first three months of the year. Inventories were virtually unchanged as at the end of 1990, at 35.2 per cent. The company blamed the continuing fall in demand for its products in its biggest European markets as well as in the US and Brazil. SKF forecast continuing low demand over the next few months, with more costs incurred by a further reduction in manpower. The company said a further 4,000 to 5,000 jobs may have to go this year if weak demand for its products continued. Profits after financial items for SKF's bearings divisions fell to SKr77m, compared with SKr600m for the first quarter of 1990, although this year's first-quarter result was better than the SKr110m loss sustained by bearings in the fourth quarter of last year. Net sales were also down to SKr5.47bn, from SKr6.04bn. The company said bearings sales in the German car industry and in the Far East had been maintained. In its tools business, SKF suffered a SKr11m loss, compared with a SKr29m profit for the same period of 1990 and a SKr29m loss in the fourth quarter of last year. Tool sales increased to SKr597m in the first quarter from SKr368m last time. 
ID: 3600
HEADLINE: FT  24 APR 91 / International Company News: Loral ties up Dollars 182m sale to Europe group 
TEXT: LORAL, the US defence electronics group, yesterday completed the Dollars 182m sale of 49 per cent of its satellite business to three European partners. This concludes an agreement made in October with Alenia, the Italian state-owned aerospace group, plus Aerospatiale and Alcatel Espace, the French public and private sector aerospace companies. Space Systems/Loral makes communications and weather satellites, with 2,000 employees and sales of Dollars 350m last year. The four partners' combined forces represents one of the world's biggest civil communications and weather satellites groupings, with 7,800 employees and Dollars 1.5bn of joint turnover. The US satellite business, formerly part of the space systems division of the Ford Motor Company, was won by Loral in an auction last summer, against unsuccessful bids from rival teams including Aerospatiale and Alcatel. The completion comes days after the acquisition by Alenia and Aerospatiale of Boeing's De Havilland subsidiary in Canada, and underlines the growing ambitions of the two continental European aerospace manufacturers to break into the US and the specialised satellite markets. According to Alenia, the deal will help the three European companies provide turn-key communications packages, offering clients satellites, control units, earth stations and related services. The three European companies have worked together with the US group now owned by Loral for some time on commercial communications satellites, notably the Intelsat V series and three Arabsat models. They are currently involved in the joint development of the next generation of Intelsat VII satellites due to enter operation next year. Independently, Alenia, which was formed from the merger of the state-owned Aeritalia and Selenia aerospace and defence groups late last year, has sealed a number of international collaboration agreements in recent weeks as part of its own foreign expansion drive. 
ID: 3601
HEADLINE: FT  24 APR 91 / International Company News: Earnings stagnate at Matra 
TEXT: MATRA, the French missiles and electronics group, yesterday reported that profits stagnated last year on a gentle increase in orders and sales. Net earnings were FFr606m (Dollars 101.89m), barely changed from the FFr605m recorded in 1989, on turnover up 10 per cent at FFr24.3bn from FFr22.1bn. The group received FFr26.3bn of orders last year, against FFr24bn in 1989. Space and defence, the largest division, which makes missiles, defence electronics and satellites, saw its turnover rise from FFr8.4bn to FFr10.3bn. This includes the first FFr4.5bn contribution from Matra Marconi Space, the 51 per cent owned space equipment company. The transport and car division, which produces the recently re-launched Espace for Renault and makes urban railways and automotive electronics, reported sales of FFr8.1bn, representing 34 per cent of group turnover. 
ID: 3602
HEADLINE: FT  24 APR 91 / International Company News: Spanish utilities propose Dollars 5bn power merger 
TEXT: THE TWO biggest private sector electricity utilities in Spain, Hidrola and Iberduero, are in 'advanced and serious' negotiations to create a new company that would make it one of Europe's largest private utilities with combined generating capacity of some 14,000MW and a market capitalisation of more than Dollars 5bn. Representatives of the two companies met on Monday with the Ministry of Industry and Energy to discuss the proposals, which could involve a full merger or the creation of a joint holding company. The proposals have been prompted by government plans to radically re-design and streamline the electricity sector. Madrid wants to take the country's 12 generators - most of which also control their own distribution networks - and create just two or three groups. Ideally, it would then hand over nationwide distribution to a single company which would be able to buy electricity from, and sell it to, Spain's neighbours in the European single market after 1992. The big private utilities - Hidrola, Iberduero, Sevillana and Union Fenosa - have become alarmed at the prospect of being pressed by the government into arrangements and mergers that do not suit them. They have been desperately trying to come up with their own plans to pre-empt the government's plans. The commotion sweeping the sector - the second biggest on the Madrid Stock Exchange after the banking industry - has been compounded recently by aggressive corporate raiding by the state-controlled generator, Endesa, the country's biggest generator, from which the private utilities are obliged to buy what they claim is overpriced power. Endesa's acquisitions include 10 per cent of Sevillana, the big Andalucian utility in 1989, and, this year, 80 per cent of Electra de Viesgo in the north, and smaller stakes in Fecsa, the Catalan utility, and Union Fenosa, which also operates in northern Spain. 'This is little more than nationalisation,' said a senior Spanish banker involved in the industry. Spanish banks own stakes in most utilities and vote up to 40 per cent of utility shares using proxy votes at shareholder meetings. Analysts believe Endesa may be accumulating the stakes to get into distribution or to use in an eventual swap of assets which the government might order to facilitate its reorganisation. At the heart of the debate is a highly complex system of compensations erected by the government in 1987 to keep tariffs standard nationwide. This assists high-cost producers by forcing efficient generators to distribute a share of their income around less fortunate operators. Endesa, probably reflecting government plans, says it wants three groups created, with Hidrola and Iberduero and itself leading them. This would leave Endesa free to take control of Sevillana, Fecsa and Union Fenosa. A combined Hidrola and Iberduero, which would bring together Iberduero's strong hydro-electrical assets and more modern conventional generating plant at Hidrola, would pose a strong industrial threat to Endesa's vision. Combined generating capacity would be close to that of the newly-created PowerGen in the UK. Total shareholder equity in Hidrola and Iberduero would be more than Pta1,000bn (Dollars 9.2bn), compared with the Endesa group's current Pta472bn. Combined long-term debt, though, would total Pta1,300bn, against Endesa's current Pta450bn. The Energy Ministry, which is designing a new national energy tariff plan to coincide with the reorganisation of the sector in the next few months, could block a merger simply by threatening it with unprofitable compensation arrangements even though it seems unlikely to drop its unified tariff. Madrid, however, is loathe to be seen to be over manipulative of private sector companies and may give it the green light if, in return, shareholders in Sevillana, Fecsa and Union Fenosa can be persuaded to ease Endesa's entry as the other main controlling force in the sector. 
ID: 3603
HEADLINE: FT  24 APR 91 / International Company News: Eridania down despite improved sales 
TEXT: ERIDANIA, the agro-industrial subsidiary of Italy's Ferruzzi group, suffered a fall in consolidated net profits to L230bn (Dollars 176m) last year from L298bn in 1989, writes Haig Simonian. The decrease, which partly stemmed from a drop in net extraordinary items to L61bn from L150bn in 1989, came despite a 2.9 per cent increase in sales to L9,165 from L8,909. Net profits at parent company level fell to L60bn from L68bn in 1989. Eridania, which earlier this month announced a rights issue of up to L281bn, is paying an unchanged dividend of L240 for ordinary shares and L270 for savings shares. The group, which last year raised its share of national sugar production in Italy to almost 37 per cent, said dry weather conditions in Europe had combined with the Gulf crisis and the rise in the value of the dollar to make business conditions more difficult last year. However, net operating profits rose by 8.8 per cent to L594bn. The company said it expected improved results for the current year, both in terms of operating earnings and sales. 
ID: 3604
HEADLINE: FT  24 APR 91 / UK Company News: Doctus shares fall 8p on profit warning 
TEXT: DOCTUS, the management, personnel and marketing consultancy, yesterday issued a profit warning and said it was reviewing the marketing element of its business - which was beefed up under two years ago through the Pounds 40m merger with Prospective Group. Doctus's share price fell 8p to 39p, compared with its 12-month high of 138p last May. The group also announced that the roles of chairman and chief executive were to be split. Mr Brian Blake would continue as chairman and Mr Alan Greenough, who joined the board last October, would take the latter post. A non-executive deputy chairman was also about to be appointed. Mr Blake, who said the management changes were not connected with the weaker performance, said the group's interim pre-tax profit to March 31 would be 'quite a bit below' last year's Pounds 4.1m. The Gulf war and downturn in the UK economy had led to 'a decision paralysis' and the cancellation of some orders. Trading had suffered particularly in January and February. For the full year brokers' forecasts of Pounds 10m-Pounds 12m (Pounds 11.4m) would not be met, although trade had picked up since the first half. The group was about to announce disposals that would reduce year-end debt of Pounds 25m. Its review of strategy included considering whether or not to keep the marketing activities, which accounted for 60 per cent of operating profit last year. Prospective, formerly known as Pineapple because of its roots in the eponymous dance studio, was mostly marketing orientated. Mr Blake said the decision to review this side of the business did not mean that Prospective - acquired for shares, but bringing in substantial debt - had been a bad buy. If parts were put up for sale, they would only go if the prices were right. Marketing's performance had been flat last year compared with more than doubled profit growth at the management and human resources consultancies. 
ID: 3605
HEADLINE: FT  24 APR 91 / UK Company News: McKechnie slides to Pounds 10.5m as Australian recession hits sales 
TEXT: TAXABLE PROFITS continued to slide at McKechnie, the West Midlands-based plastic components, specialist engineering and household products group. For the half year to January 31 1991 profit came to Pounds 10.5m, down from Pounds 12.7m, which itself was down some 27 per cent on the 1988-89 first half. Earnings per share for the latest period were 8.8p (10.5p). The interim dividend, however, is maintained at 5p. That reflected a degree of optimism about the prospects for the second half. Indeed, Mr Jim Butler, chairman, said not only that UK companies, even those in the sluggish automotive sector, were reporting 'steadier trading conditions' but also 'it is tempting to believe that the worst of the recession is over.' At the same time group companies in the US had growing order books. However, that was offset by continuing problems in Austral-asia. Recession in Australia led to lower demand and put pressure on margins during the first half. Exchange rate movements took Pounds 500,000 out of operating profits; those factors were the most significant in the decline of group profits. UK and US operations, helped by cost cutting and product improvement, managed to hold their earnings levels of 1989-90. Return on assets and on sales fell largely because of the acquisition of Engineered Custom Plastics in the US. That company had not been operating profitably but should be by the end of the year. Turnover dropped to Pounds 153.6m (Pounds 178.6m), partly because of the Australian experience. Just as important, however, was the re-positioning of the group, its greater concentration on plastics and specialist engineering, brought about by the sale of its UK metals operations, which had provided a quarter of operating profits. The impact of the sales will be spread over the whole year. During the second half turnover and profits again would be affected but interest charges would be lower. The sale of the metals companies - McKechnie Extruded Products, Worcester Parsons and Stelco - would realise Pounds 53m cash which was initially being used to strengthen the balance sheet. Gearing would be reduced to less than 10 per cent by the end of the financial year. 
ID: 3606
HEADLINE: FT  24 APR 91 / UK Company News: Interest boost helps Farnell to Pounds 33.8m 
TEXT: STRONG GROWTH in interest income helped Farnell Electronics, the manufacturer and distributor of electrical and electronic equipment, increase pre-tax profits by 10 per cent from Pounds 30.64m to Pounds 33.78m in the year to February 3. Farnell, which had cash balances of Pounds 29m at the year-end, benefited from high rates available in the money markets and interest income rose from Pounds 1.45m to Pounds 3.8m. Turnover fell from Pounds 169.7m to Pounds 163.8m, mainly because of the disposal of AC Farnell, a wholesale distributor of brown goods, sold in March last year. Farnell's main division, electronic component distribution, increased operating profits from Pounds 21.33m to Pounds 23.43m on turnover up from Pounds 97.36m to Pounds 104m. Electronic equipment manufacturing saw operating profits fall from Pounds 8.87m to Pounds 7.12m on turnover of Pounds 60.3m, down from Pounds 65.46m. Earnings per share increased by 12 per cent to 16.3p (14.5p). The directors are recommending a final dividend of 3p, bringing the total for the year to 5.5p, a rise of 15 per cent. Mr Henry Elstone, finance director, said the group's German subsidiary made a loss of Pounds 2m, but its development was continuing and he was looking for a good return in the current year. Mr Elstone said the group had been hit by recessionary conditions in the UK, but was confident that it would be able to maintain its 25-year record of growth in earnings per share. Farnell's Australian subsidiary made a small net profit during the year, which Mr Elstone said was a commendable performance in view of the difficulties of the economic climate there. COMMENT These are good results in view of the depth of the recession in the UK economy, which still accounts for the vast majority of the Leeds-based group's business. Farnell did well to increase profit margins slightly in its already extremely lucrative distribution business, but holding the erosion in manufacturing margins to 11.8 per cent, compared with 13.6 per cent in the previous year, is just as impressive. The main concern in the market is that Farnell will use its cash pile to pay too much for the distribution activities of STC, the British telecommunications group bought last year by Northern Telecom of Canada. However, paying over the odds would not be in character for a canny northern management team. Forecast flat profits of Pounds 33.5m put the shares, up 4p yesterday to 206p, on a prospective multiple of just over 12, in line with its sector. That seems undemanding, particularly if the German investment comes good, but the shares are unlikely to advance until the group's acquisition intentions become clearer. 
ID: 3607
HEADLINE: FT  24 APR 91 / UK Company News: Flat showing as FR dips to Pounds 21.3m - Worldwide defence cuts and project delays take their toll 
TEXT: FR GROUP, the aviation products group which makes 65 per cent of its sales in the defence sector, reported flat profits and earnings for 1990. Pre-tax profits were Pounds 21.3m (Pounds 22.6m), on turnover of Pounds 169.2m (Pounds 153.8m). Earnings per share came to 20.07p (20.75p). The final dividend is unchanged at 4.14p maintaining the total at 6.37p for the year. The results came against a worldwide background of cuts in defence procurement. They were also specifically affected by losses at WES, the con-tainers and general engineering division. Without these, profits would have been slightly ahead, said Mr Giles Irwin, finance director. He said FR had now 'taken the knife' to WES, which had been integrated into Flight Refuelling, the dominant air-to-air refuelling pod division. Mr Irwin said this division put in a good performance as did the other larger operations - notably FR Aviation, which provides training and maintenance to the military. However, group performance had been, and continued to be, affected by delays in sizeable projects. Supplies of refuelling pods to the US airforce, for instance, had been delayed owing to a change in specification. There had been cost overruns on the Phoenix air vehicle project where GEC is the main contractor. Mr Irwin said the Gulf conflict had produced a 'number of small value items' for FR but nothing significant in a group context. COMMENT The long-running sore of delayed contracts continues to trouble FR along with other companies in its sector. The current year is promising no relief from the complaint, especially ahead of the white paper in June, which is expected to clear up deep uncertainty about how big the British armed forces are going to be in the future. That means FR is set to complete its third year of broadly flat profits, perhaps making no more than Pounds 20m pre-tax. This puts the shares on a prospective p/e of about 8.5 while the yield is some 5 per cent. The shares are well down on levels achieved at the start of last year but still look fully-valued for the moment at 160p. It is reasonable to expect a recovery in 1992; but there is no near-term relief for long-suffering investors who have now been waiting for four years for FR to recover the momentum of its earlier career. 
ID: 3608
HEADLINE: FT  24 APR 91 / UK Company News: McCarthy &amp; Stone losses rise to Pounds 6.4m 
TEXT: MCCARTHY &amp; STONE, the UK's biggest builder of retirement homes, announced deepened losses of Pounds 6.4m (Pounds 5.7m) on turnover down from Pounds 38.3m to Pounds 33.1m for the six months to end-February. Basic losses per share were 14.4p (9.6p). The interim dividend, however, is maintained at 0.5p. Mr John McCarthy, chairman, said he remained cautious about the level of sales for the rest of the year. Volumes were virtually unchanged during the first half with 404 units sold compared with 408. Reductions in working capital meant group borrowings, excluding a convertible loan stock of which Pounds 14.8m is outstanding, fell from Pounds 90.4m to Pounds 87.4m, cutting gearing to 96 per cent. Inclusive of the convertible, gearing was 112 per cent. The half-year period was affected by a drop in the contribution from land sales and other operating income, including sale of fixed assets and commissions earned by Peverel, the management company. The company said land sales resulted in a profit of Pounds 200,000, down from Pounds 500,000, while other operating income accounted for Pounds 1.1m, against Pounds 2.6m. In anticipation of an upturn next year, the company has recommenced construction on a number of sites. Stocks at February 28 comprised a land bank of 2,189 units plus 253 units at various stages of construction and 1,413 available for sale. Interest took Pounds 7.3m (Pounds 9.1m). The tax credit arising on losses is not yet being accounted for. COMMENT There was some encouraging news in these results in that, after a very sharp fall last year, volumes appear now to be trundling along the bottom. That still leaves all those long-term investors who bought into McCarthy &amp; Stone a few years ago, when sheltered housing was all the rage, almost as woeful as the elderly would-be customers of the company who found they could not sell their existing homes. Still, the company is a reasonable play on the expected recovery in its market niche. However, it should be remembered that as a longer-term strategy McCarthy has turned its back on nursing homes - thought by many to be coming thing as the elderly survive for ever more years - having complained it could not make decent returns. After losing Pounds 10.8m last year, it should produce a deficit of about Pounds 8m this time before the pre-tax line moves back into the black in 1992. The shares presented a buying opportunity at a low of 33p last December, but that evaporated with a subsequent sharp recovery. Yesterday they stood at just above 90p. 
ID: 3609
HEADLINE: FT  24 APR 91 / UK Company News: Coats extends offer after only 0.69% acceptance 
TEXT: COATS VIYELLA, the textile group which is in the throes of a Pounds 194m hostile bid for Tootal, announced yesterday that it was extending its offer after receiving acceptances representing 0.69 per cent of its target's ordinary shares. Coats, which already owns 85.65m ordinary shares, or 29.41 per cent of Tootal's equity, has received acceptances for a further 2.02m shares. It also has acceptances for 3.67m (62.35 per cent) of the preference shares. This means the level of acceptances received by Coats from Tootal shareholders has fallen slightly since the previous closing date. Tootal yesterday issued a statement claiming this meant its arguments were 'winning the day'. The Pounds 194m bid has effectively been put on ice until May 10 while the Office of Fair Trading considers whether to refer it to the Monopolies and Mergers Commission. Tootal may then issue additional information, such as a profits forecast, and Coats could mount a second offer. Tootal's shares were unchanged at 76p yesterday, still higher than Coats' offer of 65p cash. Coats' shares slipped 2p to 137p. 
ID: 3610
HEADLINE: FT  24 APR 91 / UK Company News: Ptarmigan dives into the red 
TEXT: Ptarmigan Holdings, a maker of sausage casings and cake decoration products, reported a pre-tax loss of Pounds 6,000 for the half year to December 31 1990, against a Pounds 263,000 profit last time. Operating profits dropped from Pounds 305,000 to Pounds 167,000, but these were wiped out by increased interest charges of Pounds 173,000 (Pounds 42,000). There was no tax (Pounds 84,000 charge) and losses per share came out at 0.06p (1.83p earnings). Extraordinary charges, related to the closure costs of the hatchery operation, totalled Pounds 306,000 (Pounds 77,000). 
ID: 3611
HEADLINE: FT  24 APR 91 / UK Company News: Growth continues with 39% rise at QS 
TEXT: Growth continued at QS Holdings, the Sussex-based clothing retailer, in the second half of the year resulting in an overall 39 per cent increase in pre-tax profits. On turnover of Pounds 42.34m (Pounds 35.67m) profits for the 12 months to January 25 were Pounds 7.15m (Pounds 5.14m). There were non-recurring items taken above the line of Pounds 55,000 (Pounds 382,000). Earnings per share were 11.65p (9.11p) and a final dividend of 3p is proposed making 4.31p for the year. The company came to the market in March last year. 
ID: 3612
HEADLINE: FT  24 APR 91 / UK Company News: Cosalt shows sharp decline to Pounds 1m 
TEXT: In the half year ended March 3 1991, 'a most difficult period', Cosalt returned pre-tax profits down Pounds 617,000 at Pounds 1.01m. Outlining the reasons, Mr Edward Brian, chairman, said the fishing industry remained depressed, the caravan companies had to reduce working hours to allow overproduction to be absorbed by the market, and the workwear side, which manufactures for the rental trade, received fewer orders as a consequence of the recession. The interim dividend is held at 4.25p, payable from earnings per share of 5.9p (9.36p). 
ID: 3613
HEADLINE: FT  24 APR 91 / UK Company News: Capital spending hits VTR profit 
TEXT: Higher interest charges made inroads into interim profits at VTR, the USM-quoted video editing and audio-visual house, resulting in a pre-tax figure of Pounds 432,000, against Pounds 601,000. Mr Philip Lovegrove, chairman, explained that the rise in charges from Pounds 3,000 to Pounds 124,000 was a direct consequence of the capital investment programme. No further large capital expenditure was planned for the rest of the year. Mr Lovegrove said both Video Tape Recording and AV Department increased their revenue, despite difficult trading conditions. Turnover rose to Pounds 3.18m (Pounds 2.71m). Earnings per share came to 3.7p (5p). The interim dividend is raised to 1.2p (1.1p). 
ID: 3614
HEADLINE: FT  24 APR 91 / UK Company News: Conrad Continental losses rise to Pounds 0.68m 
TEXT: Conrad Continental, which runs leather clothing, fashion accessories and the Bobby Charlton football coaching operations, increased losses from Pounds 283,000 to Pounds 680,000 in 1990. Turnover fell to Pounds 12.06m (Pounds 13.12m) and the operating profit was only Pounds 9,000 (Pounds 302,000). The situation was exacerbated by higher interest charges of Pounds 481,000 (Pounds 278,000), but offset to some extent by a reduction in exceptional charges to Pounds 208,000 (Pounds 307,000). Losses per share were 3.51p (1.2p). There is no dividend (interim 1p). 
ID: 3615
HEADLINE: FT  24 APR 91 / UK Company News: Merlin Intl probe completed 
TEXT: The Isle of Man Fraud Squad announced yesterday that it had completed its investigation into Merlin International Properties and had found no evidence of any irregularity that would justify further inquiries, writes Sue Stuart from Douglas. The investigation, which began a week ago, centred on a set of 19 questions concerning the running of the company. The questions were posed to the island's Financial Supervision Commission by one of the company's minor shareholders following the February announcement of a Pounds 26m loss. 
ID: 3616
HEADLINE: FT  24 APR 91 / UK Company News: Near Pounds 1m turnround puts UPL in black 
TEXT: UPL Group, an importer and distributor of speciality foods, returned to profit under its new chairman Mr Arne Bergbrant and his management team. For the year to January 31 1991 the group made a profit of Pounds 34,000 from turnover of Pounds 9.03m, compared with a loss of Pounds 931,000 on sales of Pounds 14.02m. Earnings per share were 0.34p (losses 19.75p). 
ID: 3617
HEADLINE: FT  24 APR 91 / UK Company News: Allied London in the red after provision 
TEXT: An exceptional provision of Pounds 8m, made to reflect the depressed state of the housing market, left Allied London Properties, the housebuilder and property investor, Pounds 5.35m in the red for the six months to December 31. Comparable pre-tax profits were Pounds 3.87m. The commercial property investment portfolio produced a 'creditable performance' according to Sir Geoffrey Leigh, chairman, with rental income 19 per cent ahead to Pounds 7.3m (Pounds 6.1m) mainly due to rent reviews settled at 'satisfactory levels'. Losses per share amounted to 9.43p (earnings 2.5p) but the interim dividend is held at 1.075p. 
ID: 3618
HEADLINE: FT  24 APR 91 / UK Company News: British Fittings up at Pounds 6.2m 
TEXT: BRITISH FITTINGS Group, the West Midlands-based pipeline equipment distributor and manufacturer of water pumps, turned in pre-tax profit for 1990 ahead 7 per cent at Pounds 6.21m on turnover 22 per cent up at Pounds 88.72m. The greatest contribution came from the pipeline distribution division, where the full impact of the recession was not felt until December and an operating profit of Pounds 6.95m (Pounds 6.48m) was achieved. The water products division experienced particular problems owing to customers inability to raise funds, but nonetheless turned in an increased operating profit of Pounds 1.88m (Pounds 1.36m). A final dividend of 5.975p is recommended, making 7.35p (7.025p) for the year. Earnings per share came out at 19.74p (19.45p) fully diluted. 
ID: 3619
HEADLINE: FT  24 APR 91 / UK Company News: Scale back urged if Scottish electricity sale oversubscribed 
TEXT: THE GOVERNMENT is being urged not to offer shares in the two Scottish electricity companies to overseas institutions so as not to disappoint individual Scottish investors if the issue is heavily oversubscribed. Torrie &amp; Co, the Edinburgh stockbroker which handles large numbers of individual applications for privatisation shares, said it believed the issue will be so popular that it risks embarrassing the Scottish Conservative party and is calling on its customers to lobby MPs to block a foreign sale. 'It will be politically disastrous to sweet-talk the canny Scottish investor into applying for sensible numbers of shares only to be offered nominal allocations,' the broker said, especially if it is then perceived that Japanese, American and European institutions have made 'guaranteed profits.' About 20 per cent of recent privatisation issues, including the regional electricity companies and the generators, have been sold to foreign institutions. The government has appointed advisers to prepare the way for offering shares in Scottish Power and Scottish Hydro-Electric to institutions in Europe, Japan, the US and Canada, but no decision has been taken on whether to sell the shares overseas. Torrie said interest among Scottish electricity customers was running high. The issue is expected to raise between Pounds 1.5bn and Pounds 2bn. 
ID: 3620
HEADLINE: FT  24 APR 91 / UK Company News: Edinburgh Inv net assets edge up 
TEXT: the second largest in the UK - increased its final dividend by 10 per cent to 4.95p despite a rise of only 0.8 per cent in net asset value per share in the year to March 31. The trust had net assets of Pounds 771.2m at its year end, equivalent to 262.5p per share, against 260.5p per share previously. The increase in net assets lagged behind the FT-A All-Share Index - which rose by 7 per cent over the same period - because of the overseas weighting of the trust. At March 31, 33 per cent of the portfolio was invested outside the UK, split between continental Europe (11.5 per cent), Japan (8.8 per cent), United States (8.3 per cent) and Far East (4.4 per cent). Edinburgh has debenture debt of Pounds 105m, most of which is invested in the markets. The total dividend for the year is 7.7p (7p) based on earnings per share of 8.15p (7.84p). Although net asset value underperformed against the index, a narrowing in the discount to net asset value of the share price - from 19.4 per cent to 14.4 per cent - helped the shares to perform almost in line with the All-Share Index over the year. 
ID: 3621
HEADLINE: FT  24 APR 91 / UK Company News: Bridgend considers offer in Cowan de Groot battle 
TEXT: A BATTLE for control of Cowan de Groot is in the offing after Bridgend Group, the distribution, leisure and property concern, announced it was considering making a cash offer for the toys, electrical components, and household goods company. Bridgend had earlier purchased 1.15m shares in Cowan, lifting its holding to 9.98 per cent. The move comes as a response to last week's agreed share-exchange offer from Wilton Group, chaired by Mr Michael Buckley, who also heads Cowan. Bridgend had earlier unveiled a 74 per cent expansion in taxable profits for 1990. The outcome - Pounds 1.06m against Pounds 608,000 - included a nine-month contribution from the Woodington leisure and property group purchased in March 1990. Interest charges took more at Pounds 819,000 (Pounds 549,000). Turnover totalled Pounds 7.85m (Pounds 3.87m on continuing operations). Earnings per share on the sharply increased capital emerged at 3.5p (3.1p). A recommended final dividend of 0.8p brings the total for the year to 1.2p (1p). 
ID: 3622
HEADLINE: FT  24 APR 91 / UK Company News: Tarmac sinks 49% to Pounds 190.7m - Sharp fall likely in current first half as property recession continues 
TEXT: THE DEEP recession in UK and US housing and commercial property markets caused pre-tax profits at Tarmac to fall by 49 per cent, from Pounds 377m to Pounds 190.7m, last year. Sir Eric Pountain, chairman of Britain's biggest construction and building materials group, warned that profits would also fall sharply in the first half of this year. Sir Eric said January and February had been particularly bad months for UK housebuilding and construction material sales. These had been further depressed for part of that time by severe winter weather. He said it would be difficult, although not impossible, to reover the first half downturn during the final six months of the year: 'Much will depend upon the timing and the pace of recovery in the UK housing market. There has been a slight improvement in sales since interest rates started to fall in February.' said Sir Eric. The share price fell by 16p to 229p following the warning. Sir Eric said Tarmac's markets last year had been the toughest for more than a decade, reflecting the severity of the economic downturn in the UK and US. Group operating margins fell from 12.7 per cent to 7.2 per cent as sales volume and prices came under severe pressure in most divisions. Only the construction division achieved an increase in operating profits - ahead 30 per cent to Pounds 40m helped by an increase in UK road contracts. In contrast, housing profits collapsed 63 per cent from Pounds 183.5m to Pounds 67.3m. The group blamed expensive land bought in 1987 and 1988 for a sharp fall in margins. The number of houses sold slipped from just over 12,000 in 1989 to 11,209 last year. The average price of a Tarmac home had remained static at about Pounds 75,000. Sir Eric said this masked a price reduction in real terms as the group had built fewer one bedroom homes. Profits from UK quarries fell by 20 per cent to Pounds 80m. Tarmac said volume sales of aggregates and ready-mix concrete had been maintained at the expense of margins as prices had fallen. Black top sales, however, had increased reflecting the rise in road construction. Profits from sales of other building materials fell by 42 per cent to Pounds 17m. Sales of brick and aerated blocks were hit particularly hard by the decline in UK housebuilding. Industrial product profits fell by 15 per cent to Pounds 38m while commercial property profits declined by 40 per cent to Pounds 12.7m. There was no comfort in the US where profits halved from Pounds 43.7m to Pounds 20.8m. Before currency translations profits were down by 43 per cent to Dollars 40.1m. As in the UK, volume sales and prices were under pressure in many of Tarmac's US markets. Earnings per share fell from 32.3p to 16.7p leaving total dividends unchanged at 11.25p, covered 1.5 times. The final distribution is held at 8.25p. See Lex 
ID: 3623
HEADLINE: FT  24 APR 91 / UK Company News: Budgens board examines cost of restructuring proposals 
TEXT: BUDGENS, the troubled chain of neighbourhood grocery stores, is asking Charterhouse to act as its financial advisers in addition to Kleinwort Benson after receiving restructuring proposals from a group of institutional shareholders. These proposals called for the removal of Mr John Fletcher as chairman and the appointment of new directors. Mr Martin Sorrell, chief executive of the WPP marketing services group, will now play a pivotal role in determining the Mr Fletcher's future. As the only non-executive director on the Budgens board, Mr Sorrell will have to consider the merits of the proposals put to the company by IEP Securities, Electra Investment Trust, and Gartmore Investment Management which between them account for 27 per cent of its equity. The proposals also envisaged bolstering the board through the appointment of three external executives: Mr John von Spreckelsen and Mr Christian Williams, who previously worked at Bowater Freight Services, and Mr Graham Rigby, an accountant. Budgens is currently inquiring into the experience of the three executives and considering what expertise they could bring to the company. The board is also exploring its options concerning the future funding of the company and how it can reduce its borrowings of Pounds 30m. One factor that will weigh heavily with the Budgens board is the cost of replacing Mr Fletcher. He has only recently signed a five-year contract and his pay last year amounted to Pounds 145,000. Coupled with pension payments it is conceivable that Mr Fletcher could receive more in a compensation package for loss of office than the shareholders will gain this year in dividends. But the three executives who may join the board will not come cheap as they are asking for a collective salary package of about Pounds 300,000 plus a number of share options. The prime mover behind the proposals is IEP Securities, the investment vehicle founded by Sir Ron Brierley, which bought into Budgens at the time of the company's merger discussions with William Low, the Scottish grocery chain, in 1989. IEP later bought further shares to average down the cost of its shareholding but it is still sitting on a huge loss. The average price it paid for its shares is estimated at 85p compared with Budgens' closing share price of 46p yesterday. The Budgens board will have to be careful not to be seen to favour one group of investors - however powerful they may be - above the other 23,000 shareholders. 
ID: 3624
HEADLINE: FT  24 APR 91 / UK Company News: Brent Walker finalising its 1990 accounts 
TEXT: BRENT WALKER, the heavily-borrowed leisure group, is this week finalising its accounts for 1990, a period which saw the group's stop-gap refinancing of its Pounds 1.4bn of debt. The preliminary results are expected in the first half of May with the full accounts published later in the month. Brent Walker is still working with its bankers on a restructuring of its liabilities on a long-term basis, better to match its assets and trading prospects. It is likely that the accounts will be qualified as have those of other companies involved in financial restructurings. Generally, auditors have said that the accounts are prepared on the assumption that the restructuring is successful. Weatherall Green &amp; Smith, the group's property valuer, is understood to have completed a revaluation of the property assets, which will have taken account of the fall in the property market since the last valuation at the end of 1988. Directors may argue with the group's audit committee over how much of the revaluation they incorporate in the accounts. Bankers, however, will look at the actual valuation when assessing the group's ability to carry debt, and will also look at the sale value of whole businesses rather than the value put on individual properties. The group's bankers are also due to see a draft report on the company by Touche Ross, the accountants. However, this report is expected to be revised as the company has reworked its cashflow forecasts. It will eventually form the basis of the restructuring. The task facing Brent Walker and its banks is to raise cash and to prune the business to produce a company capable of servicing its debt. To this end it has been discussing the sale of various assets with interested buyers for some months. Allied-Lyons, the brewing, wines and spirits, and food group, confirmed yesterday that it was in talks with Brent Walker over its brewing and pub interests. It added that an internal memo which had been leaked to the press 'represented an analysis of commercial considerations to be addressed and does not represent any form of definitive agreement'. Allied said that it would be two or three weeks before the two sides could establish whether there might be a deal. Brewing analysts pointed out that following the government's proposals for a shake up in the industry, the sector was in a state of flux. One said 'everyone is talking to everyone else about everything'. One suggestion was that Allied could agree to supply Brent Walker's 1,122 pubs, putting extra volume through its own six breweries, which could be very profitable. This might lead to the closure of Brent Walker's brewery. Brent Walker's brewing and pub interests largely relate to its acquisition of J W Cameron and Tollemache &amp; Cobbold for Pounds 324m in December 1988 from the Barclay brothers. This purchase included two breweries and 855 pubs. The Tollemache brewery in Ipswich was closed in 1989 and production centralised at Cameron's Lion Brewery in Hartlepool. Brent Walker already buys in a sizeable proportion of its beer requirements. 
ID: 3625
HEADLINE: FT  24 APR 91 / UK Company News: Decline in financial printing hits St Ives 
TEXT: CITY FINANCIERS are not alone in mourning the dearth of contested takeover bids. St Ives, the UK's largest independent printer, reported a 26 per cent fall in pre-tax profits from Pounds 13.59m to Pounds 10.06m in the six months to January 31, almost entirely due to the fall in financial printing. Mr Robert Gavron, chairman, said the company had experienced the worst trading conditions in 30 years. Turnover on financial printing had halved and healthy profits in that division had turned into a small loss. Group sales as a whole fell 8 per cent to Pounds 108.05m (Pounds 117.1m). Earnings per share fell from 8.3p to 6.5p fully diluted but the interim dividend is maintained at 1.5p. The group had no net debt at the half way stage, but gearing was expected to rise to 15 per cent by the year end as a result of completing a Pounds 127m capital programme on new technology and consolidating printing at fewer plants. During the period, St Ives picked up the printing of 50 new titles. About 40 titles had been lost but as most of these had closed rather than gone to competitors market share had increased. Mr Gavron said that despite a pick up in financial printing as result of the recent spate of rights issues, magazine advertising was still sluggish and that division had further to fall before business improved. COMMENT Given the industry is printing 10-20 per cent fewer pages compared with six months ago, a 26 per cent fall in pre-tax profits is neither surprising nor a particularly poor showing. But things are likely to get worse before they get better in the main consumer magazines, offset only partly by an upturn in financial printing. While new printing technology and cost cutting will put St Ives in good shape for the next up-cycle, looming opportunities in Europe may not be wholly welcomed in the City. St Ives seems an obvious partner for VNU, the Dutch publisher that says it wants to spin off its printing arm, or Bertelsman of Germany if it goes the same way. The possibility that such a partnership might require a call on shareholders for cash is likely to overhang the share price. This year pre-tax profits of Pounds 21.5m are expected, giving 14p per share. It looks fairly fully priced with a multiple of nearly 17 times earnings. 
ID: 3626
HEADLINE: FT  24 APR 91 / UK Company News: Conder sale set to raise Pounds 23m 
TEXT: The Conder Group is to raise a maximum of Pounds 23m from the sale of 61 per cent of Conder Products, which supplies petrol forecourt canopies. Conder Group will receive an initial Pounds 15m plus a performance related Pounds 8m. CIN Venture Managers will hold 56 per cent and the mangers will hold the other 5 per cent. 
ID: 3627
HEADLINE: FT  24 APR 91 / UK Company News: NatWest gloomy on first half 
TEXT: LORD ALEXANDER, chairman of the National Westminster Bank, warned yesterday that there would be no immediate improvement in the bank's performance because of the recession and continued high level of bad debts. However, the bank had taken several initiatives to cut costs which should begin to flow through in the second half of the year. This would be followed by significant improvements in 1992 and 1993. Lord Alexander told the annual meeting that NatWest was taking several initiatives to deal with problems which depressed last year's result, particularly at its two loss-making arms, County NatWest, the investment bank, and NatWest Bancorp, its US arm. The equities business of County had met 'all significant milestones' which were set for the first quarter of this year, and was well ahead of its plan to achieve satisfactory profitability. In February, Lord Alexander gave the business two years to get back in the black or risk closure. NatWest also announced the appointment to the main board of Mr Derek Wanless, chief executive of UK financial services. 
ID: 3628
HEADLINE: FT  24 APR 91 / UK Company News: UK market conditions push Ward down 31% 
TEXT: THE WARD Group, the steel and building components combine, blamed the worst UK market conditions in its 45 year history for a 31 per cent drop in pre-tax profits. For 1990 the profit came to Pounds 8.7m (Pounds 12.6m). The final dividend is 4.8p, for an unchanged 7.2p, payable from earnings of 25.2p (36.4p). Mr Nigel Forsyth, chief executive, said the 'bitterly disappointing' results would have been worse without the help of the European business, which remained relatively buoyant. Non-UK turnover increased slightly to Pounds 67m (Pounds 63m) while overall sales were down to Pounds 172.8m (Pounds 175.3m). The group was planning to expand further on the Continent, into eastern Europe and the Soviet Union, increasing those sales from 39 per cent of turnover to more than 45 per cent. It already has manufacturing plants in Belgium, France, Italy and Germany. However, Mr Forsyth warned that difficult market conditions would continue throughout the year. He could not see any improvement in overall profits until 1992. The slump in profits led to the company reducing its employees from 2,360 to 1,852. Gearing fell from 39 per cent to 26 per cent as borrowings were reduced from Pounds 10.3m to Pounds 7.4m. Interest payable amounted to Pounds 2.04m, covered five times by operating profit of Pounds 10.76m (Pounds 12.9m). The group continued its investment programme, spending Pounds 7m on developing new machinery and equipment. That brought the total invested over the past four years to Pounds 30m, and a further Pounds 8m is allocated for 1991. 
ID: 3629
HEADLINE: FT  24 APR 91 / Cannon St in Pounds 46m cash call 
TEXT: CANNON Street Investments, the debt-laden industrial holding company, is raising Pounds 46.7m net via a one for three rights issue, and a placing and offer of 25.7m convertible preference shares, in a move to slash its borrowings by more than 40 per cent. The rights issue of 25.69m new ordinary shares at 90p was at a discount to the closing price on Monday of about 10 per cent gross. The shares closed up 18p at 124p yesterday. The convertible preference shares, which are subject to clawback, have been conditionally placed at Pounds 1 per share with the Bank of Scotland. The fixed cumulative annual dividend on the convertibles is 9.75p (net) and the conversion price is 120p. Cannon Street's strategy is to buy smaller companies and develop them into larger groups for eventual flotation on the market. Mr Bill Hislop, chairman, said of the decision to launch a rights issue, placing and offering: 'A major consideration was that we will be able to float our businesses totally unhampered by gearing considerations.' The group announced its cash call on the market as it reported a 35 per cent fall in pre-tax profits from Pounds 26.5m to Pounds 17.3m for the year to December 31. Turnover rose from Pounds 228.86m to Pounds 281.42m. Interest charges for the year jumped from Pounds 2.06m to Pounds 8.47m while operating profits fell 6.8 per cent to Pounds 26.5m (Pounds 28.45m). The group increased its bank borrowings to fund investments in its leisure businesses. Since 1989, it has invested about Pounds 30m to expand its hotels and leisure division. The contribution to operating profits from this area rose from Pounds 2.6m to to Pounds 3.1m last year. Only the hotels and leisure and electronics distribution divisions increased operating profits. The business services division was stable but building and building services, food and drink, and home improvements saw operating profits fall. Cannon Street's results include a Pounds 700,000 loss representing its share of the losses of Betacom, the telecommunications company, in which it has a 29 per cent stake. Further extraordinary losses of Pounds 3.3m were related to bad debts and closure and rationalisation costs. Total borrowings were Pounds 106.5m at the year-end against net assets of Pounds 26.4m. Earnings per share fell to 17.21p (24.15p) and an unchanged final dividend of 5.5p was recommended, maintaining the total at 8.80p. Lex, Page 20 
ID: 3630
HEADLINE: FT  24 APR 91 / Construction group calls for Pounds 162m 
TEXT: TAYLOR Woodrow yesterday launched a one-for-four rights issue to raise Pounds 162.4m, joining the growing number of British construction companies seeking to take advantage of a weak property market Shareholders will be offered one new share at 200p for every four already owned. Since the beginning of January, British companies have sought to raise almost Pounds 3bn from rights issues. Just over Pounds 1bn of those issues came from construction and property groups. Overall, British companies sought only Pounds 4bn from rights issues in the whole of last year. Mr Peter Drew, Taylor Woodrow's chairman, said the group would use the proceeds of the rights issue to make 'selective acquisitions' in a weak residential and commercial property market. 'Most property and housing developers have been less able than Taylor Woodrow to withstand the burden of the current recession and, as a result, opportunities have arisen to acquire property and housing assets at favourable prices. 'A number of attractive opportunities have been identified and are receiving active consideration,' said Mr Drew. The group would consider buying companies as well as individual properties and development land. He said the board considered that a rights issue was the most appropriate way to raise funds to pursue investment opportunities and still maintain a strong financial base with gearing and interest cover at reasonable levels. 'It is certainly cheaper than raising debt at current rates of interest,' said Mr Drew. Net debt represents 41 per cent of shareholders' funds, according to the group. Taylor Woodrow's share price - after an initial slide of 14p - recovered to close only 2p lower at 251p last night. Hambros Bank said that sub-underwriting for the issue, which had been fully underwritten by the bank, had been completed satisfactorily. The group's cash call is the fourth-largest rights issue to be announced by a British company this year. The biggest was by Tesco, the stores group, which at the end of January announced a two-for-11 issue to raise Pounds 572m. Last month Bass, the brewery group, announced a Pounds 557m rights issue while Redland, the UK building materials company, sought to raise Pounds 280m from its shareholders. A common theme among issues from building companies has been the need to raise cash to prepare for recovery and to take advantage of the weakness of other groups. Most companies say, however, that opportunities to buy land for housing - the sector most likely to lead the recovery - have been limited. Taylor Woodrow, like other large UK construction groups, has been hit by the collapse in residential and commercial property markets. Last month the company announced a drop in pre-tax profits of 28 per cent last year to Pounds 83.4m - the first fall at the group for 30 years. It also revealed that the value of its commercial property portfolio had fallen from Pounds 801.9m to Pounds 646.1m during the 12 months to the end of December. The group is forecasting a total dividend of 9.5p for the current year, unchanged on last year. Lex, Page 20; Tarmac falls 49 per cent, Page 22 
ID: 3631
HEADLINE: FT  24 APR 91 / Kohl backs Berlin as new seat of government 
TEXT: CHANCELLOR Helmut Kohl yesterday pledged his support for Berlin as Germany's future seat of government. He said a move to Berlin, already the official capital, would need 10 to 15 years to complete and that Bonn should retain a number of important ministries, including defence. The chancellor's surprise decision will boost Berlin's chances of again becoming the seat of government. Bonn, Before his announcement, Bonn was thought to be favoured by a slim majority of members in the Bundestag, the lower house of parliament, and by most of the west German Lander (states). It was decided yesterday that the Bundestag will conduct a free vote on the issue on June 20. The Bundesrat, the upper house, will vote the following day. Mr Kohl, trying to regain the political initiative after his party's defeat in a state election on Sunday, said a government in Berlin would be in a better position to help overcome the division between the two parts of Germany. The announcement may help to boost Mr Kohl's flagging popularity in east Germany where many voters equate a pro-Berlin view with a vote of confidence in the east. Mr Theo Waigel, the finance minister and leader of the pro-Bonn, Bavarian-based, Christian Social Union, said he regretted the announcement and insisted that he had no money available to finance the move, costed at anything between DM5bn (Pounds 1.7bn) and DM100bn. Mr Waigel said he would have preferred a compromise, dividing functions between the two cities. Land claim quashed, Page 3 
ID: 3632
HEADLINE: FT  24 APR 91 / Letter: Wealth in home-ownership should be welcomed 
TEXT: Sir, I find the concern in your editorial ('Housing and inflation', April 16) over equity withdrawal both complex and perplexing. Given that your fellow countrymen reside - according to EC statistics - in the poorhouse of Europe, one would have assumed the relatively recent ability of British house-owners to utilise prior to death what little wealth they have been able to accumulate would be welcomed. The more so since some of that equity withdrawal has been used to finance management buy-outs and other productive investments. Nor should equity withdrawal from housing cause inflation through increased demand for consumer and other goods since there is an adequate supply of foreign manufactured goods competing to meet that demand. The resulting trade deficit problems will only be solved by producing more of those goods in this country to meet home market requirements. Similarly, the home-grown inflation of house prices will only be solved when there is sufficient supply of housing for purchase and rent available to meet demand. The wholesale suppression of the housebuilding industry over the past two years by inflation fuelling high interest rates which you have often supported will simply cause house price inflation yet again in the future. Taxation neither in the form of relief nor additions will not solve your problems nor will reducing the already low level of wealth of the British people. Until you recognise that inadequate supply is the main cause of the inflation problem you are attempting to address you will never solve the problem. James Hanshaw, Kirkharle Manor, Kirkharle, Northumberland 
ID: 3633
HEADLINE: FT  24 APR 91 / Letter: Banks should take losses on the chin 
TEXT: Sir, Now that the banks' reporting season has mainly produced another disastrous set of results I am experiencing a rather nasty consequence. At our annual facility renegotiations with our various banks and institutions, new charges and increases in some rates are being proposed. This is despite our continuing satisfactory expansion and controlled use of funds which in the past have led to reductions at similar annual meetings. The reason given is always that profitability must be recovered. Superficially, of course, they are correct but in every case the losses have been caused by bad debts or provisions for non-performing loans following disastrous lending policies in earlier years. Their profits at the trading level continue to be more than satisfactory. Why should other more prudent customers make good the mistakes of the banks' managers? Surely such losses should be borne by the owners of the banks - the shareholders. All that such excessive zeal to increase rates will do is increase inflation and slow our economic recovery. Come on you clearing banks - take your losses on the chin and rebuild your customer base by supporting the better borrowers. If your customer accepts blindly your new charges and increased rates, maybe you would be wise not to lend to him] Ian McIntyre, chairman, Crown Timber Group, Thornhill Road, South Marston, Swindon, Wilts 
ID: 3634
HEADLINE: FT  24 APR 91 / Letter: Going for a desert song 
TEXT: Sir, On reading the business law article ('Settling Iraqi reparations', April 11), perhaps this exercise ought to be code-named Operation Desert Song. I think an awful lot of people are going to be whistling for their money. Garth Tomlinson 4, Tranby Lane, Swanland, North Humberside 
ID: 3635
HEADLINE: FT  24 APR 91 / Letter: The warnings of a coming slump 
TEXT: Sir, Your leading article ('The New Consensus', April 20) is incorrect when it states that, in contrast with 1981, there 'have been no howls of complaint' from the universities about unemployment. We, together and separately, have been warning for at least the past 18 months that the British economy was heading for a slump. In particular, we pointed out last July, in an IPPR pamphlet entitled 'Britain's Economic Problems in the 1990s', that it would be a strategic error of colossal magnitude to join the ERM in anything like the existing exchange rate. If Britain did so, we predicted that unemployment would eventually rise to well over 3m with severe long term consequences. These warnings and forecasts have subsequently been repeated on a great many occasions. For instance, in the New Statesman on January 18, we predicted a much larger and longer fall in output than other forecasters; in a post-Budget review we forecast that unemployment would rise to about 3.5m by the end of 1992. And contrary to what your leader suggests, these forecasts were accompanied by carefully argued, and strongly expressed, statements which explicitly disputed the proposition that 'macroeconomic policy cannot target real activity'. The Treasury has won no argument. Over the years it has made one wildly wrong forecast after another and, as a consequence, has undertaken policies which have already had extremely damaging short run and structural effects on the British economy. It is dangerous that the British establishment should only admit one way of thinking to be worthy of consideration at any given time, however wrong it has been in the past and however much the orthodoxy changes. At the same time it engages in a conspiracy of silence with respect to the expression of fundamental disagreement. In our view, the scale of the present downturn has, even now, not been properly appreciated. And we strongly dispute that there is nothing which can be done to stem the debacle. Wynne Godley and Bob Rowthorn, University of Cambridge, Austin Robinson Building, Sidgwick Avenue, Cambridge 
ID: 3636
HEADLINE: FT  24 APR 91 / Letter: Britain's legacy from neglecting education 
TEXT: Sir, It was disappointing to find Samuel Brittan (Economic Viewpoint, April 18) endorse the vulgar view that qualifications are unnecessary. It has been a long-standing English practice to denigrate formal training by pointing to the odd genius who made it to the top without such training. But for every Isambard Kingdom Brunel who got to the top a thousand 16-year-olds are left without hope of qualifications either from school or at work each year. That neglect of education is at the root of Britain's structural problems is not merely the view of the Labour party. Mr Brittan also takes the standard neo-classical position that all things, goods or services, are equal with production and that manufacturing should have no special status. However, if you think in terms of tradeables and non-tradeables, manufactures are more tradeable than services, and while it is conceivable that an import bill of any size can be financed by income on invisible account or capital inflow it is not very likely. The problem is that for Britain to finance its import bill without a devised manufacturing sector will require either a drastically devalued pound, a very high nominal interest rate or a large number of unemployed. Economic policy is about the art of the reasonably probable and not merely the remotely possible. M. Desai, professor of economics, London School of Economics, Houghton Street, WC2 
ID: 3637
HEADLINE: FT  24 APR 91 / Arts: The Government Inspector - Greenwich Theatre 
TEXT: A crooked red revolve topped by onion domes and flanked by the paraphernalia of country life, including a barely visible stuffed ram, provides the setting for this classic of the Russian stage in a rambustious new translation by Ronald Eyre. The ram is among equals, for Gogol's satire is about the stuffed sheep of local government; and here they are, in their Anglicised incarnations, with goatees and cheek puffs, quivering moustaches and great bristling beards to signify the rank, age and dignity of petty officialdom. The Englishness of Matthew Francis' production extends beyond the characterisation of this grubby local squirarchy to the character of the comedy in which they are involved. For all their hypocrisy and corruption, they are drawn with an affection for the stereotypes they represent. Arthur Cox's apoplectic judge and Patrick O'Connell's mayor are awful, but we feel safe with them; while Michael Burrell's timid, balaclava-clad schools superintendent would pass muster for a Shakespearean mechanical, and Frank Moorey's bulbous charity commissioner is a dead ringer for Mr Bumble the beadle, from Oliver. They are comic enough in the early whirlwind of conniving and kowtowing but the play tries to push them further than their constitutions permit them to go. When their stupidity has been revealed, and the mayor steps forward to implicate his audience, there is no frisson of recognition, no fidgeting in seats, because there is none of the cruelty that the satire demands. Even the incursion of the wronged populace, in a nightmarish apparition to the opportunistic Khlestakov, fails to make the leap. The result is to pull the sting from the tale, leaving an empty space where the phony inspector has been, and making the announcement of the real inspector's arrival - by a state servant in gleaming Czarist gold  - a mere textual formality. Matthew Francis' production lives through the performances of Timothy Spall and Bob Goody as Khlestakov and his servant Osip, a beaky scrimbleshanks of misdirected loyalty. Spall, particularly, is on cracking form as a little Lord Fauntleroy gone to seed who stamps a chubby foot and crinkles a piggy snout as he fights to rescue his dignity from a greasy strand of hair, the relic of some foppish haircut, which is forever flopping forward over his face. The spectacle of Khlestakov succumbing to his host's hospitality is a moment of inspired farce from an actor of vibrant originality. He does so with a physical abandon that leaves him flapping drunkenly on the floor like a great bloated cockroach helplessly stranded on its back, while the assembled worthies look on in appalled admiration. For this scene alone I would cross London. 
ID: 3638
HEADLINE: FT  24 APR 91 / Arts: The Barber of Seville - Barcelona 
TEXT: Michael Hampe's Cologne production of The Barber of Seville, seen at the Edinburgh Festival in its time and now in the hands of Hampe's colleague Kai Luft, has made its way to the Liceu in Barcelona, where I caught the last performance. The intimate, domestic style might have proved too low-key for this large and splendid theatre were it not for good team-work from a fine cast (alternatives for most of the principals) and notable support from the much improved Liceu orchestra under Paolo Olmi. Olmi's speeds were on the whole fast, riskily so when some of the soloists' runs threatened to turn into slides, but only the final vaudeville, which lost its lilt and sense of happy relaxation, was damagingly quick. A major attraction was the appearance as Rosina of Cecilia Bartoli (sharing the role in Barcelona with Raquel Pierotti), the young mezzo whose recordings have made a great impression. In the theatre the volume is not so great as the records suggest, but the vivid impact, the personality, the rhythmic zest and the burnish on the tone are unmistakable. She recalled Conchita Supervia at Covent Garden before the war - the sound was quite small but every note, inflection, gesture, carried. As a comedienne Bartoli, with her expressive features, supple movements and sure timing, is a treat to watch. William Matteuzzi, Bartoli's partner in a recent Barbiere recording, rightly played Almaviva's first scene (properly handled, one of the most effective and atmospheric openings in any opera) as a young gallant half-asleep in the cold early morning, uncertain of his welcome. Unfortunately the stiffness crept into his first aubade, but the second, the ravishing 'Se il mio nome", was most delicately turned, with decorations in keeping with the sinuous windings of the tune. Matteuzzi is an agile comedian and a good ensemble player. Long-held high notes are on the way back, it seems. With this singer, no regrets. Anthony Michaels-Moore's young, fresh and likable Figaro, his warm, vigorous baritone riding out into the theatre, reached the same high standard - no need, though, to outpace this conductor in 'Largo al factotum'. The Bartolo, Enrico Fissore, was gentle, restrained, almost self-effacing. In the midst of these the ripe and rusty Basilio of Nicolay Ghiaurov, with his imposing Slavonic bigness a potential cuckoo in the nest, was all the more effective for his restraint. He greatly pleased a packed house. 
ID: 3639
HEADLINE: FT  24 APR 91 / Arts: Sexual taboos versus the human spirit - Television 
TEXT: We see Betty Jones, who is 71, come up the stairs and into the bedroom, saying: 'I was a domestic here 50 years ago - no, more than 50 years ago. I had this terrible pain, I can remember. I came up here and I thought 'I'll just get up on the bed'. I sat on the bed and I had this terrific pain, and out pops this baby, and I thought 'Where's that come from?' It was fixed to me by the cord and I thought 'I haven't got to go through life with that fixed to me, surely?' I didn't even know I was pregnant. I was petrified. The mistress comes in and she says 'You wicked girl, Betty, look at the mess you've made. You've got to pay for those sheets, you're not getting any wages'. Next thing I knew the ambulance men came and took me off to a mother and baby's home'. The astonishing thing about this is that Betty Jones is not an actress delivering lines from an 18th century diary but a woman speaking to us from her own memory. We see her in Episode 3 of the BBC2 series A Secret World Of Sex which began last night and will continue for another five weeks. Once in a while a series turns up, usually documentary, which really does what the cliche says: opens a window on the world to reveal something which we may have heard about, but had never seen clearly before. Betty Jones's recollection typifies the way in which A Secret World Of Sex achieves this. With a vividness and immediacy which is often enthralling, and all too frequently painful, it uses personal witness to lay before us the ignorance, guilt, fear and cruelty which surrounded virtually every aspect of sex for those who grew up in the first quarter of the 20th century. Again and again women who had never been told how pregnancy occurred ('I thought what he was doing was just the 'in' thing') explain how they attempted suicide rather than face the stigma of an illegitimate child. A woman who was raped when she was 14 tells matter of factly how she could not possibly explain this to her mother. She had a breakdown and ended up in mental hospital. The series was commissioned by BBC Bristol from the independent company Domino Films, but the moving spirit behind it is Steve Humphries. Eight years ago, as a lecturer in social history at Essex University, he began the research work for a book. He says: 'I was curious to find out how the old, narrow attitudes towards sex affected the lives of people brought up before the last world war. The taboo on sex amongst that generation is still so great that we know very little about their sexual experience. I decided that the only way to find out what happened was to ask them before it was too late.' So he did, and the interviews form a major part of his book, also called A Secret World Of Sex, which appeared in 1988 (Sidgwick &amp; Jackson, Pounds 11.99). It contains many of the stories, photographs, and statistics which, as director/producer, he has now included in the BBC series. But what the book does not and cannot include is the tone of voice, the glint in the eye, the defiance of those who agreed to tell their stories for his cameras. No doubt the very fact that they did agree proves that they are atypical: more self confident than most, a bit bolshie perhaps, in many cases remarkably brave, even by the standards of this new age of supposed permissiveness. It must take considerable courage for a white haired lady in her seventies to describe in front of a film crew how her parents came home unexpectedly when she was with her boyfriend and 'I had to push my knickers in my handbag'. There is of course humour. Last night's opening programme included an account from Evelyn Nelson (81) of necking in a field of long grass when the farmer called a policeman who blew his whistle and demanded they come out: 'It was like a football match, so many people got up'. However, some of these first person accounts are so appalling that it is difficult to go on watching. Yesterday's programme included the story of Edna Higginbottom, born in 1923, who was discovered by her grandfather to be having a sexual relationship when she was 15. He called the police who asked 'Did intercourse take place?' and upon being told 'Yes' hauled her into court where her grandfather said 'Shut her away' and signed the necessary papers. She was promptly locked up in a mental home and kept there for 20 years. Nor was this particularly unusual, it seems: under the 1913 Mental Defectives Act, girls who brought shame on the family by consorting with men were routinely locked away. There is nothing revolutionary or, these days, even very unusual about the way these programmes are made. My own shorthand for the technique is 'World At War' because they employ the mixture of archive film, still photographs, and new interviews of those with good memories which was used so powerfully in the memorable Thames series about World War II. A Secret World Of Sex gains greatly from a model delivery of the commentary - in other words unselfishly unnoticeable - by Zoe Wanamaker (who recently gave such an outstanding performance as the murderer's moll in Prime Suspect) with none of the distracting histrionics which Laurence Olivier loaded onto The World At War. Each of the six episodes deals with a particular taboo: sex before marriage, pornography and prostitution, illegitimate babies, homosexuality, sexual violence, and VD. They are packed with memorable vignettes: the description of men at Soho's old Windmill theatre with cameras hidden in chocolate boxes; Lady Marguerite Tangye's account of debs' delights being aroused by debs in the backs of cars and then resorting to the lower class gels at the Bag O'Nails club for relief. Some programmes are better than others, the most powerful of the lot being the third, 'In Disgrace', which tells of five women, including Betty Jones, who bore illegitimate babies: 'I felt like killing myself, but didn't know how to start' . . . 'I was treated like an outcast' . . . 'My mother saw my morning sickness and said 'Are you pregnant?' and I said 'What's pregnant?'' The wickedness of keeping young women in ignorance, and then persecuting them for the natural results of that ignorance is enough to make you scream with anger. However sad today's one-parent family phenomenon, it is surely better than this hideous injustice. But the most impressive aspect of the series is its collective strength. Together these programmes manage to convey not just a graphic impression of the sexual aspects of pre-war society, but a powerful sensation of how it must have felt to live with all that guilty conscience, and terror, and victimisation. As you listen to the self-righteous sermonising of the religious and the 'purity league' members, it serves as a forceful reminder of how many would still like to drag us back into that cesspit of ignorance today. In the name of 'innocence' the moralists want to sterilise television and push young people back into the dark. Yet it seems unlikely they will manage it.  The most heartening aspect of this series is the character of the people who agreed to talk to Steve Humphries. Of necessity they are in their seventies, eighties or nineties, yet few of them look or sound anything like that old. Perhaps an enthusiasm for sex keeps you young. Moreover, even allowing for the fact that they are by definition the bolder members of their generation, it is their obduracy which is so striking. As Eastern Europeans later in the century would survive the political totalitarianism of their societies, these Britons outlasted the moral totalitarianism of theirs, showing that the human spirit can withstand just about anything. 
ID: 3640
HEADLINE: FT  24 APR 91 / Arts: Dutchman's dream of Italy 
TEXT: The lure of the Classical South proved irresistible to countless generations of Northern landscape painters inspired by Claude and Poussin to bask in the golden light and antiquity of the Roman campagna. Claude's poetic handling of warm southern light was to have a significant effect on the Dutch painters who migrated south during the 1630s, '40s and '50s. It even influenced those who stayed at home, such as Cuyp. The work of these Dutch Italianates is perhaps the most neglected aspect of the Golden Age of Dutch painting. A small, predominantly loan exhibition at Richard L. Feigen &amp; Co (6 Ryder Street, SW1, until June 7) focuses on Adam Pynacker. After Jan Both, and along with Nicholaes Berchem, he is arguably the most important of the second and most interesting generation of Dutch Italianate landscape painters. The show is the first devoted to him. It serves as a reappraisal and as a reminder of the enthusiasm for 17th century Dutch painting in mid-18th century Britain which was to have a profound influence on the course of landscape painting in this country, from Richard Wilson to Turner. Pynacker's first biographer, Arnold Houbraken - his latest, Laurie Harwood, has curated this show - states that the artist spent three years in Italy. It seems likely that he was there 1645-48, and that he was travelling on his father's behalf as a wine merchant. The paintings executed on his return are the results of remembered experience. There are 11 paintings on show. With the Dulwich Picture Gallery's 'Bridge in an Italian Landscape' of around 1653, we catch our first glimpse of Pynacker's mastery. The clarity of its unifying light is breathtaking. The low-lying sun illuminates the underside of the bridge, catches the water and spangles the slender-leafed long grasses, the tree trunks and hanging vines with silver and gold. The muleteer and goatherd, who strike up conversation on the bridge surrounded by their stock, are naturalistically grouped; the figures and the dog are softly silhouetted against the bluish mountains beyond. Already various elements of the Pynacker repertory are established: the serpentine contortions of the overlapping trees (derived from Both); gnarled birch stumps invaded by fungi; and silver-tinted long grasses. An open, luminous sky around the light source fills one half of the canvas and acts as a foil to the dark woody hills of the other. Pynacker is probably best known for the larger canvases he painted in Amsterdam in the 1660s, examples of which can be seen in the Wallace Collection (which cannot lend) and the Dulwich Picture Gallery. This small but delightful show, especially if augmented by visits to Hertford House and Dulwich, probably serves Pynacker better than an exhibition of 100 paintings. Another Dulwich picture takes a bow at the National Gallery, in the first of its new series of Brief Encounters (until April 28). The aim of the series is to explore the relationship between two paintings closely related in technique, style and subjectmatter, one from the permanent collection and the other a loan. What better start than the Samson and Delilahs by Rubens and his disciple Van Dyck, the latter seen for the first time in Britain since its cleaning for the recent exhibition in Washington. Mantegna's treatment of the subject is misogynous; Rembrandt's is brutal; Rubens, in contrast, allows Delilah a moment of reflection. The shorn hero is still asleep in her arms, the soldiers at the door. She looks down at her doomed lover with an expression of triumph tinged with tenderness and a hint of regret. The pose of the two figures echoes a pieta. Rubens painted this glowing, opulent and dramatic tour-de-force after his return from Italy, in 1609. A decade later, the 20-year-old Van Dyck borrowed the composition and reversed it. In every respect, his reworking of the subject makes for a disappointing contrast. Rubens's penetrating psychology is lost. He was to prove much better at being Van Dyck than Rubens. 
ID: 3641
HEADLINE: FT  24 APR 91 / Business and the Environment: UK's new pollution inspector puts industry under scrutiny - John Hunt meets David Slater, who takes up the position next week 
TEXT: The job of policing new environmental controls over a large section of British industry will be taken over next week by David Slater, a consultant from the private sector. He succeeds Frank Feates, who is retiring as chief inspector of Her Majesty's Inspectorate of Pollution. HMIP is implementing a new system of integrated pollution control (IPC), which some companies fear will require them to shoulder a heavy financial burden in order to meet the new standards. This programme commenced on April 1 and will be introduced in stages. The engineering and chemical industries have been particularly concerned about the introduction of Batneec (which stands for the 'best available techniques not entailing excessive cost'). It is the central part of the new system of pollution control. Big plants such as engineering and chemical works and refineries will be obliged to conform with Batneec by introducing tougher measures over the next four years. Industry has complained that it has little information on what this will mean in practice for specific processes and has been alarmed that it could entail heavy capital investment. But Slater believes Batneec should be seen as a positive way of improving standards so that environmental damage can be avoided. He sees Batneec and the Environmental Protection Act as 'very good conceptually, a great advance pointing the way that legislation will be going in the rest of the world'. He is also confident that the 'green' message is getting through to business and industry. 'In some of these big companies you are starting to see the effect,' he says. 'There is a big emphasis on management improving the safety of their processes. It is in the company's interests to be viewed as environmentally friendly. It is a big commercial advantage.' From experience, Slater has seen what can happen when things go wrong at large industrial plants. He is a founding director of Technica, consultant scientists and engineers, where he has worked on environmental studies and risk assessment. Previously he was with Cremer and Warner, consulting engineers. He has been involved in studying the huge chemical explosion at Flixborough, Humberside, which killed 29 people in 1974, the chemical plant accident at Seveso, Italy, the Union Carbide disaster at Bhopal, India, and a study on the Exxon Valdez disaster. He believes that industry has learnt the lessons of these events and has developed a range of management tools such as risk analysis, environmental impact assessments and environmental audits. 'There is no such thing as a completely pollution free or completely safe process. But you can minimise the risk through good design. There has been a big push towards quality in industrial processes. If you improve quality it is a safer company, a cleaner company and it makes a profit.' The UK Government has been under attack for failing to provide enough staff and resources for the inspectorate to carry out its enhanced role. Integrated pollution control means that the branches of the old inspectorates covering pollution of air, water and land have been merged into one organisation embracing all these areas. There has been some in-fighting between the different disciplines as the new There have also been complaints that salaries have been inadequate to attract staff of sufficient quality. But the Government has now increased staffing and salaries and Feates will hand over the inspectorate to Slater in better shape than when he took over. Slater believes that salaries, up to Pounds 32,900 for a new inspector are now competitive with outside industry. When jobs were advertised recently more than 600 applications poured in. 'These are very encouraging signs,' he says. He is confident that morale has improved at the inspectorate. 'It has to be professional, credible, competent and independent and I am sure it is going to be that way. 'There are a lot of very good inspectors out there at the sharp end. They have the industrial expertise and they know what the problems and practicalities are.' The inspectorate is to be given agency status so that it can operate more flexibly and at arm's length from government. Slater welcomes this: 'It makes a lot of sense, it is a natural evolution.' He is cautious, however, over suggestions that Britain might eventually need a powerful independent agency to act as a 'green' policeman along the lines of the US Environmental Protection Agency. In recent years Slater has been in charge of Technica's US operation and his experience has made him sceptical of importing the US model. He found the American system to be adversarial and believes the mechanisms now being introduced by the Government may fit better into the British scene. He emphasises that the inspectorate is prepared to listen to the problems of industry but cannot take on the role of a commercial consultancy advising companies. 'That is not good for industry,' he says. 'They have to develop their own expertise.' On the one hand the new pollution control regime has been criticised by some sections of industry for being too tough. On the other it has been attacked by the environmental movement as too weak. Slater is philosophical about this. 'If you do your job properly you may end up being somewhat unpopular with both sides,' he says. 'But at the end of the day the public needs to rely on the credibility and competence of the organisation.' 
ID: 3642
HEADLINE: FT  24 APR 91 / Business and the Environment: Looking for a quiet life - Jamie Allen reports on measures by the Hong Kong government to reduce the colony's noise level 
TEXT: Hong Kong has been called many mysterious and laudable things, including Fragrant Harbour and Pearl of the Orient. It has never officially been named Construction Site, although this comes closer to what it is like to live in the cramped and frenetic territory than any euphemism can manage. Walking along a footpath involves dodging jackhammers, crossing a road entails negotiating temporary wooden planks over works' sites, and living next to a new building site could well mean you never need worry about sleeping through your alarm clock. But coming to terms with the problem of noise has been a long, slow struggle in Hong Kong. Unlike Japan, which enacted its first environmental laws in 1967 and a noise regulation law the following year, Hong Kong did not enact its first comprehensive Noise Control Ordinance until 1988 and construction activities did not come under control until 1989. (They are still not fully under control). While Japan has banned the worst form of percussive piling - the diesel hammer - in Tokyo and several other cities, Hong Kong has chosen not to bring in sweeping regulations which rule out the use of specific pieces of machinery. Usually pragmatic in its dealings with industry over environmental matters, the Hong Kong Government devised legislation which contained incentives for contractors to switch from the noisiest type of percussive piling (the diesel hammer) to quieter methods of both percussive and non-percussive piling. Quieter percussive methods include the hydraulic hammer and the drop hammer, while non-percussive methods include hand-dug caissons (wells dug by hand into which reinforced concrete is put) and mechanically bored piles (hollow columns made by drills which grind and/or break the rock into which reinforcement is put). The system, which was implemented in late 1989, offers percussive piling operators three kinds of daily permits - a three-hour permit for piling operations which are unacceptably noisy (those which exceed the accepted noise level for an area by more than 10 decibels); a five-hour permit for those which are moderately noisy (those which exceed the level by between one and 10 decibels); and a full 12-hour permit for piling operations which do not exceed the acceptable noise level. An added incentive is that quiet piling methods are permitted to run all night, while the hours of operation for the three- and five-hour permits are not chosen to the convenience of the contractor, but by the Environmental Protection Department. As time costs money and as construction deadlines are tight in Hong Kong, the aim was to make noisy piling a frustrating, inefficient and uneconomic proposition. The controls have brought about some improvements in the thinking and behaviour of the construction industry in Hong Kong - it has encouraged some of the larger contractors to test quieter methods of piling and suppliers such as Daido of Japan and BSP of Britain to try to sell new and more sophisticated piling technology to the local market. According to one of the largest local suppliers of construction equipment, China Engineers, the controls have also caused the sales of new diesel hammers to dry up in the last few years. But statistics compiled by the Environmental Protection Department present something of a dilemma - the number of three-hour permits has not declined during 1990, meaning the incentive scheme is not working or at least not as quickly as it was intended to. On Hong Kong Island and Kowloon, the two most built-up parts of Hong Kong and hence the most 'noise sensitive', the combined number of three-hour permits in each quarter last year was, respectively, 60, 70, 58, 60. In the New Territories, the rural/new urban development part of Hong Kong, the permit numbers were 19, 23, 16, 12. Even more discouraging is the fact that the total number of three-hour permits (318) exceeded the total number of five-hour and 12-hour permits combined (276). But the Environmental Protection Department does not feel defeated by these statistics and believes contractors are going through a transition period. It will soon carry out a survey to ask contractors whether they are planning to use quieter methods. Andrew Kwan Siu-hei, acting principal environmental protection officer in the Noise Control Group, said many of Hong Kong's contractors are small operators who are reluctant to change their work practices and reluctant to buy new equipment. 'Maybe they (the small contractors) are used to the old technology. Better to let large contractors test new methods. I think sooner or later they will change,' said Kwan. Construction industry representatives say the issue is complicated and that the problem lies with Hong Kong's outdated building regulations. These regulations are enforced by another government department, the Buildings and Lands Department, whose record of co-operation with the Environmental Protection Department is less than good. Although the regulations are about to be revised, so far they have undermined the success of the incentive scheme. Rod Buckell, technical manager with the piling company Franki Kier and chairman of the environmental committee of the Hong Kong Construction Association, said contractors would change overnight if the financial incentive was there. The reason they did not was because an outdated formula governing pile driving in the building regulations makes it cheaper to use diesel hammers rather than hydraulic hammers, which would be given a five-hour permit under the Hong Kong system. Contractors cannot simply switch to bored piles for every job because they mostly follow tender designs drawn up by engineers and because the type of piling used depends on a number of factors, primarily cost, time, the size and type of site, and the weight of the building being erected. 'Quietness has nothing to do with the design of piling in Hong Kong. Cost is paramount,' said Buckell. There is one area, however, where the new piling controls are having a definite beneficial effect - the ability to pile all night with quiet methods. Buckell said this has made bored piling using new and sophisticated equipment more economic than it was before and has helped to loosen the hold percussive or 'driven piling' has on the industry. 'By limiting the number of hours driven can work, bored is now economic,' said Buckell. He estimates the permit system has increased the cost of driven piling (using steel piles) by about 10 to 15 per cent. But Buckell also asks, why use piles at all for the foundations of buildings? The cutting edge of foundation work these days in Hong Kong and countries such as France, Germany and Canada is a method called 'deep compaction'. The soil is compacted almost back into its rocky state by vibration using steel pokers or is pressed down under the impact of a heavy mass. It is useful for land reclamation work, of which Hong Kong will be doing a lot over the next 10 years, and at HKDollars 15 (Pounds 1) per cubic metre it costs about half the price of piling. Its main drawbacks are that it can only be done on sand - not on mud - and the height of buildings above is limited to about 11 storeys. Yet it is not hard to see that 'deep compaction' could have wide application throughout Asia, especially in countries where earthquake problems limit the height of buildings, such as in Taiwan, or in developing countries which do not need to build skyscrapers. 
ID: 3643
HEADLINE: FT  24 APR 91 / Jobs: Consultant discovers surprising differences between candidates either side of 40 - Fresh light on the age-barrier paradox 
TEXT: AT LAST the Jobs column has been supplied with a clue to a question that has mystified it these past 18 years or more. Why do senior executives, mostly aged at least 40, typically resist taking on people over 40 to work for them as executives? The reason usually cited for refusing to recruit same is that folk of such advanced years are no longer up to the work. But that surely rebounds awkwardly on the executives doing the recruiting. So unless there is evidence that the 'past-it' clause does not apply to 40-pluses already ranked as seniors (and I've never seen any) we would seem to be faced with a paradox. Fortunately, a way out has been found by recruiter Barrie Whitaker of the consultancy arm of Price Waterhouse. His work entails assessing job-candidates by a variety of measures - tests of verbal and numerical reasoning, and of personality, as well as 'in-tray' exercises  - and he has lately compared the under-40s' results with those of their elders. So far, only one occupational group has provided him with enough candidates for the findings to be statistically respectable. It consists of finance executives, of whom he has tested 100 on the right side of the age bar, and 77 on the wrong side. But he says the results are similar for other types such as general managers and personnel and production people. A further thing that proved much the same was the reasoning-test performance of the under- and over-40s. Apart from a marginal lead for the younger set on the numerical measure, there was no difference between them. Where the two age-groups did contrast was in persuasiveness, friendliness, decisiveness and astuteness. The oldies came out stronger on all those counts, which would apparently give them an edge in the job of managing. Nevertheless there were other factors which cast light on their unpopularity as executive recruits. For example, the oldies were more critical and controlling than the younger set, and less democratic, practical and conscientious in sticking to boring, repetitive tasks. Hence it seems that, at the same time as being better equipped to work as managers, the over-40s are more difficult to manage. But that still leaves the question why senior executives of comparable years are averse to taking on the challenge of managing them. The answer, Barrie Whitaker thinks, lies in another unexpected difference he has found between the two age-groups. The over-40s are more competitive. So senior recruiters, being of that nature themselves, probably see similarly inclined as well as better equipped older candidates as a greater threat to them in their own positions. NOW to the table below, which gives indications of the pay prospects held out by different kinds of specialist work in the United Kingdom. The figures come from the latest survey made for the British Institute of Management by the Remuneration Economics consultancy. Dated at January 1, the study covered 24,651 middle- and upper-ranked staff in 385 widely varied organisations throughout the UK, which together employ over a tenth of the country's workforce. Anyone wanting the weighty report, which costs Pounds 325, should contact Peter Stevens of the consultancy at 51 Portland Rd, Kingston-upon-Thames, Surrey KT1 2SH; tel 081-549 8726, fax 081-541 5705. My table is confined to 11 specialisms commonly found in companies, and in each case shows the average total money pay - bonuses and such besides salaries - at seven levels of seniority from director downwards. Except for 'Management services' which includes information technology, and 'Company secretary' which covers in-house legal services, the specialisms should need no further explanation. As may be seen, the one with the best top pay is financial management. But measured by the average prospects across all seven ranks, it is second to the company secretarial area. Third by the same measure comes marketing followed by management services, R and D, personnel, sales, engineering design etc, purchasing, distribution, and manufacturing. FINALLY to four jobs. All are being handled by headhunters who may not identify their clients. They therefore promise to abide by applicants' requests not to be named to the employer at this stage of the proceedings. The first pair, being offered through Brian Standring, are for technical services managers initially based near London with a probability, though no certainty, of transfer to central Africa. They will work for an international group making and distributing products including food and beverages, and will be responsible for efficient and profitable production. The more senior will require higher-level experience than the second. But both must be engineers who understand finance as well as up-to-date production methods such as total quality management and just-in-time manufacturing. They need to be French-speaking too. Salaries plus bonuses Pounds 46,000 and Pounds 35,000 respectively. Cars and stock-options among perks. Inquiries to the Standring Partnership, 83 Wycombe Rd, Marlow, Buckinghamshire SL7 3HZ; tel 0628 471185, fax 0628 482240. The other two jobs are in the London options-sales team of an international bank, and are offered through recruiter John Williams of Russell, Williams and Associates (45 St Mary's Rd, London W5 5RQ; tel 081-579 1082, fax 081-566 2024). Both posts need high numeracy, with one also requiring success in marketing currency options, and the other the same in marketing interest-rate options with emphasis on caps and floors. Salaries about Pounds 30,000 with bonus on results, and cars. 
ID: 3644
HEADLINE: FT  24 APR 91 / FT Law Report: Negligent valuer pays no damages 
TEXT: SWINGCASTLE v GIBSON House of Lords (Lord Keith of Kinkel, Lord Brightman, Lord Griffiths, Lord Oliver of Aylmerton and Lord Lowry): April 18 1991 A MORTGAGEE who lends in reliance on a negligent valuer's report, and who would not have lent but for that report, cannot claim damages from the valuer for loss of contractual interest due from the borrower on the loan sum if the borrower defaults. But, in addition to the difference between sums paid out and sums recovered, he can claim interest at a commercial rate on the loan sum, to compensate for the time he was deprived of its use. The House of Lords so held when allowing an appeal by the defendant valuer, Mr Alastair Gibson, a chartered surveyor, from a Court of Appeal decision (FT, April 6 1990) upholding a County court assessment of Pounds 7,136 damages owed by him to the plaintiff, Swingcastle Ltd. LORD LOWRY said that at the beginning of 1985 Mr John Clarke and his wife were in financial difficulties. Their home was mortgaged. They owed Pounds 1,700 to a building society and Pounds 6,300 to a finance company. Being anxious to pay off those debts, they went to brokers whose business included putting borrowers in touch with lenders. The brokers instructed the valuer to survey the property and give a report for the benefit of whoever might become their lending principals. The valuer placed the forced sale value at Pounds 18,000. Relying on his valuation, Swingcastle lent Mr and Mrs Clarke Pounds 10,000 secured by a first charge over the property. The entire loan was used to pay the Pounds 1,700 and Pounds 6,300 debts, and the Pounds 2,000 brokers' fee. The loan was repayable by 120 monthly instalments at 36.51 per cent annual interest. If the borrowers went into arrears, the lenders were entitled to add outstanding interest to the principal sum and charge interest on the whole, at 45.619 per cent. The borrowers quickly fell into arrears and surrendered possession on June 30 1986. The lenders sold the property for Pounds 12,000. Completion took place on February 27 1987. On September 4 1987 the lenders issued a writ against Mr Gibson, claiming damages for loss allegedly sustained by them in reliance on his negligent valuation. They pleaded loss comprised of Pounds 19,912.96, being the 'amount required to redeem the loan as at February 27 1987', Pounds 401.35 estate agents' fees, and Pounds 983.25 legal costs. Those sums, less the Pounds 12,000 sale proceeds totalled Pounds 9,297.56. Liability was admitted in the County court and it was admitted that but for the valuer's negligence the lenders would not have made any loan to the borrowers. The sole issue was the measure of damages on the basis that, on a competent valuation the lenders would have made no loan. About some of the figures there was no dispute. The lenders' outgoings included the Pounds 10,000, the Pounds 401.35 and the Pounds 983.25. On the other side of the account, the lenders had received Pounds 1,734 from the borrowers between February 1985 and April 1986, and Pounds 12,000 from the purchasers of the property. The disputed ingredient was the Pounds 19,912.96. The lenders arrived at that figure by calculating the amount of principal and interest outstanding, having regard to the initial 36.51 per cent rate, and the 45.619 per cent penal rate. In the County court Judge Harris QC allowed the claim and gave judgment for Pounds 7,136.41 with interest and costs. The valuer's case was that damages should have been assessed on the basis that the lenders were entitled to be placed in the position that they would have been in if they had received a competent valuer's report and had consequently made no loan. He said damages were to be calculated on the footing that the lenders should (1) take credit for the Pounds 10,000, the Pounds 401.35, and the Pounds 983.25; and (2) give credit for Pounds 1,734 paid and Pounds 12,000 received on sale of the property; and that the lenders had for two years been deprived of the use of Pounds 10,000 which they would not have lent but for the negligent valuation. In the court of Appeal Lord Justice Neill reviewed a number of authorities including Baxter v Gapp (1939) 2KB 271 which had been successfully relied on in the County court. He concluded Baxter was binding and that the judge was right to assess the damages in the way that he did. He then considered the case as if it were free from authority. He began with the principle in Livingstone v Rawyards (1880) 5 App Cas 25,39, that damages should 'put the party who has been injured . . . in the same position as he would have been in if he had not sustained the wrong'. He said that where a client would not have lent at all but for the negligent valuation, a number of approaches to assessment were possible. One was that the lender could be awarded unpaid interest owed when the security was realised. That was the method adopted in Baxter. But, said Lord Justice Neill, 'to award damages on this basis is in effect to treat the valuer as the guarantor of the contract of loan'. In the absence of authority he would have rejected that solution. Other methods, he said, were to award a sum equivalent to what the money would have earned as interest on another loan, or on deposit or if invested elsewhere. Whether any of those methods suited a case would depend on the evidence. Baxter was regarded by all three members of the Court of Appeal as authority for accepting the lenders' approach to the claim for interest. In Baxter, (1) the trial judge calculated interest by reference to what the mortgagor had failed to pay under her contract; but (2) the appropriate rate of interest was never an issue between the parties or in the mind of the court. The real issue was whether the plaintiff could recover consequential loss. Having regard to point (1), the case was almost by accident an authority for the proposition by which the Court of Appeal in the present case found itself reluctantly bound. Baxter was not an attractive precedent. The approach seemed contrary to principle. The aggrieved party was entitled to be placed in the same position as if the wrong had not occurred, not to receive compensation for lost interest at the contractual rate. The valuer's approach in the present case, and Lord Justice Neill's analysis, were correct. What the lenders lost was the use of the Pounds 10,000 while locked up in the loan. There was no cut and dry solution to calculating the amount of damages in cases of this kind. It depended on the evidence. The lenders ought to have presented their claim on the basis that, if the valuer had advised properly, they would not have lent the money. Where they went wrong was to claim that the valuer deprived them of interest they would have received if the borrowers had paid up. The fallacy of their case was that they had been trying to obtain compensation for the borrowers' failure, not damages for the valuer's negligence. Taking Pounds 10,000, Pounds 401.35 and Pounds 983.25 on one side, and Pounds 12,000 and Pounds 1,734 on the other, the lenders were Pounds 2,349.40 in credit. In the absence of evidence as to how the lenders financed the loan or how the money, if not lent, could have been profitably employed, 12 per cent interest was the proper rate at which to recompense the lenders for being deprived of their Pounds 10,000. Two years would yield Pounds 2,400, but one might ask whether it was reasonable for the valuer to bear liability to date of sale in February 1987, the property having been surrendered in June 1986. It was for the lenders to prove their case. They had not appeared. In the light of that fact and the figures, it would not be fair or sensible to remit the action to the County court for new assessment. The appeal was allowed. Their Lordships agreed. For Mr Gibson: Roger Toulson QC and Roger Stewart (Reynolds Porter Chamberlain). Swingcastle was not represented. 
ID: 3645
HEADLINE: FT  24 APR 91 / Management: The struggle to breach the Whitehall Wall - Government and industry must both play their part 
TEXT: When Geoffrey Morgan was plucked from the ranks of the civil service as a potential high-flyer and seconded for two years to Guinness's brewing operations, his arrival at the company's reception desk set the alarm bells ringing. His induction into Guinness 20 years ago provided him with his first experience of the mutual suspicions which separate Whitehall from the world of business. 'I turned up with my official briefcase and the gate-keeper immediately alerted the staff that Customs and Excise were on the premises. The company was not up to anything but it liked to be prepared when officialdom called. I was quickly given a less formal-looking briefcase.' Though Whitehall-wise, Morgan was naive when it came to the business world and jumped at the opportunity to see it from the inside. He was astonished at the lack of paperwork and what he saw as the simplicity of the company's objectives - 'selling more beer'. By contrast, helping to run a country, he suggests, without any attempt to belittle the daily challenges confronting industry, can be quite complicated. His remarks offer an insight into the cultural differences which have long separated public service and private enterprise and which many believe could, if more effectively bridged, help improve Britain's economic performance. By spending time with Guinness, Morgan climbed over what the Public Policy Unit has just dubbed the 'Whitehall Wall' - the barrier between government and industry. According to PPU, which monitors and advises on government policy, the wall is built squarely on lack of understanding, poor explanation and invariably unhelpful attitudes. A PPU report, published by the Bow Group, the centre-right think tank, concludes that the government's outlook remains steadfastly inward. It claims that Whitehall, despite the phased introduction of private sector disciplines into its revenue-raising operations, has barely started to comprehend the needs of the enterprise culture which its recent political masters have tried to spread. Industry, on the other hand, is accused of paying scant attention to the process of policy-making and of invariably leaving responsibility for dealing with government in the hands of unsuitable employees. Companies are urged to regard the task of enlightening government about their activities as a duty and social responsibility. The system of civil service recruitment does not help. The Civil Service Selection Board, which interviews all the most promising entrants, has no brief to foster either commercial disciplines or greater empathy between government and governed. Only one in a thousand of those officials entering a Whitehall department at the first level of middle management has any working experience of a commercial environment. The PPU says that the 'bottom line' to businessmen is financial; their frustration is with officials who draft policy without fully appreciating the market consequences of their actions. Top-ranking civil servants are portrayed in the same mould as judges, almost exclusively receiving their training in a cloistered environment both technically and culturally removed from the world over which they may exercise profound influence. Lord Young, the former Trade and Industry Secretary, criticises the lack of two-way traffic: 'Where are the very best of civil servants, who leave and go into industry in their early forties, as the French do as a matter of course? How many in our great companies have the faintest idea how government really works? One or two, not more. 'We practice a doctrine of separation of experience that appears absolute. Then we wonder why it is that government has an imperfect understanding of the needs of commerce and industry.' Progress towards overcoming the ghetto mentality between public and private sectors has been more marked in other, often more vibrant, economies. In Japan, for example, large numbers of 'Amagari' - or high-flyers - are continually seconded from companies to spend up to two years in government ministries, which command a far greater status in the eyes of businessmen than is the case in Britain. In France, the Ecole Nationale d'Administration provides civil servants with contextual training intended to provide them with appropriate industrial and business skills. Critics even suggest the system has gone too far, with the development of equally critical political skills invariably neglected. Sporadic attempts in Britain to enhance co-operation and understanding between both sides have been under way since 1968. The initiative was revitalised in 1989 by Lord Young as Trade and Industry Secretary with the launch of the Bridge programme. After his spell in the brewing industry, Geoffrey Morgan is now an under-secretary in the Cabinet Office and the man primarily responsible for secondment. The British programme is essentially intended for 'rising stars' on both sides. Larger, better-resourced companies tend to dominate the programme but smaller companies are now being encouraged. While many civil servants opt to join companies, as opposed to business support organisations or financial institutions, they rarely express an interest in manufacturing businesses. Among the most popular Whitehall destinations for corporate employees are the 'economic' departments like the Treasury, DTI and Energy. In 1989, the Department of Trade and Industry, which employs 12,000 people and is charged with 'assisting the process of wealth creation', despatched 41 people to join the wealth-creators. The DTI played host to 46 businessmen. The total secondment programme during 1989 saw a total of 627 longer-term placings on both sides of the Whitehall Wall, along with another 550 short-term attachments. At the same time, 69 civil servants took up non-executive directorships with companies. A separate, 'short-stay' arrangement, operated by the Whitehall and Industry Group - a joint venture between industrialists and the Cabinet Office - enables high-calibre civil servants to spend up to three weeks with companies, participating at the highest levels of decision-making. But the strong emphasis placed on quality rather than quantity for the overall secondment programme cannot fully disguise some disappointment within government and beyond over the still-limited scale of the initiative. The Royal Institute of Public Administration, which is concerned with policy making and administration in the public sector, has joined calls for the secondment programme to be expanded and given a higher status by both sides and deplores the sort of attitude which means some companies leave the job to their community affairs or charity sections. Chris Bright, a competition lawyer with Linklaters &amp; Paines, the solicitors, recently finished a two-year spell with the Department of Trade and Industry and enthusiastically supports the initiative. 'My view of the civil service changed markedly. I got fed up being accused of working from ten o'clock until four; the reality was that I had never worked harder in my life.' Though full of admiration for the expertise and dedication of the senior civil servants with whom he worked, Bright has some kindly criticism. 'There is a tendency for people within government departments to over-focus on particular issues. They do not always get the broader picture and fail to appreciate the wider impact of the decisions they take.' Bright also believes that too many civil servants remain over-sensitive about publicly imparting information and are suspicious of any scheme which lifts the veil: 'The inbuilt perception among some public servants that the people should not know certain things is a mentality that must be addressed and overcome.' Susan Gardiner left Customs and Excise to spend two years with P&amp;0 Containers and says the experience broadened her entire approach to decision-making. She says she is 'far more willing to be optimistic' about resolving problems. She does not believe, however, that the ethos of private sector management can necessarily be transferred into the civil service, where a wider, political perspective is necessary. Gardiner would like to see the secondment programme extended but says industry, too, has to be willing to participate. Businesses might not, she suggests, always demonstrate the sort of broader, long-term view such a commitment demands. Given a civil service more than half a million strong, the Cabinet Office hopes the current rate of secondments can be stepped up. In the meantime, one of its biggest challenges is to find companies prepared to take Inland Revenue staff; the quest for mutual understanding does, apparently, have some boundaries. 
ID: 3646
HEADLINE: FT  24 APR 91 / Management: A quinquennial solution to a perennial problem - Corporate governance 
TEXT: As a mechanism for disciplining bad management, the hostile takeover has its attractions. But it can be overdone. When the market for corporate control becomes over-heated, as it did in the mid-1980s, assets are shuffled and re-shuffled for short-term gain and sound companies are damaged in the process. Can anything be done to limit the intensity of the next takeover wave? The outcome of takeover contests would be more rational if the opportunistic element were reduced and the principal actors - above all, the institutional investors whose votes are usually crucial - were forced to focus on the long-term prospects of the companies concerned. At present, as in the NCR-AT&amp;T case in the US, investors have to sort their way through a stream of one-sided propaganda, accompanied by a series of legal manoeuvres as the contestants seek to gain advantage. In these circumstances it is hard to answer the fundamental question - how well has the defendant management been doing and what is it likely to achieve in the future. One of the merits of the proposal put forward last year by two American lawyers, Martin Lipton and Steven Rosenblum*, is that it offers a more orderly framework in which takeover decisions can be taken. Directors of public companies would be judged on their performance over five years. At each quinquennial meeting they would offer themselves for re-election on the basis of a detailed account of their stewardship over the preceding five years and their plans for the next five; past performance and future projections would be subject to an appraisal carried out by an independent investment bank or consulting firm. Hostile bids could only be considered at the quinquennial meeting; directors would be free from takeover threats in the interim, but their jobs would clearly be on the line at the end of each five-year period. This approach meets the desire of managers not to be judged solely on short-term financial results, but without making their lives too comfortable. They would have to be more open and explicit about their forward plans; their ability to fulfil those plans would be exposed to rigorous public scrutiny. Institutional shareholders The usual reaction of City practitioners to the Lipton-Rosenblum paper is polite indifference: do we really need to tear up the existing system just because of a few takeover excesses? But a virtue of the proposal is that it builds on existing arrangements for reporting to shareholders. Unlike most other proposals for reform, it does not have unrealistic expectations about changing the behaviour of non-executive directors or institutional shareholders. Most institutions have neither the resources nor the motivation to become 'interested owners', monitoring companies on a continuous basis; it is not obvious that the management of those companies would be improved if they did so. But shareholders do need reliable information on which to base investment judgments. Just as the proposed accounting changes in the UK would improve the quality of financial information, so the Lipton-Rosenblum reforms would provide better insight into overall corporate objectives and performance. The proposals do involve restrictions in the free market for corporate control. But takeovers, especially those involving large companies, are important events with economic and social repercussions. It is right that contested bids should be decided only after the most careful consideration. The argument is not that the market for corporate control should cease to exist - it remains an important source of flexibility in the Anglo-American capitalist system - but that the rules governing its operation should be tightened in a way which makes bad takeovers less likely. The quinquennial proposal involves a skilful trade-off between the interests of managers, investors and society as a whole. It does so by uniting boards of directors and shareholders behind what ought to be the primary goal of the enterprise -to maximise profits over the long term. *Outlined in the FT on June 27 1990, now elaborated in The University of Chicago Law Review, Vol 58, No 1, Winter 1991. Sir Geoffrey Owen is on the staff of the Centre for Economic Performance at the London School of Economics. 
ID: 3647
HEADLINE: FT  24 APR 91 / Public-sector workers urged to be flexible 
TEXT: UNIONS organising in the public sector should be prepared to be flexible about traditional bargaining structures to allow better delivery of services, a senior TUC official said yesterday. In a study of how unions can help improve standards in public services, Mr Bill Callaghan, TUC assistant general secretary, said unions needed to take 'a bold and innovative stance' and allow devolution of power. Mr Callaghan was writing in a policy paper published by the Institute for Public Policy Research, a left-wing research group, and the TUC. The paper said unions should accept that competitive tendering could be good for services. The paper includes other contributions questioning whether unions should change policies. It is intended as a stimulus to the Labour party and unions to review attitudes to how public services are delivered. The contribution of unions to better delivery of public services is highly sensitive for Labour because of the role of public-sector strikes in 1979 in bringing down the last Labour government. The paper was welcomed by Mr Rodney Bickerstaffe, chairman of the TUC's economic committee, who said unions did not 'want everything back the way it was a decade or more ago'. He said they could not simply defend the status quo. Mr Callaghan said there was no longer a consensus in the labour movement in favour of direct employment of labour by councils in all cases. The case in favour of direct employment would have to be made in a more sophisticated manner. In another contribution, Mr John Stewart, head of the school of public policy at Birmingham University, said that a form of public service more accountable to people would require a new degree of flexibility among staff. He said existing bargaining structures created barriers that prevented manual workers' full potential from being realised, and unions had to be prepared to negotiate new terms and conditions. Meeting Needs in the 1990s. By Bill Callaghan, Anna Coote, Geoffrey Hulme and John Stewart. IPPR, 30-32 Southampton Street, London WC2E 7RA. Pounds 7.50 
ID: 3648
HEADLINE: FT  24 APR 91 / Audit Office faults NHS local autonomy 
TEXT: THE NATIONAL Health Service's Pounds 4bn-a-year supplies operation could benefit from management techniques used by companies such as Boots and Marks and Spencer, the National Audit Office says today. An NAO study of the management of complex operations in private-sector companies showed that the NHS's approach differed sharply 'in nearly every respect'. In particular, the NAO report says, none of 16 private companies surveyed 'permitted local autonomy on the scale allowed throughout the NHS'. The report's conclusion that decentralised structures have prevented the NHS from maximising its purchasing efficiency comes when the government's health reforms, introduced this month, are encouraging still more local autonomy in many areas of the health service. The NAO examined how Boots, Marks and Spencer and Compass Services UK, a contract caterer, handled their equivalent of the NHS supplies organisation, which provides hospitals with food, bedding and equipment. Between them the three companies supply about 4,000 delivery points and, the NAO says, 'face similar logistic challenges' as the NHS. In addition, a consultants' report was commissioned on 13 other private companies in manufacturing, food processing and retailing. A fundamental difference between the public and private sectors was the greater emphasis placed by the private companies on central control. They also made greater use of information technology to help manage their supplies operations, and had management information 'on tap', with senior managers exercising close oversight of activities. The report concludes that the NHS supplies organisation 'does not apply financial and commercial disciplines which are common in the private sector'. It demonstrates differences of view between the NAO and the Department of Health over the value of devolving decision-making on purchasing. The NAO says the 'variety of decentralised structures' in the NHS had led to fragmented purchasing, making it unlikely that operating costs would be minimised and purchasing power maximised. The Department of Health argued that decentralised structures offered 'positive advantages such as local accessibility and ownership'. The NAO said the most significant need was for more positive strategic oversight by senior management. Department of Health officials told the NAO that, while recognising some of the points raised, 'private-sector practice was not necessarily appropriate for adoption by the NHS as the businesses were different in many respects'. National Health Service Supplies in England. National Audit OFfice. HMSO. Pounds 7.25. 
ID: 3649
HEADLINE: FT  24 APR 91 / Untitled item 
TEXT: RECORD numbers of power stations are being built in England and Wales, the seven-year statement issued by the National Grid Company disclosed yesterday. Nine new stations, with a total capacity of 7,400MW, have signed agreements for connection to the national electricity grid, NGC said. New stations planned by National Power and PowerGen, the two large generators, account for about 3,000MW of the new capacity. The rest is being built by independent power projects, notably the ICI and Enron consortium, which is planning an 1,875MW station on Teesside. The new plant would mean about 35 per cent spare capacity on the system, compared with an ideal surplus of about 24 per cent. That high margin would be likely to force old stations to close, NGC said. It had taken into account peak electricity demand expectations, which it predicted would rise from 49,200MW in the year ending March 1992 to 52,000MW in the year ending March 1998. These forecasts were broadly unchanged from those in the last seven-year statement. Mr John Uttley, the NGC's finance director, said the company was spending more on infrastructure and less on refurbishment as a result of the many new stations joining the grid. NGC could afford the capital, he said. He expected capital expenditure to rise from Pounds 300m in the year ending March 1991 to Pounds 400m in the following year. That would accord broadly with expectations at the time of the electricity flotation, Mr Uttley said. 
ID: 3650
HEADLINE: FT  24 APR 91 / Snack factory burnt 
TEXT: THE 70-strong workforce of Munchie Foods, the Northern Ireland manufacturer of snackfoods, is to be laid off after a fire, believed to be arson, yesterday destroyed the company's factory. 
ID: 3651
HEADLINE: FT  24 APR 91 / Mining regulations 
TEXT: BRITISH COAL may face stringent regulations on opencast mining in Wales if recommendations published by a Commons select committee yesterday were adopted. That would intensify British Coal's difficulties in securing planning permission for opencast - or surface - mines, which are seen as disruptive to the landscape and local community. 
ID: 3652
HEADLINE: FT  24 APR 91 / Staff losses slowing 
TEXT: LOSS OF staff from computing services companies is slowing, suggesting that the UK recession may be starting to bottom out. Figures for the first quarter of the year collated by the Computing Services Association indicate that, for the first time since 1989, the rate of change of staff numbers has not worsened. 
ID: 3653
HEADLINE: FT  24 APR 91 / Lamont shifts emphasis of economic monitoring 
TEXT: MR Norman Lamont, the chancellor, yesterday announced two fundamental shifts of emphasis in the Treasury's monitoring of the economy. In a speech to the annual convention of the Institute of Directors, Mr Lamont acknowledged that official economic data would continue to signal that the UK was in recession in spite of the output recovery expected to begin in the second half of the year. At the same time, underlying inflation - as measured by the retail prices index, excluding mortgage interest payments and the community charge - would be 'meaningless in the coming year' as a result of the changes to the poll tax and VAT announced in the Budget. To track underlying inflation, the Treasury would monitor closely the RPI less mortgage interest payments. That would recognise the largely offsetting nature of the partial taxation switch from community charge to VAT and exclude the volatility from changes in interest rates. To assess the shape of the recovery, the Treasury would focus on anecdotal surveys of consumer and business confidence, as they had given the best early warnings of the recession which started in the middle of last year. In general, forecasts - which rely more on economic statistics - failed to predict the recession. Mr Lamont said he was sceptical towards forecasts but had a lot of respect for data. Lagging indicators of the economy - such as unemployment figures - would continue to signal recession for some time after the recovery had begun. 
ID: 3654
HEADLINE: FT  24 APR 91 / The Council Tax: Independent commission planned - Local Government Structure 
TEXT: A GOVERNMENT-appointed Local Government Commission will be established to prepare for changes in the structure of English councils from April 1994. The commission, while independent, will operate within guidelines designed to achieve government intentions of replacing the present two-tier structure of county and district councils with unitary authorities. Single-tier authorities, says the government's consultation paper published yesterday, would produce 'more efficient and more accountable local government' and reflect people's sense of identity with their communities. There will be no wholesale abolition of existing county or district councils, although the consultation document makes clear the government's intention to move towards unitary authorities. 'In some places, it may be best for existing authorities to be merged; in others the best approach may be to create or recreate quite different authorities. In some areas there could be a case for two tiers. The aim will be to achieve the structure which best matches the particular circumstances of each area.' Under the present two-tier system, the paper says, there was often confusion over which authority was responsible for providing a particular service. Such confusion clouded accountability. Some authorities created by the last substantial local government reorganisation in 1974 were still not wholly accepted by the communities they served. In areas where the two tiers needed to work together - such as planning - there was sometimes conflict and tension between the policies of country and district councils. 'Changing the structure of local government will not in itself solve all the problems. But in the main it is desirable that people can identify one authority which secures services in their area. Having a single tier should reduce bureaucracy and improve the co-ordination of services, increasing quality and reducing costs.' The consultation paper emphasises the government's determination to shift the basis of local-authority activity from the direct provision of services to the 'enabling' role of organising them. It says the government is committed to contracting-out local authority services to the private sector and voluntary organisations where that is justified by market-testing. 'The aim should be to secure the best services at least cost.' Such a changing role of local government, the paper says, significantly altered the presumption that there was an ideal size of authority for the efficient delivery of services. The government expects a range of sizes for new authorities, determined by local circumstances, to emerge from the proposed Local Government Commission review. The consultation paper does not propose to change the structure of local government in London and the metropolitan counties, where unitary authorities have existed since 1985. Ministers are, however, looking for improved ways of handling some joint services such as voluntary-sector and arts funding in those conurbations. Specific proposals to establish new unitary authorities will, the paper says, have to be 'cost-effective'. The government plans to issue detailed guidance on the basis for costings. Mr Michael Heseltine, environment secretary, would reach decisions on proposals to change the system of local government in a particular area after receiving the commission's recommendations. The complexity of existing electoral arrangements, which vary between local authorities, may, the paper says, 'discourage people from taking an interest in local government'. It finds a case for reconsidering electoral cycles and numbers of councillors. Possible changes to local electoral arrangements will be discussed in a consultation paper. Views on yesterday's proposals are being sought by June 14. Separate papers are being produced on the structure of local government in Scotland and Wales. Room N7/20 Department of the Environment, 2 Marsham Street, London, SW1P 3EB. Free. 
ID: 3655
HEADLINE: FT  24 APR 91 / World Trade News: Airbus chief vows to fight off Gatt challenge by US 
TEXT: THE European Commission will use 'every legal weapon' at its disposal to defend the interests of Airbus in its aircraft subsidies dispute with the US, Mr Jean Pierson, the head of the European aircraft consortium, said yesterday. The long-standing trade dispute has entered an important new phase with the US taking the issue before the General Agreement on Tariffs and Trade (Gatt). The US claims the European consortium has received direct subsidies totalling Dollars 25.9bn which have distorted trade in commercial aircraft. But Mr Pierson, in an address to the Cranfield School of Management, vigorously rebutted the US claims and called for a more balanced redistribution of the world civil aircraft market. 'Airbus stands today as the only recourse against the monopoly of the civil aerospace industry by US manufacturers,' Mr Pierson said. 'It must carefully protect its hard-won positions in the strictest respect of international agreements,' he added. Mr Pierson claimed that the latest US attacks against Airbus coincided with the European consortium's twin strategy of capturing a third of the world airliner market by 2010 and developing a 700-seater aircraft to challenge Boeing's monopoly of the jumbo airliner market. He also suggested that the American attacks had intensified with the approach of the first flight next October of the new long distance, four-engined Airbus A340 aircraft which will increase competition for Boeing and McDonnell Douglas in the long-haul airliner market. Despite the aircraft industry's current difficulties, Mr Pierson expected air traffic to show at least 5 per cent growth a year during the next 20 years, requiring the delivery of 12,300 new aircraft between now and 2010. 'This represents some Dollars 680bn worth of business of which Airbus firmly intends to capture a third,' he said. Responding to the latest US complaints, Mr Pierson said the European side had recently made a number of proposals to redraft some of the contentious articles of the Gatt civil aircraft agreement code. Europe, for example, had agreed to limit to 45 per cent direct government support for research and development of new Airbus programmes. 'From 100 per cent for the early Airbus programmes, launch aid has been reduced to 60 per cent for our latest programme, the A330/A340 and to nil for the A321,' Mr Pierson said. In return, Europe wanted total transparency in the indirect support the US manufacturers receive from their government. However, this proposal had been turned down by the US administration. Mr Pierson claimed Boeing and McDonnell Douglas had received Dollars 23bn in indirect supports from government agencies between 1978-87. The US, however, disputes this. Mr Pierson stressed that the European consortium's target was to finance future programmes from internal funds. 'We have done so for the A321. As we start delivering a complete range of aircraft from 1993 onwards, we will be in a better position to compete with Boeing on an equal footing,' he said. 
ID: 3656
HEADLINE: FT  24 APR 91 / World Trade News: French boost Romanian links 
TEXT: FRANCE is poised to become Romania's leading foreign investor, following the visit of President Francois Mitterrand to Bucharest last week. Mr Mitterrand, the first head of state to visit Romania since the revolution in December 1989, was accompanied by six ministers, a dozen leading businessmen, and bankers from the French Foreign Trade Bank, the Credit Commercial de France and Lazard Freres. France clearly intends to take advantage of the strong cultural links between the two countries. French companies have been reluctant until now to invest in Romania, largely because they have been waiting for the law on foreign investment to be enacted this month. Most western investments in Romania have tended to focus on small-scale activities. In the first quarter of 1991, Germany and Italy invested the most, with Dollars 5.2m and Dollars 2.2m, respectively. However, French companies anxious to gain a foothold in eastern Europe now appear to be taking Romania as a serious potential trading partner. This shift in emphasis was confirmed by the companies who travelled with Mr Mitterrand. They included: CIT Alcatel. It is hoping to gain 40 per cent of the market in telephone systems. It will be competing with Siemens of Germany, which signed a joint-venture agreement last autumn. Groupe Sucres et Denrees. It signed a FFr100m (Pounds 9.93m) contract for the rehabilitation of sugar beet production and the construction of three sugar refineries. Other large companies about to sign contracts include Societe Generale des Eaux, which is planning to modernise Bucharest's poor water system and Elf Aquitaine, which is looking into the country's petrol stations network. Bouygues. It signed during the presidential visit a letter of intent for the largest joint venture in the country so far, the construction of an international trade centre. The government-backed French international radio service, Radio France International, has been broadcasting locally since January. A bilingual station in Bucharest is planned for later in the spring. The francophone international channel, TV5 Europe, started broadcasting in Bucharest the day the French president arrived. France's cultural budget in Romania already amounts to FFrs70m, by far the largest among western countries. 
ID: 3657
HEADLINE: FT  24 APR 91 / World Trade News: Nigeria seeks Dollars 530m loans for gas project 
TEXT: MR Jibril Aminu, the Nigerian oil minister, is due in Washington tomorrow to sign further financing arrangements for the Oso Nigerian gas condensate project. He will meet officials from Mobil Producing Nigeria, an arm of the US oil company, which is a partner in the project, to sign loans worth Dollars 530m. The loans are being made partly by the World Bank and its commercial arm, the International Finance Corporation, as well as Japan's Export-Import bank and the US Export-Import bank. Total financing for the project which is due on stream in 1993, is put at Dollars 885m. The Nigerian National Petroleum Corporation expects the project to produce 100,000 barrels of gas condensate a day in its first year of production. 
ID: 3658
HEADLINE: FT  24 APR 91 / World Trade News: France's export credit claims rise 
TEXT: FRENCH exporters made FFr11.4bn (Pounds 1.13bn) of net claims on state-guaranteed contracts last year, equivalent to around 1 per cent of France's total overseas sales, said Coface, the French export credit guarantee agency. The figure, the balance between overall repayments on state-guaranteed exports handled by Coface and premium and other income, is a slight increase on the FFr10.9bn of claims on state-covered exports paid out the previous year. It does not include claims expected from unpaid bills related to the Gulf war, likely to be around of FFr5bn this year, forecast Coface officials. However, Iraq was already among last year's worst payers, as were Egypt, Morocco, Nigeria and Brazil, said officials. Coface saw a 23 per cent rise in reimbursements it had to pay out on its own account, rather than on the export credit guarantees it manages on behalf of the Government. These rose from FFr290m to FFr345m, with the worst performance coming from the recession-hit UK, plus Spain and Italy, said Mr Henri Baquiast, chairman of Coface. The group covers short term credits of less than three years and political risks in the European Community, while it acts as an agency for the state for most non-EC political risks and medium term credit guarantees. Coface saw its operating profits fall from FFr133.8m in 1989 to FFr103.5m last year, but exceptional gains lifted net earnings by FFr22.9m to FFr158.4m. Premium income on Coface's own activities rose by 9 per cent to FFr605m, but Mr Baquiast did not expect the growth rate to improve significantly this year, given the uncertain outlook for French industry's main export markets. Coface was last year transformed from a government department into a state-owned company, partly in anticipation of the European Commission's increasingly tough policy on state support for exports. 
ID: 3659
HEADLINE: FT  24 APR 91 / World Trade News: Dunkel acclaims free trade moves by developing nations 
TEXT: THE Uruguay Round on global trade liberalisation may have stalled last December, but 45 countries, mostly developing ones, have liberalised their trade policies since the round was launched in 1986. These moves are recorded in the annual report of the General Agreement on Tariffs and Trade (Gatt) presented to the Council yesterday by Mr Arthur Dunkel, the director-general. While pointing optimistically towards this development within Gatt, which now has 101 members, Mr Dunkel records that, in volume terms, the growth of merchandise trade slowed in 1990 to 5 per cent from 7 the previous year. World output growth slipped from 4 to 3 per cent, but both figures were close to the average for the 1983-1990 period of expansion. In spite of the slowdown in volume growth in 1990, the value of merchandise trade rose by 13 per cent to Dollars 3,500bn, boosted by the 7 per cent depreciation in the average value of the dollar. Preliminary estimates indicate that trade in commercial services - including transport, tourism, telecommunications, insurance and banking  - increased by 12 per cent to about Dollars 770bn. Much of the standstill in the Uruguay Round talks has been caused by the impasse between the European Community and the US over the need for deep cuts in agricultural subsidies. Looking ahead to 1991, Gatt says that 'there is, as yet, no evidence that the slowdown in economic growth in the major industrial countries - including a fall in output in France, the United States and the United Kingdom in the fourth quarter of last year - has run its course'. A world recession is unlikely, it says, but the timing of a broadly-based pick-up in growth rates is also unclear. The measures undertaken by the 45 countries include tariff reductions and 'bindings' (tariffs fixed in schedules to Gatt which can only be raised if compensation is negotiated), the elimination of quotas, the abolition of import licensing restrictions and the removal of other non-tariff barriers. Looking ahead to the remainder of this year, Mr Dunkel emphasises 'the importance of pushing ahead with the Uruguay Round negotiations'. 
ID: 3660
HEADLINE: FT  24 APR 91 / World Trade News: Poland to give birth to Fiat's new baby - FSM is to produce a brand new car under licence 
TEXT: FIAT is about to become the first western car maker to start production of a new car range for western and eastern European markets exclusively from a plant in eastern Europe. The Italian company is to launch early next year a new mini car, the Fiat Cinquecento (Fiat 500), which will be assembled under licence by FSM, one of the two Polish state-owned car makers. It is the first time that a model to be licensed by Fiat for production at a foreign plant has been developed from scratch rather than derived from an existing Italian model. Fiat has invested L1,000bn (Pounds 453m) in developing the Cinquecento and in plant and equipment to modernise the FSM assembly plant at Bielsko Biala, Silesia. Initially 160,000 cars a year will be produced. About 100,000 will be exported to western Europe. Output could rise later to 220,000 cars a year. Plant and equipment worth DM900m (Pounds 302m) has been supplied to FSM under the Cinquecento development and production contract signed in 1987. About half of this is being supplied by Italian machine tool and components companies outside the Fiat group. The currency needed by Poland to pay for the investment at FSM will be generated by cars purchased by Fiat for sale through its dealer network in western Europe. As a result of this arrangement Fiat has taken on the entire commercial risk for credit extended to Poland to buy plant and equipment both from the Fiat group itself and from other suppliers. Cover provided by SACE, the Italian state export credit insurance agency, is limited to the risks of loss of revenue because of political events and catastrophes, and actions by the Polish authorities which might limit FSM production or block exports of finished cars. The Cinquecento - named after Fiat's first baby car which pioneered the mini car sector in the 1930s - will replace the existing Fiat 126, the smallest car in the Fiat range. The 126 was first produced in 1972 at the group's Cassino assembly plant in Italy, but production was gradually transferred to the FSM plant at Bielsko Biala from 1979. The Polish plant has been the sole production source for the 126 since 1981. Fiat is still seeking Polish government backing for a more far-reaching plan to modernise and rationalise the entire Polish motor industry. It wants to create a holding company combining FSM and FSO, the two state car makers, in which Fiat would take the role of 'strategic investor', to build engine and gearbox plants, and a licensing agreement to assemble the Fiat Tipo at the FSO plant in Warsaw. There is confusion over the future of the antiquated FSO operations, however, which are centred on production of earlier Fiat designs under licence. Fiat's radical plan appeared to have gained the backing of Polish President Lech Walesa on a recent visit to Italy, but FSO is also conducting competing negotiations with General Motors for the assembly of Opel/Vauxhall cars in Warsaw. Mr Jack Smith, GM vice chairman responsible for international operations, visited Warsaw last week for talks with FSO. The US car maker has completed a feasibility study and is expected to begin negotiations with the government and FSO within a month. GM is considering investing Dollars 100m to establish an assembly operation for 30-50,000 cars a year (on two or three shifts) at part of the existing FSO facility. 
ID: 3661
HEADLINE: FT  24 APR 91 / Managers shun passport offer 
TEXT: BRITAIN'S offer of up to 50,000 passports to key Hong Kong people has been poorly received by managers and administrators, the individuals the package was designed to attract. Just fewer than 15,000 passports have been allocated for managers and administrators, the largest job category in the package. The quota has been under-subscribed by about 10 per cent, according to Mr Donald Tsang, director of administration. The package was introduced last year under the British Nationality Act. It was one of a series of measures designed to restore confidence in Hong Kong, severely shocked by the crackdown against pro-democracy demonstrators in Peking in June 1989. All the other job categories have been over-subscribed, some heavily. The government received 1,000 applications from legal professionals by the time the offer closed at the end of February against a quota for this category of only 185. Mr Tsang said the response by private sector managers and administrators was not surprising because they were the only people who had to disclose details about income. Almost 400 passports were set aside within the managers and administrators category for civil servants. Competition for these passports was fierce, according to Mr Tsang. The government received just over 63,800 applications for the first tranche of 38,900 passports on offer for people in the general occupations and disciplined services. A further 1,800 people, including entrepreneurs and sensitive service personnel, have been invited to apply by the Governor. The response was much poorer than expected. China's opposition to the scheme, a feeling in Hong Kong the scheme was elitist and a dislike of the UK were all blamed for the low level of interest. 'I only want a British passport so I can go and live in Paris after 1992,' says a 28-year-old Hong Kong Chinese journalist who did apply. Mr Tsang said any passports left over from the managers and administrators category can be carried forward and given out in the second tranche when a further 6,750 passports are on offer. Applications for the second tranche will run from 1994 to June 1997, when Hong Kong is handed back to China. 
ID: 3662
HEADLINE: FT  24 APR 91 / UK offer for Kuwaiti students 
TEXT: BRITAIN has offered to take in hundreds of Kuwaiti university students next year as part of a package of technical and material help designed to get the emirate's education system back on its feet. A delegation of British educationalists, led by the British Council, made the offer this week after the Kuwait government indicated it is placing the highest priority on opening its schools and universities in August and September. Kuwait says it expects its 600 schools to be refurbished and ready by August, but that damage to vital teaching equipment in universities and other higher education institutions would hinder the return of some of the emirate's 15,000 university students. Mr Stuart Sutherland, the vice-chairman of London University, said he had accordingly offered places to hundreds of Kuwaiti students, whose fees would be payed by the Kuwait government, on a temporary basis. 'We could reopen a small campus in London next year which would take 400-500 students,' he said. 'And I"m sure other British polytechnics and universities could offer some space.' The delegation, led by Mr Timothy Raison, vice-chairman of the British Council, also included Ove Arup, the architects, and Laing Consultants, who discussed supplying Kuwait with everything from books to laboratory equipment. Mr Raison said no firm contracts had been offered, but added: 'The government seems very willing to commit themselves quickly to re-equipping.' Mr Raison also said the Kuwaiti authorities expressed interest in setting up creches, in order that Kuwaiti women could be encouraged to take up teaching posts. This is a further indication that the government is determined to replace Palestinians, who traditionally made up the core of Kuwait's teaching staff, in public service posts. 
ID: 3663
HEADLINE: FT  24 APR 91 / Jobless may spur exodus from Israel 
TEXT: ISRAEL'S central bank yesterday warned that the country could face unprecedented emigration and unemployment approaching 20 per cent of the workforce if the government did not quickly enact economic reforms to cope with a wave of immigration by Soviet Jews. Prof Michael Bruno, governor of the Bank of Israel, also linked the issue to present efforts by the US to mediate a Middle East peace settlement. He said Israel risked losing vital US assistance for raising the huge funds the country will require to finance immigration if the peace process failed. 'US readiness to help finance (immigrant absorption) has a significant importance to our ability to raise money in the international financial marketplace and a greater expert than myself would tell you what the conditions are under which the US will be ready to invest here,' said Prof Bruno, who is due to leave his post shortly. A 60-page bank plan for absorption of Soviet immigrants, expected to total more than 400,000 by the end of this year, called for a series of radical reforms as well as short-term measures to boost employment and improve infrastructure. It said that as many as 200,000 immigrants and additional native Israelis might leave the country, and unemployment could almost double within two years if such steps were not taken. It called for cuts in taxation on business and employment, the scrapping of labour market rigidities, greater capital market freedoms, and a more liberal foreign trade regime. Mr Bruno complained that a government plan last September to enact a number of these prescriptions had never been carried out. 'Non-implementation of the policies would prevent the possibility of fully enjoying the fruits of the immigration. The pace of productive growth would be too slow, unemployment would grow to dangerous dimensions, followed by growing emigration,' the bank's plan said. 
ID: 3664
HEADLINE: FT  24 APR 91 / Compromise plan for European central bank 
TEXT: LUXEMBOURG yesterday proposed that the European Community establish a fully-fledged central bank during the transition to monetary union, but delay its creation until 1996. The plan was tabled by the EC's current president at the regular fortnightly meeting of special negotiators on economic and monetary union (Emu). It is designed to strike a balance between the insistence of France and several other states that the European central bank be set up in 1994, the planned start of the transition to Emu, and the desire of Germany to delay such a bank until the late-1990s target date for a single currency. Ever since last October's Rome summit which called for a new monetary institution in 1994, there has been a war of words between Paris and Bonn on how to interpret that summit's communique, with Mr Jacques Delors, the Commission president, intervening from time to time to accuse Germany of backsliding. The Luxembourg plan calls for a three phase move towards a fully-operational European central bank. Six months after an Emu treaty comes into force, perhaps 1993 or 1994 depending on the speed of ratification by national parliaments, the present 'committee' of EC central bank governors would be transformed into a 'council'. Its role would be to improve co-ordination of national monetary policies, whose implementation would still be in national hands. By 1996, or earlier if governments agreed unanimously, the European system of central banks would be set up, to take over the running of the European monetary system and act as a clearing house for the Ecu. Finally, from the date when EC governments had taken the final decision to merge their currencies, the European central bank could expand its role to hold and manage foreign exchange reserves. It could also start to make policy recommendations to national central banks, and be empowered to make those recommendations public if necessary. 
ID: 3665
HEADLINE: FT  24 APR 91 / Eastern banks back Ecu trade system 
TEXT: THE central banks of the Soviet Union, Czechoslovakia, Poland and Hungary yesterday pledged support for a new banking payments system for trade among east European nations. The system would use as a common currency the Ecu, the basket of the main west European currencies. It has been proposed by the Ecu Banking Association, a group of west European banks, and would be based on an existing Ecu bank-payments operation in Switzerland. Officials from the central banks of the four countries were at a meeting in Turin to discuss the concept. Three west European banks - Deutsche Bank of Germany, Credit Lyonnais of France and San Paolo Bank of Italy - have said they will help the initiative. The east European nations are to discuss the system further over the next few months. Assuming details such as legal and technical issues and problems over lines of credit can be sorted out, the venture is likely to be controlled by a group of banks from eastern Europe. 
ID: 3666
HEADLINE: FT  24 APR 91 / E German land claim quashed by court 
TEXT: THE Soviet land reform in east Germany between 1945 and 1949, involving the expropriation and redistribution of nearly one-third of the former communist state's land, cannot be reversed, according to the German constitutional court in Karlsruhe. The Bonn government, under pressure from Moscow and from the short-lived democratic government in east Berlin, had already accepted the Soviet land reform in last year's unity treaty, but 14 individuals lodged formal complaints that such acceptance was unconstitutional. Yesterday's ruling, that the Bonn government was justified in accepting the land reform, affects 3m hectares of land. The court advised that the government should pay compensation to the former owners. Ministers in Bonn welcomed the decision and said that it removed an uncertainty that had held up new investment in many rural areas. Property expropriated by the Nazis between 1933 and 1945 or by the East German government after 1949 is, with some qualifications, still being returned to former owners. The uncertainty created by this slow and difficult process is still regarded as one of the biggest obstacles to new investment in east Germany. In the second half of 1990 east Germany had a GNP of DM105.3bn (Pounds 35.2bn) about 8.3 per cent of west Germany's GNP over the same period, the Federal Statistics Office in Wiesbaden said. Average gross monthly income in east Germany was DM1,357, 37 per cent of the west German level. 
ID: 3667
HEADLINE: FT  24 APR 91 / German railway chief seeks to cast off red tape 
TEXT: THE German constitution must be changed to allow the Bundesbahn, the federal railway system, to behave more like a business and free it from civil service red tape, according to Mr Heinz Durr, the former head of AEG who took charge of the Bundesbahn last year, writes David Goodhart. He said the Bundesbahn, its DM47bn (Pounds 15.7bn) debt mountain higher than annual turnover and with a deficit last year alone of DM5bn, was bankrupt in the normal commercial sense. On current projections the debts of the Bundesbahn plus the east German railways could top DM400bn by 2000. He said: 'I want to change the Bundesbahn into a business which makes profits.' 
ID: 3668
HEADLINE: FT  24 APR 91 / Slovak premier forced to quit 
TEXT: MR Vladimir Meciar, prime minister of the Slovak Republic, was ousted by parliament yesterday and replaced by Mr Jan Carnogursky, his deputy and chief rival, writes Leslie Colitt in Prague. Slovakia faced the prospect of intensified political conflict after Mr Meciar threatened to march on the government in Bratislava. Nearly 1,000 of his supporters gathered outside parliament last night demanding his reinstatement. The presidium of parliament also forced out of government all but one of the members of Mr Meciar's Public Against Violence (PAV) movement which formed a coalition with Mr Carnogursky's Christian Democrats. Several had supported Mr Meciar's new breakaway nationalist group, PAV-Platform for a Democratic Slovakia. He won more than 80 per cent support in recent opinion polls in Slovakia. Mr Meciar opposed Prague's free market economic reforms because the Slovak economy stands to lose most jobs. Mr Carnogursky has been ambivalent about Slovak independence. He favours a treaty with Prague on continuing the federation. President Vaclav Havel rejects this. 
ID: 3669
HEADLINE: FT  24 APR 91 / Bulgarian PM promises a law on privatisation and property 
TEXT: BULGARIA will have a law on privatisation and property rights in place by the autumn as part of the coalition government's timetable for implementing a second package of reforms aimed at creating a market economy, Mr Dimiter Popov, the prime minister, said yesterday. The measures, which are expected to allow Bulgarians to own and buy property, are also designed to open up the country to foreign investment. Little in the way of foreign investment has flowed into Bulgaria in recent months, largely because the current legislation is either too vague on taxes, or too restrictive on the repatriation of profits. Moreover, investors have shied away from Bulgaria because until recently the country was too unstable; western commercial bank creditors have not yet agreed to reschedule the Dollars 8.5bn (Pounds 5bn) debt owed to the London Club. However, Mr Popov, who was elected prime minister last December following the resignation of the socialist government, stressed Bulgaria's new stability. 'It is definitely stable. The parliament is working hard to draft and pass new legislation. The political climate is much better,' he said. Since January, when a coalition government consisting of the Union of Democratic Forces (UDF), a loose grouping of 19 political groupings, and the Bulgarian Socialist Party (BSP), was set up, Bulgaria has embarked on a tight monetary policy. In February, prices were increased four-fold, a squeeze on credit and consumer spending has been successfully implemented, and the first phase of land reform - the return of a maximum of 30 hectares to its original owners before 1946 - has been passed. At the same time, industrial production has plummeted by 20 per cent because of the collapse of the Soviet market and a moratorium on western credits. But the success of these reforms has been overshadowed by bitter infighting between the UDF and the BSP about who should control the political and economic agenda. Mr Popov, 63, politically independent, and a lawyer by profession, denies that purges in the administration have taken place. 'We will not start any revenge. No such thing has taken place in Bulgaria. Those with talent will be promoted, irrespective of their political background. But we will not accept those who abused their position in the former regime.' The former regime, led by Mr Todor Zhivkov, who is now standing trial for corruption charges, was toppled from power in a bloodless palace coup in November, 1989. The BSP (former communist party) won a comfortable majority in last June's free elections. However, BSP sympathisers and UDF officials admit that the UDF leadership remains determined to purge former communists. Mr Popov says his aim to to create 'a new civil service based on competence and competition.' 
ID: 3670
HEADLINE: FT  24 APR 91 / France ordered to justify state aid 
TEXT: THE European Commission has told the French government to furnish detailed proof that it is not using the flagships of its public sector to funnel illegal state aid to smaller companies in industrially declining regions. This latest row over state aid between Brussels and Paris comes shortly after the Commission announced it would examine French plans to provide over Dollars 1bn in fresh capital to two big state-owned companies, Bull, the computer manufacturer, and Thomson, the defence and electronics group. Thomson is one of six state-owned companies named in the Commission's letter, along with Electricite de France, Elf Aquitaine, Pechiney, Rhone Poulenc, and Enterprise Miniere et Chimique. The Commission has given Paris two months to provide details of the funding which would enable it to compare it with the activities of three private groups, BSN, CGE and Saint-Gobain, which France maintains behave identically. 'As major local employers (they are) merely assuming responsibility for the survival of part of the economic fabric,' the French authorities wrote to the Commission last April. Brussels says the subsidised loans, provision of services, and, in some cases, acquisition of holdings by the six state companies may constitute a distortion of competition. It has reminded the French government that if this proves to be the case, it will have to recover the aid. Last year the Commission made Renault, the state-controlled car manufacturer, repay more than Dollars 1bn in assistance which Brussels judged illegal. 
ID: 3671
HEADLINE: FT  24 APR 91 / Swedes expect recession to end next year 
TEXT: THE Swedish recession, one of west Europe's worst, should end gradually next year under the influence of the government's anti-inflation strategy and an international upturn. This was forecast in yesterday's supplementary budget. The government's medium-term outlook suggests Sweden will move into line with average western European economic performance by the mid-1990s. Mr Allan Larsson, finance minister, told employers yesterday the economy had already begun to recover In his budget statement, he said inflation, now running at 9.6 per cent annually, would ease considerably this year; he projected 3 per cent for 1992. There would be a negative growth rate this year of -0.2 per cent but the following year should see the economy grow by 1 per cent, with annual growth of more than 2 per cent thereafter until 1995. The government takes an optimistic view of what will happen to pay increases, expecting a marked fall to 5 per cent this year, after an average 10.3 per cent in 1990, and just over 3 per cent in 1992 as a result of a two-year national agreement now accepted by all public sector workers and 55 per cent of private sector manual workers. Mr Larsson said the government would have to act if those opposing restraint secured higher pay than the rest because it would lead to the collapse of the whole pay stabilisation deal and wreck the government's strategy. He said there would be a SKr18.5bn (Pounds 1.75bn) budget deficit this year, although the percentage of public spending as a proportion of gross domestic product was down to 62 per cent compared with 67 per cent 10 years ago. The government is aiming to cut its own budget by SKr2bn or 10 per cent over the next three years; public sector consumption is set to rise at an annual rate of 0.4 per cent. Registered unemployment will increase, but the government expects the rate to stay under 3 per cent. Independent forecasters believe it will climb to 4-5 per cent by the end of next year. 
ID: 3672
HEADLINE: FT  24 APR 91 / Cheap loans row taxes Spanish Socialists 
TEXT: A YEAR-LONG low key guerrilla war by Spain's governing Socialist party against the conservative finance minister, Mr Carlos Solchaga, is escalating sharply over the latter's dismissal of a party proposal to use Spanish banks to finance cheap mortgages for 400,000 people in the next four years. The Socialist party, which faces testing municipal elections on May 26, plans to use low home financing as its main election plank. However, when it was first mooted last week that Spanish banks might be forced to set aside funds to enable homebuyers to take mortgages at 8 per cent, Mr Solchaga, with Prime Minister Felipe Gonzalez' tacit support, rapidly and pronounced it unworkable. The banks, he said, could not be asked to make unprofitable loans. Normal mortgages cost more than 18 per cent in Spain. Party officials immediately hit back accusing the finance minister of trying to hijack its election programme. Two days later Mr Gonzalez steered a cabinet meeting into announcing that finding cheap homes for people was a good idea but that some other way would have to be found to do it. What he meant was that taxpayers would have to come up with the money. On Monday, for some reason, Mr Solchaga repeated, on radio, his view that the party's original plan was quite unworkable. The party immediately accused him of being blinded 'by his own fuzzy vision'. He promptly retorted that 'if they are going to accuse me of fuzzy vision they should accuse (Mr Gonzalez) the same way'. Mr Gonzalez is trying hard not to take sides, though he probably agrees with his finance minister. Mr Solchaga's toxic relations with party administrators go back more than a year, when he began to criticise openly the control over the party held by Mr Alfonso Guerra, the left-wing former deputy prime minister. Mr Guerra left the government in January in the wake of a family financial scandal, but he has remained deputy party leader. Mr Gonzalez has tried to declare his government's independence from the party but it is clear he cannot totally divorce himself from grassroots or even bureaucratic party opinion. At the moment, the row may actually be working to the Socialists' benefit, as cheap housing has become the dominant issue in the local elections. But the constant sniping between finance minister and party is beginning to irritate the prime minister seriously. 
ID: 3673
HEADLINE: FT  24 APR 91 / Dutch bank chief takes government to task 
TEXT: THE HEAD of the Dutch central bank, Mr Wim Duisenberg, yesterday called for wage restraint in industry and for greater financial discipline by the country's centre-left government. Real labour costs, relatively stable throughout the 1980s, threatened to rise by up to 2.5 per cent a year between now and 1994, causing a severe slowdown in the number of new jobs and pushing up inflation, he said. The rise in wages also had a direct impact on state finances because of the government's promise in 1989 to raise social-security benefits in line with private sector salary increases. Mr Duisenberg, presenting the bank's 1990 annual report, said the government had to do more to control its budget deficit without resorting to large increases in the burden of taxation and social security contributions. However, he 'feared the worst' because the financing deficit so far this year had already exceeded government targets, complicating efforts to cut the deficit to 3.25 per cent of national income by 1994. 'The targets for 1994 will never be realised if we do not manage to extract ourselves from the quicksand of 1991,' he said. 
ID: 3674
HEADLINE: FT  24 APR 91 / French minister heads into education minefield: Everyone agrees the system needs reforming, but no one agrees how 
TEXT: WHEN Mr Michel Rocard's government was appointed three years ago, it made modernisation of the education system its top domestic priority. Mr Lionel Jospin, a leading light in the Socialist party, was give the job of education minister, and the number two spot in the cabinet, to symbolise this priority. Most people greeted the government's declaration of commitment with a mixture of respect and scepticism. For while everybody agrees that French education needs reforming, everybody also knows that education is a daunting political minefield; recent French history is littered with education ministers who attempted to tamper with the entrenched traditions of the education system, and who paid dearly for their temerity. It now begins to look, however, as if Mr Jospin really does intend to try to reform the hydra-headed monster. He has just tabled proposals which go to the heart of the system, because they are aimed at humanising the gruelling baccalaureat school-leaving examination. These reforms are designed to simplify the syllabuses of the different baccalaureats, to shorten and above all to alleviate the school working week, and to modernise teaching methods. Whether the package will make any headway is still uncertain: the main parents' association has voiced its approval, but the main secondary school teachers' union has condemned it outright. The complaint most frequently levelled against the traditional baccalaureat is that it is an elitist, intellectual examination, ill-adapted for mass education. Twenty years ago, 40 per cent of 17-year-olds were still at school; today the figure is over 70 per cent. Twenty years ago, 25 per cent of the school-leaving generation were aiming for the 'bac'; today the figure is 55 per cent; by the end of the century the government aims to raise the proportion to 80 per cent. The traditional baccalaureat continues to be the yardstick of attainment and the principal door for future advancement, and it continues to be the main target for a growing number of French school students. And yet the expansion in numbers has left it largely unchanged either in content or in method: it remains a traditional intellectual examination, taught with traditional class-room methods, and in theory (but only in theory) it is taught by traditional French intellectuals. France is now probably the only country where philosophy is still one of the obligatory subjects in the main school-leaving examination. The most revolutionary element in the Jospin package is the proposal that the lycees should set aside three hours a week for informal 'modules', small class-groups devoted either to catch-up work for slow students, or to the acquisition of learning and research techniques for the fast. This is an iconoclastic innovation because, while the work carried on in these modules would be part of the core curriculum, it would not be marked. Two of the most notorious weaknesses of the French education system are that it has the shortest school year in Europe, but the longest school week. For some technical baccalaureats the school week now lasts 40 hours, plus several hours' home-work every night. Mr Jospin is now proposing a maximum of 35 hours. The third component of the Jospin reforms is a simplification of the baccalaureat syllabuses, so as to get away from the current scourge of hyper-specialisation. At present there are eight different subject groups for the general baccalaureat, and 17 for the technological bac; both would be simplified into three broad streams. In the general bac, the choice would be letters, social science, and science, though the curriculum would continue to include subjects outside the main specialisation. The main stumbling block for all previous reform efforts has been the resistance of the many teaching unions, and this one is not likely to be an exception. Mr Jospin has carefully kept away from any detailed proposals on the content of the baccalaureats; this is the most treacherous ground because it affects the vested interests of teachers of philosophy, geography, maths, etc. But if Mr Jospin's modest reform is to be implemented, it may require a revolution in the attitudes and methods of France's teachers. It looks as if Mr Jospin really does intend to try to reform the hydra-headed monster. He has just tabled proposals which go to the heart of the system, because they are aimed at humanising the gruelling baccalaureat school-leaving examination. 
ID: 3675
HEADLINE: FT  24 APR 91 / World News in Brief: Pounds 1m hollow leg 
TEXT: A 28-year-old Jamaican was arrested when he flew in to Heathrow airport with cocaine worth Pounds 1m hidden in his wooden leg. 
ID: 3676
HEADLINE: FT  24 APR 91 / World News in Brief: Taste of the chalkface 
TEXT: At least 400 students will be able to try teaching before committing themselves to a classroom career. They will earn Pounds 100 a week working for three weeks in secondary schools this autumn. 
ID: 3677
HEADLINE: FT  23 APR 91 / International Company News: Fokker plans to build 130-seat airliner 
TEXT: FOKKER, the Dutch aerospace group, aims to complete a feasibility study on developing a new 130-seat airliner by the end of 1991. The Dutch company is one of several European aircraft manufacturers to have announced its interest in entering the market for 130-seat aircraft. 'Four players in that market segment are too many, but Fokker believes that it must be one of those four,' Mr Marten Kuilman, the chairman, said at the annual report presentation. If Fokker's plans proceed as expected, its proposed 130-seater aircraft would be based largely on its 100-seater Fokker 100. Fokker is also considering the development of an 80-seat aircraft which would be a derivative of its former F28. In 1990, Fokker's net profit nearly doubled to Fl 83.4m (Dollars 42.1m) from Fl 42.4m in 1989. The sharp rise was due mainly to lower financing charges, higher contributions from associated companies, and book profits from divestments. Despite the steep increase, the company announced in March that it was postponing the resumption of dividend payments. It attributed the delay partly to the sacrifices being asked of its workforce, where jobs are being cut to reduce costs and counter the weakness of the dollar. Mr Erik Jan Nederkoorn, the group's finance director, said the recent strong rise in the dollar had brought it back to a more 'comfortable' level for Fokker. 
ID: 3678
HEADLINE: FT  23 APR 91 / Menem's fiscal policy attacked 
TEXT: ARGENTINA'S Catholic bishops have attacked the 'unjust' economic policies of President Carlos Menem, blaming them for creating an ever-wider gap between rich and poor. In a strongly worded note issued over the weekend, the bishop's also condemned widespread corruption which 'is destroying us as a people and as a society.' The note, issued at the end of the annual bishops' conference, is the second time in as many months that the powerful Catholic church has taken issue with Mr Menem. Last month they warned that 'generalised corruption' was undermining support for the government. The traditionalist hierarchy's latest broadside is significant because in the past it firmly supported conservative, often military, governments. Mr Menem, although nominally a Peronist, has adopted pro-business and free market policies. 
ID: 3679
HEADLINE: FT  23 APR 91 / Soviet debt to Finland falls as trade drops 
TEXT: ACCORDING to figures released by the Bank of Finland, the total Soviet debt to Finland reached around FM5.6bn, (Dollars 1.4bn) at the end of last March, dropping from some FM6.5bn at the end of 1990. The drop in the debt was mainly attributable to credits and deposits received by Finnish commercial banks from the USSR. Of the total FM5.6bn debt owed by the Soviets to Finland, FM2.2bn was made up of over five-year-long clearing credits, FM1.2bn in five to seven-year hard-cash credits and FM1bn in one-year hard-cash credits given by Finnish banks. Another FM400m is in a special clearing account with the remaining FM800m being hard-cash payments in arrears. Apart from these receivables, the balance of payments in the clearing account is at present Dollars 100m in favour of the Soviets. This money will be used to pay back the debt owed by Moscow to Finnish companies. Finland is facing a severe recession which has also been exacerbated by the sharp plunge in trade with the USSR, after the Finnish-Soviet clearing system switched to hard currency at the beginning of 1991. Mr Mauno Koivisto, the Finnish president told Mr Valentin Pavlov, Soviet Prime Minister, this week in London that he hoped both countries could switch back to trade based on barter. Given the economic and political instability in the USSR, observers are sceptical of such a change. Meanwhile, Finnair, the state-owned airline, and the Soviet airline, Aeroflot, have signed an agreement which is aimed at studying the prospects of forming a joint venture to offer air services between Leningrad and the rest of Europe. With its home base in Leningrad, the joint venture airline would use a part of Finnair's DC-9 fleet and use Finnish airlines maintenance and training facilities in Helsinki. 
ID: 3680
HEADLINE: FT  23 APR 91 / Swedish parties attacked on policies 
TEXT: SWEDEN'S main opposition parties - the Moderates and the Liberals - were accused yesterday of wanting to introduce Thatcherism into the country if they form a government after the next general election. 'They want to put Mrs Thatcher's discarded coat over Mother Sweden,' said Mr Allan Larsson, finance minister of the ruling Social Democrats, in an attack on their joint economic programme revealed at the weekend which is designed to transform Sweden into a more market-oriented economy. 'What they want to do is nothing more than to introduce the policies that were tried out in Britain during the 1980s and which led to very high unemployment and increased social division,' he added. Today Mr Larsson will introduce Sweden's supplementary budget for 1991 which will indicate the Social Democratic alternative to the Moderate-Liberal economic programme. The two main opposition parties have indicated they intend to fight the forthcoming general election campaign on a common economic strategy. It contains promises for a direct cut in Sweden's value added tax from 25 per cent to between 18-20 per cent as part of a staged reduction in public spending and tax pressure for adjustment to future European Community membership. The parties also pledge to cut the proportion of Sweden's gross national product of 60 per cent that goes to the public sector, reform the sickness insurance system to deal with the scandal of high absenteeism from work and privatise the state industry sector. They will also abolish monopolies, encourage saving and share ownership, and strengthen market forces in the labour market as well as in the financial system and in industry. Both Mr Carl Bildt, the Moderate leader and Mr Bengt Westerberg, leader of the Liberals said their programme would not be changed to satisfy any other possible coalition partners in a future non-Socialist government. The Christian Democrats who are expected to enter Parliament for the first time will back the far-reaching economic manifesto. But Mr Olof Johansson, Centre party leader, said he could not agree with much of it and doubted whether the Centre would support such a market strategy. 
ID: 3681
HEADLINE: FT  23 APR 91 / World News in Brief: Heavenly body 
TEXT: A mysterious quasar far brighter than everything else in the universe has been discovered by British astronomers in the Canary Islands. It makes the sun appear pale. 
ID: 3682
HEADLINE: FT  23 APR 91 / World News in Brief: Behind bars 
TEXT: Geoff Muntz, 52, a former prisons minister in the Australian state of Queensland, found himself on the other side of the bars when he was jailed for a year for misusing expenses. 
ID: 3683
HEADLINE: FT  23 APR 91 / World News in Brief: Military hang on 
TEXT: A leading member of Burma's military junta said there was no chance of a handover of power to civilians in the foreseeable future. 
ID: 3684
HEADLINE: FT  23 APR 91 / World News in Brief: Return of Nixon 
TEXT: Former US president Richard Nixon returned to the White House for lunch with President Bush and other senior officials. 
ID: 3685
HEADLINE: FT  23 APR 91 / World News in Brief: UK gas leak 
TEXT: An accident at Britain's secret Aldermaston weapons factory leaked as much tritium gas in a few minutes as would normally escape in three months. 
ID: 3686
HEADLINE: FT  23 APR 91 / World News in Brief: Abortion pill ban 
TEXT: France banned women who smoke heavily or are aged over 35 from taking a controversial abortion pill after a 31-year-old woman died of a heart attack. 
ID: 3687
HEADLINE: FT  23 APR 91 / World News in Brief: Threat to shuttle 
TEXT: Preparations went ahead for fuelling the US space shuttle Discovery despite a 50-50 chance that a storm would delay its launch on a 'Star Wars' research mission. 
ID: 3688
HEADLINE: FT  23 APR 91 / World News in Brief: IRA offer deal 
TEXT: The Irish Republican Army has offered to stop killing Loyalist paramilitary members if Loyalist groups stop killing Catholics. But the IRA said it would continue to target the British Government and security forces. 
ID: 3689
HEADLINE: FT  23 APR 91 / World News in Brief: Police storm square 
TEXT: Hundreds of Romanian riot police armed with batons and shields stormed a central Bucharest square to break up a demonstration by several thousand people. 
ID: 3690
HEADLINE: FT  23 APR 91 / International Company News: Fred Carr - Correction 
TEXT: In early editions of the Financial Times of April 13 a picture of Mr Fred Carr, the chief executive of WI Carr (Investments) was published. The picture should have been of Mr Fred Carr, the chairman of First Executive. 
ID: 3691
HEADLINE: FT  23 APR 91 / Survey of European Finance and Investments - Portugal (14): Quest for the right balance - Patrick Blum looks at the controversial privatisation programme 
TEXT: FEW issues have been quite as controversial as the government's privatisation programme in spite of a broad consensus in favour of selling companies nationalised in the mid-70s. Though there has been some opposition to the privatisations from groups of former owners who are mostly seeking better compensation, and, on the left, from those who want to preserve a large state sector, in practice the government has had a free hand. This has allowed it to establish what must be the largest privatisation programme in Europe outside the former communist countries. Plans are to sell dozens of leading companies including banks, insurance companies, manufacturers of a wide range of products from cement to beer, chemicals to pulp and paper, steel and oil distribution companies, leading utilities including telecommunications, the tobacco monopoly, the state airline, shipping and bus companies, to the last state-owned newspaper. The scale of the programme has not really been at issue, rather criticism has focused on the way it has been undertaken. The government has been accused of selling companies on the cheap to foreigners, of inflating share prices to maximise revenues, of distorting the market by imposing rigid limits on the purchase of privatised shares by the same foreigners, of failing to protect adequately Portuguese interests, of going about it in a half-hearted way, and of failing to use privatisations as a means of restructuring the economy. It is an illustration of the difficulty of the task that in one way or another all of these conflicting criticisms can be held to be partially true. Local business groups have been most vocal in attacking the government for failing to defend Portuguese interests. They argue that the method of selling companies on the stock market combined with the high price set for privatised shares effectively rules out a greater role by Portuguese investors who do not have the financial clout of large foreign groups. The problem is that there are too few large Portuguese groups able to absorb the volume of privatisations planned even if prices were lower. One suggestion is that potential Portuguese investors should be given preferential credit terms to help them buy into companies. To counter the criticism that it is selling off the family silver to foreigners, the government has imposed rigid limits on the amount of privatised shares foreigners can buy, but this has proved ineffective. Foreign companies have indirectly through local alliances to win key if not majority stakes in most of the companies privatised so far. What the limits have done is to distort the process, make it less transparent, and push prices up further. Most critics believe the government's main objective has been to maximise revenues from the sales, which last year alone brought it revenues of more than Es140bn (Dollars 970m) in six operations. That figure is likely to look small if this year's programme which includes selling several banks and some leading companies is fully carried out, though this appears less certain now. The programme has unfolded in fits and starts, and has faced repeated delays. These have been exacerbated by the Gulf war, and several privatisations due in the first quarter of the year have yet to take place. A general election is due by October at the latest and this will increasingly occupy the minds of ministers. Perhaps the most serious charge is that not enough thought has been given to using the privatisation process to restructure important parts of the economy. The government's answer is that by privatising public companies it is doing precisely that and strengthening the market economy. Critics are not convinced  - 'privatisations in the financial sector, for example, are decided piecemeal,' says a leading economist. 'There is no overall strategy, but what we need is an active restructuring to prepare quickly the economy for the single (European) market. 'The government should intervene selectively to help the formation of Portuguese groups, otherwise we'll miss a unique opportunity.' 
ID: 3692
HEADLINE: FT  23 APR 91 / London Stock Exchange: FT-SE 2,500 level lost in slow trade 
TEXT: UK STOCKS suffered another sharp reversal yesterday, falling nearly 30 points to close below the FT-SE 2,500 mark as investor optimism melted away on both sides of the Atlantic. Selling pressure remained fairly modest but buyers continued to avoid UK equities, believing that further cuts in UK interest rates may be delayed and that the domestic economy remains depressed. The Footsie Index ended 29.3 down at 2,490.8, the low of the day and the first close below 2,500 since the beginning of the month. Concern over interest rates and economic uncertainties mirrored those in New York. London, already depressed by the fall of almost 34 Dow points in New York on Friday, fell sharply in late dealings yesterday as Wall Street recorded a loss of a further 32 Dow points early in the new session. Having failed to show much enthusiasm last week for Wall Street's successful, albeit brief, move above Dow 3,000, the UK market now seems to be reacting quickly to the fall in the US market. As often when the underlying equity market lacks certainty, share prices reacted to movements in the June futures contract on the FT-SE Index. In late trading the futures contract turned down and led the underlying equity market below the 2,500 mark. However, equity trading volumes were moderate in London yesterday, with Seaq recorded turnover at 403m shares, compared with 465.8m on Friday and as much as 700m shares daily during last month's bullish period. Lower volume is disturbing for the securities industry; London Stock Exchange data shows that retail business fell to the Pounds 700m to Pounds 800m daily range last week, after running well above Pounds 1bn daily in March. The latest Confederation of British Industry/Financial Times survey of distributive trades did little to change views on the underlying sluggishness of consumer business - an unexpected rise in high street sales appeared to reflect special factors, chiefly the sharp increase in value added tax announced in the UK Budget in mid-March. Today brings the UK trade figures for last month, which equity market analysts predict will show little change from the Pounds 0.7bn monthly deficit recorded in February. Wall Street's influence brought widespread falls in the blue chip internationals, where the dollar's strength proved no help to such US currency earners as BAT Industries and the pharmaceutical stocks. ICI, with first-quarter trading figures due this week, fell smartly. With crude oil prices still unsettled and many analysts bearish, BP and the other leading oil producer shares could make little headway in yesterday's stock market. The retail group took the CBI/FT survey fairly well, and although there was little buying across the broad range of the sector, there were a few firm spots. Ratners, the jewellery chain, brushed off disappointing results as investors continued to show faith that there will be a recovery in the economy, and thus in consumer confidence, by the end of the year. Kingfisher, the high street stores group, managed one of the firm performances of the session. Mr Neil Mackinnon, chief economist at Yamaichi, warned that the next shock for London and other global equity markets could come on Friday, when the first-quarter GNP data for the US economy are published. 'So far there is little evidence to support the official view of an early recovery in the (US) economy,' said Mr Mackinnon. 
ID: 3693
HEADLINE: FT  23 APR 91 / London Stock Exchange: Royals hit by rights talk 
TEXT: SUSTAINED weakness in Royal Insurance, the composite insurer, was accompanied by vague market suggestions that the group might be considering a rights issue. A cash call from Royals has been talked about for some time by a number of insurance specialists. Another suggestion is that analysts are preparing to downgrade their earnings and dividend forecasts for the company. Some dealers, however, attributed the sharp fall in the shares, which settled 18 lower at 447p, to the fact that they had held up well against the rest of the sector during the first quarter. There are suggestions that Royals' first-quarter results, due next month, could show a loss in excess of Pounds 60m. Analysts had been hoping that Royals might break even in the current year, but now some of them are looking for a full year loss of something in the order of Pounds 50m. Gestetner weakens Downgradings from competing broking houses put shares of Gestetner, the distributor of office equipment and photographic products, under pressure. Three analysts at least revised estimates of current year profits, the lowest of which until yesterday had been Smith New Court's Pounds 62m. James Capel was said to have reduced its figure to Pounds 58m but more savage cuts came from BZW, and from another house which preferred to remain anonymous. Citing extremely poor trading throughout February and March, which will obviously affect group first-half profits, BZW dropped its estimate to only Pounds 50m for the full year. An even lower figure of Pounds 47m was said to have been forecast by another house. BZW retained its longer term view of being overweight in the stock but sees short-term downside. Gestetner closed 20 weaker at 213p. Hammerson good The volatile property stock Hammerson was the best performer of the day among FT-SE 100 constituents in the wake of results announced last week. County NatWest issued a buy note on the stock yesterday. It highlighted the company's cautious management policy and exposure to the dollar as reasons to buy. 'The worst is certainly over, certainly in terms of sentiment.' said County. The company also made a presentation to its institutional shareholders at the offices of its broker BZW. More than 60 fund management staff attended. Hammerson was 20 better at one point and the shares eventually closed at 630p for a gain of 15 on the day. Volume was a typical 350,000. Ratners shines Ratners, the jewellery retail chain, shrugged off disappointing final results as investors looked forward to the prospect of a recovery in consumer spending by the year-end. The shares closed 8 higher at 178p on turnover of 3m. With nearly half of Ratners' UK profits made in the Christmas period, the market took heart from the confident statement by Mr Gerald Ratner, the chairman, who said he was hopeful for significantly better trading conditions during that important period. Full year profits fell 8 per cent to Pounds 112m, slightly below market estimates. As a result, analysts lowered their current forecasts to around Pounds 127m to Pounds 130m from Pounds 130m to Pounds 135m. It was the turn of cautious chemicals analysts to voice opinions on ICI and its first-quarter figures due on Thursday. The shares fell 21 to 1080p. Inchcape slipped 8 to 332p as the company reshuffled its board. Volume in Saatchi &amp; Saatchi climbed to 25m, but traders explained that more than 1 1/2 bn Saatchi shares are in issue now that the rights offer is complete. As a result, it is one of the most liquid stocks in the market and this kind of trading volume is to be expected. The share price ended unchanged at 19 3/4 p. Weekend reports that ADT might sell its stake in Christies International left the latter 8 off at 218p. Volatile Brent Walker slid 8 to 66p in the wake of press comment on the company. The wider market reaction combined with a downgrading by Lehman Brothers, the securities house, pushed Trafalgar House down 9 to 245p in heavier trading volume of 2.7m shares. Official confirmation of weekend reports that Guinness Mahon, the UK merchant bank, will announce a substantial interim loss later this week prompted a near 20 per cent drop in the shares. They closed a net 8 lower at 42p. Mr Geoffrey Bell, Guinness Mahon's chairman, said the results would include a provision of Pounds 30m for bad loans, giving the bank an after tax loss of Pounds 35m. There will be no dividend, Mr Bell added. Bank of Yokohama, Japan's leading regional bank, gained control of Guinness Mahon in 1989, paying 146p a share, and it holds a 65 per cent stake. Mr Robert Maxwell has a 9 per cent holding. Oil shares were resilient, closing little changed on balance in spite of the steep falls in equities on both sides of the Atlantic. They were bolstered, dealers said, by the latest rise in crude oil prices, currently around the Dollars 20 a barrel mark, and the strength of the dollar. 'With oil priced in dollars the majors are 100 per cent exposed to the currency,' said one specialist. There were hints that Elf's advisers had priced Elf's 25 per cent holding in Enterprise Oil prior to its imminent placing, but specialists said it was more likely that Elf would hold out for a price in the region of 600p before it would sell. Enterprise was easier at 555p. Cadbury Schweppes fell 11 to 395p on a revival of speculation about a possible rights issue. Asda was off 1 1/2 at 119 1/2 p as the market waited for the company's meeting with brokers, to be held later this week. The shares have been depressed on speculation that analysts' forecasts may be reduced. Budgens put on 2 to 47p after reports that some shareholders are seeking senior management changes. Relief that the annual profits shortfall over the previous year was not worse boosted issues of Polymark International, the laundry equipment distributor. The ordinary shares advanced 8 to 28p and the preferred 'A' 17 to 115p. Renewed speculative interest was held responsible for further strength in USM-listed ML Laboratories, which finished 18 higher at 455p. There were further setbacks in a water sector still suffering from last week's news that trading in the Water Package is to cease from July 12. Dealers maintained that this will result in sustained selling of the Package, with funds unwilling to be left with thinly traded components of each package unit. Much of the recent selling has come from overseas investors, it was said, with Japan-ese institutions conspicuous and heavy sellers. Also depressing sentiment has been some unease about the UK government's chances of winning the next general election. The opposition Labour party has recently reaffirmed its intention to renationalise the water companies if it wins the election. The Package was down over Pounds 100 at one point yesterday, but rallied to close a net Pounds 42 off at Pounds 2968. Anglian Water weakened 10 to 286p, while Southern dipped 8 to 270p and Severn Trent the same amount to 280p. North West drew sustained support, closing unchanged at 296p after 291p. Cronite returned from suspension with a reassuring directors' statement, and the shares closed at 24p, double the April 5 suspension price. Further speculation that the UK Ministry of Defence will shortly award its much-mooted replacement tank contract to Vickers failed to support the shares, which fell 7 to 218p. Vickers manufactures the Challenger tank, a new and more sophisticated version of its old Chieftain series. Downiebrae, the Glasgow-based steel profile and pipe flange manufacturer, found favour ahead of Friday's annual results and ended 7 higher at 36p. NEW HIGHS AND LOWS FOR 1991 NEW HIGHS (198). AMERICANS (30) Am. Cyanamid, Amer. T &amp;T, BankAmerica, Bowater, Brunswick, CPC, California Energy, Cont'l. Bank, Corp Data, Dana, Data Genl., Dun &amp; Bradstreet, Eaton, Ford Motor, Gen. Elect., Greyhound Dial, Houston Inds., NYNEX, Pall, Pennzoil, Rep. NY, Sears Roebuck, Sun Co, TRINOVA, Texaco, Time Warner, USX, Unilab, Utilitech, Whirlpool, CANADIANS (13) BC Gas, Bk. Montreal, Bk. Nova Scot., Brascan, Can. Imp. Bk., Central Capital A, Derlan Inds., Hawker Sid. Can., Hudson's Bay, Inco, Nova Corp of Alberta, Royal Bk. Can., Tor.- Dom. Bk., BANKS (2) Espirito Santo, Westpac, BREWERS (3) Fuller, Greene King, Seagram, BUILDINGS (6) Amco, Boot (Henry), CMW, SWP, Smart (J), Ward, CHEMICALS (3) Caird Rd Pf., Engelhard, Jeyes, STORES (12) Alexon, Amber Day, Cantors A, Etam, Gabicci, Helene, Hogg Robinson, Leslie Wise, Pepe, QS, Scholl, Sherwood, ELECTRICALS (11) Black &amp; Decker, CML Micro., Forward Tech., Fujitsu, Hewlett-Packard, Kewill Syst., Learmonth &amp; Burchett, Nth. Telecom, Pifco, Do. A, TDK, ENGINEERING (2) ASW, Downiebrae, FOODS (8) Assoc. Fisheries, Bensons Crisps, Brake Bros., Goodman Fielder Wattie, Morrison (Wm) 5 1/4 pc Pf., N &amp; W, Nichols (Vimto), Sutherland, INDUSTRIALS (30) Amer. Bus. Systems, BH Prop., Betterware, Bluebird Toys, Bowater, Bridon, Brierley Invs., BTR Nylex, CSR, Dauphin, Dolphin Pack., Elan, Erskine Hse. 7 1/4 pc Pf., Faber Prest, Grampian Hldgs., Intereurope, Le Creuset, Low &amp; Bonar, ML Labs., MY, Nobo, Pacific Dunlop, Patterson Zoch A, Pentland, Polymark, Do. Pfd. A, Powell Duffryn, Schlumberger, Swallowfield, Whatman, INSURANCE (5) Amer. Gen., Aon, Lincoln Nat., Travelers, USF &amp; Gen., LEISURE (4) Central ITV, Hi-Tec, Invicta Sound, Pickwick, MOTORS (3) Appleyard, Dagenham, Perry, NEWSPAPERS (2) Johnston Press, News Corp., PAPERS (4) Abbott Mead V, Lawson Mardon, TMD Advertising, Waddington (J), PROPERTY (5) Cap. &amp; Counties, Lend Lease, Marylebone Ests., Slough Est. 6pc Bd. 2003, Town Centre, SHOES (1) FII, SOUTH AFRICANS (3) OK Bazaars, SA Brews., Tongaat-Hulett, TRANSPORT (4) CSX, Dawsongroup, Mayne Nickless, Tibbett &amp; Britten, TRUSTS (30) Acorn, American Tst., BWD, Baring Puma Fd., Cons. Venture, Edinburgh Fd. Man., Exmoor Dual Inc., Fidelity Japan OTC &amp; Reg. Fd., Fleming Amer., Fleming Fledgeling, GT Chile Fd. Units, Genesis Chile Fd., Genesis Emrg. Mkts., Genesis Malaysia Maja. Fd., Haw Paw Bros., Intrum Justitia, Jakarta Fd., Latin Amer., London Amer. Vent., Malacca Fd., Malasia Cap. Select, Malaysian Emrg. Co's. Fd., Do. Wrrnts., Moorgate, River &amp; Merc. Am. Inc., Scot. Nat. Zero Div. Pf., Singapore SESDAQ Fd., South East Asian Fd. Wrrnts., Thai Euro Fd., Tor., OILS (6) Chevron, Exxon, Hamilton Oil, Mobil, NZ Oil &amp; Gas, Woodside, MINES (11) Ang. Am. Coal, Beatrix, De Beers Linked Units, Doonfontein, East Dagga, Elsburg, Gencor, Impala Plat., Northam Plat., Rustenburg Plat., Western Areas. NEW LOWS (28). BANKS (2) Guinness Mahon, HSBC, STORES (3) Asprey, Oliver, Usher (Frank), ELECTRICALS (1) Sema, ENGINEERING (1) Bailey (CH), FOODS (1) Albert Fisher, INDUSTRIALS (6) African Lakes, Brompton, Courtney Pope, Kingsgrange, Ross, Scot. Heritable Tst., NEWSPAPERS (1) Gardner (DC), PROPERTY (5) Clayform Wrrnts., English &amp; O'seas, Rosehaugh, Stanhope, Wates City of London, TRUSTS (2) Sumit, Worth, OILS (3) Clyde Petlm., Tullow, XCL Sunrise, MINES (3) East Rand Prop., Harmony, Winklehaak. 
ID: 3694
HEADLINE: FT  23 APR 91 / World Stock Markets (America): Amoco counters downtrend on pleasing results 
TEXT: Wall Street THE DOWNWARD trend in share prices established since record highs for the major indices were reached last week continued yesterday, writes Patrick Harverson in New York. At the close the Dow Jones Industrial Average was down 37.87 at 2,927.72, near its low for the day. The more broadly based Standard &amp; Poor's 500 fell 3.25 to 380.95. The Nasdaq composite index of over-the-counter stocks, which had enjoyed the best run since the start of the year, continued to underperform yesterday, dropping 6.81 to 494.38. Turnover on the New York SE was relatively light at 164m shares, and with declining stocks outpacing rises by a margin of about three-to-one the weak tone of the overall market was clearly evident. The recent market rally was fuelled primarily by expectations of US economic recovery, lower interest rates and a return to corporate profitability later this year. These hopes are now fully discounted in share prices, and in the absence of a strong lead from fresh economic news there is little reason for investors to buy stocks at the moment, said analysts. Among individual issues, quarterly earnings figures continued to produce a mixed reaction. In the oil sector, Mobil initially rose against the market trend after reporting a jump in three-monthly net income to Dollars 1.73 a share, up from 94 cents posted in the first quarter of 1990. However, the stock was unable to stand up against the general sell-off and closed down a net Dollars  3/4 at Dollars 67 5/8 . Amoco proved more resilient, holding on to its gain to end up Dollars 1/2 at Dollars 54 after also revealing improved first-quarter earnings, up from the Dollars 466m of last year to Dollars 803m. The long-running bid battle between NCR and AT&amp;T took another turn yesterday as NCR's stock forged ahead Dollars 5 1/8 to Dollars 101 7/8 on turnover of 1.8m shares after AT&amp;T said it was ready to improve its offer for the computer group to the equivalent of Dollars 110 a share. The development left AT&amp;T down Dollars 1 1/4 at Dollars 36 1/4 on 2.7m traded. NCNB retreated Dollars 2 3/8 to Dollars 37 in active trading after the regional banking group said it had held merger talks with Southeast Bancorp and was considering making an offer for the Florida group in the near future. Southeast rose on the news at first, but eased back to close down Dollars  1/4 on balance at Dollars 5 3/4 . Bankers Trust put on Dollars  1/2 to Dollars 49 in spite of unveiling a 19 per cent decline in first-quarter profits to Dollars 160m. Martin Marietta, the defence equipment manufacturer which makes components for the Patriot anti-missile missile system used in the Gulf war, fell Dollars 2 1/2 to Dollars 55 in the wake of just a modest improvement in first-quarter net income to Dollars 1.44 a share, against Dollars 1.32 a share a year ago. Canada TORONTO partially recovered from an early decline during a quiet trading session. The composite index was finally down just 4.4 at 3,491.6, while declining stocks led advances by 333 to 205. Volume fell to 17m shares from Friday's 35.4m. Eight of the 14 sub-groups finished lower, although there were not any significant declines. Energy, industrial products, financial services and consumer products all posted small losses. The mining group ended steady while golds gained 2.49 per cent. Abitibi-Price, unchanged at CDollars 15 1/4 , saw its first-quarter loss decrease to 9 cents a share from the 17 cents recorded a year earlier. The company said it expects 1991 to be 'a difficult year'. 
ID: 3695
HEADLINE: FT  23 APR 91 / World Stock Markets (Europe): Germany falls 1.7 per cent on Kohl party's defeat 
TEXT: THE WEAKNESS of the German government and its currency dragged other bourses lower yesterday, writes Our Markets Staff. FRANKFURT reacted to the crushing defeat for Chancellor Helmut Kohl's Christian Democratic party in Sunday's state election in the Rhineland Palatinate, Mr Kohl's home state, and yesterday's fall in the D-Mark to a 16-month low against the dollar. After an 8.18 or 1.2 per cent fall in the broadly based FAZ index at midsession, the DAX index closed 27.46, or 1.7 per cent down at 1,571.91, its intraday low. The heavier falls in the blue chips, said Dresdner Bank in Frankfurt, indicated that dealers were anticipating foreign selling. However, the drop in German equity market turnover from DM5.5bn to DM5bn indicated that prices were marked down, rather than forced down by selling volume. By the end of the afternoon, too, the leaders were probably a shade higher than the close on aggregate, in spite of a fall of more than 1 per cent on Wall Street. Daimler, Siemens and Deutsche Bank, the main international stocks, fell DM10.50 to DM680.50, DM10.20 to DM583.30 and DM13 to DM628.50 respectively, Daimler after stating that 1990 group operating profit was about 10 per cent below the 1989 level and Siemens on higher net profit for the half year to March. PARIS slipped to a five-week low on the last day of the monthly account, depressed by the French franc's weakness against the dollar and by a finance scandal which threatened to endanger the government. The CAC-40 index lost 23.92 or 1.3 per cent to 1,767.20, its lowest close since March 20, in volume estimated at just below FFr2bn. Trading was dominated by arbitrageurs tidying up their positions at the end of the account. Among the day's big losers was Paribas, down FFr14 to FFr443, with most of the 123,025 shares traded attributed to arbitrage activity ahead of the close of the share swap with Ciments Francais. Alcatel Alsthom, which was weak last week, fell another that a consortium led by Alcatel had won a FFr10bn train order from the French state railway. Peugeot gave up some of last week's recovery, losing FFr10 to FFr543. In the retail sector, Galeries Lafayette rose FFr70 or 4.1 per cent to FFr1,800 in thin volume of 380 shares after the company said it would not make a full bid for Nouvelles Galeries, in which it has a 38 per cent stake. Nouvelles Galeries fell FFr40 or 5 per cent to FFr760 with 1,350 shares traded. MILAN fell across the board in moderate trading, reflecting declines on foreign markets. Insurance and banking shares, which were sought after last week, were particularly hard hit as speculative buying petered out. The Comit index fell 6.65 to 595.99 in volume estimated below Friday's L170bn. Trading is expected to quieten before the public holiday on Thursday. Fiat fell L69 to L5,460 and dropped further to L5,435 after hours. Among the insurers, Generali lost L400 to L38,100 but eased to L37,975 later in the day, while among banks, Mediobanca fell L415 to L16,215. Hopes that the protracted feud between Mr Carlo De Benedetti and Mr Silvio Berlusoni for control of the publisher Mondadori would soon be resolved lifted Cir, the holding company of Mr De Benedetti, to L2,680 after hours, after an early fixing at L2,610, down L20. Shares in L'Espresso, 80 per cent controlled by Mondadori, were suspended at L17,000 amid frantic buying before being fixed L920 or 5.9 per cent higher at L16,500. Olivetti eased L75 to L3,845 ahead of its 1990 results due tomorrow. AMSTERDAM slumped in low volume on fears that the ever-stronger dollar would do more harm than good to corporate earnings and force the Bundesbank to raise rates to protect the D-Mark. Bonds were easier. The CBS Tendency index fell 1.9 or 2 per cent to 94.1. Fokker, the aircraft manufacturer, lost Fl 1.70 to Fl 31.30 on a weekend report in the Dutch press that the US airline AMR Corp might not convert 75 aircraft options into firm orders. STOCKHOLM continued to worry about interest rates and first quarter results. The Affarsvarlden general index fell 15.8 or 1.5 per cent to 1,058.1. Volume fell from SKr308m to SKr264m, with one-third generated by Trelleborg and Ericsson. Trelleborg free B shares fell SKr1 to SKr138 and Ericsson free B's fell SKr7 to Skr192. SKF free B's fell SKr2 ahead of its first quarter earnings report due today. MADRID was lower. A 21 per cent increase consolidated net profit failed to support Banco Santander, which fell Pta70 to Pta5,510. The general index closed 2.85 lower at 279.58 in low turnover of Pta15bn. BRUSSELS saw continued interest in Gechem, the polyurethane foam producer, on rumours that Societe Generale de Belgique would soon sell its stake. The ordinary shares jumped 5.9 per cent to BFr832. The Bel 20 index fell 7.54 to 1,203.29 in volume of BFr635m. ZURICH saw the Credit Suisse index fall 7.3 to 550.0 as a slight firming in domestic interest rates kept most investors on the sidelines. --------------------------------------------------------------------- FT-SE Eurotrack 100 - Apr 22 Hourly changes --------------------------------------------------------------------- Open     10 am    11 am    Noon    1 pm   2 pm    3 pm      Close --------------------------------------------------------------------- 1115.69  1115.63  1113.37  1112.62  N/A    N/A    1113.62   1112.13 Day's High   1116.26         Day's Low   1111.97 --------------------------------------------------------------------- Apr 19        Apr 18         Apr 17         Apr 16         Apr 15 1122.00       1124.98        1126.20        1113.65        1125.46 --------------------------------------------------------------------- Base value 1000 (26/10/90) --------------------------------------------------------------------- 
ID: 3696
HEADLINE: FT  23 APR 91 / Foreign Exchanges: Dollar keeps up the gallop 
TEXT: THE DOLLAR was very firm yesterday, particularly against the depressed D-Mark. The defeat of the ruling Christian Democrats in Sunday's state election in the Rhineland Palatinate, the home state of German Chancellor Helmut Kohl, increased downward pressure on the currency. Mr Kohl's political difficulties weighed on the D-Mark at a time when it is already suffering from the economic problems caused by German unification and concern about growing instability in the Soviet Union. The decline of the D-Mark weakened all members of the European exchange rate mechanism against the dollar, but the US currency was strong in its own right, improving against non-ERM units such as the Swiss franc and the Japanese yen. Hopes of a gradual recovery in US economic performance and fading expectations of lower US interest rates helped to push the dollar up to another 16-month high against the D-Mark. This followed on from the renewed surge in demand seen on Friday. There was no sign of central bank intervention as it broke through technical resistance at DM1.7620 yesterday and touched the day's high at another resistance point of DM1.7680, before closing in London at DM1.7660 compared with DM1.7360 on Friday. Finance ministers from the Group of Seven leading industrial nations meet in Washington next weekend, amid concern at an apparent lack of agreement on interest rate policy. It was also noted that the US administration's desire for lower rates does not appear to be shared by members of the policy-making US Federal Open Market Committee. A US press report last week suggested that the FOMC has agreed that interest rates may be low enough to end the recession. This coupled with concern among some FOMC members about rekindling inflation if rates are cut were major factors sparking the dollar's surge over the last two trading days. At the London close the dollar had also advanced to Y139.40 from Y138.35; to SFr1.4795 from SFr1.4705; and to FFr5.9475 from FFr5.8575. Its index climbed to 67.1 from 66.3. The D-Mark maintained the downward trend against the yen, which resumed last Thursday after the Bundesbank council failed to increase official German interest rates. In London the German currency finished at Y78.95, compared with Y79.70 on Friday and Y81.00 on Thursday. Sterling lost ground in the ERM, but stayed second strongest, according to figures from the European Commission. The pound fell 2.95 cents to Dollars 1.6925, after losing 5 cents on Friday. It remained steady against the D-Mark, however, closing unchanged at DM2.9900, while falling to FFr10.0650 from FFr10.0875; to SFr2.5050 from SFr2.5325; and to Y236.00 from Y238.25. Sterling's index weakened 0.6 to 91.6. In New York the pound recovered a modest 30 points to end at Dollars 1.6955. 
ID: 3697
HEADLINE: FT  23 APR 91 / Commodities and Agriculture: Nickel development plans as confidence is boosted 
TEXT: FIRM NICKEL prices and the prospect of sustained global growth have persuaded Falconbridge Ltd to commit CDollars 35m (Pounds 17.6m) to underground development at its remote Raglan property in northern Quebec over the next 18 months. Falconbridge, owned 50-50 by Noranda and Trelleborg of Sweden, is discussing developing a mine at Raglan with annual output of 20,000 tonnes of nickel. The cost would be around CDollars 375m, including infrastructure. The property has been long known as Falconbridge's 'perennial mine of tomorrow'. The deposit was found after World War II by the late Mr Murray Watts, one of Canada's most successful mine finders. He was looking for uranium as well as precious and base metals. Falconbridge bought control of the property in 1957 and spent many millions of dollars outlining the deposit. However, its location north of Schefferville and the northern rail terminus, ruled out development. Raglan is nearly 1,000 miles north east of Montreal and only 60 miles south east of Deception Bay, on Hudson Strait, the shipping point for the former Asbestos Hill mine. During the seventies asbestos fibre was mined openpit and shipped for refining at Nordenheim in Germany until the US Environmental Protection Agency finally knocked the bottom out of the international asbestos market. Last month, the ice-breaking freighter Arctic, used to move zinc ores from the central Arctic to European refineries, successfully navigated the forbidding ice in Deception Bay, tying up at the old asbestos dock. This means the old three-month shipping season for asbestos can be extended to eight months, helping Raglan's economics significantly. The mine could operate year-round and production for four months be stockpiled. Falconbridge will spend CDollars 20m at Raglan this year alone and has begun a full feasibility study. Most of the money will go for an underground ramp, lateral work and drilling. Raglan is a series of deposits along a 30-mile strike length. Estimated reserves are 18m tonnes averaging 3.13 per cent nickel and 0.88 per cent copper in one group of mineralised zones. But total reserves are believed much larger. In terms of grade Raglan is the best undeveloped sulphide deposit anywhere, believes Falconbridge. The mine would be a fly-in/fly-out operation. A rail connection with Schefferville was considered in the past, but the rugged terrain makes the cost prohibitive. The tree line ends just north of Schefferville and the permafrost then begins. Potentially, Raglan could increase Falconbridge's annual nickel output by 25 to 30 per cent by 1996. Last year Falconbridge produced 62,000 tonnes from its mines in Sudbury, Ontario, and in the Dominican Republic. Nickel prices are around USDollars 4 a lb and many forecast tightness in supply because of problems in the Soviet Union. Together the Soviet Union and Cuba have been supplying between 12 and 15 per cent of western demand. Falconbridge says production in Sudbury and the Dominican Republic will remain flat for the next few years and Raglan would help retain its world market share. 
ID: 3698
HEADLINE: FT  23 APR 91 / Commodities and Agriculture: Fears for farm budget if price ceiling ignored 
TEXT: THE European Commission expects the EC farm budget to run out of money before the end of the year, if the community's agriculture ministers continue to fail to agree to stay within the mandatory ceiling, or 'guideline', on farm price support. Brussels is understood to have calculated that the first cash shortages in the Common Agricultural Policy will appear around October, if ministers push the tangled debate over this year's price package into June. Such a delay looked altogether likely last night, as the council of agriculture ministers began their third attempt since February to fix this year's prices - by agreeing that any accord would have to wait until next month at the earliest. Ten of the 12 farm ministers reiterated their demands that the ceiling be raised to take account of what they claim is the unforeseen cost of integrating east German farms into the CAP. Led by France and Ireland, they want to soften the cuts proposed by the commission on February 27. These cuts are intended to limit the rise in farm spending this year to Ecu7.4bn, a record 30 per cent leap from last year, touching the ceiling of Ecu32.5bn (Dollars 40bn). Only the UK, and, with some dithering, the Netherlands, are holding fast to the guideline, both in the council of farm ministers and finance ministers, whose unanimous agreement would be needed to breach it. The UK's fiscally rigid stance was one of three emerging from yesterday's farm council. In addition: Ireland was advocating the adoption of the guideline but creation of 'an ad hoc mechanism', a special reserve, in case it is broken. In common with France and others, the Irish believe the commission has overreacted to one-off effects on the beef market, such as the 'mad cow' scare and the Gulf crisis, has exaggerated overproduction trends, is overly pessimistic about world farm prices, and has misjudged how fast the dollar is strengthening so reducing the cost of export subsidies. France appears still to want to take the wrangle to the European summit due in June, in the hope of winning sanction for a higher guideline, having failed to get it on to the agenda of the special summit here on April 8, devoted almost entirely to the Kurdish emergency. The finance ministers meeting which took place alongside that summit replicated the 10-2 division among farm ministers over the guideline. However, it was a European summit, in Brussels in February 1988, which set the yearly ceilings. The Irish idea of a special reserve would, commission and UK officials say, require the unlikely unanimity of the finance ministers. However, one of its underlying premises - that Brussels has done its sums wrong - appears to be buttressed by figures from the commission's periodic 'early warning system' survey of expenditure. These show that price support to the end of this month has been underspent by Ecu1.1bn. France also pressed last night for an update. But commission officials maintain that the seeming underspend is because certain member states, Italy in particular, are behind in paying out subsidies to their farmers. They also dismiss the contention that the stronger dollar will save the guideline, since its effect will not feed through until next year. There is concern in the commission, however, that if a summit were to address farm spending, it might fix guidelines into the future, and queer the pitch for the radical reform of the CAP which Mr Ray MacSharry, EC agriculture commissioner, is due to present in detail by July. Its preferred alternative may in the end be simply to roll over last year's price package, keep formally within the 1991 guideline and pass on surplus spending to next year, when it hopes to start the reform. 
ID: 3699
HEADLINE: FT  23 APR 91 / Commodities and Agriculture: Peru cuts taxes and declares mining emergency 
TEXT: PRESIDENT Alberto Fujimori has declared a state of emergency in the Peruvian mining industry and announced tax concessions to give the beleaguered sector a breathing space. From July, small and medium-sized mines will be exempted from the current 5 per cent emergency tax on copper export. Output from mines in this category is worth Dollars 750m (Pounds 441m) a year, or over a third of Peru's earnings from mining. Peru's important silver mining sector will also benefit from new 'drawback' measures which allow it to reclaim income and business equity taxes. Although the measures were welcomed by Mr Luis Rodriguez Mariategui, head of the National Mining Society, (SNM), it is not clear whether they are in time to save about 14 medium-sized mines under threat of closure. For example Huaron, a leading silver, zinc and lead producer has been losing Dollars 800,000 a month since January and is now said to have debts of almost Dollars 13m. While plummeting international silver prices mean that silver producers have been worst hit, the entire sector is in poor shape. Preliminary figures for 1990 indicate that direct losses may be around Dollars 130m, close to those registered in 1986, the worst year in the last decade. State-owned giant Centromin lost Dollars 50m last year and is contemplating drastic personnel cuts. Only five mining companies reported profits last year, according to preliminary data - Southern Peru Copper, Orcopampa, Milpo, Simsa and Arcata. Copper output fell 13 per cent in 1990 from 1989, while silver and iron production declined 15 and 20 per cent respectively. Spare parts and maintenance problems at HierroPeru, the country's sole iron producer, meant a fall in iron output from 2.9m tons in 1989 to 2.1m last year. High international metals prices partially masked the crisis - but this year is likely to be worse, according to industry sources. Speaking at the close of the national Mining Engineers' Convention in Lima, President Fujimori acknowledged the importance of the mining industry. It generates over half of all foreign exchange earnings and employs one in five of the population. The solution to the sector's problems, he recognised, lay in a more realistic exchange rate and lower interest rates. The dollar-inti exchange rate has scarcely moved since December. The inti is over-valued by a factor of three, according to the mining industry. Mr David Ballon, president of the Mining Engineers' Institute says the sector has lost Dollars 1.62bn in the last two years alone through exchange rate lag. This has meant low levels of reinvestment and failure to spend on exploration. Many mines' proven reserves are now perilously low. Short-term debts also plague the sector. Mines have been forced to borrow heavily to pay taxes levied on total sales, rather than profits and run between 20 and 30 per cent of turnover. Interest rates exceed 20 per cent a month, in spite of a gradual fall in inflation, down to 7.7 per cent last month. Mining companies' debt positions have been exacerbated by Centromin's failure for the past several months to pay suppliers. Participants from abroad at the convention emphasised the need for Peru to stabilise tax policies and standardise contracts along Chilean lines. Their call appeared to have been heard by President Fujimori. He promised to promote mining investment under extraordinary facilities recently granted by parliament. This, he said, would make laws 'more flexible,' attract risk capital and favour joint ventures. If the main problem for Peruvian miners continues to be the exchange rate, there is another to which there is no solution yet in sight - terrorism. The SNM counts 304 terrorist actions directed at mining companies during the last decade, mainly with the object of stealing explosives and other supplies. Attacks have left 62 dead, it calculates, with a disturbing recent rise - 14 mining employees were killed in remote mountain camps in December last year alone. 
ID: 3700
HEADLINE: FT  23 APR 91 / Commodities and Agriculture: Canadian government support package criticised as too little 
TEXT: CANADA'S federal government plans to bolster 1991 farm income by CDollars 425m (Pounds 214m) this spring through its Farm Support and Adjustment Programme. It claims that this will bring realised farm income to CDollars 3.3bn from Dollars 3bn in 1990. Realised income is operating profit after depreciation. But both western and eastern farm groups said that this would not be nearly enough to counter the farm crisis, particularly on the prairies. Incomes will remain under pressure from the continuing wheat trade war between the US and Europe, and the impact of Canada-US free trade on horticulture. Western groups were the most critical. The Saskatchewan Wheat Pool said that the prairies alone needed CDollars 1.3bn this year to offset low prices and 'they gave us Dollars 200m.' However, Mr Donald Mazankowski, the federal agriculture minister, said that the government 'just doesn't have the dollars.' The Farm Support programme replaces emergency annual bail-outs, with income insurance designed to guarantee participating farmers 90 per cent of long-term average income in case of crop disasters or low commodity prices. Further changes in the system are due next year. The federal government picks up part of the premiums but most provinces have delayed their contributions and farmers have been slow to sign up. Mr Mazankowski agrees that the premiums are high. The government has also announced modest help for horticulture and direct financial incentives to prairie farmers to take marginal land out of production. 
ID: 3701
HEADLINE: FT  23 APR 91 / International Capital Markets (Government Bonds): German bonds tumble as election gloom deepens 
TEXT: GERMAN government bonds opened sharply lower yesterday as the market reacted to the defeat of the ruling Christian Democratic Party in state elections in the Rhineland Palatinate. The bund futures contract on the London International Financial Futures Exchange fell to 84.98 during the morning, against Friday's close of 85.27. However, the market showed resilience in later trading and the contract closed at 85.15. The benchmark 10 per cent government bond maturing 2001 closed on a yield of 8.44 per cent, down from an opening level of 8.38 per cent. The election defeat gives the opposition Social Democrats an overall majority in the Bundesrat, the upper house of the German parliament. The Bundesrat can block any legislation which affects the financing of the regional lander (such as planned VAT increases and reform of the corporate tax structure) and any moves to change the way in which the regions are administered. The gloom was increased by the weakness of the D-Mark on the foreign exchange market against the dollar. The US currency opened at around DM1.74 but fell back to trade at around DM1.7640 in late afternoon. There are fears that the strong dollar could increase import prices, adding to inflationary pressures in the domestic economy. Any signs of additional inflationary pressure would be countered by tighter monetary conditions. Fears of further tightening by the Bundesbank suppressed bond prices at the shorter maturities end more than at the 10-year maturity. UK government bond prices showed little reaction to retail sales figures for March which pointed to a sharp upturn in consumer expenditure. The benchmark 11 3/4 per cent government bond issue maturing 2003/2007 opened at 110 9/32 and closed just  1/32 down on the day, for a yield of 10.22 per cent. Figures showing retail sales growth of 3.7 per cent for March over the previous month were dismissed as a freak by analysts. Most had predicted a month-on-month upturn of between 0.3 per cent and 0.7 per cent. The unexpected increase was blamed on a rush by consumers to buy goods before the new rate of VAT (17.5 per cent against 15 per cent at the old rate) came into effect on April 1. Elsewhere, the evidence remains mixed. Money supply figures on Friday showed M0, the narrow measure of notes and coins in circulation, growing at an annual rate of 2.7 per cent. Yet bank lending was recorded at an all-time low. JAPANESE government bonds fell back during Tokyo trading as the yen continued to depreciate against the dollar on the foreign exchange markets. The benchmark government bond issue No129 closed in Tokyo on a yield of 6.725 per cent, against a close of 6.705 per cent on Friday. In London trading the 129 slipped further for a yield of 6.73 per cent by late afternoon. Trading remained focused on the foreign exchange market, where the dollar continued to move higher against the major currencies, including the yen. The US currency opened at Y138.75 and pressed ahead to around Y139.30 by the close of London trading. The strength of the dollar will, if sustained, increase the cost of many imported goods into Japan. This could delay any easing of monetary conditions by the Bank of Japan later this year. Tomorrow, the government is expected to issue Y800bn of 10-year securities, with a coupon of either 6.7 per cent or 6.8 per cent. IN THE absence of a lead from economic news US government bond prices edged lower yesterday ahead of this week's injection of fresh supply by the Treasury. In late trading the benchmark 30-year Treasury issue was down  1/2 at 95 13/32 , to yield 8.285 per cent. The two-year note was only slightly lower, down  1/32 at 100 1/8 , yielding 7.034 per cent. The market appears resigned to the fact that the Federal Reserve is not going to cut interest rates in the near future. The sell-off that came in the wake of the Fed's inaction is complete, and yesterday's weakness was primarily a technical move ahead of the two and five-year note auctions due on Wednesday and Thursday this week, said dealers. In the money markets the Fed intervened via overnight matched sales agreements to drain reserves from the system and exert an upward pressure on the Fed funds rate. The Fed's target for the rate remains 6 per cent, and yesterday Fed funds were trading just below it at 5 13/16 per cent. 
ID: 3702
HEADLINE: FT  23 APR 91 / International Company News: Brazil steel group plunges into red 
TEXT: USIMINAS, the steel group due to be one of the first companies to be privatised in Brazil this year, announced an inflation-adjusted net loss for last year of NCrz1.5bn, or about Dollars 5.3m at today's unofficial rates, writes Victoria Griffith in Sao Paulo. In 1989, the group registered an inflation-adjusted net profit of NCrz36bn. The group blamed recession at home and an overvalued cruzeiro for the feeble figures. 
ID: 3703
HEADLINE: FT  23 APR 91 / International Company News: Union Carbide earnings hit by plant blast 
TEXT: FIRST-QUARTER earnings at Union Carbide, the US chemicals producer, would have matched last year's levels were it not for the serious disruption caused by an explosion last month at its chemicals plant at Seadrift, Texas. Net earnings dropped to Dollars 83m or 54 cents a share from Dollars 94m or 65 cents a share. Sales slipped by 3 per cent to Dollars 1.86bn. Union Carbide estimates that the Seadrift explosion cost it about Dollars 18m in lost profits. It expects to restore most ethylene and polyethylene production at the plant by the end of this month, but production of ethylene dioxide and related products is unlikely to restart before the summer. Mr Robert Kennedy, chairman, said the first-quarter earnings were better than expected, thanks to falling raw material costs and strong export shipments of some chemicals, especially ethylene glycol. But he warned that the recession and extra capacity coming on stream may dampen chemicals and plastics earnings for the rest of this year. Industrial gas sales fell by 17 per cent in the quarter. 
ID: 3704
HEADLINE: FT  23 APR 91 / International Company News: First Executive hit by Dollars 643m tax claim 
TEXT: ATTEMPTS to rehabilitate Executive Life of California, the main operating unit of troubled Los Angeles-based insurer First Executive, have run into a serious obstacle from the Internal Revenue Service, which claims to be owed Dollars 643m. Mr John Garamendi, the Californian insurance commissioner who seized control of Executive Life earlier this month, warned that the move 'could force the company into liquidation and jeopardise the savings of hundreds of thousands of policyholders and annuitants'. The Los Angeles office of the IRS, however, said that while it was obviously concerned about policyholders' welfare, it had a duty to the US public to make sure that demands for back tax were logged. The IRS claim covers tax which the authorities say the company should have paid in 1981, 1982 and 1983, together with penalties and interest due because of the non-payment. The IRS declined to split the tax sum from the penalty/interest charges, although there were reports that the actual tax claim totalled less than Dollars 250m. The IRS acknowledged that the penalties/interest element was likely to be substan-tial. The Californian regulators have recently suggested that rehabilitation efforts were centring on talks with a European consortium, led by Altus, part of Credit Lyonnais, the French bank. Yesterday, officials at the Insurance Department said they did not know what the reaction of the consortium had been to the tax demand. However, Mr Garamendi said that he would 'do everything in my power to stop this IRS raid on the assets needed to pay Executive Life policyholders. I plan to immediately contact both the Bush administration and Congressional leaders,' he added. 
ID: 3705
HEADLINE: FT  23 APR 91 / International Company News: ITT starts year with 9.4% fall to Dollars 229m 
TEXT: ITT, the US conglomerate with interests ranging from defence to insurance, yesterday reported a 9.4 per cent fall in first-quarter profits, to Dollars 229m after tax. Earnings per share also fell away, from Dollars 1.77 to Dollars 1.7, but, in both cases, comparisons were distorted by one-off items. On the one hand, the first quarter of 1991 took in portfolio gains of Dollars 35m - or 26 cents a share - mainly at ITT Hartford, the insurance arm. This contrasted with portfolio gains of Dollars 4m, or three cents a share, in the same period a year earlier. On the other hand, the first quarter of 1990 was boosted by an after-tax gain of Dollars 47m from the sale of the stake in Alcatel Alsthom. ITT said that without this item net income in the first quarter would have improved by 18 per cent. ITT said that its electronic components business improved on higher volumes and better efficiencies at ITT semiconductors. ITT Defence also had a better quarter due to more favourable margins on certain contracts. 
ID: 3706
HEADLINE: FT  23 APR 91 / International Company News: Occidental reaps tax benefits of restructuring 
TEXT: OCCIDENTAL Petroleum has begun to reap the tax benefits of a Dollars 2.2bn restructuring charge taken after the death last December of Dr Armand Hammer, who presided over the Los Angeles-based energy and chemicals group for more than half a century. Net first-quarter earnings were Dollars 136m or 45 cents a share, up from Dollars 108m (37 cents a share) a year earlier. The latest figure, however, includes a Dollars 53m tax benefit from operating loss carryforwards created by last year's restructuring. These carryforwards, which totalled Dollars 1.7bn last December, can be set against taxes on operating income and capital gains. They are recorded as an extraordinary item. Mr Ray Irani, who took over as chairman when Dr Hammer died, has taken the scalpel to Occidental with the aim of concentrating on the core businesses of oil, gas and chemicals. He has put several of Dr Hammer's pet projects on the block, and laid off 1,000 employees. He signalled a break from the past by moving the annual meeting from Dr Hammer's birthday on May 20 to a date 10 days earlier. Oil and gas earnings in the first quarter rose 22 per cent to Dollars 122m, reflecting higher oil prices and production, higher international natural gas volumes and improved domestic gas liquids prices. On the other hand, earnings from chemicals dipped by 25 per cent to Dollars 139m, as a result, among other things, of higher feedstock prices and lower farm products volumes. Amoco Corp lifted its first-quarter earnings by 6 per cent to Dollars 803m or Dollars 1.60 a share from Dollars 466m, or 91 cents a share a year earlier, due largely to a benefit from a change in accounting for income taxes. Excluding this benefit, earnings of the Chicago-based energy producer rose 6 per cent to Dollars 492m. Refining and marketing income rose to Dollars 214m from Dollars 129m, due to wider refining margins. On the other hand, earnings from exploration and production fell steeply, both in the US and internationally. The drop was due to lower natural gas prices, a fall in domestic crude oil output and higher exploration expenses. Olin, the Connecticut-based chemicals and special metals producer, took an Dollars 80m charge in the first quarter as part of a restructuring. Other measures include a 10 per cent cut in the salaried workforce and the sale of several businesses. These include industrial phosphates, electronic chemical and inter-connect operations, and some small chemical and metal product lines. As a result Olin suffered a first-quarter loss of Dollars 59m (Dollars 2.20 a share), against earnings of Dollars 32m (Dollars 1.60 a share) a year earlier. 
ID: 3707
HEADLINE: FT  23 APR 91 / International Company News: Martin Marietta up 
TEXT: MARTIN Marietta, the US aerospace company whose Patriot missiles hit the headlines during the Gulf war, lifted first-quarter earnings by 6 per cent to Dollars 71.1m after tax,from Dollars 67.1m in the same period a year ago. But revenues fell to Dollars 1.4bn from Dollars 1.42bn. Marietta said the fall stemmed partly from non-recurring sales from a commercial Titan rocket launch in the first quarter of 1990, and partly from the effects of the recession and poor weather. At the operating level, Marietta reported a slightly sharper rise of 13 per cent to Dollars 108m. But 'other income' fell to Dollars 1.7m from Dollars 6.8m, while interest expenses rose from Dollars 10.2m to Dollars 12.1m. The earnings per share figure was much in line with analysts' expectations, at Dollars 1.44, against Dollars 1.32. 
ID: 3708
HEADLINE: FT  23 APR 91 / International Company News: Capital Cities/ABC hit by recession and war costs 
TEXT: THE IMPACT of recession on advertising and the cost of covering the Gulf war has cut the profitability of Capital Cities/ABC, one of the three big US television networks. It yesterday unveiled a 38 per cent slump in first-quarter operating income to Dollars 130.3m and warned of a further decline in the second quarter. The company owns the ABC radio and television national networks, local television and radio stations and weekly newspapers, including the Fairchild fashion trade publications. First-quarter net income fell 45 per cent to Dollars 58.6m or Dollars 3.50 a share from Dollars 106.3m or Dollars 6.08 a year earlier on revenues essentially unchanged at Dollars 1.26bn. Operating income was Dollars 130.3m, against Dollars 211.5m a year ago, while income before taxes dropped 44 per cent to Dollars 103.4m from Dollars 186.2m. Capital Cities/ABC's weak first-quarter performance comes on the heels of poor results from CBS and General Electric's NBC broadcasting, which were also hurt by higher news costs and the very weak advertising market. Revenues from the company's broadcasting operating advanced to Dollars 1bn from Dollars 992.5m, due to the telecast of the Super Bowl and two National Football League Wild Card play-off games. 
ID: 3709
HEADLINE: FT  23 APR 91 / International Company News: Weak dollar hits Bankers Trust 
TEXT: BANKERS Trust, the highly- regarded US banking group, suffered a 19 per cent fall in first-quarter earnings, with a strong advance in trading income more than offset by higher non-interest expenses, lower foreign exchange revenues and write-offs on investments in highly-leveraged companies. Net earnings slipped to Dollars 160m or Dollars 1.85 a share from Dollars 198m or Dollars 2.36 a year earlier. Interest income fell only slightly to Dollars 213m. The company blamed an 8.4 per cent rise in non-interest expenses partly on the weaker dollar, which accounted for about a quarter of the increase. Staff severance costs jumped by Dollars 40m. Trading revenues almost doubled to Dollars 304m, thanks largely to a strong performance by the capital markets business, which includes interest rate, currency and equity derivative products. But corporate finance fees tumbled by 23 per cent. Loans on BT's books continue to fall sharply, reflecting the policy of the past four years of distributing a higher proportion of loans to other financial institutions, such as regional and foreign banks, insurance companies and pension funds. BT's total loan portfolio stood at Dollars 19.6bn on March 31, down from Dollars 29.2bn in 1986. BT is less exposed to the depressed real estate market than some other US money-centre banks, but it has nonetheless not been left unscarred. The bank lifted loan-loss provisions to Dollars 51m from Dollars 40m a year earlier. Non-performing assets, other than renegotiated Third World debt, jumped to Dollars 164m on March 31 from Dollars 65m. Real estate credits made up the bulk of the increase. 
ID: 3710
HEADLINE: FT  23 APR 91 / International Company News: Overseas arms help Avon to 20% rise 
TEXT: AVON Products, the world's biggest maker of cosmetics and toiletries, yesterday turned in a 20 per cent improvement in first-quarter net income. The result included strong gains from the company's overseas operations offsetting the deteriorating performance of its US business. For the first three months of 1991, Avon had net income of Dollars 18.4m or 16 cents a share against Dollars 15.2m or 11 cents a year ago. Revenues grew 9 per cent to Dollars 769.6m from Dollars 703.8m. The 1991 figures include a Dollars 7m settlement with Chartwell Associates, the investor group which recently agreed to abstain from launching a proxy fight for increased control of Avon's board for 10 years, after nearly two years of consistent pressure on Avon. Mr James Preston, Avon's chairman, said the company expects a good year in 1991 thanks to its strong international position. 'Avon continues to benefit from having a global portfolio of businesses that minimises the impact of a recession in one country or region.' The New York-based company said pre-tax profits from its international business grew 40 per cent in the quarter on a 25 per cent improvement on sales, led by Europe and the Americas. In the US, Avon's pre-tax profit fell 12 per cent on a 7 per cent decline in sales. This reflected the continued impact of recession, particularly in the northeast. Avon, which has been steadily reducing its debt, said debt at the end of the 1991 first quarter was Dollars 572.7m, down 18 per cent on a year earlier. 
ID: 3711
HEADLINE: FT  23 APR 91 / International Company News: FleetNorstar, KKR succeed in bid for Bank of New England 
TEXT: KOHLBERG, Kravis, Roberts, the New York buy-out investment boutique and one of the most powerful takeover players in the US, and Fleet/Norstar Financial group have succeeded in their joint bid to acquire most of the assets of the failed Bank of New England (BNE), once the second-biggest bank in the region. The three BNE 'bridge banks', with combined assets of about Dollars 15bn, will be managed by Fleet, which will raise Dollars 683m of new capital including Dollars 283m to be provided by investors advised by KKR. The Federal Deposit Insurance Corp will receive Dollars 125m as a premium - Dollars 100m in preferred stock and Dollars 25m in cash. BNE was declared insolvent and seized by regulators in January. The KKR/Fleet Norstar group had competed against BankAmerica, the big San Francisco bank and Bank of Boston in a bidding contest for BNE, whose assets are estimated at Dollars 20bn. Mr William Seidman, FDIC chairman, said: 'Based on an analysis of the proposals the board determined that selecting Fleet would have the lowest cost to the bank insurance fund.' Mr Seidman said KKR would not exercise control of bank activity. The FDIC said the cost of the bailout would cost the treasury about 10 per cent more than the Dollars 2.3bn originally estimated. The assistance package, agreed in principle, will give Fleet the right to put to the FDIC any classified loans and repossessed assets now on the books of the bridge banks for three years. The decision to award BNE to the Fleet/Norstar group raises questions about the future of Bank of Boston. 1990. According to some analysts, there is concern that without the capital from BNE, Bank of Boston may fail. Mr Ira Stepanian, chairman of Bank of Boston, said a BNE acquisition would have accelerated Bank of Boston's recovery, 'but the FDIC's decision by no means negates it.' 
ID: 3712
HEADLINE: FT  23 APR 91 / International Company News: Abitibi-Price loses CDollars 5.5m 
TEXT: ABITIBI-PRICE, one of Canada's three biggest integrated pulp and paper groups, registered a small fourth-quarter loss, writes Robert Gibbens. It also warned it expected a difficult year because of poor markets, especially in newsprint. Sales in the period dipped 7.5 per cent to CDollars 726m (USDollars 625m); the loss was CDollars 5.5m or 9 cents a share, against a loss of CDollars 11.3m or 17 cents a year earlier, including a CDollars 13.7m special charge. During the quarter, Abitibi, controlled by the Reichmann brothers of Toronto, made two disposals for CDollars 53m. 
ID: 3713
HEADLINE: FT  23 APR 91 / International Company News: Agnelli arm buys Perrier options 
TEXT: IFI International (Ifint), the Luxembourg-based holding company partly owned by Italy's Agnelli family, has acquired an option to become the largest single shareholder in Exor, the investment group which controls the Perrier mineral water group. Ifint told the French stockmarket authorities yesterday that it could raise its existing 13.5 per cent stake in Exor, to just over 21 per cent. However, a Perrier spokesman said the deal will have no impact on the mineral water group. It is not known whether Ifint plans to exercise its option, although the mere fact of owning it means the group is considered under French law to have lifted its stake in Exor to above 20 per cent, at which level it has to make an announcement. If Ifint exercises its option, it will overtake Ms Corinne Mentzelopoulos, whose family is Exor's main shareholder and who now owns 18.6 per cent of the group. Analysts said this is unlikely to change the Mentzelopoulos' control of Exor. Exor made no comment yesterday and securities analysts confessed to being baffled by the deal. The Agnelli family could be strengthening its French industrial portfolio, which already includes stakes in BSN, the food group, Accor in hotels, and the Pechelbronn holding group, said Mr Sylvain Massot, food and beverages analyst at Morgan Stanley's London office. Ifint paid around FFr700m (Dollars 119.5m) for its existing 13.5 per cent share in Exor in January, making it then the group's third biggest shareholder. It has now acquired options for another 7.86 per cent from Rovida, a Swiss-based holding company and currently the second largest shareholder, which had 18.2 per cent of Exor's stock. Ifint, 23 per cent of whose ordinary shares are owned by the Agnelli-controlled Istituto Finanziario Industriale, bought its stake as part of a complex share swap with Ms Mentzelopoulos. 
ID: 3714
HEADLINE: FT  23 APR 91 / Treuhand poised to boost German paper market 
TEXT: THE FLEDGLING German commercial paper market is to receive an important boost from the Treuhand, the state-backed agency responsible for privatising east German companies, through plans for a large borrowing programme to finance restructuring investments. The Treuhand is today expected to announce a commercial paper programme, arranged by Dresdner Bank, of up to DM2bn (Pounds 600m), making it the largest programme of its kind since the market began to take shape earlier this year. If the issue runs smoothly, the Treuhand may test the market again to cover more of its DM25bn borrowing limit for 1991. Some Treuhand officials have speculated that the organisation will make use of commercial paper, among other instruments, gradually to take over up to DM70bn of the DM100bn in old debts that the corporate sector in former east Germany is still theoretically carrying. The Treuhand is already paying interest to the Bundesbank on those debts and some analysts believe that it would be better to centralise the debt under one roof. The Bonn finance ministry admits that much of the corporate debt will not be repaid but it officially prefers a case-by-case policy on debt forgiveness. The commercial paper market is only available to the best risk borrowers who then acquire relatively favourable terms. The Treuhand can exploit its semi-government status to save money on its extensive borrowing needs. The maturity of the first issue is expected to be one year. The Treuhand declined to comment yesterday on when, if at all, it intended to tap the commercial paper market, but finance ministry officials confirmed that such a move, rumoured for some time, was now imminent. The move is likely to be welcomed in Frankfurt where financiers will be keen to see the commercial paper market given some ballast. German companies have long complained of restricted financing options in their home market and the shortage has forced them to turn to the Euromarkets. Commercial paper only became possible in Germany earlier this year when the Bundesbank withdrew its previous objections, finance ministry permission for such issues was no longer required, and the turnover tax on securities was abolished. Since then, the biggest issue announced, although not yet completed, was a DM500m programme for Daimler Benz arranged by Deutsche Bank. Daimler already has a commercial paper programme in Dutch guilders and in dollars. 
ID: 3715
HEADLINE: FT  23 APR 91 / Ratners to shed jobs despite profit rise 
TEXT: RATNERS Group, the jewellery chain, will implement a cost-cutting programme this year leading to the loss of up to 1,000 jobs, as it tries to combat recessionary markets in the UK and the US. Although the company pushed annual pre-tax profits up from Pounds 108.22m to Pounds 110.05m before property gains, Ratners' fully-diluted earnings per share fell 9 per cent to 23.6p as cost increases outstripped sales growth. Mr Gerald Ratner, chairman, said the company would reduce staff by 5 per cent as well as cut stockholding and distribution costs and trim some of its guarantees and credit terms. 'It is no good just hibernating like a hedgehog during a recession,' he said. Sales in the year to February 2 topped Pounds 1bn for the first time, climbing 24 per cent to Pounds 1.11bn. The results were buoyed up by the inclusion of Kay Jewelers, the US chain which was bought for Pounds 207m last year. Kay, which has been quickly integrated with Ratners' existing Sterling business in the US, contributed Pounds 14m to operating profits. Overall, operating profits rose 3.6 per cent to Pounds 134.25m. The UK saw a reduced contribution of Pounds 79.74m (Pounds 93.37m), but the US added Pounds 54.5m (Pounds 36.12m). Most of Ratners' UK high street chains registered comparable sales increases: H. Samuel produced a 13 per cent gain; Ratners, 18 per cent; and Zales and Ernest Jones 19 per cent. Watches of Switzerland, the group's most upmarket chain, suffered from a drop in tourists and recorded an 11 per cent slide in sales, while Salisburys, the handbag chain, incurred a loss of Pounds 1m. Salisburys will be trimmed from 220 stores to 170 at an exceptional cost of Pounds 2m. An extraordinary charge of Pounds 6.74m was also taken as a result of the company's decision to shut its Regent Jewellers chain, which operates 43 stock clearance branches. Ratners said it had increased its market share in the UK by 3 percentage points to 33 per cent and that it now commanded 5 per cent of the US market. Mr Ratner said: 'With the competition collapsing there is nothing out there to stop us.' A final dividend of 7.6p will lift the annual pay-out to 10p, a 5 per cent increase. Ratners Group said that Sir Victor Garland, a non-executive director of the Prudential Corporation, had joined the board as a non-executive director. 
ID: 3716
HEADLINE: FT  23 APR 91 / AT&amp;T raises stakes in battle for NCR: Offer for computer maker increased to Dollars 110 per share in paper bid 
TEXT: The hostile takeover battle for NCR took a dramatic turn this week when American Telephone &amp; Telegraph, the US telecommunications group, offered to increase its bid to Dollars 110-a-share. However, the new proposal also suggested replacing the cash consideration by all-paper terms. Yesterday, NCR said that it was concerned that the AT&amp;T offer might not be worth as much as Dollars 110 a share by the time the offer closed, if AT&amp;T shares fell heavily. 'That's the sticking point,' said an NCR official. NCR, the fifth-largest computer manufacturer in the US, has been in discussions all weekend with AT&amp;T officials. The NCR board has yet to make any official comment on the proposal announced late on Sunday night. If AT&amp;T is now in sight of achieving its aim of buying NCR, the only sure winners are likely to be NCR's own shareholders. The takeover battle is likely to cost AT&amp;T Dollars 1.36bn more than it bargained for; and there will be no guarantee that AT&amp;T's dreams of building a successful global information technology company - spanning computers and communications - can be realised. NCR shareholders will have seen the value of their investments increase almost two and a third times in the past four months if the latest proposal goes ahead. They owe thanks for their good fortune to the rugged determination of Mr Charles 'Chuck' Exley, NCR president, to hold out for the best possible price once it seemed clear there was no hope of resisting AT&amp;T's embrace. It was not a universally popular attitude. NCR's shareholders interested in the future of the company as a computer business applaud Mr Exley's apparent intransigence; those who are interested chiefly in realising the value of their investment as quickly as possible - Wall Street's arbitrage community -think he has merely been dragging out the inevitable. AT&amp;T's opening bid in December last year - at Dollars 90 a share - valued NCR at Dollars 6.12bn. Although Mr Exley immediately rejected the offer - arguing there was no industrial logic in the takeover - he suggested that the companies could do business if AT&amp;T valued NCR at Dollars 8.5bn or Dollars 125 a share. From that point, resistance deteriorated into price haggling. Mr Exley reduced his demand to Dollars 110 a share while Mr Robert Allen, chairman of AT&amp;T, raised his offer first to Dollars 100 a share and then two days ago to NCR's asking price. The latest offer values the company at Dollars 7.48bn. Under AT&amp;T's new proposal, investors would get 2.943 AT&amp;T shares for every NCR share held. AT&amp;T claimed that this was the equivalent of Dollars 110 a share, based on AT&amp;T's close on Friday. To protect NCR investors against a future fall in AT&amp;T stock, the bidder said it would be willing to offer up to 3.099 shares if the price averaged less than Dollars 37.375 during a 20-day period ahead of an NCR shareholder meeting to vote on the merger. Yesterday, NCR's shares rose Dollars 5 1/8 to Dollars 101 7/8 - well short of the Dollars 110 figure - with AT&amp;T falling Dollars 1 3/8 to Dollars 36 1/8 . The new offer could break the impasse in what has been one of the most bitterly-fought takeover battles the modern computer industry has ever witnessed. If the offer is accepted, then AT&amp;T will have spent more than Dollars 12m in legal fees and NCR about Dollars 7m on its defensive strategy. From the outset, a sizeable proportion of NCR's shareholders had wanted to accept the AT&amp;T bid. AT&amp;T, however, was constrained from simply buying shares in the market by Maryland's takeover laws. NCR showed an appetite for the fight which surprised those familiar with its sleepy marketing methods. It deployed a series of 'poison pill' defences including an employee share ownership scheme, which was later declared invalid. AT&amp;T set up a proxy battle at the NCR shareholders' meeting in March and succeeded in ousting four directors, including the chairman. AT&amp;T's battle for NCR is, however, likely to prove only the beginning of a very long road for North America's largest telecommunications company. The history of mergers between large electronics groups is stained with red ink and littered with failures. Unisys, for example, the world's fifth-largest computer company forged five years ago from parts of Sperry and the Burroughs Corporation, lost Dollars 436m in 1990. It is still struggling to resolve the problem of two completely different product families. Siemens-Nixdorf, put together just over 12 months ago from the loss-making Nixdorf and the barely-profitable computer operations of Siemens, is expected to lose money this year. It is proving difficult to find common ground between the radically different cultures of the two companies. Groupe Bull, which two years ago took over the US personal computer manufacturer, Zenith, has been experiencing similar problems. This is despite Groupe Bull's declared intention to manage the company at arms length from the rest of its computer operations. Groupe Bull is being propped up with FFr4bn (Pounds 397m) of investment from its largest shareholder, the French government. Furthermore, over the past decade both AT&amp;T and International Business Machines, the world's largest computer manufacturer, have made abortive efforts to invade each other's territory. AT&amp;T's basic plan is to merge its small and unsuccessful computer business into NCR, leaving the Ohio-based company essentially alone to manage the business. Superficially, it is an attractive idea. For a new computer company to stand a chance of success today it must: Have identified a market niche in which it can be a leader; Offer products based on low-cost, standard microprocessor chips; Offer 'open' systems based on standard operating software; Have firm control of 'channels' - dealers, value-added resellers and software houses who provide the conduit between the manufacturers and their customers. AT&amp;T developed, and owns copyright on, the software system, Unix, which most manufacturers now agree will become the industry standard for open systems. NCR, alone among the large computer manufacturers, has taken the plunge into designs based on low-cost microprocessors and the Unix operating system. Despite the fact that it is not among the world's top 10 computer manufacturers, NCR is a leading supplier of financial systems and dominates the market for automated teller machines - 'holes-in-the-wall'. NCR, which began as a manufacturer of cash registers in the 1800s, would give AT&amp;T's computer ambitious a powerful fillip through its distribution channels. It has already been identified by Europe's largest manufacturers as a potential route into the US market. The big question is whether it will be possible for the staff of two such different companies to work together profitably. AT&amp;T has no record of success in computers. Its computer division turns over about Dollars 1.5bn a year and loses about Dollars 200m. A merger with NCR may be its last chance. But if it fails, it will bring the computer manufacturer down with it and Chuck Exley's worst fears about a merger he never wanted will have been realised. 
ID: 3717
HEADLINE: FT  23 APR 91 / FW de Klerk 
TEXT: President FW de Klerk arrives at South Africa House in London yesterday to be greeted by African National Congress protesters. Last night it was announced that Mr Douglas Hurd, the foreign secretary, will visit South Africa. Report, Page 4 
ID: 3718
HEADLINE: FT  23 APR 91 / CBI finds upbeat outlook on R&amp;D: Survey contrasts sharply with last month's gloomy report from the Lords 
TEXT: A SURPRISINGLY upbeat picture of investment in innovation by UK businesses, in spite of the recession, emerges from a survey by the Confederation of British Industry. According to the CBI's second annual innovation trends survey, 55 per cent of UK manufacturing companies are satisfied that their spending on innovation is adequate to meet future competitive pressures, while 37 per cent think it is inadequate. The survey contrasts sharply with the tone of last month's House of Lords report on innovation in manufacturing industry, which claimed that British-owned manufacturing industry could almost disappear if the government did not abandon its 'hands-off' attitude. Mr John Banham, CBI director-general, said yesterday there was no sense of complacency in its trends survey. He added: 'The facts do not sit well with the conclusions of the Lords committee - translated into plain English they were wrong'. Mr Banham said UK businesses spent Pounds 6.5bn on research and development in 1989, a higher proportion of gross domestic product than any other European Community country except Germany. The survey showed that on balance this was being maintained last year. 'All is by no means gloom and doom, which is what you might conclude if you were an avid reader of the Lords report,' he said. Two thirds of the 336 companies taking part in the survey spent up to 5 per cent of sales on innovation - which is defined as the development of new products, processes and services - and just over one fifth spent up to 10 per cent. The survey identified a marked trend downwards in the use of consultants and a rise in expenditure on joint ventures or co-operation with other companies, particularly overseas. New regulations, especially tougher environmental rules, were seen by some companies as an opportunity and by others as a threat. Mrs Fiona Steele, CBI's head of technology and innovation policy, said the survey showed that UK companies saw an increasing competitive threat from EC and other UK companies, rather than from Japan and the US. She cautioned, however, that the survey was intended to identify trends rather than absolute values. The survey was carried out in October and November and follows a more limited pilot study of trends in 1989. It is sponsored for five years by National Westminster Bank's technology unit. Innovation Trends Survey. CBI, Centre Point, 103 New Oxford Street, London WC1A 1DU. 
ID: 3719
HEADLINE: FT  23 APR 91 / Iraq accused of holding Kuwaitis 
TEXT: KUWAIT accused Iraq yesterday of continuing to hold more than 5,400 Kuwaiti civilians and soldiers and of failing to return stolen property, as required by a United Nations Security Council resolution. The Kuwaiti ambassador to the UN, Mr Mohammad Abol Hassan, wrote to the Council saying that Baghdad's failure to adhere to Security Council resolution 686 'puts the credibility and motives of the Iraqi regime under suspicion'. In accepting the resolution, adopted two days after the end of the Gulf war, Baghdad had pledged to carry it out 'swiftly and honestly'. The regime of president Saddam Hussein has said it accepts all Security Council resolutions adopted since the invasion of Kuwait, including two that impose financial liability on Iraq. But Baghdad has not explicitly announced that it accepts liability and will pay damages. The letter also complained that Iraq has failed to begin returning goods it plundered from Kuwait during the seven-month occupation. Iraq has agreed to return gold, currency, Kuwait Airways aircraft and museum collections and antiquities. Mr James Baker, the US secretary of state, said yesterday during a visit to Kuwait that he had received assurances from the Emir that human rights abuses against minorities in the country had ceased. He said that Sheikh Jaber al-Sabah had conceded during talks that there had been some human rights abuses in the days after liberation and that the Emir 'made it clear the extent to which the government of Kuwait regrets that'. Mr Baker said that Sheikh Saad al-Sabah, the prime minister, and the Emir had told him that they would be 'pleased to invite human rights organisations to interview minorities - Palestinians and others'. Amnesty International, the human rights group, said in a report last week that there had been many substantiated cases of abuse against Palestinians by Kuwaitis since the liberation and that there was evidence that such abuses continued. Only hours before Mr Baker's arrival, the Kuwaiti government refused permission for opposition groups to hold a news conference and ordered the lights to be turned off in a Kuwait City hotel ballroom where the event was to be held. Opposition figures said that the incident showed that the ruling al-Sabah family was not sincere about allowing greater democracy and free speech. Kuwait's dark side, Page 4 
ID: 3720
HEADLINE: FT  23 APR 91 / Moscow looks to Ecu for trade fillip 
TEXT: THE SOVIET UNION is to discuss today with three of Europe's leading banks a payments system that could ease trade among the former communist nations of eastern Europe and help them to move to a free-market economy. Officials from Gosbank, the Soviet central bank, are meeting in Turin to talk about the concept with representatives of Deutsche Bank of Germany, Credit Lyonnais of France and San Paolo Bank of Italy. These three groups have indicated general support for the idea, possibly through establishing lines of credit. The state banks of Poland, Czechoslavakia and Hungary are also to be represented at the meeting. An official from the European Commission, which may support the venture financially, is taking part. The system under discussion would use the Ecu, a basket of the main west European currencies, as a common financial unit in settling transactions between banks in eastern Europe that arise from trade payments. It would replace the system formerly used in eastern Europe for trade-based banking settlements, which was based on the transferable rouble. The transferable rouble was abolished earlier this year as part of the process of adopting western-style economic thinking in the former communist-bloc nations. Since then, trade among the countries in the region has been hit due to the lack of an alternative payments procedure. The Ecu-based system could start in about a year, assuming planning proceeds smoothly. It would use computers and financial procedures based on an existing Ecu payments-clearing system. It is thought that initially the east European venture would administer a far smaller total of transactions, involving about 15 commercial banks in eastern Europe. Later, it could be extended to incorporate transactions involving banks in western Europe, so bolstering trade between the eastern and western parts of the continent. According to one idea under discussion, the system could be run by a consortium of east European commercial banks, possibly with help from western partners. Representatives from four commercial banks from the former communist states have indicated an interest in this idea and are attending the Turin meeting. The banks are the International Bank for Economic Co-operation of the Soviet Union; Investicni Banka of Czechoslovakia; the Inter Europa Bank of Hungary; and Poland's State Savings Bank. Setting up the system would cost about Ecu1m. The meeting in Turin has been initiated by the Ecu Banking Association, a group of European banks. Mr Dominique Rambure, chairman of the association and a senior executive at San Paolo Bank, said: 'The system would be a step in the right direction of getting eastern Europe away from centralised economic planning.' Boost for German papermarket Page 21 
ID: 3721
HEADLINE: FT  23 APR 91 / Tesco chairman's earnings top Pounds 1.4m 
TEXT: SIR Ian MacLaurin, chairman of Tesco, the grocery chain, received total remuneration of Pounds 1.48m last year, representing a steep increase on his previous year's basic pay of Pounds 345,000. The pay of the chairman of Britain's second-biggest food retailing chain advanced by Pounds 45,000 to Pounds 390,000. In addition, however, he received a substantial boost from the inclusion of Pounds 1.09m in performance-related incentive payments. The payments related to a scheme introduced in 1988 which linked directors' bonuses to the performance of the company's earnings per share. Over the three-year period, Tesco's earnings per share rose by 71 per cent. Four of Tesco's other executive directors benefited strongly from the incentive scheme. Last year, one earned over Pounds 610,000, another more than Pounds 665,000, and two are bracketed in the Pounds 785,000 to Pounds 790,000 pay range. In total, the amount paid out to all directors in the year to February 23, 1991, increased from Pounds 2.24m to Pounds 6.74m. Next year, however, the directors will receive only Pounds 1.8m between them under the incentive scheme as opposed to the accumulated three-year total of Pounds 4.33m they received last year. The growth in Sir Ian's remuneration follows a series of big rises for senior executives at a number of the UK's largest companies. Observer, Page 18 
ID: 3722
HEADLINE: FT  23 APR 91 / Labour's pay plans suffer further blow 
TEXT: LABOUR party plans to reform wage bargaining were dealt a further blow yesterday when the AEU engineering union rejected a second attempt in two weeks by the Trades Union Congress to resolve inter-union differences on the issue. The decision of the executive of the the AEU, the UK's fourth-largest union, illustrates difficulties faced by the Labour movement in formulating a consensus on plans to create a national minimum wage and hold a yearly national economic assessment. Such an assessment, in which a Labour government, unions and employers would take part, would be used to set a national minimum wage. The two policies form the centre-piece of Labour's plans to reform wage bargaining. Failure to find a meaningful compromise could leave the Labour party open to charges that it and the unions have not resolved the pay-bargaining difficulties that helped to topple the last Labour administration in 1979. AEU objections to the plans of the TUC and the Labour party are especially damaging because the union is one of the more moderate, and normally among the party's most loyal supporters. The AEU executive decided it could not accept a redraft of a TUC paper in which unions were asked to agree that, in pay talks for higher-paid workers under a Labour government, they would not cite any rise in the proposed national minimum wage. The wording has changed from the previous draft, which said unions would disregard the minimum wage in talks on other pay levels. AEU members fear the new version still implies an unacceptable erosion of wage differentials. AEU representatives will press at the TUC general council tomorrow for further changes, although some executive members believe the clause should be removed. The union, which supports a national minimum wage, will also seek amendments to other parts of the document to emphasise further the rejection by unions of any form of wage restraint. Mr Bill Jordan, AEU president, said suggestions that skilled workers' pay should be held down were 'not only economic madness, but will be implemented over this union's dead body'. He said the Labour movement needed to study the issue further. Failure to do so might lead to a dangerous diversion from Labour's central objective of regaining power. Employment, Page 9 
ID: 3723
HEADLINE: FT  23 APR 91 / Letter: Why company well-being is a priority for banks 
TEXT: Sir, As you would expect I totally disagree with the letter from Jeremy Parker (April 15) suggesting the clearing banks were often too tardy in helping ailing companies. We currently have some 400,000 small business customers on our books and are deeply committed to ensuring that our customers' well-being is a top priority - it has to be in order to guarantee our own future as a viable company. Mr Parker chides us for not using our 'early warning systems' to detect the first signs of decline in the quality of security. In many respects we are largely in the hands of the companies themselves - in a recession the most ominous sign to a good bank manager can be the total lack of contact with a business customer. As one of my branch managers in central London put it recently: 'It's when I don't hear from customers that I start to worry.' That said, there are many forms of assistance we can and do give - and we constantly remind customers to come to their bank manager at the first signs of problems. Peremptory calling in of borrowing may only lose the bank both its investment and its customers. PH Nunnerley, assistant general manager, Lloyds Bank, Canons House, Canons Way, Bristol 
ID: 3724
HEADLINE: FT  23 APR 91 / Passage from India 
TEXT: 'Indians massacre villagers', read the headline over a short news item from my colleague David House-go yesterday. His report, detailing the actions of Indian security forces in Kashmir, came as a salutary reminder of the internecine strife, government indecision and financial crises that threaten the world's most populous democracy. We who watch from afar have naturally been transfixed by events in the Gulf and the slow disintegration of the Soviet Union; meanwhile the outlook for India becomes more uncertain. Kashmir, the only one of India's 25 states with a Moslem majority, is being held within the republic by military force. In the Punjab a Sikh uprising by proponents of an independent 'Khalistan' - note how like Kurdistan it sounds -appears to be continuing. This is complicated by divisions among the Sikhs themselves. Militancy has been met with brutality. The slaughter of innocents by terrorists is evident. Yet the grievances endure; the ideal of Khalistan will persist even if modified by events. There is also a continuing undercurrent of revolt in Assam, in the north-east, while in the enchanting southern state of Tamil Nadu the Tamil Tigers take their recreation leave from fighting in Sri Lanka by imposing their own will on parts of their home ground. Clearly the peaceful democracy so well espoused in London salons by the late Mr Jawaharlal Nehru is not working as well as it should. This is hardly surprising. The US has cohesion because its original settlers, who were overwhelmingly from the British Isles or German-speaking parts of Europe, created a melting-pot into which later arrivals have to be poured. It works, if imperfectly. But imagine a federated Europe, stretching from the Atlantic to the Urals and Stockholm to Naples, in which the Germans predominated and their language and that of a departed army of Hindi-speaking conquerors were the two official media of government and business. In the long run it would not work. Perhaps what we are seeing in India today is the beginning of the end of the long run. There was no Indian state before the British created its political boundaries. The legacy of the Raj was picked up by an educated elite wedded to the notion of a socialist, secular, permanently unified state. The older members of this elite still retain England - its language, history and culture - in their heads; their children less so. The more ambitious among the governing classes still entertain visions of India's grandeur as the leader of the non-aligned nations, a senior player upon the world stage, even a nuclear power. Reality is eating away at the ideas of Mr Nehru and the founding fathers. Socialism is increasingly out of fashion in most parts of the world, perhaps puzzlingly so to some Indians. (There are two Communist parties, which together have 56 seats in the country's 524-member lower house of parliament.) Yet for the election due next month Mr Rajiv Gandhi, inheritor of the leadership of the founding Congress party, is fighting on a manifesto that promises both a programme of privatisation and a cut in government spending. It is hard to maintain the secular ideal. The revivalist Bharatiya Janata Party, BJP, trades upon the paradoxical feelings among Hindus that although they are the overwhelming majority they are somehow threatened by Moslems, Sikhs, and other minorities. This reaches deep into the psyche of many Hindus. Indian acquaintances of wide erudition and a cosmopolitan mien have confided to me that they see a point in BJP's proposal to construct a Hindu temple on a site claimed by Moslems. Mr Gandhi needs Moslem votes and cannot play the Hindu card, but he has offered a compromise on job reservation for lower castes, offering to support a scheme without giving figures. As to national unity and international status, post-war Indian foreign policy has been firmly based on cementing a special relationship with the Soviet Union. But now we live in a one-superpower world, and any outside acquiescence in bloody attempts to repress secessionist movements will depend upon the US. There is not much point in being non-aligned if there is no balance of power within which not to align yourself. During the Gulf war India managed to offend almost every party - its old friends, the Iraqis, by doing nothing, and its potential business partners, the Americans, by cutting off overflying rights to refuel at Bombay. It will be difficult to mend such broken fences until the election produces a new government, probably a coalition, possibly led by Mr Gandhi. The first step, however, will be to produce a budget, postponed for electoral reasons, and the step after that will be to sit down with India's creditors. This is where outsiders, like the IMF and the World Bank, have some leverage. They will not provide cash without strings. But how far should conditionality go? It is in everyone's interest to strengthen Indian democracy, and - as the Gulf war and its aftermath show - it is the prevailing fashion to maintain existing boundaries however colonialist their origins. But Indians are independent-minded people. They need not follow fashion. They would be wise at least to loosen their tight republic and replace it with a true federation, or, better, confederation - in short, to decentralise administration outwards and far away from Delhi. The new government should state its intentions about economic liberalisation, and clear its mind about whether it welcomes inward investment or seeks to drive it away by the sheer weight of obstructive bureaucracy. I have anecdotal evidence about an Indian mega-millionaire who made his money in the US and wanted to invest Dollars 250m back home but withdrew after three months of frustrated attempts to meet the demands of the Indian civil service. There is a huge wealth of talent and drive among India's 850m people. They need to shed the remaining burden of the Raj, even take the risk that in the end some of them go their separate ways, if they are to realise their potential. 
ID: 3725
HEADLINE: FT  23 APR 91 / Letter: A gripe about the sniping 
TEXT: Sir, You have pointed out that the European Bank for Reconstruction and Development is the only institution of its kind which is based in London. With all the sniping that has attended its establishment, perhaps this is hardly surprising. Graham Watson, 3 Haslemere Road, SE5 
ID: 3726
HEADLINE: FT  23 APR 91 / Into the air with a hold full of hopes: Martin Dickson on the outlook for the US aircraft maker McDonnell Douglas as it tries to recover from a succession of blows 
TEXT: Three sleek new airliners, their fresh paint glinting in the spring Californian sunshine, sit on the 'flight ramp' - the very end of the production line at McDonnell Douglas's Long Beach plant - surrounded by a clutter of equipment as workers prepare the jets for final delivery. They are among the first dozen production models of a wide-bodied, three-engined jet - the MD-11 - to roll off the commercial aircraft line. To McDonnell Douglas, these jets, and 34 other MD-11s due for delivery this year, represent much more than routine aircraft sales. To the management at Long Beach, where McDonnell makes its civilian aircraft, they provide hope that the chronic problems that have plagued the plant for years are being solved. And at the group's headquarters in St Louis, Missouri, the sales are a kind of financial poetry in motion: each departing Dollars 100m (Pounds 55.8m) jet brings in huge amounts of cash flow which the company believes will extricate it from a tight corner by the end of this year. For McDonnell Douglas, the largest defence contractor in the US and one of the western world's three leading civilian aircraft manufacturers, has a stretched balance sheet. In 1990 much more cash - some Dollars 400m - flowed out of the business than came in. Ironically, just when the company has been basking in the success of its weapons systems in the Gulf war, a succession of blows has left some Pentagon officials and industry observers questioning whether it could even become a contender for bankruptcy or a government bail-out. Mr John McDonnell, the company's bearded, 53-year-old chairman and the son of its founder, says the Cassandras are just plain wrong. 'We've taken a lot of strong measures to improve cash flow and they are taking effect,' he says. 'By the end of this year our cash flow will be getting quite positive and our debt will be going down, and it will be obvious to everyone that we're getting in a much stronger financial situation.' But in 1990 the company reported net earnings of only Dollars 306m on revenues of Dollars 16bn, while at year-end its debts, excluding its financing arm, totalled Dollars 3bn, or 95 per cent of its equity. Nor is the quality of its earnings very impressive: some Dollars 376m of 1990 profits came from a one-time pensions settlement, while the company is in dispute with the government over military contracts which could eventually mean writing off hundreds of millions of dollars. The most serious dispute stems from January's decision by Mr Dick Cheney, the US defence secretary, to cancel development of the A-12 attack aircraft, a potential Dollars 50bn programme being jointly developed by McDonnell Douglas and General Dynamics. The two contractors, having already taken large write-offs on the A-12, are now locked in litigation over Dollars 1.3bn of progress payments which the Pentagon wants back. Even if McDonnell's finances are now improving, with a reported profit of Dollars 58m for the three months to March 31 this year, against only Dollars 2m for a year earlier, it faces a difficult long-term juggling act: its combat aircraft business, which for years has made up for the weak financial performance of the commercial side, is shrinking inexorably as the US cuts its defence budget. The Gulf war is unlikely to bring in much fresh business - apart from a replenishment of the Tomahawk cruise missiles. And while McDonnell remains the leading US manufacturer of combat aircraft, several models - the F-15 Eagle, the Harrier II AV-8B and the Apache helicopter - are nearing the end of their Pentagon production programmes. An announcement is expected today on the air force's choice to succeed the F-15. The contenders are a Northrop-McDonnell partnership and one comprising Lockheed, Boeing and General Dynamics. Worth Dollars 64.6bn, according to the Pentagon, the contract for the advanced tactical fighter, the ATF, is vital to McDonnell Douglas. This month it lost out to a rival Boeing-Sikorsky consortium for the US army's new light attack helicopter contract. Whichever way the ATF contest is decided, it is clear that McDonnell's future is becoming more dependent on Long Beach and its ability to develop profitably new generations of civilian aircraft in competition against the larger, more efficient Boeing and European Airbus Industrie. Long Beach, in common with rival manufacturers, has a strong order-book  - particularly for wide-bodied jets - though in recent months the industry has become nervous because of deferrals and cancellations by airline customers. But the plant has been an Achilles heel since the Californian Douglas company merged with McDonnell in 1967, losing money for much of the past 15 years. Its profits record might be blamed in part on the competitive pressures of the aerospace industry, but insiders suggest it results substantially from years of poor productivity and lack of discipline. The plant's management did not have a sufficient grasp on real production costs, while suppliers complained about bureaucracy and inefficiency in the purchasing system. All these problems were exacerbated in the mid-1980s as Long Beach tried to cope not only with making the aircraft it already had in production - the MD-80 twin-engine jet and the now discontinued DC-10 wide-bodied aircraft - but also with a rush of new developments: there was the MD-11, the successor to the DC-10; the MD-90, a follow-on from the MD-80; the C-17, a new generation of military transport aircraft specially designed for use on short runways; and the T45, a naval training aircraft. Despite these new ventures, McDonnell Douglas's family of commercial aircraft is less comprehensive than that of Boeing and the developing Airbus fleet. Unlike its two principal competitors, it has no presence in the middle range of the market, but is concentrated at the lower end, with the MD-80, and at the top with the MD-11. McDonnell and Airbus missed a chance to challenge Boeing two years ago by failing to agree to co-operate on new aircraft production. Now McDonnell is understood to be actively looking for an equity partner to buy a minority stake in the commercial jet side of the business. Meanwhile, as the company struggled to meet its commercial aircraft commitments and programmes, staff levels were rising. At Long Beach, the workforce went from just 12,000 in 1982 to 52,000 in 1989. As it did the experience level of the average worker dropped from 10 years to two. Problems multiplied and the plant's development schedule lagged. At this point Mr McDonnell, who became chairman in early 1988, decided that the entire group needed a radical overhaul of its management systems. A new executive team, drawn from across the company, was despatched to Long Beach last year, headed by Mr Bob Hood. The new management approach aims to improve productivity and customer satisfaction by stripping away bureaucracy, pushing greater powers of decision-making down the line, and creating greater motivation and inter-departmental co-operation through the formation of teams. Called Total Quality Management System (TQMS), and inspired by the Japanese, it has been adopted by several other leading US manufacturers. 'We started from ground zero,' recalls Mr Hood. Departments were reshaped into teams working on individual products, drawing together people from different disciplines. Management layers were cut from nine to five and the new leaders were selected with an emphasis on what Mr Hood calls their ability to 'coach and listen' rather than 'old-style dictatorial management'. Over the longer term, the changes may well prove to be the salvation of Long Beach. In the short term, they produced more confusion, demoralisation and delays. TQMS was introduced gradually and quite successfully at McDonnell's St Louis division, but was imposed virtually overnight at Long Beach. Matters became so bad that Colonel Kenneth Tollefson, the air force representative overseeing the C-17 programme, wrote an article in the staff newspaper accusing management of lack of leadership. Morale at the plant still seems shaky, and union relations delicate, but over the past year progress on the MD-80 and MD-11 lines does suggest that the shake-up is starting to produce better results. For example, productivity on the MD-80 improved by more than 30 per cent in 1990 and is still getting better. For the first time in its history that aircraft has enjoyed two consecutive money-making quarters, with a third coming up. All this has not saved the MD-11 from some recent embarrassing criticism from Mr Robert Crandall, the chairman of American Airlines, who was unhappy with the first aircraft delivered to his company. Mr Crandall's complaints seem to involve some easily fixable and relatively minor glitches, and American says the problems do not alter its enthusiasm for the MD-11. A far larger Long Beach dispute, which could have a significant impact on the group's profits and balance sheet, concerns the C-17, which is behind schedule and looks likely to come in over the Dollars 6.6bn fixed-price contract McDonnell Douglas accepted from the air force. The air force, claiming that McDonnell is Dollars 500m above the ceiling, withheld progress payments late last year and Pentagon officials were recently quoted as saying that the project might now be Dollars 800m to Dollars 900m over budget. McDonnell, however, reckons the aircraft will come in only Dollars 100m above the ceiling. Mr Herb Lanese, the company's senior vice-president, finance, says the two sides are working on new figures and insists that 'the performance indicators at this time are a lot closer to our numbers than to the air force's'. The Pentagon's withholding of Dollars 900m last year for work on the C-17 and the cancelled A-12 has contributed significantly to McDonnell's cash squeeze, as has the tightness of the capital markets, restricting cheap access to funds for a company with a low investment-grade credit rating. But the main factor has been the Dollars 3bn cost of developing the MD-11 - roughly the same as the group's entire equity base. However, Mr Lanese says the financial picture is on the point of improving substantially and that March probably saw the peak of the company's borrowing needs. At the end of the first quarter McDonnell's debt totalled about Dollars 3.3bn, with some Dollars 370m of cash on hand, against net equity of Dollars 3.5bn. With loan covenants setting a ceiling of just over Dollars 4bn on total borrowings, the company still has a sizeable ability to raise funds. The improving cash position is due in part to MD-11 sales but also to a company-wide savings drive: working capital is being slashed, the dividend has been reduced and capital spending curtailed. The MD-11 production schedule has also been cut - by five aircraft this year, from 42 to 37, helping save on parts and labour costs. All this does suggest that the direst predictions are overdone. That said, McDonnell's room for manoeuvre will remain tight for the rest of this year, and there are several wild cards - a Dollars 500m tax claim, the C-17 and labour issues - which could yet cause it severe headaches. Next year cash flow is likely to turn positive, but the heat will still be on McDonnell's management: to improve Long Beach productivity; to find funds to develop the next wide-bodied jet - a stretched version of the MD-11 called the MD-12X which will compete with the Boeing 747-400; and to handle the tricky transfer of resources from fighter to commercial aircraft. 
ID: 3727
HEADLINE: FT  23 APR 91 / Leading Article: Listening to employees 
TEXT: ANYONE seeking a lesson in the most productive ways to manage workers would be unlikely to look first to Britain. Failure to engage the skills and commitment of workers effectively has been a longstanding problem for industry. In the 1970s, the symptom of this British disease was industrial action. In the 1990s, it is unemployment caused by inability to contain wage growth. Mr Michael Howard, the employment secretary, nonetheless believes Britain has a story to tell. He yesterday praised companies for promoting employee involvement. Instead of following rigid European practice, companies were finding their own ways of raising productivity through worker involvement. Mr Howard's point is that British companies are already addressing this tricky issue without having to be forced to do so by the European Commission. He suggested that the Council of Ministers accepts a vaguely worded endorsement of worker participation in place of the Commission's draft directive on European works councils. This would avoid large employers having to establish European consultation mechanisms. Part of Mr Howard's motive was no doubt political. The government has played on its resistance to what it regards as the Commission's plan to smother the Single European Market in the red tape of the social action programme. Mr John Major has less taste for such public carping than Mrs Thatcher, but Mr Howard believes he is on firm ground, given the undoubted hostility of British employers to the draft directive. Overblown rhetoric The political motivation accounts for some of the overblown rhetoric. Companies employing more than 1,000 people and more than 100 in at least two EC countries would no doubt find it irritating to have to pay for regular pan-European briefing meetings. Many might question their value, but the directive would hardly force them into full-blown co-determination. One reason why the fears appear exaggerated is the long history of the directive. It is a descendant of more ambitious attempts to impose worker participation, including the Vredeling directive of 1980. But its roots are misleading: the European Commission no longer sees itself applying the German model across the Community. Most of today's debate revolves around the entirely valid objective of increasing managerial effectiveness and corporate success. Code of practice Mr Howard could do more to catch this mood. For example a code of practice on employee involvement has already been drawn up by the Institute of Personnel Management and the Involvement and Participation Association. Mr Howard should consider endorsing it. But such signals of encouragement to employee involvement are the limit of what governments should do. Legislation is not the right way to define or enforce good management practice. This is as true of employee communication as it is of the structure of company boards or the planning of a production line. Inflexible models of how managers should inform workers will not increase good communication. Much of this legislative intent at the European level is, in any case, clearly outdated. Not only European governments, but US management consultants now preach the virtues of involving employees in production systems and quality control; wise managements keep workers informed and listen to what they say. Japanese team-working methods and quality circles are among the clearest pieces of evidence that worker involvement can bring a financial pay-off. The market is thus already deciding in favour of involvement. Changes in working methods to suit more complex production processes are already making it more difficult to sustain a clear divide between managers and the managed. This is something for governments to encourage if they want to achieve economic success. It cannot be imposed through inflexible legislation, no matter how well intentioned. 
ID: 3728
HEADLINE: FT  23 APR 91 / Arts: Snowy wastes focus the mind - William Packer on the Canadian exhibition at the Barbican 
TEXT: The True North is the self-consciously evocative, not to say portentous title of the exhibition that now fills the upper tier of the Barbican Art Gallery (until June 16: sponsored by The Daily Telegraph and Air Canada). But while its sub-title, 'Canadian landscape painting 1896 - 1939', might well give us pause, with thoughts inevitable of something more frozen, dull and provincial than exciting, for once the more hopeful expectation is not disappointed. As is so often the case with national schools, Canadian painting has been for far too long too well-kept a secret, to the general loss. What the Barbican now offers us is quite simply, within its own terms, as intriguing and physically enjoyable a show of well-made, honest paintings as we could wish for. The study of art is littered in paradox, not the least of them that which suggests that the more national, even local the work might be, the wider its general interest and significance. So steeped are we in the idea of Paris as the very heart of modernism through all its earlier phases, that we too easily accept that franco-centric reading at its own self-valuation, seeing everything else as but second-hand, second-best and provincial. But, paradox again, Paris was indeed at the heart of things, and artists came from across the world to see and respond to what was being done, and measure their own art by its standards. The traffic was ever all ways, and in the first decades of this century many of these expatriates clearly held much in common in that was quite distinct from Paris. The more worldly and knowing, the more true to themselves they were. The Canadians were no exception in this, but they might as well have been Scots or Scandinavians, Spaniards or Mexicans, Americans or even Japanese. The mistake was only to forget, or rather discount the fact that artists went on working wherever they were, thinking of home when they were in Paris, and quite often remembering Paris when they were home. But while this question of national self-identity is common-place, it is true that it has concerned Canadians to a peculiar degree. The looming, over-bearing presence of the US, the sense of existing along a narrow southern fringe with, at their back, the immense wilderness stretching endlessly away to the Farthest North, has always concentrated their minds wonderfully. In their artists it must surely account for the often self-consciously exhortatory quality of their writings, urging each other towards a position that is truly Canadian; for the constant groupings and regroupings of clubs and societies; and above all, for the epic and celebratory aspect of so much of the work in this exhibition. This last especially is a quality held in common with certain of the contemporary Scandinavian and Icelandic painters, but here so much more forceful and intense. The show begins with the work of the young artists who were in Paris well before the turn of the century, where they they were able to respond directly to impressionism in its later moods and phases, and to early developments in post-impressionism. These are not the most dramatic images, but their accomplishment and sophistication are incontestable, two views of 1906 by Maurice Cullen, across the St Lawrence river to and from Quebec, as subtle and exquisite in their suggestive tonality as any Monet, and the most beautiful in the entire show. Suzor-Cote, Clarence Gagnon and James Morrice, make up this first most distinctive and distinguished group. But the best known group, and indeed central to the whole study of Canadian painting in the early 20th century, is the Group of Seven, which came together informally in the 1910s and formally constituted itself just after the Great War. With certain individual artists loosely associated with it, such as Tom Thomson who died in 1917 and, much later, Emily Carr, it addressed itself consciously to the landscape not merely as a visible phenomenon, but as a moral force. In the work of all the Seven: Harris, MacDonald, Lismer, Jackson, Varley, Johnston and Carmichael, the landscape takes on an almost mystical presence, not personal exactly but alive in its physicality, the space across the lake, the form over the mountain febrile in definition, fraught with feeling. Cloud, mountain, lake and forest alike are simplified and celebrated almost as symbol and totem, the individual tree or rock itself become a monument. But there is rather more to it than simple symbolic signification. The works are beautifully painted, and with a raw but contained energy in the drawing, and rich paint on the surface. Landscape, image and experience alike are beautifully observed, realised and felt. As much is true of the work of Tom Thomson, perhaps more so, which is as impressive as anything here, though shown separately by the accident of his early death. If the exhibition does nothing more than establish his wider reputation, it will have been worthwhile. The show is rounded off by the later work of those artists who continued, by Emily Carr's overt symbolism, by younger artists such as Charles Comfort, and by perhaps the most idiosyncratic and particular of them all, David Milne, whose delicately mannered touch exquisitely combines any number of modernisms, from impressionism on. Back to the Seven for a moment, Arthur Lismer and Frederick Varley were both from Sheffield and their work is the subject of a coincidental exhibition, Our Home and Native Land, organised by the Sheffield City Art Galleries, which comes to Canada House next month (May 3 to June 18). Showing them as it does in depth, it is a necessary pendant to this Barbican exhibition. Un-Natural Traces, which fills the Barbican's lower gallery, is a complementary show of current Canadian art. 
ID: 3729
HEADLINE: FT  23 APR 91 / Arts: Robert Wilson's 'Night before the Day' - Paula Deitz on the American director's latest presentation: a retrospective exhibition of his work together with his new production, Ibsen's 'When we Dead Awaken' 
TEXT: Robert Wilson, the theatre director, writer, designer and artist, was born in Waco, Texas, lives in New York City, and has preferred to work in Berlin, Paris and other cultural capitals of Europe. During the past season, though, Boston and Cambridge have provided the artist, who will be 50 this year, with two opportunities for world premieres that will travel across the country. They mark a new stage in his career. Wilson's stock-in-trade is to give concrete form to a combination of visionary images and gestures gleaned from daily observation. Placed in a theatrical, indeed operatic setting, these fragments are made to cohere by a third ingredient - the attention and imagination of his audience. In many ways, he is closer to Wagner than Ionesco, for though the absurd may be buried in the material, it is the epic themes and variations, repetitiously unfurled during long performances like those of Einstein on the Beach, that shape the disjointed parts into a memorable whole. And even where a performance may lag, there is the architecture of the set and his painterly use of light that make the experience more than just a worthwhile representation. At the Museum of Fine Arts in Boston, Robert Wilson's Vision, the first retrospective of the artist's work in a decade, is as much a performance as an exhibition. And across the Charles River in Cambridge, the American Repertory Theatre at Harvard premiered Wilson's production of Henrik Ibsen's last play, When We Dead Awaken, which will now be moving with the exhibition to Houston, Texas, and, one would hope, to other cities here and abroad. As is often the case, an outside discipline can channel creativity into unusual depths, and here an 1899 play (Wilson usually writes his own scripts), whose symbolist themes are compatible with Wilson's techniques, has given the director a chance to cut loose in amazing ways. Not the least of these are the inclusion of some hauntingly beautiful blues songs, composed and sung by tap dancer Charles 'Honi' Coles, sometimes with the whole cast, during the 'Knee Plays', the brief performances in the intervals that are the joints between the acts. Both the exhibition and the play are accompanied by sound environments composed by Wilson's longtime collaborator, Hans Peter Kuhn. In designing the exhibition, a work of installation art in itself, Wilson created a journey through three major galleries that, like any classical drama, suggests the passage of a single day. 'The Night before the Day,' as he calls the installation, features objects and furniture used as props, drawings, paintings, maquettes and actual sets from his past productions. The entrance through a long dark corridor sounds like a wind tunnel with distant bird calls and leads to a room the colour of dawn, where, among other objects, his hanging wire mesh chairs and tables are doubled by their perfect shadows on the walls. Such objects as the Japanese-style puppets, used in 'Knee Plays' during CIVIL WarS, and the glass and neon light bulb from Death Destruction and Detroit are elegant in themselves though somehow denuded of their active stage roles. More illuminating are the black-and-white drawings of his stage designs that convey with solid and luminously transparent planes the great sense of stage distance he achieves. One drawing, for 'A Letter for Queen Victoria,' demonstrates how something as simple as the back of an envelope can inspire the diagonals of his stage design. The final gallery, dark as night, is aglow with the moving lights of the grid - like the interior of the spaceship from the climax of Einstein on the Beach: being so close to it fulfils an audience fantasy of wanting to be in it. Having recently seen a more traditional production of When We Dead Awaken performed by the Jean Cocteau Repertory in New York, I am convinced that Wilson has given a more thoughtful and penetrating interpretation of this enigmatic play, which Ibsen saw as the epilogue of his previous works. The new translation is by Robert Brustein, the ART's artistic director. Rubek, the famous but ageing sculptor who attempts to rekindle his creative spark, rejects his young, earthy but boring wife, Maya, for a kind of spiritual meeting with the model, Irene, who inspired his greatest work and who may or may not be alive. The sets of mountainous seaside scenes, with rivers of glass and glacial peaks are realistic enough and make one sense the starkness of the terrain. The 'music' of clanking metal and roaring sea evokes a desolate landscape as well. But the constructions, as of a metal cage cum labyrinth where Irene and her keeper, here her inner self, take interminable walks, add to the psychological force of the dialogue. The sets and costumes recall the sombre beauty of 19th-century Scandinavian landscape and figure painting. Wilson has hewed to the force of the script and each act takes his audience higher into the mountains in a natural ascent to the fatal avalanche. The line from Charles 'Honi' Coles' first song - 'I was alone when I met her/ Now I wish I was alone' - becomes a good refrain for the play. When We Dead Awaken will be presented by the Alley Theatre in Houston, Texas, May 22 - May 26. Robert Wilson's Vision will go on exhibit in Houston at the Contemporary Arts Museum, June 15 - August 18 and at the San Francisco Museum of Modern Art, September 12 - December 1. AT&amp;T is the corporate sponsor. 
ID: 3730
HEADLINE: FT  23 APR 91 / Arts: Prokofiev symphonies - Royal Festival Hall 
TEXT: One of the most interesting features of the current 'Russian Spring' series on South Bank is the programming on two weekends of all seven Prokofiev symphonies. This is much rarer than it ought to be; and even individually, the fortunes of the symphonies are mixed - the First ('Classical') and Fifth are played a lot, the Sixth slightly less often, and the remaining four very little. In addition, the chance to hear the seven given in chronological order, as the two BBC Philharmonic weekends allow, tells one a great deal not only about the development of an important composer, but much that is central to the whole notion of a 'Russian Spring' in music. For, while Prokofiev may not have been a revolutionary composer in any committed ideological sense, it is in his brilliant, audacious, and copious musical outpourings that we come to appreciate most fully the trends of the immediate pre and post-Revolutionary period. The BBC Philharmonic under Edward Downes played the 'Classical' and the Second on Saturday evening (separated by Nikolay Demidenko's superlatively fine account, technically impeccable, formidable, sparklingly witty, of the First Piano Concerto) and the Third and Fourth on Sunday afternoon (the rest follow, in similar programme divisions and timings, next weekend). The 'Classical' (1916-17) is a jeu d'esprit indicative of the saucy wit and love of 18th-century forms and counterpoint that would stamp Prokofiev all his life. But from there to the Second is a big, fascinating step; and under Downes's sympathetic and knowledgeable guidance it was rewarding to be able to take it. The following three works, all scored for gigantic forces, are stepchildren of the repertory; the Second (1924-5), a piece of steel-and-smoke musical machinery unparalleled in Prokofiev's output, is the most neglected and misunderstood of the trio - unsuccessful at its Paris premiere, apt to be dismissively viewed even now. The title of Mossolov's notorious short ballet, Iron Foundry, could with some aptness serve as its subtitle, though in the second movement, a set of theme and variations, there is relief, of a quietly and mysteriously beautiful kind, from the pounding, braying and chains of dissonances (all of which Downes and his orchestra clarified with masterly patience). The Second is not exactly a decorous or tidy piece of symphonic construction (Prokofiev never got round to revising or re-scoring it, as he planned). But in a carefully considered performance such as we heard on Saturday, the wealth of combative, rhythmically intricate, densely vibrant material it contains can knock an audience sideways. The next two symphonies gained their existence via a different route: both are re-thinkings of existent material, the one operatic, the other balletic, and so it is understandable that both, while no less thunderous at climaxes, should be cleaner and trimmer in their proportions. And both, in their different and more mature ways, seem to mark the most artistically striking point of balance between the 'iconoclastic' Prokofiev and the 'popular'. Both contain extraordinarily rich and exciting invention: their blends of sounds and harmonies - intense, pungent, and sweepingly lyrical by turns - are like no other I know. The Third (1928) is the symphony that Prokofiev drew from the opera The Fiery Angel (which Downes will be conducting - happy news] - at Covent Garden in two seasons' time); the Fourth (1929-30, revised 1947) is an adaptation and extension of material from the ballet The Prodigal Son. Whether or not Prokofiev was a symphonist in the traditionally understood sense is a question that has been hotly debated before, and will no doubt be again; but it seems to me that, particularly in the Third, with its depiction of worlds earthly and demonic, of states of mind 'normal' and wildly out of kilter, a discourse of confronted opposites is very much in the fabric of its four movements. While the Fourth does not grip the listener in quite the same way, the diversity of its sound-worlds - comic-pastoral, sparkishly jazzy, and broadly melodic - is even more immediate in its appeal. I formed the impression, perhaps unjustly, that of all the works on the bill of the first BBCPO weekend, the Fourth had been the one least precisely prepared. There were patches of scrappy ensemble, and it was here that one noticed most often the orchestra's relative narrowness of string tone (the brass played expertly throughout). But in Downes's hands, lack of orchestral inflation was an interpretative feature, and a wholly positive one, of both concerts: while performances of more extravagantly virtuosic, or 'Russian', characterisation are easily imagined, those of more musicianly style and substance can hardly be. On to next weekend] 
ID: 3731
HEADLINE: FT  23 APR 91 / Arts: Today's Television 
TEXT: No generation in English history had more influence on the way we lead our lives today than those who lived in the first half of the 17th century. From the winning of the initiative by the House of Commons via the civil war, with the defeat and execution of the king in 1649, to the Cromwellian Commonwealth, it was a period packed with crucial incident. It can be argued that it was the earliness of their 'revolution' which gave the English such a stable constitutional life for the next 300 years. Channel 4 starts a 6-part series on England's Civil War (8.30). ITV starts a second series of the entertaining drama Chancer (9.00) about the cockney yuppie Stephen Crane. BBC2 begins a six-part documentary series about the British experience of sex in the first half of this century: A Secret World Of Sex (9.50). Under the Mental Defectives Act of 1913 young women could be locked away in mental homes if they had illegitimate babies, and for many the annual seaside holiday was one of the few opportunities for sexual activity. 
ID: 3732
HEADLINE: FT  23 APR 91 / Parliament and Politics: Sleepy Commons takes on funereal atmosphere 
TEXT: A PRIME-time debate in the Commons on the funeral industry is not a normal feature of parliamentary life. Coupled with rumours, which began immediately MPs reassembled after a fortnight's Easter recess, of a two-week break at Whitsun, it produced a feeling at Westminster that the session had effectively turned up its toes. Mr John MacGregor, leader of the Commons, is quick to dispel such ideas. Parliament is dealing with more bills this session than in both the two previous years, he says, and the government is carrying through a heavy legislative programme. Yesterday's debate was a routine occasion for a backbencher's choice of subject. Mr MacGregor points out that so far 34 bills have been launched in the 1990-91 session, compared with 26 in the 1989-90 period and 30 the year before. In terms of controversy and length, the picture is slightly different. The Commons will indeed be disposing of four bills this week, but discussions on bills dealing with Scottish natural heritage and the atomic weapons establishment are unlikely to attract full houses. Every year has some politically inconsequential measures, such as the Overseas Superannuation Bill which the Commons passed almost without noticing, but most sessions have blockbusters as well. Only the Criminal Justice Bill this year is comparable with heavyweights such as last year's legislation on broadcasting, environmental issues and health service reforms. Alongside the deliberate pre-election mix of bills, MPs are also benefiting from Mr MacGregor's positive management of the programme. In refusing to allow his colleagues to hijack bills and expand them to overflow the time provided, and in creating special committees to leave most European Community legislation to the enthusiasts, he has lightened two traditional scourges of backbenchers in search of more time with their families. Outside factors have also helped. Ministers mention MPs' pre-occupation with the Gulf, and with local government elections and finance. The most effective distraction, however, was the one that dares not speak its name - the Tory leadership contest in November. While the Tory party went through the most dramatic political events in most politicians' memories, in just a fortnight, the Commons went through all stages of three bills and the second readings of five others. Even after Mrs Thatcher's departure, politics continued to dominate over government. It would not have been the way of expediting legislation that the government would have chosen, but it certainly worked. Its effect has been to end the business managers' annual nightmare of ranks of MPs increasingly bad-tempered and tied to Westminster by three-line whips through long, hot July evenings. Instead, in order to avoid both the opposite trap of devilish work being found for idle hands and the charge of running out of steam, ministers are emphasising the amount of business still to be done. They acknowledge privately, however, that MPs have largely lost interest in legislation, with the possible exception of the Finance Bill. 'They're just looking to the election now,' said one cabinet minister. 
ID: 3733
HEADLINE: FT  23 APR 91 / Parliament and Politics: Chalker to press United Nations to play much more active role - Kurdish refugees 
TEXT: BRITAIN is to press the United Nations to inject a greater sense of urgency into the direction of its relief programme for the Iraqi refugees on the Turkish border and in Iran. Mrs Lynda Chalker, minister for overseas development, clearly shocked by the 'horrendous' conditions she saw for herself at the end of last week, is to make urgent representations at the UN headquarters in New York. She will see Mr Javier Perez de Cuellar, the UN secretary general, today. Mr Douglas Hogg, foreign office minister of state, will have parallel talks in Geneva with Prince Sadruddin Aga Khan, the UN delegate in charge of the refugee programme in Iraq and Kuwait. Mrs Chalker warned the Commons yesterday that the role of British troops in creating safe havens for the Kurdish refugees in northern Iraq would extend over 'several months'. She called on the UN to play 'a much more active role right away'. She made it clear that, if necessary, she would go beyond normal diplomatic niceties to ensure that Mr Perez de Cuellar was in no doubt about Britain's concern. Mrs Chalker, who acknowledged that local UN representatives were making strenuous efforts, stressed: 'It is at the centre and the top where me must get things sorted out.' Describing the plight of the Iraqi refugees as 'truly harrowing' she said the assistance being provided was greater for those on the Turkish border than for those in Iran. She announced that Britain would make an initial contribution of Pounds 2m to help the refugees in Iran, from the Pounds 20m programme pledged by Mr John Major, the prime minister. Britain wants the UN and other international agencies to join in a drive to at least double the rate of delivery of supplies for the refugees. MRS CHALKER rejected Labour charges that she had been wrong to link efforts to secure the release of British hostages held in the Lebanon with the provision of aid for the refugees. She insisted she had not linked the two issues, but claimed she would have been open to criticism if she had not referred to Britain's anxiety to secure the hostages' earliest possible release. 
ID: 3734
HEADLINE: FT  23 APR 91 / Parliament and Politics: Full circle for Thatcher's nemesis -Philip Stephens on Michael Heseltine's replacement for the poll tax 
TEXT: BACK in 1981 when Mrs Margaret Thatcher first pushed for the abolition of domestic rates, Mr Michael Heseltine offered a simple solution to her most pressing concern. The then environment secretary told the then prime minister that if her main worry was the high bills faced by little old ladies living alone in large houses, the answer was simple. He would make local authorities give them a big discount. The rest is history. Mrs Thatcher did not take his advice. Mr Heseltine moved on and then out of the Cabinet. The prime minister solved her problem by replacing the rates with the poll tax. Mr Heseltine pushed her out of Downing Street. Today Mr Heseltine, back at environment under a new prime minister, will outline his plan to replace the poll tax with a property tax which provides a 25 per cent discount to little old ladies living alone in large houses. The important details have already emerged; and despite of talk of further consultation, the scheme will represent a firm proposal rather than an option. At first glance it looks a neat synthesis of political imperatives and economic logic, though the realistic in Whitehall are still unsure of how strong the joins are. The tax will be levied on property classified in seven bands according to capital value. Bills will be applied to households - with an assumption that they contain two adults - rather than to individuals. The poorest will be exempted entirely. The present system of grant distribution using Standard Spending Assessments will remain as will draconian 'capping' powers to prevent 'excessive' spending by local authorities. There is little talk nowadays of preserving 'local democracy'. The economic logic is there in the fact that a property tax restores some relationship between individual wealth and the size of bills. The Duke in his stately home will pay more than the dustman in his council flat. The Treasury, which has always regarded property values as a reasonable proxy for income, is satisfied. So too are the politicians who can claim this makes the tax 'fair', or at least much fairer than the poll tax. All single adults, including the famous little old lady, will get a 25 per cent discount. The political compromise reveals itself in the decision to compress and then 'cap' the increases in bills which can be applied to the different bands. The government will set the bands nationally along with strict 'multipliers' to regulate the proportion of revenue raised from properties in each category. Most importantly, the bill for a house worth, say, Pounds 1m or more in band 7 will not be more than 2.5 times higher than for the flat worth Pounds 40,000 in band 1. So the system will be progressive - about 90 per cent of households will be unaffected by the 'cap' on band 7 - but, like the present income tax structure, only up to a point. Mr Heseltine hopes this compromise will calm Tory fears that a return to any property tax would automatically create a swathe of 'losers' in the south. The Budget switch of more than Pounds 4bn of local taxation to VAT should ensure that average bills across the country should not be much more than Pounds 350 per household. The multipliers will prevent councils from loading the burden on to southern Tory voters who have benefited from the sharp rise in property values over the past decade. Bills for similar properties will not be identical across the country. A three-bedroom semi in London will typically be in a higher band that a similar house in Barnsley, so will attract a higher bill. The Treasury thinks it should - incomes are higher in London than Barnsley. But the politicians will control the size of the differential. It all looks ingenious, and ministers are convinced that it will work. This time, they insist, the Treasury is fully behind the new system. It has been tested on the computers in Great George Street as well as those in Marsham Street. There is even a fig-leaf for those still wedded to the principle that all should contribute to the cost of local services. Mr Heseltine will argue that the two-person household assumed by the tax will capture 38m of the 42m adults theoretically liable to pay the poll. There is still, though, one serious weakness. Whatever the initial level of bills, the commitment to the Uniform Business Rate means that any local tax will be highly 'geared'. A 10 per cent rise in spending beyond that allowed for in government grant would produce a 70 per cent rise in bills. More than one senior minister is convinced that the UBR cannot survive in its present form. But talk of raising the tax burden on industry is for after, not before, the general election. 
ID: 3735
HEADLINE: FT  23 APR 91 / Parliament and Politics: Fare cuts ruled out 
TEXT: REPLYING to complaints in the Commons yesterday that London's commuter fares were the highest in Europe, Mr Roger Freeman, junior transport minister, ruled out cuts in Network SouthEast fares, saying that would mean cutting investment. 
ID: 3736
HEADLINE: FT  23 APR 91 / Parliament and Politics: Pollution plans 
TEXT: A LABOUR government would require industry to give full details of all pollution it emits, Ms Ann Taylor, the party's environment spokesman said yesterday. The flow of information on the environment would also be improved by the setting up of a national inventory of toxic waste emissions. Other proposals included the ending of international trade in toxic waste. Ms Taylor said it was wrong that Britain should be 'a dustbin for other countries'. 
ID: 3737
HEADLINE: FT  23 APR 91 / Parliament and Politics: Tory group reprimands secretary 
TEXT: THE Bruges group, the Tory-dominated organisation opposed to a Federal Europe, last night reprimanded Mr Patrick Robertson, its secretary, for issuing a statement earlier this month attacking the leadership style of Mr John Major. The group stopped short, however, of accepting his offer to resign - leading to claims from some Conservatives that the group remained discredited. Mr Major was accused in the statement of 'wobbling' and of engaging in gesture politics over the Kurdish issue. At a special meeting, the group approved a tightening of rules for issuing statements on behalf of the group. Mr Robertson and Dr Alan Sked, who helped draft the comments, offered 'an unqualified expression of regret'. 
ID: 3738
HEADLINE: FT  23 APR 91 / Sir Geoffrey Howe 
TEXT: SIR Geoffrey Howe, (above) who resigned from the government last November in protest at Mrs Margaret Thatcher's stance on Europe, is to join Jones Day Reavis and Pogue, a US law firm, as a London-based consultant on European matters. Sir Geoffrey, a Queen's Counsel, is aged 64 and has announced that he will not stand for his Surrey East parliamentary seat at the next general election. He has recently taken on non-executive directorships at Glaxo and BICC and has joined the International Advisory Council of the Institute for International Studies at Stanford University, California. Sir Geoffrey's role with the firm will be to act as a special adviser on strategic and investment activities in Europe, the Middle East and Asia. 
ID: 3739
HEADLINE: FT  23 APR 91 / Cathay will operate flights from Heathrow 
TEXT: CATHAY PACIFIC will on May 1 become the second international airline to offer its first services from London's Heathrow airport. The move follows the government's decision to open Heathrow, the world's busiest international passenger airport, to all carriers. The start of Cathay's daily non-stop service between Heathrow and Hong Kong will increase competition for British Airways at its home base of Heathrow. Mr John Dance, Cathay's UK manager, said it was important for the airline to operate from Heathrow as well as Gatwick to match BA's services. Heathrow would give Cathay access to about 50 per cent of the UK market. BA is already in competition with United Airlines for transatlantic services. United started flights to Heathrow this month after winning approval to take over Pan Am's London services. A total of 10 international airlines, barred up to now from operating from Heathrow, have successfully applied for rights to start services at London's leading airport. Royal Brunei will launch a twice-weekly service on May 7 from Heathrow to Bandar Seri Begawan stopping at Dubai and Singapore. Virgin Atlantic, Korean Airlines and All Nippon Airways are among airlines planning new Heathrow services this summer. These services are expected to lead to a fierce war on fares and promotions between airlines vying for passengers in a depressed air-travel market. Sir Colin Marshall, BA's chief executive, warned that the airline's passenger volume was not expected to recover to levels reached before the Gulf war until September or October. BA's traffic fell 13.2 per cent in March compared with March 1990. Mr Dance said Cathay intended to match all the promotions and lower fares offered by BA, but added: 'I hope when we get to the peak season, there will be a bit more sense seen by carriers.' 
ID: 3740
HEADLINE: FT  23 APR 91 / Slowdown in managers' pay rises 
TEXT: THE RATE of increase in the total pay of managers slowed slightly in the first quarter of 1991, leaving them on schedule for an increase of 13 per cent for the full year. That is the finding of the executive pay index produced by Noble Lowndes, management consultants and actuaries. The index, which includes the value of fringe benefits such as cars and pensions as well as salaries and bonuses, is calculated quarterly for the Financial Times. The latest figure is based on a survey of 5,085 managers in 396 companies throughout the UK. In the first quarter the average total pay for all ranks of executives rose by 3.3 per cent to Pounds 71,633. The rise compares with a 3.5 per cent increase for the first three months of 1990 and a rise for the whole of last year of 13.8 per cent. Although total pay increased, the recession was reflected by a decline in the element made up of incentive bonuses to an average of Pounds 4,242 at the start of this month, against Pounds 4,369 in early Jan-uary. The salary element increased by 3.3 per cent to Pounds 50,771, the average value of company cars by 4 per cent to Pounds 8,329, pension entitlements by 5.8 per cent to Pounds 7,014, and other benefits by 7.3 per cent to Pounds 1,277. Further information from Mr Don McClune, PO Box 144, Norfolk House, Wellesley Road, Croydon CR9 3EB. 
ID: 3741
HEADLINE: FT  23 APR 91 / Abta warns of delay in refunds when tour companies collapse 
TEXT: SCHOOLS which had booked holidays through companies that later collapsed may have to wait up to three months for a refund, according to the Association of British Travel Agents. Mr David Hurst, Abta's head of public affairs, said schools should apply to Abta for their money and then book their trips again, rather than assign their refunds to other companies. Some schools are confused about how to respond to other companies, some non-Abta, offering to take over trips which had been booked with failed operators. Abta has so far received 200 claims from customers of Adventure Travel International (ATI), which ceased trading at the end of March, and a similar number for Adventure Express, an un-related company which has also ceased trading. The failure of Sun Living, a school tours group that went into liquidation in February, has led to 1,000 claims. The Earl of Scarborough High School at Skegness, Lincolnshire, has been caught in the failures of two tour companies since February, and is awaiting more than Pounds 20,000 in refunds from Abta. ATI's receiver has written a letter saying the school remains 'principally liable' for a further Pounds 7,625. According to Abta, the school will eventually receive its refund and should not have to pay anything to the receiver. Mr Jim Whittaker, the school's headmaster, said he planned to veto future group holidays. The school had booked three holidays with Sun Living. Within an hour of the announcement that the company had collapsed, Mr Whittaker received a call from ATI offering to take over the planned trips on identical terms and without further payment. With one group due to leave at the end of that week, Mr Whittaker instructed Abta to pay the refund direct to ATI. Although the holiday took place, it was 'substantially defective', he said. The other two parties never boarded their coaches. In spite of its previous undertaking, Mr Whittaker said, ATI asked for additional cash if the trips were to proceed. He had to get an emergency payment of Pounds 13,066 from Lincolnshire County Council. Mr Whittaker said ATI assured him on March 28 that the groups would leave the next day as planned. He learned three hours later that the company had ceased trading. 'We have incurred considerable administrative costs in organising holidays and dealing with cancellations for which there is no compensation,' Mr Whittaker said . 
ID: 3742
HEADLINE: FT  23 APR 91 / UK News (Employment): Breakaway members may win TUC affiliation 
TEXT: THE TRADES Union Congress is set to agree to the affiliation of the breakaway Electrical and Plumbing Industries Union at a meeting of the TUC's council tomorrow. The move does not mean that the door is closed to the readmittance of the EETPU electricians' union, the TUC said yesterday. The EPIU, which has about 4,000 members, was formed by disaffected members of the EETPU after that union's expulsion from the TUC in 1988. The expulsion followed a recruitment row involving two single-union deals. The TUC finance and general purposes committee yesterday put forward a recommendation to the council that the EPIU should be allowed to affiliate. The union was given observer status at the 1989 TUC congress, but was refused full membership. The AEU engineering union argued then that the EPIU was dependent on other unions, had no funds of its own or recognition deals with employers and therefore could not be counted as an independent union. Mr Gavin Laird, AEU general secretary, said from his union's annual conference in Eastbourne yesterday: 'The wisdom of the F and GP decision is questionable. However, this reinforces the case for the EETPU amalgamating with the AEU.' The TUC said that the EPIU was considered now to be self-sufficient and no longer dependent on other unions. A decision on the union's standing is also expected soon from the government's certification officer. 
ID: 3743
HEADLINE: FT  23 APR 91 / UK News (Employment): Government adds Pounds 4m to YT funding 
TEXT: EXTRA financial help is being provided by the government to ensure that its guarantee of a place to all young people on its main training scheme for 16- to 19-year-olds is met. Essex Training and Enterprise Council warned last month that its funding allocation of Pounds 12.3m for Youth Training in 1991-92 would leave about 5,000 young people without a YT place, out of an estimated total of 6,450 in the county. The warning came when many Tecs were expressing fears that cuts in funds for YT, coupled with rising un-employment, could leave them unable to meet the guaran-tee. Mr Roy Lawrence, chairman of Essex Tec, said: 'Essex Tec is delighted that the government has moved so swiftly to provide an extra amount - more than Pounds 4m - in response to the recent review of YT in Essex.' The Department of Employment said Essex Tec had been told that the government would underwrite any overspend after the Tec had spent on YT the Pounds 12.3m and any operating surpluses arising from savings on its other training budgets. The department said it believed Essex was the only Tec which had said it could not meet the guarantee. If other Tecs made similar claims they would have to be reviewed. 
ID: 3744
HEADLINE: FT  23 APR 91 / UK News (Employment): Civil Service union to urge rejection of 8% pay offer 
TEXT: MEMBERS of Britain's second-largest Civil Service union will be advised by their leaders to reject the government's 8 per cent pay offer. The executive of the NUCPS union also left open the possibility of a ballot on industrial action if members accepted their rejection recommendation and the government continued to refuse arbitration. In contrast, the leadership of the CPSA, tbe largest Civil Service union, decided to recommend their members to accept a separate 8 per cent offer. The leaderships of both unions believe the 8 per cent offers break the spirit of long-term pay agreements which allow a form of comparability with the private sector. Under the agreements, offers fall within the middle range of comparable private-sector settlements in the previous year. This year the range was 8 per cent to 10 per cent, with a median of 9 per cent. Although the offers are 8 per cent the majority of both unions' members will receive less - 7.6 per cent in the case of CPSA and 7.8 per cent in NUCPS. The balance is made up of high awards of up to 11 per cent for lower-paid civil servants. The Treasury has refused the two unions' request for arbitration. Ms Marion Chambers, CPSA president, said her union executive felt the alternative to recommending acceptance was industrial action and there was no mood for this among members. Some members of the NUCPS executive believe their members will also be reluctant to take action. 
ID: 3745
HEADLINE: FT  23 APR 91 / UK News (Employment): Howard to put plan for workers' rights to EC 
TEXT: MR MICHAEL Howard, emp-loyment secretary, yesterday voiced his continuing opposition to the European Commission's proposed directives on employees' rights to information and consultation. He said he would seek to replace them with his own five-point plan. Mr Howard announced the initiative at a conference to launch a joint government and Confederation of British Industry campaign to improve business performance through employee involvement. He will present the plan on employee involvement to an informal meeting of his fellow employment ministers in the European Community in early May. Mr Howard will urge the EC to adopt a voluntary approach towards encouraging company policies for informing and consulting employees. The EC has proposed more formal machinery for companies with concerns in more than one member state, such as the formation of a works council containing employees from each of the countries covered by the company. Mr Norman Willis, general secretary of the Trades Union Congress, said the British initiative looked like 'a smokescreen to cover the government's embarrassment at being out of step in Europe'. He said the UK government had consistently tried to veto European proposals to give employees rights to information and consultation over company decisions. The aims of the five-point plan are: To generate the commitment of all employees to the success of the business. To enable the business to adapt to changing market requirements and improve its prospects for the future. To increase the satisfaction that employees get from their work. To improve performance and productivity by drawing on the skills and knowledge of all employees. To provide all employees with the opportunity to contribute to the development of their company. Mr Howard said the voluntary approach allowed companies to establish arrangements best suited to their own circumstances. He said: 'We shall therefore continue to resist the imposition of Community legislation on this subject. That is true of the worker participation proposals in the Fifth Company Directive and the European Company Statute.' Mr Howard yesterday said a study by his department showed Labour's economic policies could cost 2.2m jobs - leading Labour to protest at the use of government officials to compile Tory 'propaganda'. Editorial comment, Page 18 
ID: 3746
HEADLINE: FT  23 APR 91 / UK News (Employment): London Tube workers vote to strike 
TEXT: SUPERVISORS and booking clerks on London Underground have voted to strike over cuts of up to 1,800 jobs and changes in working practices, even though the organisation says it will suspend any employee who takes part in industrial action. The ballot held by the TSSA white-collar union will be followed next week by the result of a ballot about the same issue by 13,000 members of the RMT transport union working on London Underground. The RMT has threatened a series of one-day strikes after London Underground's refusal to negotiate on job losses and changes in working patterns which are intended to help reduce an anticipated loss of Pounds 92m. The dispute has broken out at the same time as annual pay talks at British Rail which resume today. The dispute threatens a repeat of the industrial action on London Underground in 1989 at the same time as an industrial dispute at British Rail. Mr Richard Rosser, TSSA general secretary, said supervisors and booking-office workers on London Underground did not have a history of taking industrial action. He hoped managers would realise the strength of feeling among workers. The TSSA has been upset both at the size of job losses and at the effect on earnings of changes in working patterns. London Underground has guaranteed no loss of earnings to staff for the first 18 months of the new rosters. TSSA members voted for strike action by 575 votes to 289, out of a total of 1,553 ballot papers. London Underground said this result was 'certainly not an example of a popular uprising'. The RMT yesterday released a briefing paper given to London Underground managers advising them of procedures for first warning and then suspending any staff who take part in industrial action if strikes are called. Mr Jimmy Knapp, RMT general secretary, said the briefing paper was 'the action of a desperate, inadequate management' and was already rebounding on them by making workers more determined to vote for and take industrial action. Mr Knapp said the savings from single staffing of stations and reductions in overtime and weekend working would amount to only Pounds 400,000. The savings would have little effect on the expected loss even if they were implemented in full. 
ID: 3747
HEADLINE: FT  23 APR 91 / Peter Marks 
TEXT: MR PETER MARKS, a director of Branston and Gothard, the firm of stockbrokers, pictured leaving Clerkenwell magistrates' court in London yesterday. He faces allegations of manipulating the share price of Maxwell Communication Corporation, Mr Robert Maxwell's publishing group. Mr Marks is charged with spreading rumours in October last year about the impending liquidation or bankruptcy of MCC, contrary to section 47 of the Financial Services Act 1986. The case was referred for committal before Wells Street magistrates in London on September 25. 
ID: 3748
HEADLINE: FT  23 APR 91 / Jobs warning 
TEXT: THE OUTLOOK for employment will remain bleak until after 1994, says Business Strategies, a research consultancy, in a report published today. It adds that the jobless total is likely to rise by about 400,000 to 2.4m in 1994. 
ID: 3749
HEADLINE: FT  23 APR 91 / School budgets 
TEXT: FURTHER measures to increase the independence of state schools from local authority control were announced yesterday. The education department said all schools would manage their budgets by April 1994 at the latest. 
ID: 3750
HEADLINE: FT  23 APR 91 / Prince on the attack 
TEXT: THE Prince of Wales yesterday launched a wide-ranging assault on what he saw as the failings of the education system. At a conference at Stratford-upon-Avon to mark Shakespeare's birth he deplored the shortage of nursery education, the low stay-on rate among 16-year-olds, excessive specialisation at sixth-form level and the collapse of the apprenticeship system. He also expressed astonishment at the absence of Shakespeare from some GCSE and A-level English courses. One in three primary school pupils is not being taught to read and write properly, the schools' inspectorate said yesterday. 
ID: 3751
HEADLINE: FT  23 APR 91 / IRA offers conditional ceasefire 
TEXT: THE IRA said last night it would refrain from killing loyalists if their recently announced conditional ceasefire proved genuine, writes our Belfast Correspondent. However, the Provisionals said in a statement issued in Belfast that their campaign against the British government and security forces - ultimately responsible, they said, for the conflict in Northern Ireland  - would continue. The move follows last week's statement from the main loyalist para-military groups, the Ulster Volunteer Force and Ulster Freedom Fighters, that they would suspend operations during the forthcoming talks between the province's political parties. 
ID: 3752
HEADLINE: FT  23 APR 91 / The Guinness Appeals: 'Ambivalence' over Roux highlighted 
TEXT: AN appeal court judge yesterday referred to the 'ambivalent attitude' of the prosecution towards Mr Olivier Roux, the former Guinness finance director and the principal prosecution witness. Mr Justice Ognall said he was 'very troubled' about the status invested in Mr Roux at the trial last year. Mr Roux had admitted having known about an allegedly unlawful share support operation mounted by Guinness during its takeover battle for Distillers, so why had he not been an accomplice as far as the Crown had been concerned, the judge asked. Mr John Chadwick QC, for the Serious Fraud Office, replied that Mr Roux had consistently said he had not regarded what was done during the bid as dishonest. How, the judge asked, did a witness's assertion that he was not dishonest alter his status? Mr Chadwick said that if Mr Roux had been treated as an accomplice from the start, that would have taken the decision from the jury: they had to decide whether they believed his evidence as to the honesty of the support operation. Mr Justice Ognall said: 'I suspect that at least some of the mischief that has arisen in this particular case may have arisen because of the ambivalent attitude of the Crown towards Mr Roux and his role in this enterprise.' Mr Chadwick said the Crown had to form a view as to whether a person had accepted his criminality. Mr Roux clearly had not, and the Crown had taken the view that this was something to be left to the jury. The exchanges came on the fifth day of appeals by Mr Ernest Saunders, former Guinness chairman and chief executive, Mr Anthony Parnes, a City stockbroker, and Mr Gerald Ronson, head of the Heron group, against their convictions and sentences. The appeals continue today. 
ID: 3753
HEADLINE: FT  23 APR 91 / Trident warhead should be redesigned, says study 
TEXT: BRITAIN'S latest nuclear weapon, the Trident II warhead, should be redesigned, suggests a draft report from Basic, a London-based think-tank which specialises in critiques of Nato policy. The study also calls for a halt to all movements of nuclear weapons in Britain while an independent review is made of their safety in storage and transport. Basic's report draws upon criticism of US nuclear weapons levelled by independent scientific assessors over a year ago, and assumes that British weapon designs relate closely to their US counterparts. Britain's first Trident submarine is scheduled to enter service in 1994. Its warheads are believed to be behind schedule because of production difficulties. They were designed by the Atomic Weapons Establishment at Aldermaston, Berk-shire. Safety of British Nuclear Weapon Designs. Basic, 33 Southampton St, London WC2E 7HQ. 
ID: 3754
HEADLINE: FT  23 APR 91 / The Blue Arrow trial: County man 'unaware' of stake 
TEXT: MR PETER DALE, former managing director of County NatWest Securities, yesterday insisted to the Blue Arrow trial that he had no knowledge of other shares taken by County NatWest, CNWS's merchant banking co-subsidiary, until the day the holding of a discloseable stake was publicly announced. Mr Dale, a prosecution witness, said that until December 17 1987 he did not know of the stake, worth almost 5 per cent of Blue Arrow, bought by County's corporate advisory division. He knew only of the 4.5 per cent holding taken by CNWS and a similar stake held by Phillips &amp; Drew which, along with County, advised Blue Arrow on its 1987 rights issue. County NatWest, NatWest Investment Bank, UBS Phillips &amp; Drew Securities and seven individuals all deny conspiring to mislead the markets over the outcome of the Pounds 837m rights issue. Mr Dale said he had seen no problem in CNWS accepting its 31m shares from County's corporate advisory division. 'It was only a problem if you were aware, as NatWest's senior management were, of the corporate advisory holding and the P&amp;D holding,' he told Mr Alun Jones QC, for Mr Stephen Clark, a County director and one of the defendants. He denied the suggestion from Mr Jones that he had known what was going on. Mr Dale agreed that he had allowed Stock Exchange rules to be breached by delaying the reporting to the exchange that the 5 per cent disclosure limit had been exceeded in normal trading, but described this as 'relatively trivial'. Mr Dale told the court that he had been informed by Miss Elizabeth Brimelow, then compliance director, that County was considering making a larger disclosure and that the matter was being dealt with at a senior level within NatWest, the parent bank. When he learnt of the stake held by the corporate advisory division, he had said the full holding should be disclosed. However, since he still thought legal advice had been taken, his concern was not fully aroused. The trial continues today. 
ID: 3755
HEADLINE: FT  23 APR 91 / World Trade News: Joint air cargo venture 
TEXT: AN ANGLO-SOVIET cargo airline is being set up to specialise in transporting heavy loads, using the Russian-built Antonov AN124 Ruslan, one of the world's biggest aircraft, capable of carrying 150 tonnes of cargo. The joint venture airline involves a partnership between HeavyLift Cargo Airlines, a subsidiary of the UK Trafalgar House group, and the Soviet Volga-Dnepr company. The airline is expected to start operating in June, adding more AN124s to its fleet before this year ends. The Soviet transport aircraft, equipped with on-board hoist and crane systems to load heavy goods both front and back, with minimum ground equipment, will be used to carry the largest tracked or wheeled vehicles, aerospace and space-related components, oil pollution control gear, building materials and relief supplies for international agencies. HeavyLift Cargo Airlines operates a fleet of large Belfasts, Hercules, Boeing 707s and Guppy aircraft to transport heavy loads. Soviet officials described the joint venture as 'an important contribution to developing Anglo-Soviet trade and economic relations'. The Soviet partner is one of the first joint stock enterprises set up in the Soviet Union. Still ultimately controlled by the state, these new enterprises do not come under the rigid departmental control, enjoying greater operating flexibility. 
ID: 3756
HEADLINE: FT  23 APR 91 / World Trade News: AT&amp;T, NEC to develop new chip technology 
TEXT: AT&amp;T Microelectronics, a division of the US telecommunications company, and NEC of Japan will jointly develop technologies to make future generations of semiconductors, they said yesterday. The agreement comes as Washington and Tokyo are negotiating a new pact on semiconductor market access in Japan, and is a sign Japanese companies intend to build closer links to the US electronics industry, in an attempt to reduce trade tension. For the next two years, the two companies have agreed to develop jointly the manufacturing processes for further miniaturisation, enabling them to increase the memory capacity and functions of an individual chip. While other semiconductor companies compete to develop similar technology, executives of the two companies said the joint effort would provide big advantages. Mr William Warwick, president of AT&amp;T Microelectronics, claimed developing the 0.35-micron process, as the system is known, is likely to cost Dollars 400m (Pounds 232m) to Dollars 500m. A micron is a millionth of a metre. The smaller the micron measurement, the more advanced the chip. The next generation of memory chips, 16-megabit chips, are being developed using 0.5-micron technology. AT&amp;T and NEC are aiming for even more chip generations with the 0.35-micron technology. The companies will be sharing sensitive technologies in ultra-fine etching and circuiting, but say they are likely to have few problems in sorting out ownership rights of new processes. 'If the patent is developed from the joint effort, it will be used by both of us. If there are necessary patents that we already own, they will be licensed for the joint work,' Mr Warwick said. The companies plan to break down the development process into tasks they call 'modules', with 50-70 researchers from each company working on each module. There will be about 25 of these modules, and the two companies will exchange at least one researcher for each module, and have agreed to report regularly on progress. The project follows a more general pact signed in March last year, where the companies agreed to co-operate in semiconductor development. 'The relationship represents a win-win situation for both companies. Through partnering, each company shares resources, lowers individual company risks and gains timely access to technology,' Mr Warwick said. Mr Tomihiro Matsumura, NEC executive vice-president, said the agreement represents 'true co-operation between two multinational semiconductor companies', and proves the enthusiasm of each for 'a long-term co-operative relationship'. 
ID: 3757
HEADLINE: FT  23 APR 91 / World Trade News: US prepares to repel Chinese software pirates - Peking is being challenged to prove it can protect foreign intellectual property, writes Lynne Curry 
TEXT: UNDER pressure from the US and other foreign business executives, China is attempting to strengthen its patent law and develop a code for the protection of computer software manufacturers, but is hampered by conflicting domestic interests. The Chinese government is also making efforts to revise its patent law and draft copyright regulations to protect computer software manufacturers, but doing so involves many Chinese companies and 'could be a hard job', according to the official English language China Daily. China's lack of copyright regulations and its limited patent law were the subject of discussion between the Chinese and a visiting US official in February. 'The concern is enormous', said the official, Mr Joseph Massey, assistant US trade representative. 'If the problem of piracy of software doesn't get fixed, we will have to take action.' While software piracy is rampant, illegal copying of other proprietary works is also widespread. Entire sections of some bookstores only sell unauthorised copies of foreign books. Other examples of piracy include records, video tapes, computer hardware and even the Disney characters, Mickey Mouse and Donald Duck. The purpose of Mr Massey's visit was to determine how much progress the Chinese have made towards drafting copyright legislation which would provide effective protection for computer software manufacturers. 'It's at an early stage, but we have a lot of problems with what we have seen,' Mr Massey said. The trade representative said China must show progress on its draft copyright regulations before April 15, the statutory deadline under US law, when the trade office makes recommendations to the administration about retaliatory actions against countries deemed to be following unfair trade practices with the US. This can result in additional tariffs on a country's exports to the US. China is already on a 'priority watch' list, because of concern about the piracy problem and inadequate efforts to prevent it. In an effort to resolve the problems, a Chinese delegation was expected in Washington in mid-April for talks on intellectual property rights and bilateral scientific co-operation. China's current patent law does not provide adequate protection for chemical and pharmaceutical products, according to western lawyers. It protects only the process by which a compound is made, not the product. If a chemical process is altered only slightly, pirated versions of an already patented compound could be made legally in China. The Chinese are considering expanding the patent law, extending the protection period for inventions to 20 years from the present 15 and widening protection to include the product directly obtained by such a process, according to the China Daily. But the debate is believed to be deadlocked, with some ministries supporting the proposed revision and the Ministry of Chemical Industry fighting it. Apart from problems with pharmaceutical products, software piracy has reached epidemic proportions in China. US software manufacturers estimate that unauthorised copying of software has resulted in Dollars 400m of annual lost sales to China. The traditional Chinese approach to copyright and other intellectual property issues differs significantly from the western view that some works have proprietary ownership. 'The Chinese consider it an honour to lift someone else's work and publish it,' said one Western businessman involved with copyright problems. 'The Chinese have a much harder time formulating a law which is acceptable to the west, because the idea of certain work belonging to an individual is antithetical to socialist precepts,' one western lawyer said. A vague copyright law will become effective in June. Western observers say problems with the legislation arise not only with its vagueness but with the implementing regulations being debated by Chinese officials. The law does not stipulate on the time limit that a work can be protected, and it states that a foreign work can only be protected if it was first published or produced in China, according to western lawyers. Much secrecy surrounds implementing regulations which would provide more detail about the scope of the copyright law. Mofert is believed to favour strong copyright regulations, while ministries -such as the Ministry of Chemical Industry - with vested interests in continuing to make cheap, illegal copies of software have opposed the legislation. 'Certain ministries have been told to pirate as much software as they can, so that when the law does go into effect, they will have everything,' one western executive said. 'Mofert has overall responsibility for this issue, but the other ministries are telling Mofert to get lost.' Not all ministries are copying software illegally, and some do recognise proprietary rights. But Western analysts say that China's ability to provide adequate protection for foreign intellectual property is vital if the country wants continued access to investment and high technology. 
ID: 3758
HEADLINE: FT  23 APR 91 / World Trade News: FFr10bn order for trains 
TEXT: THE FRENCH SNCF rail board yesterday placed orders for FFr10bn (Pounds 990m)-worth of double-decker high-speed trains with a consortium led by GEC-Alsthom, the Franco-British engineering group. This is one of SNCF's biggest orders and aims to boost capacity of its near-saturated domestic Train a Grande Vitesse (TGV) routes in the second half of the decade, so cutting the need for new track. This will be greeted with relief by environmental groups, which have protested against plans to extend the 10-year-old Paris-Lyon TGV line to the Mediterranean. The double-deckers will take the expected strain on the Paris-Brussels TGV route, two years after it opens in 1993, but will be too large for the UK end of the Channel Tunnel line. The order comes as GEC-Alsthom is negotiating against Italian, German and Swiss competition for four overseas TGV contracts, in Canada, the US, South Korea and Taiwan. The double-deckers will carry 520 passengers, 35 per cent more than existing single-deckers, but cruise at the same 300 kmh as the newest TGVs now in service. Each train includes eight carriages, with a locomotive at each end. The contract includes firm orders to develop and produce 45 trains, with 55 more under option. Other consortium members include ANF Industries, France's second biggest maker of railway rolling stock, and De Dietrich, the French electrical engineering and household appliance group. 
ID: 3759
HEADLINE: FT  23 APR 91 / World Trade News: Hopes for Congress fast-track approval 
TEXT: A COMPROMISE proposal, introduced yesterday in the US Senate, improves the chances for congressional approval of the 'fast-track' negotiating authority necessary for an extension of the Uruguay Round trade talks. However, under the plan submitted by Senator Donald Riegle, chairman of the Senate banking committee, Congress would hold a much tighter rein on talks for a free trade agreement with Mexico and Canada. The fast track is a parliamentary procedure that speeds trade negotiations by allowing Congress only a single yes-or-no vote on trade pacts. Mr Riegle is proposing to grant the fast track for the Uruguay Round but to permit Congress to amend the FTA in selected areas. The senator is typical of many in both houses of Congress, supporting the Uruguay Round but concerned that an FTA would mean the loss of manufacturing jobs to Mexico. The combined opposition to both has put in jeopardy the administration's prime trade objectives. Either the House or the Senate can kill the fast track by voting against it by June 1. In a press conference yesterday, Mr Riegle accused the administration of proposing the pact for foreign policy, rather than economic policy, considerations. The US economy is getting worse, he said, not better. 'Mexico is too poor to buy most of our products, but is often willing to sacrifice its environment and worker safety to lure US companies with low-wage rates,' he said. Mexican workers earn one-tenth of that earned by US workers, and the country's work safety, child labour and environmental laws are only loosely enforced. Under Mr Riegle's proposal, Congress would be permitted to amend an FTA pact in the five areas of greatest congressional concern: labour standards; environmental protection; 'rule of origin' which would prevent other nations from funneling goods through Mexico into the US; assistance for American workers displaced by imports; and dispute resolution. 
ID: 3760
HEADLINE: FT  23 APR 91 / Washington bank group attacks Polish debt deal 
TEXT: THE decision by the Paris Club of creditor governments to forgive at least half Poland's debt is unhelpful for the stability of the international financial system, the Institute of International Finance, the Washington-based group which promotes the views of international banks, said yesterday. Mr Horst Schulmann, IIF managing director, described the forgiving of Poland's debts as foreign aid through the back door. It would lead other debtor governments to seek similar treatment, he said, suggesting it would contribute to the breakdown of order in international finance. He also criticised the pressure on banks to match the Paris Club. 'In contrast to governments, banks cannot be in the aid business,' he said. This pressure was one of two developments over the past six months - the other being the continued growth of interest arrears owed by developing countries to commercial banks - which were damaging the prospects for flows of private capital to middle-income countries, he said. The IIF calculated that interest arrears owed to banks grew to Dollars 26.8bn (Pounds 14.9bn) at the end of March, from about Dollars 18bn six months earlier. The figure includes Dollars 9.5bn owed in interest by Brazil, which reached a preliminary agreement with banks on clearing Dollars 8bn of interest arrears this month - an agreement which must be ratified by Brazil's senate and 95 per cent of creditor banks. Mr Schulmann said the fact that some countries were allowed to build up arrears while others, particularly in Asia, did not, showed a double standard. Financial institutions should refuse all new loans to countries in arrears until they have an effective agreement to eliminate them. He called on finance ministers, in Washington this week for the spring meetings of the IMF and World Bank, to address three issues: the global capital shortage, which could not be managed merely by lowering interest rates; interest arrears by debtor countries; and the growing 'moral hazard' in the international financial system, epitomised by the Polish debt forgiveness deal. Walesa interview, Page 19 
ID: 3761
HEADLINE: FT  23 APR 91 / De Klerk urges more UK links 
TEXT: PRESIDENT F W de Klerk of South Africa last night appealed to Mr John Major the UK prime minister to help him win investment as apartheid is steadily dismantled. It was the two leaders' first meeting. At a working supper at the British premier's official residence in London Mr Major told him efforts to end race policies should be rewarded by the scrapping of sanctions and the sports boycott which has left South Africa isolated. Mr de Klerk, on a two-day visit to London, earlier held a private meeting with representatives of banks and financial institutions, at which he called for the strengthening of trade and investment links between Britain and Pretoria. Mr Robin Leigh-Pemberton, the Bank of England governor, was among senior bankers present. Lord Alexander, chairman of National Westminster Bank and Sir John Quinton, his Barclays Bank counterpart, are also believed to have attended the meeting. Mr de Klerk is accompanied by his deputy foreign minister, Mr Leon Wessels, who met Mr Douglas Hurd, the UK foreign secretary, in the afternoon. Today Mr de Klerk will address the conference of the Institute of Directors, and speak at the Royal Institute for International Affairs. He leaves tomorrow for Denmark, before flying to Ireland on Thursday and back to London on Friday to speak to the Confederation of British Industry and the UK-South Africa Trade Association. Amnesty International, the human rights organisation, yesterday criticised what it called 'the lack of accountability' of the South African security forces. Amnesty said there was 'a pattern of unlawful behaviour by members of the security forces' which lent weight to 'allegations of unprovoked use . . . of lethal force.' The statement called on the government 'to bring to justice those members of the security forces responsible for human rights violations'. 
ID: 3762
HEADLINE: FT  23 APR 91 / Israeli right sees no change on settlements 
TEXT: EXTREME right-wing members of the Israeli government said yesterday Mr Yitzhak Shamir, the prime minister, had promised them he would not compromise on Jewish settlement of the occupied territories, despite Washington's protests that continued settlement could upset its Middle East peace effort. Meanwhile Mr Yossi Ben-Aharon, head of the prime minister's office, said the government would not accept any Palestinian from Jerusalem in a Palestinian delegation to talks and opposed extending the role of a proposed regional peace conference beyond an opening function for later bilateral negotiations. Both issues - along with settlements - are among the obstacles to convening Arab-Israeli talks that Mr James Baker, the US secretary of state, will seek to overcome when he returns to Israel today for further talks. Mr Shamir met the Tehiya party, a three-member faction in the coalition led by the Likud party, and a group of settlers to discuss their concerns. Ms Geula Cohen, a Tehiya junior minister, said afterwards Mr Shamir had 'promised that settlement will not be harmed'. Ending Jewish settlement of the West Bank and Gaza Strip is a key demand of Palestinians and other potential Arab peace conference participants. But Mr Shamir's government has repeatedly vowed that it should continue. Yesterday, opposition politicians published a report they said showed mortgage subsidies beyond those available in Israel proper were on offer to settlers to encourage faster settlement. 
ID: 3763
HEADLINE: FT  23 APR 91 / EC surpluses seen as aid food 
TEXT: Surplus European Community farm produce should be used to help Kurdish refugees in northern Iraq, EC agriculture ministers were told yesterday by Mr Michael O'Kennedy, the Irish farm minister, David Gardner writes from Luxembourg. The proposal got immediate support from Italy and the Netherlands, but Mr Ray MacSharry, the agriculture commissioner, said it was impractical because the food would take time to process. The ministers later agreed to study the proposal. 'There was general agreement that beef and dairy stocks could be sent to the refugees,' Mr Rene Steichen, the Luxembourg agriculture minister said. Farm budget fears, Page 30 
ID: 3764
HEADLINE: FT  23 APR 91 / Italians awarded telecom contract 
TEXT: Italcable, the international telecommunications subsidiary of Italy's STET state-owned group, has won a contract to re-establish all Kuwait's telex links with the outside world, Haig Simonian reports from Milan. A value for the deal, which is for three years at the outset, has not been disclosed. However, Italcable says it also hopes to be involved in future work on developing Kuwait's telecommunications systems. 
ID: 3765
HEADLINE: FT  23 APR 91 / Kuwaiti terminal reopened to all 
TEXT: Shuaiba, Kuwait's largest container terminal, was cleared for general traffic by the emirate's authorities yesterday, Paul Abrahams writes from Kuwait City. The port's opening should help reduce shortages of essential supplies in the country. Although Shuaiba was re-opened last month, only government-chartered ships were allowed to use its facilities. Otherwise, imports were flown in by military aircraft or trucked along heavily damaged roads from Saudi Arabia. Routes from Iraq, from where most of Kuwait's pre-war supplies came, are closed. 
ID: 3766
HEADLINE: FT  23 APR 91 / Japan to send minesweepers 
TEXT: The Japanese government yesterday gave final approval to the despatch of minesweepers to the Gulf, on what will be the Japanese military's first mission on active service overseas since the Second World War, Stefan Wagstyl reports from Tokyo. Leaders of the ruling Liberal Democratic Party decided to override objections from critics who argued that sending troops abroad would infringe Japan's peace constitution. Six ships and 500 men will set off before the end of the week on the month-long voyage to the Middle East. 
ID: 3767
HEADLINE: FT  23 APR 91 / Soviet Union collapse not in west's interest, warns Hurd 
TEXT: THE DISINTEGRATION of the Soviet Union into separate states was contrary to the interests of the rest of Europe and the west as a whole, Mr Douglas Hurd, the British foreign secretary, said in London yesterday. Mr Hurd, who was addressing the British Atlantic Group of Young Politicians, conceded that the western European states could not have much influence on developments inside the Soviet Union. That was a matter for the Soviet people themselves. 'But what we can say is that it is not in the interests of Europe as a whole, or of the west, to see the Soviet Union disintegrate into a kaleidoscope of republics, some quite weak, some divided within their own boundaries, and leaving a possibility of continuing disorder and weakness . . .' What the west wanted to see was a Soviet Union which was dedicated to reform, and in which the links between the various republics were based on consent rather than on command and force. It wanted to help the Soviet Union to reform itself. Turning to the lessons that Europe should draw from the events of the past year and the Gulf war, in particular, Mr Hurd expressed strong support for greater foreign policy co-ordination within the EC. 'I can see in our dealings with the Soviet Union . . . over events in the Baltic states, that it really would be crazy if there were separate and contrasted British, French, German, Italian policies towards what is happening in the Soviet Union,' Mr Hurd said. However, he reiterated Britain's opposition to majority voting on foreign and security policy issues, which, Mr Hurd claimed, would have led to a less effective European reaction in the Gulf crisis. In the aftermath of the Gulf conflict, one particular problem which the Twelve should now be considering, in co-operation with the US, the Soviet Union and China, was the problem of arms exports and the proliferation of weapons of mass destruction. In spite of calling for greater intra-European co-operation on security and defence policies, Mr Hurd stressed that Nato remained 'the main defence institution of western Europe and the Atlantic'. While Nato had to be reformed if it were to survive and remain relevant, to allow it to disappear would be 'to spit in the face of the lessons of history. It would be a great foolishness, the kind of foolishness we committed in the past and regretted.' 
ID: 3768
HEADLINE: FT  23 APR 91 / Walesa looks to clear air in UK 
TEXT: PRESIDENT Lech Walesa arrives in London today hoping for good weather and determined to convey some 'home truths' about the way western countries are dragging their feet over reuniting Europe in the twilight of the cold war. 'I perform badly when its rainy and misty' he said, adding: 'I've had the sun on my other trips,' referring to recent journeys to Washington, Paris and Brussels where he has urged western investors to come to Poland. These visits have revealed west European leaders unwilling to speed integration with post-Communist countries at the moment when, according to Mr Walesa, 'everything is possible'. In Britain he will be encouraging businessmen to put money into Poland, where the government is maintaining strict monetary controls in an attempt to lower inflation to a monthly 1 per cent by the end of the year. Mr Walesa will meet bankers at the Bank of England on Thursday and urge them to halve the Dollars 11bn his country owes them, as western governments have agreed to do. His visit comes in the wake of 40 hours of talks in Paris at the weekend between Polish negotiators and representatives of 17 western countries to whom Poland owes Dollars 33bn. The talks produced a framework for a 50 per cent debt reduction. This foresees Poland devoting Dollars 600m a year until 1994 to debt service payments, by which time the debt should have been reduced by half on condition that Poland maintains its anti-inflation programme agreed with the International Monetary Fund. Repayment of the entire debt, however, should be complete by the year 2014. President Walesa will be staying with the Queen at Windsor during his three-day visit. Meetings with Mr John Major and Mrs Margaret Thatcher, the present and former prime ministers, and Mr Neil Kinnock, the Labour party leader, are also envisaged. Polish debt, Page 6 Walesa interview, Page 19 
ID: 3769
HEADLINE: FT  23 APR 91 / Electronics giants seek protection 
TEXT: PRESSURE TO protect the European Community's troubled electronics industry intensified over the weekend at a crisis meeting between key members of the European Commission and the EC's five main electronics companies. The industrialists pressed their case for specific support measures going beyond the general plan presented by Brussels last month to channel more EC research money into demand-creating infrastructure projects. The commissioners apparently expressed sympathy for the companies' increasing difficulty with Japanese competition, but in no way committed the EC executive, officials said yesterday. The secret meeting was called last Friday and Saturday in a small town in Burgundy by Mr Jacques Delors, the Commission president, with Bull and Thomson, France's state-controlled electronics companies, Siemens of Germany, Olivetti of Italy and Philips of the Netherlands. Also present were Mr Martin Bangemann, the EC industry commissioner, Mr Filippo Maria Pandolfi, the research commissioner, and their two directors-general. The attempted secrecy of the meeting, news of which leaked into the French press over the weekend, reflects the sensitivity of the issue, as much within the Community as in relations with Japan. Sir Leon Brittan, the competition commissioner who had succeeded in pruning dirigiste elements out of the Commission's March paper on the electronics sector, was a notable absentee from the Burgundy meeting, though he was assured in advance that it would not compromise his policy of controlling state aids. Sir Leon is examining the complaint by ICL of Britain, which is majority-owned by Fujitsu of Japan, against the French government's recent decision to inject FFr6bn (Pounds 590m) of fresh capital into Bull and Thomson. Mr Alain Gomez, the chairman of Thomson, recently called for the establishment of high EC customs duties on Japanese electronic goods for an adjustment period of five years. 'That will be enough for us to catch up the unwarranted advantage acquired by the Japanese thanks to 30 years of unfair competition,' he told Le Monde newspaper. An EC official said yesterday that Mr Gomez's ideas could not be considered close to Commission thinking. Tomorrow, EC research ministers will discuss, at France's insistence, the issue of whether foreign-owned companies should participate in EC research programmes. ICL was recently barred from a couple of Esprit information technology programmes in which it had been marginally involved. But UK officials said yesterday Mr Pandolfi had assured them that ICL would not be excluded from any important research on grounds of its ownership. Siemens results, Page 25 
ID: 3770
HEADLINE: FT  23 APR 91 / Deadlock in Danube hydro talks 
TEXT: HUNGARY yesterday attacked a Slovak plan to divert the Danube river, accusing it of breaking international law, after talks about the controversial hydro-electric project broke up in disagreement, writes Nicholas Denton in Budapest. Slovakia appeared determined to continue with the Bos-Nagymaros project, despite Hungary's opposition. Mr Vladimir Meciar, the Slovakian prime minister, even made a veiled threat to complete construction within Slovakia's own territory, according to Hungarian officials. 'It would infringe the integrity of Hungarian territory,' an official said of a Slovak scheme to divert the Danube. Mr Meciar refused to rule it out as one way of circumventing Hungarian opposition. 'Slovakia will not give up its intention to continue construction,' he said. 
ID: 3771
HEADLINE: FT  23 APR 91 / Kohl's chickens home to roost: Chancellor's problems are of his own making, writes David Marsh 
TEXT: JUST AS Chancellor Helmut Kohl's problems over German unity have been manifestly increasing, his capacity to do anything about them has now plummeted. Sunday's crushing defeat for his Christian Democratic Union (CDU) in the state of Rhineland-Palatinate leaves Mr Kohl's party in control in only one of the 10 west German states making up the old Federal Republic. The loss of the right's majority in the upper house of parliament, the Bundesrat (federal council), which has a veto over all tax legislation, significantly constrains Mr Kohl's ability to govern. Less than five months after the Chancellor gained a sweeping victory in the December 2 all-German general elections, German politics is facing a confused period of confrontation, uncertainty and drift. The centre-right coalition in Bonn, made up of the CDU, the Bavarian Christian Social Union (CSU), and the liberal Free Democratic Party (FDP), still has a secure majority in the lower house, the Bundestag. But Germany's highly developed system of political checks and balances now deprives Mr Kohl of the necessary means to push through unpopular decisions. A large part of his misfortunes stems from his lack of foresight last year in failing to present voters with a more accurate picture of the economic and social challenges caused by German unification. Mr Hans-Werner Meyer, the head of Germany's Trade Union Federation (DGB), believes that, if Mr Kohl had announced the likelihood of tax rises before the December elections, he would probably have won with a still higher majority. As it is, following the large rises in taxes and social security levies decided in February, the Chancellor is now paying a triple price for his foolishness. First, as was widely predicted at the end of his year of victory in 1990, his personal credibility has taken a nosedive. Second, the round of Social Democrat election successes in recent state polls has resurrected regional coalitions between the SPD and the Greens in Lower Saxony, Hesse and now (probably) Rhineland-Palatinate. This has effectively resurrected at a regional level the Greens party which is one of Mr Kohl's pet hates, and which appeared to be close to extinction after its collapse in the national December elections. Third, Mr Kohl's misfortunes have prepared the way for a new spate of coalition bickering. The Chancellor's slightly bizarre revelation a fortnight ago that Mr Wolfgang Schauble, the wheelchair-bound interior minister, was the most likely man to succeed him has been roundly criticised by Mr Theo Waigel, the finance minister and CSU chairman. Mr Waigel - who shares the blame for last year's extraordinary economic policy insouciance - believes that the premature start to a leadership debate has damaged the coalition's poll standing. Mr Waigel himself has done his bit towards incurring the wrath of the free-market wing of the FDP, by announcing at the end of last week his decision to water down plans for cuts in the next few years in taxes on companies and high-earners. But these would anyway now have been blocked by the SPD majority in the Bundesrat - as well as by the need to trim the swelling budget deficit. In view of decision-making disarray, and the sharp deterioration in Germany's financial position, Mr Kohl's main hope is that an international economic recovery later this year come to Germany's rescue. Unfortunately, the foreign exchange markets - where the D-Mark fell yesterday to a 17-month low against the dollar - may upset the prospects. With the Bundesbank signalling its desire to press harder on the monetary brakes to bolster the D-Mark, Mr Kohl may face before too long, in addition to the recession in east Germany, a sharp slowdown in growth in the previously booming west. 
ID: 3772
HEADLINE: FT  23 APR 91 / Gas price formula may go to MMC 
TEXT: BRITISH Gas could face a Monopolies and Mergers Commission investigation if it fails to agree in the next week to revise its formula for setting the price of gas for 17m domestic and small business customers. The company was last night finalising its response to an 11-month review into the formula and said it would respond to the industry regulator's proposals by the end of April. The Office of Gas Supply (Ofgas) is apparently planning to turn the review over to the MMC if British Gas does not respond in the next week. The pricing formula review is the first since British Gas was privatised five years ago. If British Gas accepts Ofgas's proposals, it will face tighter controls on standards of service and a less generous pricing formula, which should reduce consumers' energy costs. Ofgas argues that, in the absence of competitive suppliers of gas, it must force British Gas to set public standards, for example on call-out times and disconnections, against which it can be held to account. Under its current price formula, British Gas can increase prices by the rate of general price inflation, less an efficiency clawback of two percentage points. The company is also allowed to pass on to customers all increases in the cost of North Sea gas. Gas users have complained that this structure provides no incentive for British Gas to seek lower-priced supplies. Ofgas has also queried whether British Gas operates its own gas fields in the most efficient way. At the same time, Ofgas is likely to reduce the amount British Gas can add to prices to account for inflation. This is most likely to take the form of increasing the so-called efficiency factor from two to perhaps three or four percentage points a year. When the regulator revamped British Telecom's pricing structure three years ago, this element was increased from three to 4.5 percentage points. The Gas Consumers Council has called on British Gas to cut the inflation-related increase it adds on to prices, but not by cutting the quality of service it offers consumers. Editorial Comment, Page 18 
ID: 3773
HEADLINE: FT  23 APR 91 / Dollar hits 16-month high against weakened D-Mark 
TEXT: THE DOLLAR rose to a 16-month high yesterday on the back of a fast-falling D-Mark, weakened in the political aftermath of the weekend's state election in Germany. Sterling was also undermined as the US unit kept up its gains on hopes of an imminent end to the US recession. In Germany and abroad, the vote against the ruling Christian Democrats was seen as a further blow for Mr Helmut Kohl, the chancellor, when the condition of the east German economy is causing increasing concern. The defeat in Mr Kohl's home state of Rhineland-Palatinate also removes the government's majority in the Bundesrat, the upper house of parliament, which has the power to veto legislation. The dollar was also helped by comments from Mr Otmar Issing, a Bundesbank director, who restated the bank's policy of following a monetary and not an exchange rate goal. Dealers took this to mean the Bundesbank did not intend to intervene heavily to stem the dollar's rise, although it is keen that the German currency should remain strong to help ward off rising inflation. Central banks have not been intervening to curb the marks recent falls with concerted dollar sales. This has added to market perceptions that the US authorities are happy to see the dollar strengthen further, and that the Federal Reserve is content with the current level of interest rates. As the Bundesbank is thought to be unwilling to stem the D-Mark's fall, the markets are expecting the currency volatility to last at least until agreements about interest rates emerge from this week's meeting of the Group of Seven in Washington. The dollar climbed to a Frankfurt close of DM1.7585 - its highest since the end of 1989 - and continued to gain in New York where it finished at DM1.762. German share prices fell back with the currency. On the Frankfurt Stock Exchange, the DAX index shed 1.7 per cent to 1,571.91. US share prices were also weaker. Disappointment at the Federal Reserve's refusal to cut interest rates combined with profit-taking to leave the Dow Jones Industrial Average 37.87 lower at 2,927.72. The Dow has fallen more than 76 points since it reached its record 3,004.46 on Wednesday. There were also sharp falls in the pound - losing 3 cents in London to Dollars 1.6925 before edging back to Dollars 1.6955 in New York - and on London's equity market, where the FT-SE 100 index ended 29.3 lower at 2490.8. Sterling, which has been weakened by recent economic data suggesting that the recession has yet to touch its trough, is also becoming vulnerable to political uncertainty ahead of the local elections on May 2. Lex, Page 20 Money markets, Page 31 World stocks, Page 37 London stocks, Page 40 
ID: 3774
HEADLINE: FT  23 APR 91 / Stock and Currency Markets 
TEXT: ------------------------------- STERLING ------------------------------- New York: dollar 1.6955 (1.7215) London: dollar 1.6925 (1.722) DM  2.99 (2.99) FFr  10.065 (10.0875) SFr  2.505 (2.5325) Y  236.0 (238.25) pounds index 91.6 (92.2) ------------------------------- GOLD ------------------------------- New York: Comex Jun dollar 359.7 (359.0) London: dollar 357.3 (356.45) ------------------------------- N SEA OIL ------------------------------- (Argus) Brent   Jun dollar 19.625 (18.975) ------------------------------- DOLLAR ------------------------------- Tokyo open: Y138.83 New York: DM  1.762 (1.736) FFr  5.937 (5.852) SFr  1.4705 (1.46785) Y  139.43 (138.3) London: DM  1.766 (1.736) FFr  5.9475 (5.8575) SFr  1.4795 (1.4705) Y  139.4 (138.35) dollar index 67.1 (66.3) ------------------------------- US CLOSING RATES ------------------------------- Fed Funds   6% (5 3/4) 3-mo Treasury Bills: yield:   5.834% (5.91) Long Bond: 95 5/16   (95 13/16) yield:   8.294% (8.247) ------------------------------- STOCK INDICES ------------------------------- FT-SE 100: 2,490.8 (-29.3) FT Ordinary: 1,954.4 (-25.7) FT-A All-Share: 1,207.44 (-1.0%) FT-A World Index: 142.68 (-1.7%) New York: DJ Ind. Av. 2,927.72 (-37.87) S&amp;P Comp 380.95 (-3.25) Tokyo: Nikkei 26,237.01 (-304.96) ------------------------------- LONDON MONEY ------------------------------- 3-month interbank: closing 11 13/16% (11 23/32) Liffe long gilt future: Jun 91 3/4 (91 29/32) ------------------------------- 
ID: 3775
HEADLINE: FT  23 APR 91 / Budget sparks big rise in retail sales 
TEXT: BRITAIN'S high streets saw their sharpest increase in business for almost 12 years last month as shoppers hurried to beat the April deadline for VAT and excise increases announced in the Budget. Retail sales figures from the Central Statistical Office yesterday showed that volumes rose by a provisional 3.7 per cent in March, after a fall of 0.1 per cent in February. This was the largest monthly rise since June 1979, when volumes surged by 6.9 per cent in the wake of a similarly unexpected decision to raise VAT. Few industry analysts, however, expect volume levels to be sustained into April. In the Budget Mr Norman Lamont, the chancellor, announced his intention to raise VAT to 17.5 per cent to pay for big reductions in individual poll tax bills. This increase had a particularly marked effect on sales of large electrical goods, televisions, furniture and carpets in the last two weeks of March, according to the Retail Consortium, which says it represents 90 per cent of the industry. The Budget's indexation of excise duties on alcohol led to 'excellent' sales of wines and spirits ahead of the price increases on April 1, the consortium said. The other big factor boosting sales was that the whole Easter period - traditionally a time for heavy purchases of confectionery and gifts - fell in March, said the CSO. The month also benefited from the stimulus of balmy weather and interest rate cuts. The CSO said no adjustment had been made to account for the timing of Easter. The monthly value of sales in March was Pounds 12.2bn against Pounds 9.26bn the previous month. Trends in retail sales remain depressed. In February, a provisional 1 per cent rise was subsequently revised into a final 0.1 per cent fall. The underlying rate of growth in sales volumes during the three months to March was still only 0.9 per cent, and 0.6 per cent lower than the same period a year ago. The Treasury said it was 'difficult to draw any underlying conclusions' from the figures, which had been 'propelled upwards by the VAT measure and the Easter holiday.' Mr David Walton of Goldman Sachs, the US investment bank, said record rises in unemployment and sharp contraction of credit growth suggested a consumer-led recovery was still a long way off. He expects sales volumes this month to fall by about 3 per cent. The surge had little impact on London's financial markets, which remained preoccupied by the internal troubles of Germany and the rise of the dollar. The provisional index of retail sales volumes was 122.9 (1985=100) in March, after 118.5 in February. Lex, Page 20 
ID: 3776
HEADLINE: FT  23 APR 91 / Economic rescue package put to Soviet parliament 
TEXT: PLANS FOR sharp curbs on strikes and political rallies in the Soviet Union, coupled with an emergency system for distributing grain and other foodstuffs were put before parliament in Moscow yesterday by Mr Valentin Pavlov, the prime minister. The proposed programme to deal with the country's escalating economic crisis also calls for financial stabilisation measures, giving Gosbank, the central bank, the power to control spending by republican governments. The measures are almost certain to be approved by the parliament and Mr Pavlov suggested that the Kremlin may resort to force to implement them. The proposals involve banning strikes and political rallies during working hours. Hard-liners in the Soyuz (Union) group called for the declaration of a state of emergency which would impose a ban on strikes and bring rebel republics to heel. Mr Pavlov said in response: 'They are right in two respects. There is a need for a special regime in certain crucial branches of the economy, such as energy and transport, and in certain regions.' Although it seeks to encourage privatisation and foreign investment, the plan has been criticised by the country's leading economists as too vague to combat the budget crisis. Mr Pavlov stressed that the so-called anti-crisis programme required co-operation with the republics and that any use of force would be limited. In the case of the current coal strikes, he suggested that force could be used to allow working miners to cross picket lines. He said: 'A state of emergency, or special regime, does not mean that people will be forced back to work, but it is possible to let people work with the help of force. For that purpose, we do not need the army.' President Mikhail Gorbachev, who faces threats to his leadership from his own Communist Party and as a result of strikes backed by opposition forces, is under pressure to opt for a coalition government. However, Mr Pavlov rejected calls for a coalition. He said his appeal a few months ago for alternative cabinet nominations had been ignored by the republics. He added that it was not up to him to decide whether to agree to the proposal by Mr Boris Yeltsin, the Russian leader, for 'round table' talks with republican leaders and opposition forces. Mr Nursultan Nazarbayev, the president of Kazakhstan, said, however, that the government could not introduce market reforms without recognising the sovereignty of republics. Mr Pavlov's programme also proposes that republics which refuse to sign a union treaty and contribute to the union budget should be charged hard currency for raw materials and energy. Only eight out of 15 republics have agreed to sign the treaty incorporating them into a political federation. The economic union proposal, approved by the republics last year as the foundation for economic reform, committed republics to a common market and currency, a financial stabilisation programme, and rapid privatisation. Mr Gorbachev is due to discuss the draft treaty with the republics today. One possible compromise would be to stop trying to push republics into signing the treaty if they agree to drop trade barriers, subscribe to a common financial policy, and delegate limited responsibilities to the central government. Hurd warning Page 3 Ecu plan Page 20 
ID: 3777
HEADLINE: FT  23 APR 91 / World News in Brief: Ethiopian famine fear 
TEXT: More than 1m people are facing food shortages in Ethiopia's drought-stricken Ogaden region, the UN food aid agency warned. 
ID: 3778
HEADLINE: FT  23 APR 91 / World News in Brief: Central American quake 
TEXT: A powerful earthquake hit Costa Rica and northern Panama last night. The quake, which registered 7 points on the open-ended Richter scale, killed several people. 
ID: 3779
HEADLINE: FT  23 APR 91 / World News in Brief: Hurd to visit S Africa 
TEXT: Foreign secretary Douglas Hurd will visit South Africa in the summer, prime minister John Major and president F. W. de Klerk agreed. De Klerk urges more UK links, Page 4; Picture, Page 20 Earlier, African National Congress deputy president Nelson Mandela said security forces were conniving in South African violence and urged foreign governments to consult blacks before lifting sanctions. 
ID: 3780
HEADLINE: FT  23 APR 91 / World News in Brief: Iraq accused over Kuwaiti prisoners 
TEXT: Kuwait accused Iraq of holding more than 5,400 Kuwaiti civilians and soldiers and of failing to return property, as required by the UN Security Council. The Kuwaiti ambassador to the UN, Mr Mohammad Abol Hassan, said in a letter to the council that Iraq's continuing failure to adhere to the articles of Security Council resolution 686 'puts the credibility and motives of the Iraqi regime under suspicion'. Baghdad had pledged to enact the resolution 'swiftly' two days after the end of the Gulf war. Page 20; Kuwaiti politics; Kurdish camps effort, Page 4; Parliament, Page 11 
ID: 3781
HEADLINE: FT  23 APR 91 / Survey of European Finance and Investments - Portugal (13): Slow but steady take-off - Patrick Blum discusses Madeira as an offshore business centre 
TEXT: IT HAS not exactly been plain sailing for Madeira's offshore business centre. Establishing a new legal framework to cover financial institutions, manufacturers in the free trade zone and a new international shipping register has taken up more time and encountered more bureaucratic obstacles than expected. Nevertheless, Madeira is slowly taking off as a viable alternative or addition to existing offshore centres in Europe and elsewhere. 'If you look at the early years of other centres, their own development was not any faster than ours. Early days are always difficult,' says Mr Francisco Costa, chairman of the Madeira Development Company (SDM), which is responsible for developing the island's offshore activities. In spite of initial problems, Madeira already has attracted a good number of businesses including 13 banks, 231 service and trading companies, and 10 manufacturing companies. Another five banks have applied to set up an offshore branch, 10 more service companies have applied for a licence, and three more manufacturing companies are waiting for authorisation to operate in the free trade zone. Response to the shipping register has been slower with only five vessels registered so far. Initially, only branches of banks and investment companies could operate in the offshore centre. This was later extended to all financial institutions. Now new laws are being prepared to allow funds to be domiciled locally and to enable the local incorporation of full banks and insurance companies as opposed to only branches. Mr Costa expects these to be in place this year. The shipping register has posed bigger problems. Until now, all crews for Portuguese registered ships had to be 100 per cent Portuguese, a standard requirement in Portugal. This is in the process of being changed so that crews will only need to be 50 per cent from the European Community. Restrictive and uncompetitive Portuguese mortgage regulations were another problem, and this is also being changed to allow ship-owners to choose the law under which they will operate when registering a ship. New legislation will also allow private yachts to be registered. Mr Carlos Sousa, general manager of Steermar, a ship management services company, says he expects to register 80-100 ships in the first year after the new law is approved. 'Foreign shippers are waiting for the change. We've had many enquiries, especially from Germany,' he says. The free trade zone has had more success with a mix of companies from as far apart as Brazil (plastics), Ireland (gold and jewellery), Lebanon (textiles and marble), Liechtenstein (precision optical instruments), Hong Kong (garments), and Portugal (construction materials, tobacco, electronics, food, and chemicals). Only a handful have started work, the others are building their own factories or in the process of installing machinery. The free zone is on a 120-hectare site on Madeira's eastern coast some 8km from the airport and 30km from Funchal, the island's main town. Next to the smaller town of Canical, it is easily accessible though the roads and a tunnel leading to the site are having to be widened and upgraded to cope with the heavier traffic. About half the initial 40 hectares to be prepared in a first phase of development have been completed: the land levelled, roads and infrastructures including water supplies and telecommunications installed. Work on a new deep sea port directly serving the site began in October 1990 and is due to be completed by the middle of next year. The island's main airport will be expanded to enable it to receive bigger aircraft and to improve freight facilities. Officials say rents are competitive at Dollars 13.50 per square metre of land per year for a minimum of five years for companies building their own installations, and Dollars 40 per square metre for ready-made building. Offshore financial business is centred in Funchal. So far all but one of the bank branches established are Portuguese. The exception is Lloyds Bank Fund Management of Guernsey, to be joined soon by Banque Franco Portugaise of France. Mr Costa believes this is to be expected of the centre's development. 'It is important to have Portuguese banks. It has a demonstration effect showing Portuguese banks are confident about the centre's prospects.' The banks do any type of business from taking deposits - there is strong competition for remittances of emigrant Portuguese workers and the savings of the wider Portuguese community around the world - to trade financing, fund management and granting credit. There are considerable attractions for investors and companies. Incentives include full tax holidays until 2011 for all financial institutions, trading and manufacturing companies setting up offshore or in the free zone. This allows banks, for example, to offer better conditions to their customers at no extra costs. Foreign exchange rules have been liberalised. However, this has caused some concern to the financial authorities in Lisbon. Accordingly, the central bank has asked for clarification on regulations covering the operations of Portuguese non-banking institutions which it argues should be treated under the same tax regime as their mother companies and not as foreign companies. The central bank would like all non-financial Portuguese companies wishing to operate offshore to first seek the bank's approval. 'There's a hole in the legislation on this,' a bank official says. Several Portuguese or Madeiran companies, such as Companhia Insular de Moinhos (CIM), a biscuit and pasta manufacturer, are moving into the free zone to take advantage of the favourable tax regime. CIM is also using the opportunity to restructure and modernise its production. Requests for information have been 'pouring in', according to Mr Joao Luis Dias, director of Dixcart Management (Madeira), a subsidiary of the Dixcart group. He says establishment procedures have greatly improved, making it possible to incorporate a company within a little more than two weeks. Office space has been scarce, but supply is improving. Dixcart recently moved into new premises while The New Madeira Investment Servicos, another management company, prepares to make its own move. The original optimism appears unchanged. 'The centre is well regulated and we keep standards high. I don't have any doubts about the future,' Mr Costa says. 
ID: 3782
HEADLINE: FT  23 APR 91 / Survey of European Finance and Investments - Portugal (12): Standards are rising - Doing business in Portugal 
TEXT: 'PORTUGAL,' quipped a Mozambican friend, 'is an African country with a European vocation.' The remark, neatly turning round a popular saying about Portugal's historic links with Africa, has more than a grain of truth in it. Life in Portugal, especially in the southern half of the country, is tempered by a distinctly non-European nonchalance; spontaneity, a tendency to leave decisions to the last minute and a desire to please, all mixed with a strong streak of fatalism, seem designed to test the patience of visitors. If you are in a hurry, Portugal is not the place for you. If you add to that problems that result from an as yet under-developed infrastructure, poor though improving telecommunications, and the dead weight of a massive state bureaucracy with its over-abundant 'red tape,' it is easy to see why business people occasionally despair they will ever get anything done. Portugal's ties with its former colonies in Asia, with Portuguese-speaking Brazil and more especially with Africa, are still much in evidence. Immigrants from Cape Verde, Angola and Mozambique make up a good proportion of workers on building sites in and around Lisbon. In late afternoons, the northern side of the Rossio, the capital's main square, is animated with groups of immigrants who have made it a meeting point to exchange gossip or simply while away the hours. But for all these vivid reminders of Portugal's colonial past, Lisbon has been rediscovering Europe with an official enthusiasm matched only by generous helpings of European Community funds. EC membership is assisting Portugal to overcome decades of neglect and changing attitudes. Foreign investment has poured into the country helping to modernise industries and infrastructures. The pressure of EC integration is forcing the pace of change. The range and quality of goods and services is improving, new businesses are bringing more ideas and promoting the cause of efficiency. Standards of living have risen, though wide disparities of wealth are still noticeable. Wages are the lowest in Europe, and this has been an important attraction for foreign investors. While the public sector is plagued with poor industrial relations and strikes from government bureaucrats to policemen, teachers, doctors, and museum attendants, the private sector is practically free of strife. Managers of multinational companies say that while local workers generally have lower initial skills, they respond well to training and can achieve levels of proficiency that can compete with levels elsewhere. Housing is often sub-standard with poor safety and hygiene. There is a serious housing shortage, but foreign executives can find better quality accommodation in Lisbon or Oporto though at prices closer to those in other European cities. Office space is a problem and prices are high though after 1992 they should stabilise as more commercial property comes on the market. Bureaucracy and red tape are infuriating, though the right connections will usually help speed matters, but not always. Brush a local government official the wrong way, and the water link that you so desperately need will be dammed at source by forms and unanswered letters. Construction work is slow and requires constant supervision; delays are common. Appointments will often be changed, sometimes at the very last minute, and few will actually start on time playing havoc with business schedules. Minor officials can be wrong-headed and infused with an exaggerated sense of their own importance. Service, especially in the state sector, is bad - reflecting the fact that many state employees are poorly paid and trained. Taxi drivers are probably among the rudest in the world and you will be lucky to get a grunt back as an acknowledgement after you mention your destination. Finding a garage to park your car is difficult and expensive, but it could save having to pay for broken windows and stolen car radios if you leave your car in the street, even if you live in a smart part of town. If you are planning to live outside Lisbon and drive in, travel before or after the rush hour to avoid long jams. And always drive defensively  - Portuguese drivers are among the worst and probably the most dangerous in Europe, giving Portugal the highest proportion of fatal road accidents in the Community. Insurance premiums are high. But for all these drawbacks, there are big compensations. Apart from four months between December and April when it can rain torrentially for days and temperatures are low, the climate is mild, the summers long and hot, and the beach is never very far away. At the height of the tourist season, it is best to avoid the main resorts along the Algarve, but there are still many places left to visit along the coast and in the interior. From the green hills of the Minho where vinho verde (red and white) is produced in the north, along the Douro river and valley that runs downhill from Spain in the east through stunning landscape to Oporto, through the Serra da Estrela mountains in the centre, and south, across the Alentejo, with its miles of practically-deserted beaches and torrid interior landscape, there is plenty to delight and discover. Portugal has much to offer those who like to live outdoors. There is a wide choice of sea food and some good wines, and once off-duty a temporary resident can enjoy a pleasant and relaxed lifestyle. 
ID: 3783
HEADLINE: FT  23 APR 91 / Survey of European Finance and Investments - Portugal (11): Step by step to private ownership - Case study, Banco Totta &amp; Acores 
TEXT: WHAT happens when a state-owned bank becomes private, and how does it prepare for the change? For Mr Alipio Barrosa Pereira Dias, president of the Banco Totta &amp; Acores (BTA), the first Portuguese bank to be privatised, save for about 16 per cent remaining in state hands, privatisation was a crucial factor for the bank's future development not just because of the change in ownership, but because it enabled the bank to do several things that it could not do before. The privatisation itself took place in three separate stages: an initial floation on the stock exchange of 49 per cent of the bank's share capital in July 1989, followed just over a year later with the sale of anothger 31 per cent stake. A capital increase last December, finally brought the private shareholding in the bank to above 84 per cent. Despite government limits on the purchase of privatised shares by foreigners, Banesto, the Spanish banking group, managed to build up directly and indirectly a controlling interest in the bank. Today, Banesto holds directly around 10 per cent of the shares, while Valores Ibericos - a joint venture with a Portuguese partner in which it holds 49 per cent, has another 28 per cent. Other shareholders are small and in practice Banesto has effective control of the bank. From the very begining, the privatisation had a dramatic impact on the bank. First and foremost, it allowed it to strengthen its capital base and grow. Like all Portuguese state-owned banks that were nationalised in 1975, BTA had seen its need for fresh capital frustrated by the unwillingness of successive governments to provide new funds. A weak capital base was a common problem for the nationalised banks. It was a double handicap at a time when a system of credit ceilings - established in the late 1970s and only recently abandoned - limited the amount a bank was allowed to lend on the basis of its capitalisation. With expansion thus constrained, BTA had to face increasingly tough competition from new foreign and private Portuguese banks allowed to operate once more after an initial liberalisation of the banking system in 1984. By 1989, the need for fresh capital had become urgent if the bank was going to remain competitive and grow. Privatisation came just at the right moment. 'It became possible to raise the bank's capital and with more capital we could expand our activities. This was the most important effect of privatisation,' Mr Dias says. Paradoxically, the credit ceilings now started to work in BTA's favour. The state-owned banks which were denied new injections of funds from the government could only strengthen their own capital base either by issuing limited amounts of participation certificates, or by ploughing back into the bank what profits the state as main shareholder would decide to leave them. This clearly hampered their development, which was already more difficult because of their heavy burden oif bad debts, inefficient structures and overstaffing. The second most important effect was to give the bank a new sense of direction. Mr Dias who had joined BTA in 1988, prepared a new strategic plan for the bank aimed at modernising operations, improving research and internal controls, increasing the number of branches, and making more efficient use of human resources. Staff had to be reduced and productivity raised, older employees were retired early or retrained. Whereas in December 1987 the bank had on average 37 employees per branch, this is now down to 23 employees. The total number of employees has been reduced from about 4,500 in 1988 to 4,200 today in spite of an increase in the number of branches from 127 in February 1988 to 173 now. Mr Dias says he expects to open up another 10 to 15 branches by the end of this year. Productivity has risen dramatically, helped by the introduction of new computing and software systems. Privatisation also meant changes in the image of the bank and in the attitude of its employees. 'Sometimes it was simple things, like employees coming to work in casual clothes without a tie. We had to explain to them this gave the bank a bad image. But you couldn't legislate this, you had to win their cooperation,' he says. Another problem was the length of the privatisation process. For a period of months, the future of the bank and of its shareholding structure remained uncertain. This made it especially important for the bank's management to maintain the full confidence of both the financial authorities and of its staff. 'It was crucial during the privatisation to make people understand the need for the process,' Mr Dias says. Consultations and persuasion created a better climate than edicts from above and sackings, though some lay-offs were inevitable. But over a year and a half after the initial part-privatisation, Mr Dias feels he has overcome the biggest obstacles - 'now we compete on equal terms with the private banks. By next year we'll be in a position to do much more.' 
ID: 3784
HEADLINE: FT  23 APR 91 / Survey of European Finance and Investments - Portugal (10): Miguel Beleza 
TEXT: Mr Miguel Beleza, Portugal's finance minister: he prefers caution to speed in the privatisation programme, but insists that the programme is nevertheless on target. Most critics believe the government's main objective has been to maximise revenues from company sales, which last year alone brought it revenues of more than Es140bn (Dollars 970m) in six operations. 
ID: 3785
HEADLINE: FT  23 APR 91 / Survey of European Finance and Investments - Portugal (9): Fragile but promising - David Waller on the stock market's development 
TEXT: SINCE THE mid-eighties, the Portuguese stock market has been through an exaggerated surge of business and endured a severe collapse. Only now, with a package of reforms due to be put in place this summer, are optimistic observers saying the market has calmed down after the excesses of the past half-decade. Six years ago, the market barely existed. There was a stock exchange, but volume was minuscule and there had not been a rights issue since before the 1974 revolution. All this changed in 1985-1986. The minority Social Democrat government stimulated business confidence. Portugal joined the European Community. A bull market was born. 'The market took off in 1985-86 and carried on rising until October 1987,' says Joao Rendeiro, managing director of Gestifundo, a Lisbon-based securities house. 'In the run-up to the election in June 87 there was incredible euphoria. In other countries, the bull market took 10 years to build up. Here the whole process was concertinaed into just six months.' From 1983 to 1987, the number of quoted companies rose from 41 to 176; the value of share transactions rose from Esc 5.7bn (Dollars 39m) to Esc 282.4bn. The total value of securities issued on the capital markets soared. The Banco Totta e Acores (BTA) index began 1987 at 1,220, rose to a peak of 6,812 just before the crash, but fell back to 2,990 by the end of the year. If it took a relatively short time for Portugal to enjoy a bull market, it has taken correspondingly longer for the market to revive after the crash. There have been two serious attempts at rallies, but the index ended last year at 2143.4, a fall of 34.6 per cent in local currency terms over 1990 and still well below its level at the end of 1987. 'After the crash Portuguese investors sold in panic like anywhere else,' says Mr Rendeiro, 'but all the weaknesses of a fragile infrastructure came to the forefront dramatically. There was a huge shift in sentiment and for more than a year afterwards the market continued to sink downwards as investors tried to come to grips with the mess left by October 1987.' The post-crash problems have been psychological and structural. Psychological, because local investors had their fingers severely burned in October 1987 and thereafter proved reluctant to get into the market. Structural, because of an antiquated settlement system and a lack of liquidity in the majority of stocks, which has discouraged all but the bravest of foreign investors. Although the number of companies quoted on the exchanges of Lisbon and Oporto rose from 135 to 182 between 1987 and 1990, the bulk of activity is concentrated on a dozen liquid stocks. Just 10 stocks - including Soporcel (a pulp and paper company), Sonae (an industrial holdings company), Radio Marconi Portuguesa (telecommunications), Banco Comercial Portugues, and Banco Portugues de Investimento accounted for 52 per cent of the market's capitalisation at the end of 1990, while trading in these shares invariably accounts for most of the average daily Dollars 5-Dollars 6m turnover. In January this year, the government finally approved a package of reforms meant to remedy some of the structural defects of the market. The main features are: The setting up of a Securities &amp; Exchange Commission as the main regulatory and supervisory body; The privatisation and unification of the markets in Lisbon and Oporto. The two trading floors will remain but in future each will be managed by an association of local brokers and dealers who will be responsible for setting up an investors' compensation scheme; The creation of a central depository and settlement system; The implementation of a new paperless trading system, at first only for the blue-chips, eventually for the market as a whole, giving investors continuous stock prices; and rules and penalties on insider dealing, takeovers and mergers; share manipulation and disclosure rules. The package will be implemented in June at the earliest; preliminary reforms were introduced earlier this year (when the two exchanges introduced a second daily price-fixing for the most liquid stocks) and at the beginning of this month when a new partially computerised trading system was introduced in Lisbon. 'The initial impact of the stock market reform is difficult to assess,' says Mari Vargas, a London-based analyst at BNP Securities, 'but it should bring greater efficiency and liquidity to stock exchange transactions for the benefit of investors. 'Costs are also expected to go down . . . and the major foreign institutional investors, including the Americans, that have been reluctant to face the difficult trading conditions should reconsider their investment decisions.' Foreign investors, while accounting for much of the turnover, and owning 15 per cent of the market by market capitalisation (at the end of September 1990), were net sellers in the fourth quarter of 1990. The market's recovery in the first months of this year - up from 1986 at its lowest point in mid-January to 2515 - is thought to be driven by domestic investors awash with cash because of the delayed privatisation programme. A revival of this programme in the months ahead will soak up that demand and is likely to tempt back foreign investors who have traditionally been keen on new issues. As the early privatisations will be banks and insurance companies, the market's heavy skewing towards financial services will be exacerbated: large sectors of the economy such as property and tourism are under-represented, while banks alone accounted for 39 per cent of the market's capitalisation at the end of last year. The Portuguese market is the EC's smallest stock market and last year was the worst performer. But it gives investors the opportunity to invest in a small but dynamic economy. Thus, if the market is still fragile, it certainly has potential - 'for the first time in five years, stocks and p/e ratios are in line with international standards,' says Mr Rendeiro. 'Prices react to events and information in a normal way. For the first time we begin to have a real market.' 
ID: 3786
HEADLINE: FT  23 APR 91 / Survey of European Finance and Investments - Portugal (8): Picture of satisfaction - Peter Wise investigates foreign investment and finds a . . . 
TEXT: LEICA camera bodies, the most expensive and prestigious in the world, are made in Germany. But an important part of their manufacture, together with the full production of high-precision binoculars and microscopes, is carried out near the town of Vila Nova de Familicao in north-west Portugal. Here, 500 employees match their German colleagues for quality and are only marginally behind in productivity, according to Mr Wolfgang Koch, the group's general manager for Portugal. The only difference between the Portuguese plant and Leica's two factories near Frankfurt is that labour costs are 65 per cent lower. 'We would not be in the market at all if it were not for our lower wage costs in Portugal,' says Mr Koch. Leica, now owned by Cambridge Instruments of the UK and Switzerland's Wild group, set up a subsidiary in Portugal in 1973 when the pressure of Japanese competition forced the company to choose between cutting costs or closing down. The Portuguese operation, Leica Aparelhos Optica de Precisao, has since increased its workforce more than twentyfold, investing a total of Es1.5bn (Dollars 10.6m) over the past five years. Two new factory units were recently opened, raising the value of the company's exports to Es3bn a year. Management is now considering negotiating a new investment contract with the Portuguese Institute of Foreign Trade (ICEP). Leica's success in Portugal bears out the assertion of Mr Antonio Neto da Silva, the secretary of state for foreign trade, that, 'allied to efficient management and modern technology, Portuguese workers achieve productivity and quality levels to equal the best in Europe'. Twelve German technicians work at the Vila Nova de Familicao plant. But the head of the quality department is Portuguese. 'They like to say he is more German than the Germans,' says Mr Koch. Local women, who make up 60 per cent of the workforce, show particular prowess at close precision work. 'The calibre of our workers; their willingness to learn skills and work hard is one of the most satisfying aspects of being in Portugal,' says Mr Koch. Low costs and high productivity such as those enjoyed by Leica are drawing other foreign investors to Portugal in record numbers. Direct foreign investment grew to Es509bn (Dollars 3.6bn) in 1990, a 46-per cent increase on the previous year - the increase in dollar terms was over 60 per cent. Most investment originated from Britain, followed by France and Spain. German investment, in fourth place, increased more than fourfold to Es60bn. Foreign companies already established in Portugal accounted for 56 per cent of the total through capital increases and expansion projects. Heavyweight projects such as the Es27.5bn investment by Continental of Germany in a tyre manufacturing joint venture made the headlines. But only two out of a total of 3,500 foreign investment projects went above Es10bn. 'It is the small and medium-sized foreign investments that are providing our industrial fabric with density and critical mass,' says Mr Miguel Athayde Marques, vice-president of ICEP. Besides illustrating the comparative advantages that are pulling foreign investors to Portugal, the Leica subsidiary is also a prime example of why the government is so keen to attract them. The high-tech, high value-added plant is set in the Vale do Ave, the most depressed industrial region in the country, where the government estimates 45,000 jobs could be lost by 2000 as textile, clothing and footwear companies - Portugal's principal sources of export revenue - fall victim to increased competition. 'Investment in new areas with a high technological component is vital for the structural adjustment of Portuguese industry and the efficient reallocation of manpower and resources,' says Mr Athayde Marques. The sectors pinpointed by the government as having the most potential for investment are information technology and electronics, biotechnology and pharmaceuticals, technical ceramics, special purpose plastics, medical equipment, agribusiness, cars and components, equipment and machinery, sporting goods and tourism. Foreign investment in such areas has been highly beneficial to the Portuguese economy over the past six years. Exports are becoming increasingly less dependent on the labour-intensive, low value-added sectors of clothing and shoes and moving into more technologically sophisticated areas. Foreign manufacturers are forming upstream links with local suppliers. Their demanding requirements are helping to promote the upgrading of Portuguese companies, forcing them to improve their performance in terms of specifications, quality, and delivery times. The benefits are also being felt in Portugal's backward agricultural sector where productivity is less than a third of average EC levels. The Plein Sud group of the French entrepreneur Mr Thierry Roussel recently launched the first stage of a planned Dollars 100m investment in two large farms to produce off-season fruit and vegetables in the southern Alentejo, and plants and flowers in northern Portugal. Both farms use modern production and management techniques that contrast dramatically with traditional methods. The Lisbon government's eagerness to capture foreign investment is backed by attractive investment incentives for projects considered to have a positive structural impact. According to the Institute for the Support of Small and Medium-sized Industries (IAPMEI), foreign investors account for 16 per cent of the Es149bn that has been awarded in investment incentives since two EC-funded grant schemes were launched at the beginning of 1989. That percentage is likely to undergo a substantial increase if a plan by Ford Europe and Volkwagen to invest more than Es300bn to manufacture a new multipurpose passenger vehicle in Portugal goes ahead. Officials are waiting for Brussels to approve finance for an incentive package reportedly worth between Esc 100bn and Esc 130bn before finalising the project. The Portuguese Confederation of Industry complains this will be equal to the amount of incentives awarded to Portuguese companies over the past three years and has called for more support for local industry. But government officials say the amount of incentives for the Ford/Volkswagen plant has been exaggerated. They defend the project, which will be the largest single foreign investment ever made in Portugal, not only for the 5,300 jobs it will create directly but for the structural impact it will have on the economy as a whole, increasing the value of exports with the planned production of 173,000 vehicles a year, promoting the growth of supply industries and indirectly creating thousands of other new jobs. --------------------------------------------------------------------- SOURCES OF FOREIGN INVESTMENT (PERCENTAGE OF TOTAL FOREIGN INVESTMENT, 1980-89) --------------------------------------------------------------------- UK                       23.1 US                       12.6 France                   11.4 Spain                    10.9 Sweden                    6.1 Netherlands               5.6 EC                       64.5 EFTA                     10.5 Japan                     1.1 --------------------------------------------------------------------- Source: ICEP --------------------------------------------------------------------- --------------------------------------------------------------------- TOTAL DIRECT FOREIGN INVESTMENT IN PORTUGAL (ES BN) --------------------------------------------------------------------- 1980                 6.2 1981                 9.2 1982                 9.7 1983                15.7 1984                27.6 1985                42.3 1986                24.5 1987                61.6 1988               138.0 1989               353.8 1990               509.0 Total 1980-90    1,197.9 --------------------------------------------------------------------- Source: Portuguese Institute of Foreign Trade (ICEP) --------------------------------------------------------------------- 
ID: 3787
HEADLINE: FT  23 APR 91 / Survey of European Finance and Investments - Portugal (7): Independence strengthened - Patrick Blum discusses the central bank's changing role 
TEXT: SINCE 1984, Portugal's financial system has been through more change than any other sector of the economy. New private banks and financial institutions sprung up from nowhere to become leading players on the domestic market, offering new services, using more modern methods, and bringing fresh ideas to shake the complacency of the state-owned and state-run banking establishment. Deregulation gradually helped open up markets and the economy to international market forces. Liberalisation was given a further push by European Community membership and the need to meet requirements for financial services and institutions. By 1992, Portugal will have to comply with the bulk of EC directives on the liberalisation of the financial system except for short-term capital movements for which it has won a reprieve likely to last for another two to three years. The Banco de Portugal (central bank) which for years after the 1974 revolution had been little more than a conveyor belt for Finance Ministry edicts has not escaped the movement for reform, winning a new, more independent lease of life. It is now undergoing a programme of important changes that has already strengthened its independence and improved its operations. Mr Jose Alberto Tavares Moreira, the bank's governor, says that within three to four years the reform will be completed and the bank will have radically changed structures. 'At the end of that period we'll have a structure composed of six main departments organised on the basis of the essential functions of the bank, compared with 19 departments when we started with the reform, and 12 departments now,' he says. The six departments will be responsible separately for economic research, the money markets, foreign exchange operations, banking supervision, staff and administration, and issuing currency. Each one will have its own director. The streamlining of functions will be accompanied with a streamlining of staff which will be reduced from about 3,000 at the start of the reform almost two years ago (now 2,300) to about 2,000 employees. But at least as important for the bank are the reforms outlined in a draft law approved last autumn enhancing its autonomy. While Portugal's central bank will not be as independent as Germany's Bundesbank, it will be more independent than the Bank of England or the Banque de France. In the past, the central bank was independent only in theory. It was described as the country's issuing bank, responsible for foreign exchange regulations and currency management, as well as for the orientation and control of monetary policy, but with an important proviso: that it would carry out all these functions 'within the guidelines' established by the Finance Ministry. And while it could give its opinion on monetary and fiscal policy, in practice the last word always belonged to the government. The bank was essentially an administrative, and at times, political, instrument of government. In what was a highly regulated financial environment the central bank acted as a gendarme to ensure that the minutiae of economic and monetary policy dictated by the Finance Ministry in great detail was properly enforced. Under its new statutes, it has won far greater freedom of action and is required to fulfil its functions 'taking into account' government policies. It 'collaborates in defining' monetary and exchange rate policy and 'keeps a watch over the stability of the financial system'. It advises on monetary and financial policy, and is responsible for supervising the monetary, financial and foreign exchange markets. It is also no longer obliged, as in the past, to lend funds to the government. It was not uncommon for a government suddenly pressed for cash to ask the bank for the money. This was a convenient way for governments to hide part of their indebtedness and raise money cheaply since interest rates were set administratively. The bank could argue, but in practice it could not reject a government request for credit. The bank's management and the position of its governor have also been strengthened and given greater responsibilities. In the past the bank's only authority was its collective management board of which the governor was an administrative chairman, but under the new statutes the governor's role and authority have been enhanced. 
ID: 3788
HEADLINE: FT  23 APR 91 / Survey of European Finance and Investments - Portugal (6): Painful changeover - Insurance 
TEXT: PORTUGAL is grossly under-insured by the standards of the European Community. According to a study conducted by Arthur Andersen, total premiums in 1989 amounted to Es220bn (USDollars 1.5bn), which works out at about 3 per cent of GDP - less than half the EC average. Premiums per head are around one-eighth of the level of the rest of Europe. The opportunities for such an underdeveloped sector are enormous, especially in view of Portuguese people's high propensity to save. Recognising this, the number of insurance companies operating in Portugal has risen from 50 in 1986 to 65 now and an estimated 75 by the end of the year. Like the banking sector, the insurance industry was owned and controlled by the state until the mid-1980s. The pace of change has been slower, though, than in banking and deregulation has in many cases brought pain rather than prosperity. The market is extremely concentrated - the six biggest companies account for approximately 70 per cent of the industry. In 1986, all were state-owned; by now one is totally private, another is in the throes of privatisation, and three more are to be sold off by the end of next year. Between 1984 and 1989, the state relinquished its control over tariffs in segment after segment of the insurance market. This ushered in an era of fierce price competition, which according to Mr Ruy de Carvalho, president of the Portuguese Insurers' Association, lingers on still. Thus, in sectors such as motor insurance, big-ticket industrial insurance and workmen's compensation, premiums have fallen dramatically recently. 'After decades of control competition is now very lively,' Mr Carvalho acknowledges. It is in the life sector that premiums rose most comfortably last year, by 26 per cent, twice the rate of inflation. It is the life business which offers the biggest opportunity for profitable expansion. This accounts for only 20 per cent of the market against an average of 40 per cent across the EC. In total, the life market grew from Es45.5bn to 69bn over 1989-90 and the non-life from 175.5bn to 221bn. New companies - such as Ocidental Seguros, the insurance subsidiary of the Banco Comercial Portugues - have tended to concentrate on life. Older ones - like Fidelidade, Portugal's second largest insurer now owned by the giant Caixa Geral - are scurrying to form distribution links with the banks. This form of selling is gradually replacing the army of agents who act as intermediaries. Mirroring the success of its parent company in the banking sector, Ocidental has come from nowhere to be the 14th largest insurance company. Seguros predicts its premium income will grow by 80 per cent this year, an indication of the vigour of the life business. The company would occupy a higher position still if motor insurance were stripped out. This accounts for a substantial proportion of the premium income generated by the top six insurers but, according to Mr Joao Talone, president of Ocidental, losses in this segment of the market amounted to Es7bn last year. The total profit across the sector was Es6 - 7bn last year. Talone says that two thirds of this is not trading profit - 'the only thing the big companies can do is cut their rates to keep market share,' he comments. 'They have made most of their money by selling properties in the middle of a bull or by selling shares bought long before the 1974 revolution. 'All the big insurers are engaged in window-dressing to make themselves look good for privatisation,' he says. 'The state sector companies are hampered from doing deals with banks to secure distribution channel for life products,' he continues. 'Nobody knows who's going to end-up owning whom. We are selling well into our own bank because we are part of the same culture. They have been forced to compete very strongly without having the tools to take the necessary strategic decisions.' Mr Jose Antonio Santos Texeira, president of Imperio, the largest insurance company in Portugal and yet to be privatised, rejects any suggestion that the state sector is grossly inefficient. He admits, however, that the company is handicapped by its public-sector status. Mr Texeira would like to have a bank and a large foreign insurance company as shareholders. Rivals comment that the problem with the privatisation programme is that the state will demand a high price for its insurance assets, but will want control to remain in the hands of the Portuguese. The trouble may be that only outsiders will be willing to pay the price. Foreign interest in the sector is high: Andersen calculated that Portuguese companies will have less than 60 per cent of the market by 1995. The main foreign entrants are from France and Spain, and they have considerably greater financial muscle. Ruefully, Mr Texeira says that his company's capital amounts to Pounds 2.5m, compared to the Pounds 1bn of UAP, the French group which has acquired Garantia, Portugal's seventh largest insurance company, and which is poised to take control of Alianca, another state-owned insurer - when its privatisation is finally completed. 
ID: 3789
HEADLINE: FT  23 APR 91 / Survey of European Finance and Investments - Portugal (5): Key Facts and Indicators 
TEXT: Area                         92,390 sq km Population   10.34 million (1990 estimate) Head of State       President Mario Soares Prime Minister         Anibal Cavaco Silva Currency                      Escudo (Es.) Average exchange rate   1989, dollars1=Es 157.46; 1990, dollars1=Es 142.55 --------------------------------------------------------------------- ECONOMIC INDICATORS --------------------------------------------------------------------- 1989        1990 --------------------------------------------------------------------- Total GDP (dollarsbn)           45.4        59.6 Real GDP growth (%)              5.4         4.4 GDP per capita (dollars)        4338        5656 Components of GDP (%) Private consumption            63.6         na Gross fixed investment         26.7         na Stockbuilding                   2.6         na Government consumption         16.1         na Exports                        36.6         na Imports                       -45.7         na Consumer prices (% change pa)                  12.6        13.4 Unemployment (% of labour force)                  4.8         4.6 Industrial output (% change pa)                   5.0         6.0 Reserves, minus gold (dollarsbn) 9.9        14.5 Discount rate (% pa, Dec.)     14.3        14.5 Total external debt (dollarsbn) 17.8        19.6 Current account balance (dollarsmn) 139      -61 Exports (dollarsmn)           12,716      16,420 Imports (dollarsmn)           17,594      23,001 Trade Balance (dollarsmn)     -4,878      -6,581 Main trading partners (1989, % by value): Exports     Imports West Germany                    15.7        14.4 France                          15.1        11.6 Spain                           12.5        14.5 UK                              12.3         7.4 Total, European Community       71.5        67.9 --------------------------------------------------------------------- Sources: IMF; Economist Intelligence Unit; govt. statistics. --------------------------------------------------------------------- 
ID: 3790
HEADLINE: FT  23 APR 91 / Survey of European Finance and Investments - Portugal (4): Serious underlying problems - Although the economy appears to have performed remarkably well, Patrick Blum discovers . . . 
TEXT: AT FIRST sight Portugal's economy appears to have performed remarkably well. Last year, the gross domestic product grew by 4.4 per cent, exports surged, investment was up by 8.7 per cent with direct foreign investment rising by more than 60 per cent to Dollars 3.6bn, the current account balance closed with a hardly noticeable Dollars 61m deficit, and unemployment was below 5 per cent. Only inflation, at 13.4 per cent for the year, appeared to cloud the horizon. Yet, in spite of the good news which merited praise from the Organisation for Economic Co-operation and Development (OECD) and the European Commission, there remain serious underlying problems of which inflation - which officials seem at times to perceive as only a temporary difficulty caused by too much success - is just one. True, exports are rising, but not as much and not sufficiently fast to overcome an enduring trade deficit. Merchandise imports have grown much faster than exports. The value of imports of goods rose by 31.5 per cent from Dollars 17.6bn in 1989 to Dollars 23bn last year, while the value of exports of goods grew by a sturdy but more modest 25.2 per cent from Dollars 12.7bn in 1989 to Dollars 16.4bn. The deficit in traded goods rose by almost 35 per cent in 1990, resuming an upward trend that had been reversed in 1989. It will not be easy to overcome this imbalance, although some important manufacturing projects now under way will help in the future. But for the time being, Portuguese manufactured goods tend, with few exceptions, to be of lower quality and geared to the mass market. Inefficient production methods are compensated for by the lowest labour costs in the Community, Portugal's largest market. But that comparative advantage is being increasingly eroded as competition from other EC and non-EC producers becomes more intense, and as wages rise to come more into line with those in the rest of Europe. Mr Jose Alberto Tavares Moreira, governor of the Banco de Portugal (central bank), argues that the growth in exports demonstrates that Portuguese industry is becoming more competitive: 'In spite of the strong appreciation of the escudo we have managed to have a current account practically in surplus. This shows that there has been a considerable restructuring of the economy. There have been extensive productivity gains." That is true in some industries though the extent and significance of the restructuring is less certain. Traditional sectors such as textiles or agriculture - the two biggest areas of activity - are deeply in crisis. Repeated complaints about high interest rates - at between 21 per cent and 23 per cent for prime corporate clients for a year, or 24 per cent to 26 per cent for small companies - and recurrent calls for help from Portuguese business groups in the face of foreign competition suggest that industry remains deeply apprehensive about the future. The current account has improved with the latest figures for 1989 showing a surplus of Dollars 139m instead of the forecast deficit of Dollars 550m, and initial - likely to be revised - figures for 1990 showing a deficit of Dollars 61m compared to a forecast deficit of Dollars 1.2bn. But this was achieved not simply because exports grew - though that helped - but in large part because of higher than expected earnings from tourism, up by almost 30 per cent from Dollars 2.1bn in 1989 to Dollars 2.7bn last year, and higher emigrants remittances worth Dollars 4.2bn. For Portugal to be able to benefit fully from European integration and European economic and monetary union (EMU) inflation must be brought under control and the inflation differential between Portugal and its European partners reduced. But while inflation was brought down from its 1984 peak of nearly 30 per cent to an annual rate of 9.4 per cent in 1987, it has edged back up since then. Mr Miguel Beleza, the finance minister, appointed more than a year ago, is more cautious than his predecessor when it comes to forecasts, but his own 10.5 per cent target, later revised to 11 per cent, still fell short of the 13.4 per cent annualised average rate actually achieved - more than double the European average. This year, the government hopes to bring down inflation to a maximum 11 per cent. Mr Tavares Moreira says this is feasible though it will be difficult because of strong demand pressure. 'It is not easy to deflate an economy under these conditions,' he says. There are signs that price rises may have slowed a little with the annualised average rate in February falling 0.1 of a percentage point to 13.3 per cent, but this is still a long way from the 8 per cent which he says would be desirable to bring the escudo into the Exchange Rate Mechanism (ERM) of the European Monetary System (EMS), a move the government would like to make as soon as possible. Another factor may now also be entering the inflation equation. In recent years, wages have lagged behind rather than led inflation, but this could be changing. An agreement last autumn between the government and some of the unions to keep wage increases to 13.5 per cent may limit rises in the state sector, but low unemployment and labour scarcity, especially in parts of the private sector, is causing strong upward pressure with pay deals this year reaching 16 per cent. Yet wages must go up if higher productivity gains are to be achieved. The government is caught between conflicting pressures. In the past, interest rates were kept high administratively as part of efforts to curb credit demand and consumption to fight inflation. Now, with moves towards market set rates, the main and enduring cause of high interest rates remains the budget deficit which represents between 6.5 per cent and 7 per cent of GDP. Government borrowing effectively sets the rates for the market. Privatisations which last year brought the government an extra income of nearly Dollars 1bn, cannot help since revenue from the sale of state-owned assets cannot be used to finance the budget. Meanwhile, high interest rates and a stable currency encourage capital inflows thereby adding to inflationary pressures. Moreover, as the economy is opened up and the financial system is liberalised it is increasingly difficult for the authorities to control capital movements. Short-term capital inflows proved especially troublesome last year having increased from Dollars 770m in 1989 to Dollars 1.8bn which represented more than one third of all capital movements in 1990. To discourage these mainly speculative capital movements the authorities tightened up foreign exchange rules and allowed greater fluctuations in the value of the escudo by ending the practice of maintaining a 'crawling peg' according to which the escudo was depreciated by 0.25 per cent a month. The immediate effect, however, was to send the escudo up rather than down. So those hoping for a depreciation of the escudo are unlikely to see their wishes satisfied. 'We have to see the exchange rate level on a long-term basis, and (on that basis) the escudo is about right at the moment,' Mr Tavares Moreira says, adding, 'there is no alternative to maintaining a very firm monetary policy'. And that means the squeeze between high real interest and exchange rates is likely to continue. --------------------------------------------------------------------- CAPITAL MOVEMENTS NOT RELATED TO FOREIGN DEBT (DOLLARS M) --------------------------------------------------------------------- 1987       1988       1989       1990 --------------------------------------------------------------------- Medium and long-term capital     758        938       2217       3226 Foreign                          768       1162       2505       3550 Domestic                         -10       -224       -288       -324 Short-term capital*              628       1653        770       1863 TOTAL                           1386       2591       2987       5089 --------------------------------------------------------------------- *Any bank transaction of up to one year; note - values for 1990 may be revised. Source: Banco de Portugal --------------------------------------------------------------------- 
ID: 3791
HEADLINE: FT  23 APR 91 / Survey of European Finance and Investments - Portugal (3): Spanish banks invade - Patrick Blum records the end of an era for Lloyds 
TEXT: SOMETIME soon the distinctive rich, blue colours of Banco Bilbao Vizcaya (BBV), Spain's biggest banking group, will be hoisted on to the front of the modern headquarters of Lloyds Bank Portugal on Lisbon's busy Avenida da Liberdade. The occasion will mark the end of an era for the British bank which put down its first roots in Portugal in 1865 as the Anglo Portuguese Bank, later transformed into the Bank of London and South America, and which has operated under its present name since the 1970s. One of the few banks to escape the 1975 revolution's sweeping nationalisations, Lloyds kept and developed a small but highly profitable business niche in the country. When the bank's sale to BBV for Pounds 110m is approved by the Portuguese authorities, it will also highlight the recent inroads made by Spanish banks into the Portuguese market. It is not quite a flood, but it is already a good deal more than a trickle. Apart from BBV, Banesto has bought a leading stake in Banco Totta &amp; Acores (BTA), Banco Santander has a substantial share of Banco de Comercio e Industria (BCI), and Banco Exterior de Espana has a main branch in Lisbon and plans to open several more branches this year. Furthermore, Banco Hispano Americano is waiting for authorisation to transform its Portuguese investment company into a bank, Banco Central has a representative office and a standing request for a branch and several regional savings banks have representations in Portugal. All this, of course, excludes specialised investment, leasing and real estate companies. But whereas most Spanish banks chose either to build up their stakes gradually in local institutions as Banesto has done through BTA's privatisation or start from scratch with an investment or fund management company, BBV has taken a different route by buying up an existing private bank with a small but well-established network of a dozen branches. It was an unexpected move, but one which fitted the Spanish group's strategy. Mr Gonzalo Terreros, BBV international manager, says the bank wanted to be in the Portuguese market to offer universal banking services with an emphasis on corporate and private banking. He sees Portugal as a rapidly expanding market with reactions similar to the Spanish market in the early 1980s. 'Spain and Portugal are the fastest growing areas in Europe,' he says. Lloyds was chosen after a study of various other possibilities including that of buying a bank that was being privatised. This was discarded as too slow, too uncertain, and as a potential source of conflict with the Portuguese authorities. BBV wanted to avoid the controversy that surrounded Banesto's move into BTA as well as the need to have to negotiate with too many diversified shareholders. At the same time it was not seeking a commercial bank with a large branch network. For size and nature of its business Lloyds fitted BBV's ambitions. Calculating that Lloyds which had been cutting back on its international operations may be willing to sell, BBV approached the bank and was able to clinch a deal within a relatively short time. 'We were sure that the bank would be healthy, productive and without bad surprises. So the Lloyds trademark was a guarantee,' Mr Terreros said. Another of the bank's assets with BBV was that although Lloyds was not a typical retail bank, it had a network of branches and operated in all BBV's target markets: wholesale and retail banking with a good corporate customer base in the state and private sectors, among medium and small companies, and with a solid private clientele of high net worth individuals. Since 1986, Lloyds has more than doubled its total assets which where valued at Es87.3bn at the end of last year with profits of Es1.2bn. Once it is authorised to transform the bank into a 100 per cent BBV-owned Portuguese subsidiary it intends to build on the bank's present strengths and seek to capture a greater chunk of the market among small and medium-size companies and among private customers. 'We think we will be able to develop immediately new products, new customers and markets, and compete with highly attractive products in those parts of the market that are growing very fast,' Mr Terreros says. Plans are to increase the number of branches to around 35 within 18 months. In the longer-term, the goal is to establish BBV as an important Portuguese bank with 'a Portuguese team and character, not a marginal foreign bank'. 
ID: 3792
HEADLINE: FT  23 APR 91 / Survey of European Finance and Investments - Portugal (2): Preparing for turbulence - The Banking Community 
TEXT: IN THE past five years the Portuguese banking sector has risen swiftly from a very low base. The question troubling bankers now is whether the growth can continue in the years to come. 'There have been five terrific years of banking,' reflects Mr Carlos Rodrigues, president of Manufacturers Hanover (Portugal). Margins have been high, competition from the state-owned banks - which even after the latest privatisations account for 75 per cent of the sector - less than vigorous. Up until earlier this year, the financial authorities maintained a strict credit ceiling on bank lending. According to Mr Timothy Bradbury, managing director of Lloyds Bank, Portugal (recently bought by BBV, Spain's largest bank), this meant that corporate customers 'were competing to borrow. In the meantime, the private banks could buy liquidity from the public banks and lend it out under their own credit ceiling.' Even now, savers are paid 14-15 per cent on their deposits, subject to 20 per cent withholding tax, which works out at less than inflation. Banks then lend out the funds at 26 per cent retail and 22 per cent wholesale. With such handsome margins, it is not surprising that the banks have prospered. The growth of the sector as a whole is captured in the extraordinary story of Banco Comercial Portugues. When the bank started in 1986, it had 205 shareholders, capital of Esc 3.5bn and 255 employees. Now it has nearly 25,000 shareholders, capital of Esc 66bn and it employs 2,500 people. There is more turnover in BCP shares on the Lisbon stock exchange than in any other company's shares. Coming from nowhere five years ago, BCP is now one of Europe's top 100 banks in terms of capital strength and one of the 60 largest in terms of market capitalisation. The banking industry today cannot be understood without remembering that in 1975 all Portuguese banks were nationalised. It was not until ten years later that the government promoted legislation allowing private banks to be set up. The first stage of deregulation drew six foreign banks into Portugal within 18 months, and local entrepreneurs founded four banks, of which BCP is the best-known. This sudden influx of competition had a profound effect on the sleepy public sector banks. They were exposed as not merely grossly inefficient by European standards - they had more employees per branch than any other European country and fell behind by all other yardsticks  - but downright insolvent. 'Throughout the 1970s and early '80s, we had a social role and we were not driven by normal financial and economic goals,' reflects Mr Pedro Rebelo de Sousa, president of the Banco Fonsecas &amp; Burnay, a state-owned bank which is hoping to be privatised later this year. By the mid-1980s, the consequences of this uncommercial approach were clear: the average percentage of bad credit to total loan portfolios among the state-owned banks had climbed to 20 per cent. 'Many of the borrowers simply didn't exist,' quips one banker. Add-in unfunded pension liabilities and dubious accounting policies and the result was most of the state-owned banks were insolvent. The reaction of Fonsecas to the new environment is typical of that of the whole state-owned sector. It shrunk its staff by 25 per cent. It shored up its balance sheet by selling off properties amid a bull market for real estate. It sorted out its provisions for bad debts and unfunded pension liabilities. It has invested heavily in information technology. Fonsecas now considers that it is virtually indistinguishable from Portugal's private-sector banks. a feeling shared by the large state sector banks such as Banco Espirito Santo e Comercial de Lisboa, which is also hoping to be privatised later this year. The tidying up process completed, these banks like to think of the state as just another shareholder. In this vein, Mr Alipio Dias, president of the Banco Totta &amp; Acores, in which the government retains a residual 15 per cent holding, says 'the treasury is a shareholder like any other.' According to Mr Alexandre Vaz Pinto, president of the Banco Espirito Santo e Comercial de Lisboa and the chairman of the Portuguese Bankers' Association, the average percentage of bad debts to loan portfolio is down to 14 per cent across the state-owned sector. More recently, the public and partially-public banks have shared in the general prosperity of the sector. For example, the 85 per cent privatised Banco Totta reported a 76 per cent increase in cash flow last and assets were up 33 per cent, with profits rising from Esc 73m in 1985 to 3.26bn in 1989. This year the rise in cash flows will be less, but lower provisions will mean that net profits rise by as much as 50 per cent. The pattern is repeated at Caixa Geral de Depositos, the gargantuan state-sector bank which on its own has 25-30 per cent of the Portuguese banking market, a fact easy to understand when one considers that it has 8.5m customers out of a population of 10.5bn. Here, profits have risen from Esc 8.9bn in 1984 to Esc 29.9bn in 1989, with cash flows rising from Esc 15.5bn to Esc 82.2bn. Caixa, which will never leave the public sector, is planning an aggressive branch-opening programme, and aims to increase its branches from 420 to 500 by the end of next year. Caixa is not alone in expanding its branch network -all the other banks are doing it too. This is but one symptom of increasing competition in the banking sector. The government has yet to deregulate its rules forbidding banks to offer interest-bearing current accounts at anything paying anything other than nominal rates. But relaxation of this rule is expected sooner or later. Another factor behind the increasing competition is the presence of foreign banks - in particular Spanish banks eager to repeat in Portugal the success they have had on domestic territory. More significant, though, is the recent abolition of the credit ceiling. This frees the banks' lending capacity. Combined with increased competition in the market for retail deposits, it is inevitable that banks' spreads and profit margins will narrow. 'When we were founded we realised we only had a limited time to reach a certain dimension,' reflects Mr Jorge Jardim Goncalves, President of BCP. 'In 1985, we calculated that we wouldn't face intense competition for 5-7 years and that we could reach a certain market share by launching innovative products and introducing new technology. We were were always clear that in 1992 and afterwards there would be intense competition from foreign and domestic private banks.' Competition from foreign banks will be restrained for as long as the government keep in place its restrictions on short term capital flows. Looking ahead, one banker reflects that the days of easy money are over  - 'it's going to be war out there,' he said, 'and it's going to be bloody.' 
ID: 3793
HEADLINE: FT  23 APR 91 / Survey of European Finance and Investments - Portugal (1): Tougher days ahead - As Portugal faces increasing political and economic change, the time of easy successes for the financial community is over, reports Patrick Blum. The sector is experiencing stronger competition from abroad and further restructuring is needed 
TEXT: Lisbon waterfront, the Finance Ministry, Stock Exchange and several government departments are located in this area of the city. Lisbon is also Portugal's chief port and lies on the right bamk of the Tagua River, 13 kms from the river's entry into the Atlantic Ocean, at the westernmost fringe of the European continent. Portugal's main towns and cities include Oporto, Setubal, Colombra and Brage. Pictured below, Lisbon's main square, the Praca do Comercio. THIS YEAR is likely to go by unusually quickly for Portugal. First, it is having to speed up the pace of reform to meet next year's European Community deadlines for the internal market. It must prepare also for its first EC presidency starting on January 1 - exactly six years after it joined the Community. Before that, a general election, due by October at the latest, will decide whether Mr Anibal Cavaco Silva, the prime minister and leader of the ruling Social Democratic party, remains in power for a third term of government. At stake will be a particular model and style of government whose achievements and shortcomings are likely to come under close scrutiny in the run-up to the election. The result of the vote cannot be forecast, but the tenant at the Sao Bento prime ministerial residence will have his work cut out. Economic pressures are building up in spite of some striking successes. In the years that followed its accession to the Community, Portugal benefited from propitious domestic circumstances, a favourable international environment and considerable goodwill and assistance to help it modernise and catch up with its European partners. But it is still a relatively poor country, and after five years of rapid growth and development, new problems have emerged and some old ones are re-asserting themselves with a vengeance. The good news is that Portugal continued to grow at a faster rate than any of its European partners last year with the gross domestic product rising by 4.4 per cent. Investment, up by more than 8 per cent, remained sturdy, and foreign investment rising by over 60 per cent was buoyant. Official unemployment was negligible and industrial activity high. The current account was almost balanced. The bad news is that inflation at 13.4 per cent - more than twice the EC average - resisted official efforts to bring it down. The budget deficit at close to 7 per cent of GDP is proving equally difficult to reduce, and it is keeping interest rates at punishingly high levels squeezing industry. Traditional sectors from agriculture to textiles are inefficient and facing their most serious crisis yet. In the past few years, the government has carried out or began several important reforms. A land reform has opened the way for privatising the large collective farms, the gradual privatisation of companies nationalised in 1975 and 1976 has started to reduce the weight of the public sector in the economy, new labour laws have relaxed some of the rigidities of the labour market and eased conditions for dismissals, a tax reform has made tax collection more efficient, and the financial sector has seen the most extensive liberalisation and deregulation of all, spurred along by the need to meet the approaching 1992 deadline for an EC-wide internal market in financial services. But there is still much to be done. Mr Rui Machete, past minister in several governments, former president of the Social Democratic party and the chairman of the parliament's budget, finance and planning committee, identifies four areas in need of fundamental structural change: agriculture, industry, social welfare and education. Portuguese agriculture employs about 19 per cent of the active population but accounts for only six per cent of gross domestic product. Fewer than 15 years ago, Portugal's population was predominantly rural, yet it cannot feed itself and depends for more than half of its food on imports. Part of the problem is due to an excessive division of the land into a plethora of tiny unviable plots, mainly in the north, and inefficient huge co-operative farms created after the revolution, mainly in the south. Productivity is among the lowest in the EC and most farmers survive thanks to generous subsidies. Mr Machete says the land structure and the system of agricultural price subsidies will have to change, though he expects it will take several years of transition. Industry also faces the challenge of the internal market. Most Portuguese companies remain unprepared for the inevitable increase in competition after 1992, and continue to rely on old production methods, low wages, and outdated management methods. There are exceptions, and larger companies, many of them foreign or with international links or partners, find they can achieve productivity levels comparable to those in other European countries. In contrast to the growing apprehension of some Portuguese business groups, foreign investors exude optimism, seeing in Portugal's relative backwardness the springboard for sustained and dynamic development. In the long run, foreign investment can have a ripple effect throughout the economy, encouraging the development of local suppliers and helping to raise quality standards, but the adaptation will be difficult. A large number of small and medium-size companies will face a straightforward choice: modernise or close - many will probably have to close. Industrial restructuring will inevitably lead to job losses which will have to be alleviated through a more efficient and expanded social security system since it will not be possible to retrain all displaced workers. Education is in a sorry state. Teachers are underpaid, career conditions unattractive and schools and colleges plagued with recurring strikes. Illiteracy at anything between 15 per cent and 20 per cent of the population, depending on the statistics, is still widespread and educational standards are generally low. As old industries give way to new ones or modernise, training and retraining have become more important. The EC is helping through its social fund to finance training in private industry. But as Portugal prepares for the future, education will need greater resources with more emphasis placed on quality. Reducing the weight of the state in the economy is another huge task. In economic terms, the state accounts for nearly 40 per cent of GDP, but its weight in particular sectors is overwhelming. In the financial sector, it still controls about 80 per cent of the market. Once the privatisation programme is completed, the two big financial groups remaining in state hands together will have between 30 per cent and 40 per cent of the market. Privatisations are a key element in the government's strategy to reduce the weight of the state and open the economy to market forces, but the process has been slow and prone to delays. Conditions are less favourable now than they were 18 months or a year ago, investors have become more wary especially since share prices of privatised companies have tended to fall below their original, often high, selling price. This may not matter too much for big domestic or foreign groups whose objective is to win market positions, but it has shaken the confidence of smaller investors. Diminishing the size of the state is only part of a wider need to reduce bureaucracy and bureaucratic interference. 'There is an enormous bureaucracy run by incompetent people who interfere in too many areas and in excessive detail,' says a senior businessman airing a common complaint. Political parties and trade unions which should counter-balance the state, often operate as if they were state institutions, making it difficult at times to dissociate administrative from political decisions. 'We've progressed and reached a higher stage of problems and issues to deal with,' Mr Machete says. Some of the government's critics are less charitable and argue it has wasted a unique opportunity since it had a free hand with an absolute majority in parliament. The truth probably lies somewhere in between: quite a lot has been achieved but a lot more could have been done. Given the scale of the challenge, the task of restructuring the economy and the state may have only barely began, but the process will have to be accelerated if Portugal is to develop into a modern and competitive economy. 
ID: 3794
HEADLINE: FT  23 APR 91 / London Stock Exchange: Equity futures and options trading 
TEXT: THE HINT of a weak performance on Wall Street sent UK stock index futures scurrying lower yesterday and dragged the share market down in its wake. A dearth of buyers initially left the London market vulnerable to profit-taking. It then only took suggestions of a decline on Wall Street to send equity futures still lower. Brokers said the lack of buying made it difficult to execute even the small number of institutional sell orders placed with them. Instead, turnover was dominated by market professionals and securities houses. There was also interest in FT-SE 100 index options, with some investors short of futures buying April calls and others buying puts and selling calls, all of which are deals that assume the equity market will weaken further. The June FT-SE futures contract traded for much of the session just 20 points above the spot index, compared with the 30-point premium brokers estimate is necessary to take account of future dividend payments and financing cost. June FT-SE closed at 2,511, down 33 points on the day and 17 points above the spot index. Hanson August 220 and 240 calls were actively traded as investors in the recent Euro- bond issue continued to sell calls as a hedging trade against the bonds. GEC August 200 puts were a busy contract as a large technical trade was executed. 
ID: 3795
HEADLINE: FT  23 APR 91 / Appointments: Chairman of Aviation Holdings 
TEXT: Mr Stephen Walls (pictured) has been appointed non-executive chairman of AVIATION HOLDINGS from May 23, holding company of the Electra Aviation Group which specialises in commercial aircraft leasing. He is chief executive of Wiggins Teape Appleton, and was previously group managing director of The Plessey Company. ***** CANNON STREET INVESTMENTS has appointed Mr John Maclean as a non-executive director. ***** LAURENTIAN FUND MANAGEMENT, investment arm of Laurentian Financial Group, has appointed Mr Nigel Quinnen as director of UK equities. He was head of UK equities at Lazards. ***** Mr Patrick Hall, an equity partner and director of Mason Philips since 1980, will be joining the board of GREAT PORTLAND ESTATES as an executive director from August 12. ***** Mr Andrew Hindmarsh has been appointed director and general manager of RJL FINANCE, of Stretford, Manchester, personal loans subsidiary of Refuge Group. ***** CAMERON IRON WORKS, Livingston, West Lothian, has appointed Mr Derek Graham Pattle as director, forged products division, from May 1. He was operations director, and joined the company in 1982. ***** Mr Stephen Hannah has been appointed a director and head of fixed income research at IBJ INTERNATIONAL. He was a director and head of research with NatWest Capital Markets. ***** Sir Robert Clark and Mr Alan Clements have been appointed non-executive directors of MIRROR GROUP NEWSPAPERS in preparation for its flotation. Sir Robert recently retired from TSB Group where he was deputy chairman. He is a non-executive director of Shell Transport and Trading Co, SmithKline Beecham, and Racal Telecom. Mr Clements recently retired from ICI where he was finance director. He is non-executive chairman of David S. Smith Holdings, and a non-executive director of Trafalgar House, Granada Group, The Brent Walker Group, and Guinness Mahon Holdings. ***** HERON INTERNATIONAL has appointed Mr Mike Gilhooley as a director of Heron Garage Properties, which acquires petrol station sites for the group. He was retail investments manager. ***** Mr Laurence Newman (pictured) has been appointed chairman of KPMG PEAT MARWICK's leisure and tourism group. ***** Mr Martin Lister has become a director of GRE Asset Management, GUARDIAN ROYAL EXCHANGE's investment arm. He was an assistant director. ***** Sir Victor Garland has been appointed a non-executive director of RATNERS GROUP. He is a non-executive director of the Prudential Corporation, and a director of several investment trusts. Mr John Hughes has resigned from the main board but continues as director of group retail operations. ***** Mr Desmond Taljaard has been appointed financial director of LADBROKE GROUP PROPERTIES. He was a senior manager, property and construction group, at Ernst &amp; Young. ***** DG DURHAM GROUP has appointed Mr Peter Riddell to the board. He continues as chairman of Durham Hadley Cannon, the group's Lloyd's broking subsidiary, of which Mr Nicholas Morgan becomes managing director. Mr Morgan was managing director, wholesale division. ***** KLEINWORT BENSON has appointed Mr Ben Siddons as managing director of Kleinwort Benson Investment Trust Management of which he is a director, and manager, The Merchants Trust. ***** AT&amp;T ISTEL has appointed Mr Patrick Gaul as business development director. He was with AT&amp;T in Japan as director of international market development. Mr John Maher has been appointed business development manager with the Rover division. He was business operations manager with Extel Financial. 
ID: 3796
HEADLINE: FT  23 APR 91 / World Stock Markets (Asia Pacific): Weaker yen and bond prices prompt profit-taking 
TEXT: THE WEAKER yen and lower bond prices brought profit-taking by investment trusts yesterday, but overall trading remained dull, writes Emiko Terazono in Tokyo. Volume fell to 250m shares, dropping below 300m for the first time since February 4. The Nikkei average, which lost 256.93 on Friday, fell a further 304.96 to 26,237.01, the day's low in spite of sporadic buying by arbitrageurs. The index opened at the session's high of 26,492.45. Declines overwhelmed rises by 818 to 164, with 151 issues unchanged. The Topix index of all first section stocks fell 22.54 to 1,975.53, and in London the ISE/Nikkei 50 index shed 3.19 to 1,489.05. Traders said the only activity of note was small-lot, short-term trading. Mr Bill Wilder, director of research at Schroder Securities, said domestic institutions were uncertain of the central bank's interest rate scenario due to the weak yen. 'The market could be in the doldrums for another three weeks, since the earliest possibility of a discount rate cut will be mid-May,' he added. The smaller markets, which attracted investors looking for quick profits last week, retreated on profit-taking. The second section slipped 8.76 to 3,396.12 and the over-the-counter market fell 30.53 to 3,065.53. Interest rate-sensitive issues also declined on profit-taking, with Nippon Steel shedding Y9 to Y471. Nippon Telegraph and Telephone lost Y19,000 to Y991,000, falling below the important Y1m level for the first time since February 15. Mitsubishi Heavy Industries receded Y12 to Y771 on reports that it had decided to write off Y30bn worth of bills receivable that are due from Iraq. Chiyoda, the plant engineer, dipped Y30 to Y3,030 on profit-taking after rising for the last three days. Nihon Nohyaku, an agro-chemical manufacturer, rose Y70 to Y2,320 in heavy trading. Some investors were attracted by rumours that speculative buying has boosted the issue recently. Demand spread throughout the sector, with Kumiai Chemical adding Y40 at Y1,200 and Hokko Chemical Y50 at Y1,240. Securities houses weakened on concern that poor market conditions would affect earnings. Daiwa Securities fell Y60 to Y1,350 and Nomura Securities Y30 to Y2,140. The land transportation sector was the worst performer of the day, losing 4.03 per cent. Traders attributed the weakness to the decline of Seino Transport, which retreated Y150 to Y2,250 on selling by foreigners. Medical equipment makers improved on reports of new requirements stipulating that ambulances would have to carry electro-cardiographic equipment. Nihon Kohden gained Y10 to Y1,430. Iwasaki Electronics, a lamp maker, gained ground in the morning on reports that it has developed an ultra-violet ray lamp which decomposes harmful substances in pesticides used on golf courses, but closed unchanged at Y1,260 on profit-taking. In Osaka, the OSE average fell 342.44 to 29,557.25 on volume of 21.4m shares, down from Friday's 33.7m. Roundup A MIXED DAY for equities in the region emphasised the old saying that what goes up must come down, with Hong Kong and Manila as the illustrations. HONG KONG lost 2.3 per cent in heavy trading, but the 84.91 fall to 3,582.49 in the Hang Seng index, its lowest close in seven weeks, still left it nearly 45 points above the day's low of 3,538. Turnover rose from HKDollars 1.22bn to HKDollars 1.41bn. Dealers said London institutions were taking profits on currency, as well as on the market. The Hong Kong dollar is pegged to the ascending US dollar; but support for the Hang Seng was lost after Mr Douglas Hurd, the British foreign secretary, failed to secure an agreement from China on the colony's HKDollars 100bn international airport plan earlier this month. MANILA's downswing accelerated with a drop of 4.1 per cent, the composite index sliding 44.38 to 1,027.12. Some observers blamed last week's Supreme Court ruling which allowed industrialist Mr Eduardo Cojuangco, a close associate of the late Philippines president Ferdinand Marcos, to vote his sequestered shares in San Miguel, the brewer and market leader. Turnover fell from 142.9m pesos to 95.9m. San Miguel declined 5.50 pesos to 52.50. TAIWAN, in contrast, set a 10-month high in modest trading as an historic political reform package was passed. The weighted index advanced 69.91 or 1.2 per cent to 5,824.00. The index has climbed 510.69 or 9.6 per cent since last Wednesday. However, turnover continued to dwindle yesterday, falling from TDollars 76.7bn to TDollars 69.7bn. JAKARTA, which has been criticised for not doing enough to protect investors, tightened disclosure regulations for companies hoping to list on the market. The official index, meanwhile, celebrated its return from a week's holiday by rising 3.07 to 415.55 in heavy volume of 5.83m shares. 
ID: 3797
HEADLINE: FT  23 APR 91 / World Stock Markets: Mexico in pole position yet again 
TEXT: WALL STREET's historic breach of the 3,000 level changed the direction of the FT-Actuaries World Index last week. Overall, it rose 0.3 per cent in local currency terms. Excluding the US, the world was 0.1 per cent lower. Japan held the world back in spite of reports in midweek that the central bank was loosening its monetary policy. Speculation of an early cut in interest rates was fanned by last Friday's release of better than expected March money supply figures. From a technical standpoint the Nikkei average was unable to break decisively through the important 27,000 mark. Without Japan the world index would have risen 0.7 per cent last week. The best performer of the week and of the year to date was Mexico, which put on 9.5 per cent and 62 per cent respectively in local currency terms. Mr Jeremy Campbell-Lamerton of Baring Securities attributed the advance to unabated buying of shares in Telmex, the telephone monopoly and a rise in foreign investment on optimism that the Free Trade Agreement between the US and Mexico will succeed. The government is due to make an international offering of its remaining Telmex shares next week, expected to raise over Dollars 2bn. Telmex has risen over 50 per cent to over Dollars 3 in the last month and now accounts for one-fifth of average daily market volume of Dollars 32m. However, it showed signs of tiring last Friday, which could herald a much-needed rest for the market, Mr Campbell-Lamerton says. Interest rates continued to steer most stock markets last week. Hopes of an early cut boosted Australia 5.1 per cent and New Zealand 4.4 per cent in local currency terms, while receding hopes of a reduction cost France a fall of 1.5 per cent and rising domestic rates left Sweden 2.2 per cent lower. Hong Kong lost 1.7 per cent on worries about the new airport project following the stalemate in negotiations between the UK and China. 
ID: 3798
HEADLINE: FT  23 APR 91 / World Stock Markets: South Africa 
TEXT: JOHANNESBURG continued to lack direction. The all-gold index slipped 10 to 1,031 on weaker bullion prices, but the industrial index remained firm at 3,475, just below Friday's record 3,476. The all-share index eased 3 to 2,992. 
ID: 3799
HEADLINE: FT  23 APR 91 / Money Markets: London rates firmer 
TEXT: NEWS OF a sharp rise in March UK retail sales pushed interest rates higher on the London money market yesterday. Dealers expected a very small increase of about 0.1 per cent, and were concerned that March sales rose 3.7 per cent after falling marginally in February. The authorities said retail demand was boosted by buying ahead of VAT increases, announced in the Budget on March 19, but not effective until April 1. Nevertheless the market is concerned that the figure may delay further cuts in UK bank base rates. Three-month sterling interbank rose to 11 7/8 -11 3/4 from 11 25/32 -11 21/32 per cent and 12-month money firmed to 11 7/16 -11 5/16 from 11 3/8 -11 1/4 per cent. On Liffe short sterling futures weakened following the retail sales news. June delivery opened at 88.69 and fell to a low of 88.63 before closing at 88.64 compared with 88.71 previously. Day-to-day credit was in short supply on the cash market. The Bank of England initially forecast a shortage of Pounds 900m, but revised this to Pounds 1,100m at noon and to Pounds 1,050m in the afternoon. Total assistance of Pounds 875m was provided. An early round of help was offered and at that time the authorities bought Pounds 161m bills outright, by way of Pounds 23m bank bills in band 1 at 11 7/8 per cent and Pounds 138m bank bills in band 2 at 11 13/16 per cent. Before lunch another Pounds 153m bills were purchased, via Pounds 45m bank bills in band 1 at 11 7/8 per cent and Pounds 108m bank bills in band 2 at 11 13/16 per cent. In the afternoon Pounds 561m bills were bought, through Pounds 81m bank bills in band 1 at 11 7/8 per cent, Pounds 42m Treasury bills in band 2 at 11 13/16 per cent and Pounds 438m bank bills in band 2 at 11 13/16 per cent. Bills maturing in official hands, repayment of late assistance and a take-up of Treasury bills drained Pounds 949m, with exchequer transactions absorbing Pounds 250m and bank balances below target Pounds 270m. These outweighed a fall in the note circulation adding Pounds 570m to liquidity. In Frankfurt call money rose to 8.85 from 8.80 per cent in response to Friday's warnings by top Bundesbank officials that German monetary policy will stay tight. Dealers said they expect call money to remain just below the 9 per cent Lombard rate, but are waiting for further guidance from the terms of this week's securities repurchase agreement tender. 
ID: 3800
HEADLINE: FT  23 APR 91 / Commodities and Agriculture: Amax optimistic of a bright outlook for aluminium 
TEXT: ALUMINIUM'S OUTLOOK remains exceptionally bright, in spite of the present very low prices, according to Mr Alan Born, chairman of Amax, the third-largest US aluminium producer. He told London analysts and institutional investors that he predicted the market would be about balanced - as long as there is no sharp deterioration in economic growth in Europe or Japan. His view contrasts with that of most analysts who expect a supply surplus this year. Mr Born admitted that very few of the west's aluminium smelters were profitable at today's prices. 'But we think the market is at or near the bottom of the current price cycle,' he said. Market sentiment had not been helped by the delivery to the west of about 100,000 tonnes of aluminium from the Soviet Union in the past 30 days. Aluminium for immediate delivery closed at 62.79 cents a lb on the London Metal Exchange last night. Mr Born suggested 80 to 85 cents a lb was more likely to be a sustainable price. The highest-cost smelters were in Europe and cuts would probably come in this region, he pointed out. Some of the older smelters in North America, which were benefiting from power contracts related to aluminium prices, might close as their power contracts came up for renegotiation. Amax estimated that primary aluminium demand would rise from 14.6m tonnes this year to 16.2m tonnes in 1995. This forecast indicated that a new 200,000-tonne smelter was required every second year, Mr Born said. But he added: 'I don't see that happening. Not enough new smelters are being built.' The group had enough faith in its forecasts to invest heavily in new primary aluminium capacity. It had a 25 per cent interest in the recently-completed expansion of the Becancour smelter in Quebec and was constructing a USDollars 1bn, wholly-owned smelter at Deschambault, also in Quebec. Together these projects would add about 50 per cent to Amax's primary aluminium capacity, taking it to an annual 750,000 tonnes. About 20 per cent of this would be surplus to Amax's own requirements. More than two-thirds of Amax's capacity by 1992 would be based on hydro-electric power, up from just over 49 per cent at present, and would put its costs 'among the lowest of the low.' Amax also expected to go ahead with the proposed Dollars 1bn (Pounds 588m) Antlantal smelter in Iceland in which it would have a 40 per cent interest. Mr Paul Drack, president of Alumax, the group's aluminium subsidiary, said negotiations about power contracts for the Iceland project were almost completed but capital costs needed to be trimmed and government permission to use foreign workers would be required. He hoped the Iceland smelter could be operating in 1995. 
ID: 3801
HEADLINE: FT  23 APR 91 / World Commodities Prices: Tea 
TEXT: There was good general demand, reports the Tea Brokers' Association. Brightest and good medium teas showed some irregularity but were mostly fully firm to dearer. Plainer mediums were barely steady. Coloury Tanzanians and the better Central Africans attracted increased competition at firm to dearer rates. Ceylons met improved support and opened fully firm to 5p dearer although price levels weakened towards the close. Offshore teas proved a strong feature except for plainer Kenyas which were neglected. Quotations: Quality 275p nom, medium 114p, low medium 75p. 
ID: 3802
HEADLINE: FT  23 APR 91 / International Capital Markets: German bank to raise DM500m convertible 
TEXT: BAYERISCHE Hypotheken und Wechsel-Bank, the smaller of Bavaria's two leading banks, is increasing its capital by an issue of DM500m worth of convertible participating certificates. The certificates give investors a share of the profits, but do not carry voting rights. Under German banking law, they count as risk but not core capital, and under future EC guidelines will be classed as tier two supplementary capital. The bank is boosting its capital reserves after a year of rapid credit expansion in all areas, including in east Germany. The participating certificates are being offered, at a price yet to be fixed, to holders of shares and to holders of warrants in the ratio of 39 shares or 39 warrants for one convertible participating certificate with a face value of DM1,000. The certificates mature at the end of 2001 and pay a coupon of 9.25 per cent. Investors have the option to convert one certificate into 3 shares in the period June to December from 1992 to 1999. Spain's Banco Hispano Americano and Commerzbank of Germany have agreed to open a joint offshore banking operation in Gibraltar. The bank, to be called Hispano Commerzbank, will begin operations with Pta1bn in start-up capital. 
ID: 3803
HEADLINE: FT  23 APR 91 / International Capital Markets: Norske Skog poised to launch convertible bond 
TEXT: NORWAY'S Norske Skog, one of Scandinavia's biggest pulp and paper producers, plans to issue a convertible bond in the range of NKr550m to NKr700m, with maturity on December 31, 2000. The proposal will be made at the company's annual general meeting on May 14. The bond will be convertible into B shares. The issue is the last phase of a NKr6bn financing programme which was initiated in 1990 when a NKr500m convertible bond was launched. Norske Skog said that the new issue will be aimed at international capital markets and placed with a selected number of investors. To retain flexibility in fixing the terms, a framework for the new issue has been decided. The final proposal will cover the conversion premium, coupon, subscription period and payment date. The placement is scheduled for the period between May 6 and May 15, if the convertible bond is approved at the annual general meeting. Topdanmark, the Danish banking and insurance group, said its banking unit Aktivbanken will take over Sydfyns Discontobank as part of its strategy of building a nationwide financial services network. Sydfyns' end-1990 balance sheet total was DKr1.1bn. 
ID: 3804
HEADLINE: FT  23 APR 91 / FT Conference (European Securities Markets in the 1990s): Securities chiefs split as deadline looms - Ahead of next month's Athens meeting which aims to approve a pan-European stock market trading system, the views of industry leaders are polarised, reports Richard Waters. 
TEXT: SENIOR officials of the largest stock markets in the European Community still have markedly different ambitions for a proposed system to support cross-border share trading, just one month before they are due to reach agreement on the system's final form. Speaking in London yesterday at a conference on the development of the European securities industries, officials from Germany, France and the UK seemed as far apart as ever on the future for securities trading in Europe. Yet at a meeting in Athens in a month's time, they and other EC exchanges hope to agree the development of Euroquote, a network which could form the basis for cross-border share trading. Mr Rudiger von Rosen, executive vice-chairman of the Federation of German Stock Exchanges, said that there is no demand in Germany for Euroquote to act as a pure information system - the planned first phase of the development. Instead, he said, 'the obvious need remains for a European settlement system'. Mr Jean-Francois Theodore, chairman and chief executive of the Paris Bourse, did not specifically address the question of Euroquote in his speech, but later said that the system was not a necessary part of cross-border share trading. Commercial information suppliers could disseminate information just as effectively, he said. Mr Peter Rawlins, chief executive of London's International Stock Exchange, said that to be useful, Euroquote should carry regulated company news - something that only two of the 12 EC exchanges could currently provide about companies they listed. He added: 'We are sceptical about the development of Euroquote into any (as yet wholly undefined) kind of trading or settlement system . . . We must first decide what it is that Europe's markets need.' Mr Patrick Gifford, a director of Fleming Investment Management, challenged many of the assumptions made by the exchanges when he said that, for an investor, the current fragmented European markets offered greater opportunities than would exist in a single, efficient, transparent market. Instead, he called for cheaper settlement costs and changes that would make the job of fund managers easier. These include a common settlement period in all markets, to make international switching easier, and more information from exchanges about corporate actions like the timing of dividend payments. Differences also arose over the regulation of cross-border share trading. The EC hopes by June to agree an Investment Services Directive to regulate securities business, but this has so far foundered on strong differences of principle. Mr Theodore said that cross-border share trading would develop through co-operation between existing national markets, each of which would remain the main centre of liquidity in its own domestic shares. What was needed was high standards of transparency and listing requirements on each market. He defended the view that this should be extended to all equity markets, including wholesale markets developed for professional investors, such as SEAQ International in London. 'Investors need some sort of price transparency, whatever the market they are dealing on,' he said. Mr Rawlins, though, argued against imposing a common level of price transparency, adding that such ideas 'could drive business away from regulated markets or, indeed, drive it away from Europe altogether.' Mr Geoffrey Fitchew, director general of the EC directorate for financial institutions and company law, laid out the terms of the EC's planned compromise. He said that investors should be able to give a blanket authorisation to intermediaries to deal off-exchange on their behalf, and that it should be left to member states to decide whether and when the details of transactions are published, provided they are all reported to a market authority. Mr Jeffrey Knight, conference chairman and a special adviser to the Federation of Stock Exchanges in the EC, said Europe's various securities markets would inevitably grow closer. 'The question is not whether markets will become integrated, but how,' he said. 
ID: 3805
HEADLINE: FT  23 APR 91 / International Capital Markets: Brazil warms to overseas mediums 
TEXT: FOREIGN-issued medium-term notes have become one of the hottest corporate finance tools in Brazil this year, as tight credit and high inflation at home force companies to look abroad for funds. Brazilian companies have so far issued Dollars 620m of medium-term notes overseas in 1991. The product is officially known as 'commercial paper'. But because it must be placed at maturities of at least two years, bears more resemblance to medium-term notes. Brazilian banks have been quick to take advantage of the change in rules. Banco Frances e Brasileiro (BFB), an associate of Credit Lyonnais, has issued Dollars 100m during the past few months, and is currently negotiating another Dollars 100m issue. Credibanco has made a Dollars 100m placement and Banco Real Dollars 20m. 'The product has given us an important new option in obtaining medium-term financing,' said Mr Ruy Raya, head of commercial-paper issues at BFB. 'Inflation is still so high here that it is extremely difficult to obtain funds with maturation more than a few months out.' One of the main attractions of medium-term notes is their tax-exempt status. This allows multi-national companies to use the product to replace inter-company loans, which are fully taxed. The success of this product contrasts sharply with domestic commercial paper issues which have failed to catch investors' imaginations. Since the product came on the market in November last year, not a single issue has been made. According to a spokesman for the Comissao de Valores Mobiliarios (CVM), Brazil's stock market watchdog, this is because a flat tax of 0.64 per cent of the total value of the issue has proved prohibitively expensive. The issuing group must be registered with the CVM, itself a costly process. Domestically issued commercial paper also carries a maximum maturity of six months, a term unappealing to companies in dire need of longer-term funds. 
ID: 3806
HEADLINE: FT  23 APR 91 / International Capital Markets (International Bonds): Spain issue could spark Ecu primary sector revival 
TEXT: THE Ecu bond market, which has been subdued for the last month or so, looks set to revive, as the Kingdom of Spain prepares an Ecu750m-Ecu1bn issue of registered bonds. However, dealers say there is an overhang of paper from the deluge of issues earlier in the year. Banesto will lead manage the issue, which may emerge later this week. Spain's debut in the Ecu market a year ago, an Ecu500m offering due 1995, has performed strongly and is yielding 9.08 per cent, a relatively expensive level compared with other secondary market issues. An intensive marketing campaign in Spain will seek to encourage domestic participation, which ran at around 5 per cent for the last issue. On the face of it, Spanish investors have little incentive to buy Ecu bonds yielding 9 per cent or so, when Spanish government bonds denominated in pesetas yield more than 12 per cent and carry no foreign exchange risk. However, the peseta is expected to weaken against the Ecu over the medium- to long-term, so domestic investors' returns may be enhanced by currency gains. In addition, Banesto will again be offering Ecu bank accounts to retail investors. Nevertheless, despite its domestic, registered structure, the deal will be mainly placed internationally, and will trade like a Eurobond. The issue, which will not be swapped, is expected to be attractively priced, given its political purpose. The maturity and size of the issue could be fixed later today, once the extent of institutional interest in the French Treasury's offer to exchange an outstanding six-year Ecu bond issue for longer-dated bonds has been gauged. In the Australian dollar market, the State Electricity Commission of Victoria launched an ADollars 100m 10-year deal. The borrower's outstanding debt is currently under review by Moody's for possible downgrade from Double-A1. However, the pricing took account of any uncertainty, dealers said. They added that investors know Australian states (the borrower is guaranteed by the State of Victoria) are declining credits. In the equity-linked sector, Unitika, a Japanese textile manufacturer, launched a Dollars 110m four-year deal, quoted at a premium of three points to its par issue price. 
ID: 3807
HEADLINE: FT  23 APR 91 / Brazilian steel group plunges into red 
TEXT: USIMINAS, the steel group due to be one of the first companies to be privatised in Brazil this year, announced an inflation-adjusted net loss for last year of NCrz1.5bn, or about Dollars 5.3m at today's unofficial rates. In 1989, the group registered an inflation-adjusted net profit of NCrz36bn. Using another accounting method, the group claimed a net profit of NCrz1.9bn, a result which led Usiminas to claim it was the only steel group in Brazil last year to record a positive result. The group blamed recession at home and an overvalued cruzeiro for the feeble figures. Demand for steel dropped 30 per cent in Brazil last year, dipping to its lowest level in 13 years. These factors, however, did not exact a heavy toll on gross receipts, which rose in real terms from NCrz129bn in 1989 to NCrz139bn last year. A bigger problem seemed to be mounting expenditures on debt service. In 1989, Usiminas earned large amounts of interest on its resources but in 1990, the situation had turned around, and led the group to declare a loss on operations of NCrz2.1bn. This loss was despite what the group referred to as a 'rigorous programme to reduce costs'. 
ID: 3808
HEADLINE: FT  23 APR 91 / Venezuela may sell 35% of airline overseas 
TEXT: VENEZUELA, in announcing the conditions under which it will privatise its Viasa international airline, says foreign airlines will be able to buy around 35 per cent of the airline's shares. The government stipulates that although it plans to sell up to 60 per cent of Viasa, it will keep at least 51 per cent in the Venezuelan hands. It also says airline employees can own up to 20 per cent of Viasa under stock purchase plans. Viasa, which flies to Europe, the US, Latin America and the Caribbean, made a loss last year. Profits in previous years were due mainly to government export bonuses. Viasa operates five DC-10 jets (four are owned by the airline, one is leased) and three leased Airbus 300-B4s. Officials say they plan to complete the privatisation of Viasa by July of this year. Potential bidders must set up consortia that will be able to operate the airline, the government said. Petroleos de Venezuela (PDVSA) plans capital investments of Dollars 48bn for domestic and international projects by 1996, including direct capital outlays of Dollars 34bn by PDVSA itself. In addition, Dollars 14bn is to be invested by overseas subsidiaries, partners in existing joint ventures and private companies which are developing new projects with PDVSA. PDVSA is one of the world's largest petroleum companies and has oil refining and distribution assets in the US, Germany, Sweden and Belgium. The Dollars 34bn in direct investments programmed by PDVSA represents an increase of 36 per cent - or Dollars 9bn - over the Dollars 25bn investment programme for 1991-96 announced at the end of last year. In 1990, PDVSA's total turnover topped Dollars 23bn. The company has over 60bn barrels in proven reserves of crude oil, the largest in the western hemisphere. 
ID: 3809
HEADLINE: FT  23 APR 91 / International Company News: VME plans to invest SKr135m 
TEXT: VME Group, the construction equipment group owned jointly by Volvo of Sweden and Clark Equipment of the US, plans to invest SKr135m (Dollars 21.8m) in its articulated dumptruck business, including SKr80m for a new factory in Sweden. The investment is one of the very few so far this year in the construction equipment industry, which has been hit by recession in the US and UK. In February VME announced a 10 per cent rise in 1990 operating profits to Dollars 79m, against the industry trend and helped by a strong performance in continental Europe. VME is the world's largest producer of articulated dumptrucks and will be investing the money in its Swedish-based subsidiary VME Articulated Haulers. Manufacturing will be moved to a new plant near the existing one at Braas, Sweden. VME plans to modernise the dumptruck frames and bodies and reorganise the workforce. Production at the new plant will begin in autumn, 1992. VME also plans to concentrate production of rigid dumptrucks at its plant in Guelph, Canada. Production at the group's rigid hauler operations in Landskrona, Sweden, will cease at the end of 1992. 
ID: 3810
HEADLINE: FT  23 APR 91 / International Company News: Cummins sees quarterly operating loss of Dollars 34.3m 
TEXT: CUMMINS Engine, one of the world's leading diesel engine makers, suffered a first-quarter operating loss and warned of a further decline in the North American heavy truck market. Cummins' bottom line was bolstered by various accounting changes, which resulted in net earnings of Dollars 17.2m, or Dollars 1.02 a share, compared with Dollars 8.9m, or 41 cents a share, a year earlier. But sales slipped to Dollars 811.5m from Dollars 861.4m, and there was a loss before the accounting changes of Dollars 34.3m. A new inventory accounting method and an adjustment to the method of depreciating engine production equipment produced a one-time gain of Dollars 26.5m. The company expects to decide within the next month whether to cut its dividend from the present annual rate of Dollars 2.20 a share. This month Cummins said its second-quarter operating loss would be cut substantially provided production volumes hold, but it warned yesterday that a further drop in the truck market is expected over the next few months. North American heavy-truck output has sunk by 45 per cent since the first quarter of 1989 and by 14 per cent since last summer. Cummins said the UK truck market and worldwide orders for off-highway vehicles have also weakened 'significantly'. The company has laid off another 170 workers at its US heavy-truck engine plants this month, bringing the cuts to 3,800 people, or 14 per cent of the worldwide workforce, in the past months. 
ID: 3811
HEADLINE: FT  23 APR 91 / International Company News: San Miguel debt plan overturned 
TEXT: A PLAN by San Miguel, the Philippine brewing conglomerate, to issue convertible debt has been voted down by shareholders after the company's former chairman had argued that the issue would prejudice his interests. The vote at the San Miguel annual meeting on Friday represents another winning round by former chairman, Mr Eduardo Cojuangco, in the fight to reassume a substantial role in the management of San Miguel. At stake, according to Mr Cojuangco's lawyer, was ultimate control of San Miguel, the Philippines' biggest industrial company. Under the management's debt plan, shares in San Miguel nominally owned by Mr Cojuangco, but held in trust by the government, would not have qualified for the convertible issue. Mr Cojuangco's 18 per cent equity stake in San Miguel was taken into guardianship by the Good Government Commission in 1986 because of allegations that the shares were acquired illegally. The shares remain in dispute and were thus unavailable for Friday's shareholder vote. Since the plan involved the eventual issue of 7.5 per cent of San Miguel's outstanding shares, it threatened to dilute seriously Mr Cojuangco's potential shareholding. Mr Andres Soriano, the chairman of San Miguel, said the company's management believed the 3bn pesos (Dollars 110m) convertible debt issue was 'in the best interests of the company', and that its rejection 'could hurt some of our plans'. The issue, together with 2bn pesos from internally generated sources, was earmarked for an expansion and modernisation programme. The Good Government Commission holds stakes in 300 Philippine companies pending a determination of whether they represent unlawful proceeds. Mr Estelito Mendoza, Mr Cojuangco's lawyer, said the decision was likely to have a knock-on effect for another Cojuangco case pending before the Supreme Court. This relates to shares seized by the commission in the United Coconut Planters Bank, which, if freed, would unlock the bank's indirectly-owned 30 per cent stake in San Miguel. Along with the 18 per cent stake and residual proxies, this would give Mr Cojuangco effective control of San Miguel together with eight of the 15 seats on its board of directors. 
ID: 3812
HEADLINE: FT  23 APR 91 / International Company News: Kao hit by overseas operations 
TEXT: KAO, the Japanese toiletries maker, last year suffered losses in its overseas operations which virtually wiped out the increase in profits made inside Japan. The group yesterday posted a rise in consolidated pre-tax profits for the year to March of just 0.4 per cent to Y38bn (Dollars 274m), compared with an increase of 3.4 per cent to Y40.1bn at the parent company. The parent company accounts for the bulk of Kao's operations within Japan. Six subsidiaries, including the US business, made losses. The parent company saw sales rise 4.5 per cent to Y570bn. Growth was held back by intense competition in the market for household detergents, where Kao's highly-successful Attack has spawned imitators. Also, Kao made little new headway in hygiene products, including disposable nappies, where it launched New Merries. On a consolidated basis, sales were up 6.7 per cent at Y662bn. For the current year, Kao forecasts parent company sales of Y585bn, an increase of 2.6 per cent, and pre-tax profits of Y42bn, up 3.4 per cent. Kao said it hoped for increases in sales and profits despite a slow-down in the Japanese economy. It said that because the domestic market for household products was mature it was pouring its energies into developing new markets. 
ID: 3813
HEADLINE: FT  23 APR 91 / Abitibi-Price reveals smaller loss of CDollars 5.5m 
TEXT: ABITIBI-PRICE, one of Canada's three biggest integrated pulp and paper groups, yesterday revealed that it had posted a small loss in the first quarter. It also warned it expected a difficult year because of poor markets, especially in newsprint. Sales in the period dipped 7.5 per cent to CDollars 726m (USDollars 625m) and the first-quarter loss was CDollars 5.5m or 9 cents a share, against a loss of CDollars 11.3m or 17 cents a year earlier, including a CDollars 13.7m special charge. During the quarter, Abitibi, controlled by the Reichmann brothers of Toronto, made two disposals for CDollars 53m. More non-core assets will be sold to reduce debt. Even the paper distribution and converting businesses, though profitable, will be adversely affected by the recession throughout 1991. In the first quarter Abitibi lost money on an operating basis in all its activities, except distribution and converted products. Newsprint production was 444,000 tonnes and groundwood papers were 105,000 tonnes, both around the same level as a year earlier. Campeau Corp has sold a 10 year old office building in Montreal to Confederation Life Insurance, raising the total generated by property sales in eastern Canada to about CDollars 500m in the past year. 
ID: 3814
HEADLINE: FT  23 APR 91 / Nova may split into two 
TEXT: NOVA, a large Canadian energy, pipeline and petrochemicals group, is considering splitting its business into two separate companies, with shareholders maintaining their proportionate interests. Nova is the main natural gas pipeline operator in Alberta, a provincially-regulated business and hiving off this activity would ease the task of raising new capital. The other entity would hold the oil and gas and petrochemical interests and raise capital on its own. Petrochemicals and plastics are subject to big price swings. At present the gas transmission business accounts for more than half Nova's total business. In 1988 Nova bought Polysar's petrochemical business for well over CDollars 2bn (USDollars 1.7bn) and last year sold the synthetic rubber division for CDollars 1.35bn. Its 43 per cent interest in Husky Oil would be rolled into the new energy and petrochemicals company. RBC Dominion Securities and Morgan Stanley of New York are advising Nova on the restructuring. 
ID: 3815
HEADLINE: FT  23 APR 91 / International Company News: Schneider bid for Square D examined by Canada 
TEXT: THE Canadian government's Bureau of Competition Policy has begun a formal inquiry into the proposed acquisition of Square D of the US by France's Groupe Schneider. Both companies, which produce electrical equipment, have significant competing businesses in Canada. Under Canadian law, an inquiry begins only if there are reasonable grounds to believe an acquisition could substantially prevent or lessen competition in Canada. Square D has been fighting off Schneider efforts to take it over since February, when Schneider made an unsolicited offer of USDollars 78 per share, or Dollars 1.9bn, for the company. Square D wants to remain independent and is looking for third parties with which to make alliances. Mr Jerre Stead, chairman of Square D, said Schneider's takeover effort 'raises substantial questions under the Canadian competition laws as well as under the US anti-trust laws and competition laws of several European countries'. A US District Court is scheduled to consider Square D's allegations that the Schneider acquisition would violate US anti-trust laws on May 13. Square D is also urging the US Federal Reserve to review the Schneider takeover bid on the grounds that it would violate US banking laws. American bank holding companies are prohibited from owning more than 5 per cent of a non-banking company. At issue, according to Square D, is the control of Schneider by Paribas and Societe Generale, the big French retail bank, which hold 9.7 per cent and 10 per cent, respectively, of the shares of SPEP, which in turn holds a majority interest in Schneider. 
ID: 3816
HEADLINE: FT  23 APR 91 / International Company News: High margins lift Mobil 78% in first quarter 
TEXT: UNUSUALLY high refining margins in Europe and the Pacific Rim helped boost Mobil Corp's first-quarter earnings by 78 per cent. North America's second biggest integrated oil company lifted net earnings to Dollars 710m, or Dollars 1.73 a share, from Dollars 400m, or 94 cents a share, a year earlier. The 1990 figure included a Dollars 28m tax charge from a prior period. Sales climbed by 10 per cent to Dollars 16.6bn. The improved earnings were due largely to the strong performance of several international businesses. Income from marketing and refining soared four-fold to Dollars 442m, with non-US operations contributing Dollars 342m, compared with Dollars 81m a year earlier. Mobil ascribed the wide international refining margins to a shortage of capacity. Earnings were especially strong in Singapore and in Australia, where Mobil has acquired Exxon's refining and marketing operations. Natural gas output outside the US rose to record levels, due partly to the cold winter in Europe. On the other hand, North American exploration and production earnings were hit by the unremitting fall in natural gas prices caused by warm weather, weak demand and competition from alternative liquid fuels. Crude oil prices were about level with a year ago, but some Dollars 10 a barrel below the fourth-quarter average. Mr Allen Murray, the chairman, said that although refining margins have recently narrowed from the peaks earlier this year, 'they should continue to support good earnings, although below first-quarter levels'. He noted, however, that earnings from petrochemicals have recently come under pressure. 
ID: 3817
HEADLINE: FT  23 APR 91 / International Company News: US insurance broker ahead 
TEXT: MARSH &amp; McLennan, the world largest insurance broker, yesterday reported firstquarter income of Dollars 96.6m after tax, against Dollars 94.2m in the same period a year earlier. The increase was scored on total revenues up to Dollars 744.1m from Dollars 695.7m. The rise in operating income was slightly larger - up to Dollars 171.2m from Dollars 161.8m after expenses increased by 7.3 per cent to Dollars 572.9m. But interest income was reduced to Dollars 6.7m from Dollars 7.5m. 
ID: 3818
HEADLINE: FT  23 APR 91 / Recession and war cut into profits at Capital Cities/ABC 
TEXT: THE IMPACT of recession on advertising demand and the cost of covering the Gulf war has cut into the profitability of Capital Cities/ABC, one of the three biggest US television networks. It yesterday unveiled a 38 per cent slump in first-quarter operating income to Dollars 120.2m and warned of a possible further decline in second-quarter earnings. The company owns the ABC radio and television national networks, local television and radio stations and weekly newspapers, including the Fairchild fashion trade publications. It said first-quarter net income plunged about 45 per cent to Dollars 58.6m or Dollars 3.50 a share from Dollars 106.3m or Dollars 6.08 a year earlier on revenues which were essentially unchanged at Dollars 1.26bn. Operating income in the first three months of 1991 was Dollars 130.3m, against Dollars 211.5m a year ago, while income before taxes dropped 44 per cent to Dollars 103.4m from Dollars 186.2m. Capital Cities/ABC's weak first-quarter performance comes on the heels of poor results from CBS and General Electric's NBC broadcasting business, which were also hurt by higher news costs and the very weak advertising market. Capital Cities/ABC said yesterday there had been a return to more normal business patterns since the end of the Gulf war. However, the company said levels of advertising demand might not be sufficient to prevent earnings from declining in the second quarter of this year. Capital Cities/ABC said the operating profits from its television network in the first quarter of 1991 represented a significant decline from the previous year's results. In the three months ended March 31, revenues from the company's broadcasting operating advanced to Dollars 1bn from Dollars 992.5m, thanks to gains from the telecast of the Super Bowl and two National Football League (NFL) Wild Card playoff games. Capital Cities/ABC's publishing operations brought in revenues of Dollars 250.6m in the latest quarter, down about 7 per cent from the previous year. Operating income from publishing dropped 24 per cent to Dollars 18.4m from Dollars 24.3m, with declines in all operating groups. 
ID: 3819
HEADLINE: FT  23 APR 91 / International Company News: San Paolo ready for Spanish expansion 
TEXT: ISTITUTO Bancario San Paolo di Torino, the big Turin-based bank, is negotiating to buy Banco Catala de Credit, a medium-sized Spanish bank owned by Banco Banesto. The purchase would substantially boost San Paolo's expansion plans in Spain, where it bought a 35 per cent stake in Banca Matutes, a small 32-branch private bank, last year. Banco Catala de Credit has 105 branches, 26 of which are around its Barcelona base, and the remainder in Catalonia. It had net profits of L12.3bn (Dollars 9.59m) last year. Banca Matutes is concentrated on the Balearic Islands. San Paolo itself last year opened a Madrid branch. San Paolo could not comment on the likely price for the acquisition, but confirmed talks were under way on a letter of intent. Separately, the company denied recent Italian press reports that San Paolo had substantially raised its stake in Hambros, the UK merchant bank, following the sale by Baltica, the Danish insurance group, of a 14 per cent stake. San Paolo's holding has recently risen to about 14.9 per cent from 14.3 per cent, but this was due to the exercise of convertible bond holdings. Sasib, the quoted food, packaging and industrial group controlled by Mr Carlo De Benedetti's CIR holding company, raised net profits by 16.6 per cent to L70.2bn from L60.2bn last year. Total sales jumped by 22 per cent to L619.7bn, with foreign turnover, boosted by acquisitions, surging by 50 per cent to L439.2bn. The company is paying a dividend of L230 for ordinary shares and L250 for its savings shares respectively. 
ID: 3820
HEADLINE: FT  23 APR 91 / International Company News: Banco Santander ahead but Banesto slips back 
TEXT: BANCO SANTANDER, the Spanish commercial bank which owns 10 per cent of Royal Bank of Scotland and which recently bought 13.3 per cent of First Fidelity Bank in the US, said yesterday its first-quarter net consolidated profits increased 21 per cent to Pta20bn (Dollars 187m). Banco Espanol de Credito (Banesto), one of Santander's main Spanish rivals, reported a 17.15 per cent drop in net first-quarter profits for its financial group (which excludes its industrial corporation) to Pta12.99bn, largely because of a sharp fall in extraordinary profits. Santander, which recently sold control of Electra de Viesgo, a northern electricity utility, for Pta40.5bn, giving it a net profit on the deal of Pta14.8bn, said its cash flow in the first three months of 1991 had increased 65.46 per cent to Pta54.4bn, almost half of which had been made over to provisions and reserves. Santander said shareholders would receive its second 1990 dividend payment - Pta100 - on April 30, making the total payout for the year 16.22 per cent higher than in 1989. Banesto's lower results were due to sharply reduced extraordinary income which usually involves disposal of assets. Banesto's financial group made Pta2.9bn from such sales in the first three-quarters of this year against Pta8bn last year. Gross operating profits for the financial group rose, in contrast, by 12.5 per cent to Pta19.3bn due to a 9.8 per cent rise in the financial margin to Pta42.9bn and to strongly increased income from commissions which were up by 51 per cent to Pta11.6bn. Operating costs were up by 19.5 per cent to Pta35.3bn. Total consolidated assets of the financial group, which exclude those of Banesto's industrial conglomerate, increased by 26.4 per cent to Pta5,399bn in the first quarter. A notable feature of this figure was a 29.7 per cent rise in loans to Pta2,606bn. In the first three months of 1990, loans to the private sector were limited to a 10 per cent increase under the government's credit restriction policy. Banco Bilbao Vizcaya, Spain's largest bank, said yesterday it had bought a further 6 per cent of the large Catalan water utility, Aguas de Barcelona, to take its stake in the group to 14.5 per cent. The bank bought the extra stake from the Catalan gas utility, Catalana de Gas. Its efforts to form a giant Catalan energy and resources group were frustrated last year when Repsol, the state-owned oil conglomerate, and La Caixa, the Barcelona savings bank, combined to take control of Catalana de Gas and merge it into Repsol's growing gas interests. The government, however, has been keen to prevent Aguas de Barcelona falling into French hands and will have actively supported BBV increasing its stake. 
ID: 3821
HEADLINE: FT  23 APR 91 / International Company News: Daimler falls 10% before tax 
TEXT: DAIMLER-BENZ, the diversified German motor group, said its pre-tax profits fell by around 10 per cent last year, much of the decline caused by currency movements. Because of a lower tax payment, however, net profits were 6 per cent higher at DM1.8bn (Dollars 1.03bn) compared with the comparable figure of DM1.7bn. It actually announced a net profit of DM6.8bn for 1989, but DM5.1bn of this was due to a change in accounting methods. Daimler gave no pre-tax figure for last year. Turnover rose by 5 per cent to DM85.5bn. It said it would maintain its dividend at DM12 a share. Mr Edzard Reuter, the chief executive, said in February that Daimler had considered raising its dividend until it became clear last autumn that the dollar's weakness - which especially affects Mercedes-Benz car sales in the US - and worsening economic conditions would hold back profits. Last week, AEG, its electrical and electronics subsidiary, announced a DM205m loss for 1990; Daimler said a further loss was expected this year as a result of restructuring measures. 
ID: 3822
HEADLINE: FT  23 APR 91 / International Company News: Nixdorf holds back Siemens result 
TEXT: SIEMENS made a first-half loss of DM380m (Dollars 227m) on its computer activities in the first half of the financial year to September 30, 1991, as it began to integrate the business of Nixdorf, the company which it rescued last year. The continuation of Nixdorf's losses added to the burdens on the German electrical and electronics group at a time when worldwide economic conditions have deteriorated. Its total first-half net profits rose by 6 per cent to DM793m. Siemens did not spell out the extent to which the Nixdorf loss held back its full result; analysts, who pointed out that German companies have considerable accounting leeway in arranging how they report their results, have already forecast lower group earnings per share this year. The group said the loss made by Siemens Nixdorf Informationssysteme, created by the merger of its computer interests with Nixdorf, partly reflected a backlog of DM500m in unbilled sales. This was caused by the time taken to integrate the two companies. New computer orders in the first half totalled DM5.7bn, a fall of 5 per cent, with invoiced sales 17 per cent lower at DM5.1bn; allowing for the backlog, however, sales were less than 10 per cent lower. Siemens said the integration of Nixdorf was going well, but was not completed. Strong gains in orders and sales were recorded in the second quarter. Siemens Nixdorf said recently it might not show a profit for the whole of 1990-91. Nixdorf made a DM800m loss in the last nine months before its full absorption by Siemens in last October; DM300m of this was to meet restructuring costs and valuation changes. The group has already warned that growth in total profits would be difficult this year. In the last financial year, net income rose by 6 per cent to DM1.7bn and Siemens raised its dividend. Outlining overall group progress in the first half, Siemens said it booked a 15 per cent rise in new orders to DM41.4bn, though half the improvement stemmed from the first-time inclusion of new businesses. Domestic orders showed a 30 per cent advance, with business in east Germany, much of it linked to vital infrastructure improvements, totalling DM1.4bn. The group said foreign business stagnated. The 6 per cent rise in foreign orders to DM23bn was mainly due to the inclusion of the merged Siemens Nixdorf operation and the activities acquired from Plessey of the UK. Turnover during the period totalled DM33.1bn, a rise of 9 per cent; of this, 7 percentage points were due to the enlargement of the group. 
ID: 3823
HEADLINE: FT  23 APR 91 / International Company News: Japanese group files for protection 
TEXT: SHIZUSHIN Lease, a Japanese financial company with debts of Y255.5bn (Dollars 186m), filed for court protection from its creditors yesterday in a further sign of the pressures imposed by high interest rates and weak property markets. Shizushin, a medium-sized leasing company, will go bankrupt if its creditors fail to agree on a reorganisation plan. If it goes under, it will be the fourth-largest corporate failure in Japan and the second-biggest this year after Nanatomi, a property developer, which went bankrupt owing Y300bn. Shizushin would be the first financial company to fail during the squeeze on credit in Japan. It was founded in 1982 and began by financing the lease of office equipment. It subsequently expanded into property lending. Its borrowers include a company run by Mr Suemitsu Ito, a property developer connected with Itoman, the trading company which got into financial difficulties through investment in land. Mr Ito worked for Itoman for eight months until he resigned late last year. During that time, he was responsible for expanding its property investments. Shizushin, based in Shizuoka, a town west of Tokyo, was established with the help of the Shizuoka Shinkin Bank, a local institution. Shizuoka Shinkin has a 4.7 per cent stake in Shizushin, but it is not thought to be threatened by the leasing company's difficulties. 
ID: 3824
HEADLINE: FT  23 APR 91 / International Company News: Vard reverses into deficit 
TEXT: NORWAY'S Vard shipping group said yesterday that in the first quarter of this year it had plunged into a pre-tax deficit of NKr37.3m (Dollars 5.53m), compared with profits of NKr104.4m in the same period of 1990. Vard said that the poor result was due mainly to a large number of cancellations by customers for Kloster Cruise, the group's cruise unit, during the Gulf war. Kloster Cruise reversed its 1990 first-quarter NKr67.5m profit into a NKr25.9m loss for the first quarter of this year. The figure includes a currency exchange gain of NKr84.1m. The group warned that Kloster Cruise's bookings in the second quarter will also be affected by a general decline in the cruise market but suggested that results would improve. Vard said that the capacity in Royal Viking Line, another cruise operation, is to be reduced by 70 per cent in 1992. 
ID: 3825
HEADLINE: FT  23 APR 91 / International Company News: Pickens considers sale of Koito stake 
TEXT: TEXAS CORPORATE raider Mr T. Boone Pickens is considering selling his 26.4 per cent stake in Koito Manufacturing, the Japanese motor parts manufacturer which has repeatedly spurned his advances. A spokesman for Mr Pickens yesterday told the Associated Press news agency that the disposal of the Koito shares, currently worth about Dollars 850m, is among several options being considered by the Dallas-based financier. 'We're not in any rush, but it's one of the things we're looking at,' the spokesman said. However, he denied Japanese reports that Mr Pickens has already sold his shares back to Mr Kitaro Watanabe, the Japanese speculator who secretly financed the purchases with a loan secured by the shares. A Koito spokesman said in New York yesterday that the Japanese company had no 'direct information' on the reports of Mr Pickens' retreat, but that 'we would certainly not be surprised by such a turn of events'. Mr Pickens has had several well-publicised run-ins with Koito, which has refused to give him any representation on its board and has consistently accused him of being a front for Mr Watanabe's efforts at short-term speculation. The market price of Koito shares has halved since Mr Pickens made his initial investment two years ago through his privately-held holding company Boone Co. Besides Koito's unremitting hostility, Mr Pickens' willingness to put his shares up for sale may be influenced by the financial difficulties of Mesa Limited Partnership, the large US natural gas producer of which Mr Pickens is the general partner and in which he has a 4.5 per cent stake. One New York analyst also suggested yesterday that Mr Pickens may see his continued involvement with Koito as a hurdle to his apparent ambitions to run for election as governor of Texas. 
ID: 3826
HEADLINE: FT  23 APR 91 / UK Company News: Company News in Brief 
TEXT: ARCADIAN INTERNATIONAL has entered into its first development in Spain as part of a consortium acquiring land at El Zaudin, Seville, to build a hotel, and golf and country club resort with 300 luxury houses in a Pounds 30m scheme. It has paid Pounds 978,000 for 10 per cent of the capital of Zaudin Golf. It has also sold a Glasgow office block for Pounds 1.45m. ASD has agreed to sell 49 per cent of Welbeck Steel Service Centre to Sollac, a subsidiary of Usinor Sacilor, and to sell land and related assets to Welbeck. ***** ASPEN COMMUNICATIONS has acquired Ravensdale Film and Television, a post production television editing and graphics paintbox facility. ***** BASS: Recent rights isue accepted in respect of 71.3m shares (89.6 per cent). ***** BIWATER has bought Spectrascan, a specialist information technology business. ***** BODY SHOP has acquired Cos-Tec, which supplies some 50 per cent of group's Colourings cosmetic range, for an initial Pounds 560,000 cash. Further payments, dependent on Cos-Tec profits in the seven years from end-February 1994, are pitched between a minimum of Pounds 1.25m and a maximum of Pounds 8.25m. ***** CARLTON COMMUNICATIONS has entered into a letter of intent to acquire substantially all the assets and certain liabilities of Chyron Corporation of Melville, New York, and Santa Clara, California. Its most important products are characters and graphics generators and electronic editing systems. ***** CH INDUSTRIALS: The receiver has agreed to sell the Gripperrods International subsidiary as a going concern together with its wholly owned subsidiary Carpet Systems, to Boldfact. ***** CRAY ELECTRONICS has sold W&amp;J Tod, a composite material engineer, for Pounds 1.7m to a management buy-out. 3i provided backing with Pounds 1m of equity and loan capital. ***** DAVIS (GODFREY) has acquired Presco (Holdings) for an initial Pounds 3.75m cash. A further Pounds 3.15m by way of variable rate loan notes may become payable dependent on profits to December 31 1993. Presco makes and rents relocatable steel buildings and will be incorporated into Elliott Group, Davis' site services division. ***** DAWSON INTERNATIONAL subsidiary, Pringle of Scotland, has extended its capital expenditure programme to more than Pounds 3m for 1990 and 1991. ***** DERBY TRU portfolio valued at Pounds 56.19m at March 31 (Pounds 48.66m at December 31). Net asset value of the capital shares was 398p (340p). Figures for quarter to March 31 were calculated after taking into account of the issue of 38,285 capital shares with effect from March 31. With immediate effect, company will discontinue publishing the March 31 and September 30 net asset values. ***** EUROMONEY PUBLICATIONS has acquired 80 per cent of PREP Institute of America, which trades as Amembal Halliday Isom and provides education/consulting and publication services to the leasing industry, for up to Dollars 1.7m (Pounds 950,000). ***** EXPEDIER has sold CCI, a clay pigeon maker, to Meadowbell, a new company formed for the purpose, for about Pounds 1.65m including repayment of inter-company loans. ***** FOBEL INTERNATIONAL: new management has found that net assets are likely to be less than 50 per cent of capital of Pounds 1.78m. Accordingly, meeting called for May 7 to consider position. Accounts for 1990 will be despatched next month with detailed proposals of reorganisation. ***** GUERNSEYGAS GROUP: in year to December 31, pre-tax profits were Pounds 3.16m (Pounds 2.03m) on turnover of Pounds 98.92m (Pounds 82.48m). Earnings rose to 42.7p (27.6p) and the gross dividend was 22.5p (20p), after a 13.5p final. ***** JLI GROUP has bought Langwood (Prepared Vegetables) for Pounds 721,000 cash, with a possible further maximum payment of Pounds 875,000. In 1990 Langwood incurred Pounds 205,000 loss on turnover of Pounds 4.8m. ***** MAXIPRINT: The agreement to acquire 96 per cent of Decisionware has been altered. It will now acquire all the shares of Decisionware and will pay Pounds 102,000 on completion. Further consideration - up to Pounds 1.6m - depends on profits. ***** McINERNEY PROPERTIES has sold its 85 per cent holding in McInerney Contracting to Mr GT Pierse and others for Pounds 4m. Mr Pierse is managing director and holds the other 15 per cent of the shares. The disposal improves liquidity and reduces group future working capital requirements. ***** OSSORY ESTATES: In its open offer to shareholders, 60.57m new ordinary shares, or 29.29 per cent, have been applied for, with the balance being subscribed by the conditional placees. ***** PALMA GROUP subsidiary, Clothkits, has sold its trading name and associated trade marks, together with the customer list of its mail order business, to Freemans for Pounds 650,000 cash. 
ID: 3827
HEADLINE: FT  23 APR 91 / UK Company News: How Group declines 19% and warns of bigger fall this year 
TEXT: HOW GROUP, the Midlands-based building services contractor, warned that profits were likely to be much lower this year as the trading environment remained difficult. Mr Peter How, chairman, said: 'In a recession the bigger companies and the smaller companies come out better and it's the people in the middle who get squeezed. But we're not ultra dispirited.' The group made its forecast as it reported a 19 per cent decline, from Pounds 5.18m to Pounds 4.21m, in pre-tax profits for 1990. However, the 1989 figure included Pounds 1.15m from investment disposals. A fall in margins had put pressure on profitability, Mr How said. Margins were down about 1 per cent on order book values. Turnover rose 6 per cent to Pounds 236.58m (Pounds 222.83m) while orders overall had fallen about 15 per cent. The group was particularly hurt by a 20 per cent fall in the engineering division's order books since that accounted for a large proportion of its businesses. Costs associated with delayed orders were a main factor, Mr How said. On the other hand, the distribution division, which supplies refrigeration and air conditioning machinery, saw its order book climb, helped by the fact that its business was outside the construction industry. Steps had been taken to try to maintain profit margins, tighten credit controls and cut costs through staff reductions. Recent bids were on very slim profit margins so that the group has had to be extremely selective in what it tendered for, Mr How said. It still had a net cash position. Earnings per share were 5.94p (8.32p) and an unchanged final dividend of 2.25p is recommended, holding the total at 3.6p. In order to bring more accountability to the organisation, the decision-making and managerial functions have been split. A main board will be responsible for planning and monitoring performance, and a group executive board will be responsible for implementing policies and overseeing the management of divisions. Mr David Summerfield has taken over as chief executive from Mr Arthur Hogarth, who is retiring as managing director. 
ID: 3828
HEADLINE: FT  23 APR 91 / UK Company News: Ramco rises to Pounds 1.1m and seals Soviet joint venture 
TEXT: RAMCO OIL Services, which provides tubes to the North Sea oil industry, reported pre-tax profits of Pounds 1.13m for 1990, compared with Pounds 942,000 previously. The heavy burden of maintenance currently underway in the North Sea, which requires the shutdown of installations, kept turnover static at Pounds 4.78m, but Ramco is paying an annual dividend of 2p - its first for five years. Earnings rose 0.1p to 3.96p. Mr Stephen Remp, chairman, said he was looking for a boost to turnover next year when extensive North Sea maintenance work would be complete. At the beginning of this year, Ramco set up a joint-venture operation to import oil pumps from the Soviet Union in a bid to capture 10 per cent of the Dollars 500m (Pounds 292m) western market for electric submersible pumps. Alnas, the Soviet company which makes the pumps, has taken a 50 per cent stake in the Aberdeen-based venture to market the pumps in the west and two Soviet directors sit on its board. The first shipment of pumps is due to arrive in June. In an effort to break into the market, Mr Remp said the company would try to get round any reluctance it encounters among western firms by offering generous guarantees to replace any pump which fails in its first year of operation. Alnas started making the electric pumps 12 years ago in a bid to reduce the dependence of the Soviet oil industry on imported equipment. Its manufacturing facilities were set up using western technology to make a Soviet-designed pump. Mr Remp said the high quality of the pumps meant that they could last up to 800 days while western pumps will last 200-600 days. Nevertheless, he said he thought the venture would have to offer some price advantages to make them attractive to western buyers. Flexible arrangements would also be offered on hire or hire-purchase and giving companies the chance to have the pumps on a trial basis. Alnas is carrying the cost of holding stock by supplying pumps and taking the payment when they are sold. 
ID: 3829
HEADLINE: FT  23 APR 91 / UK Company News: Polymark prospects justify 1p dividend 
TEXT: POLYMARK International, the industrial laundry equipment and technographics group, is returning to the dividend list after an absence of 10 years as 'medium-term prospects are sufficiently encouraging'. Fully diluted earnings per share benefited from a low tax charge and moved ahead to 5.07p in 1990, against 4.49p. The proposed dividend is 1p. Pre-tax profit, however, fell from Pounds 2.01m to Pounds 1.51m in the year. That reflected a substantial reduction in operating income from discontinued activities of Pounds 421,000 (Pounds 2.51m), which was offset somewhat by an improvement in continuing operations from Pounds 237,000 to Pounds 594,000 and interest credit of Pounds 442,000 (charge of Pounds 785,000). Mr Len Weaver, chairman, said the laundry division held its profit at Pounds 352,000 after reorganisation costs of Pounds 42,000. In technographics, a programme to improve productivity and enhance margins led to a turnround from a loss of Pounds 114,000 to a profit of Pounds 242,000. He said much was done to create a more stable and profitable basis for the continuing operations. Below the line there was an extraordinary profit of Pounds 2.92m, being the final dividend from Polymark France and surplus on the sale of the French division. 
ID: 3830
HEADLINE: FT  23 APR 91 / UK Company News: New EFM trust comes to market 
TEXT: THE STOCK market's current enthusiasm for split capital investment trusts continues with the Pounds 15m flotation of EFM Income Trust. There are two classes of shares in the trust, managed by Edinburgh Fund Managers. Zero dividend preference shares, with a par value of 25p, are being issued at 35p each. The trust will repay zero holders at 95p per share in the year 2000, a compound growth rate of 11.75 per cent. Although repayment at that level is not guaranteed, the trust will be able to do so, provided net asset value does not fall between now and 2000. The ordinary shares, issued at 65p apiece, will be entitled to all the income. EFM expects the yield on the shares to be above that on the FT-A All-Share Index. Net assets of the trust will need to grow at 6 per cent per annum compound for the shares to be repaid at the issue price in 2000. The trust will invest in the UK, with about 80 per cent in equities and the rest in convertibles, bonds and cash. Allied Provincial Securities is underwriting and sponsoring the issue, which consists of a placing of 15m of each class of share. Dealings are expected to start on April 29. 
ID: 3831
HEADLINE: FT  23 APR 91 / UK Company News: Restructured Burnfield turns in Pounds 1.41m 
TEXT: BURNFIELD, a manufacturer of electric surface heating systems, returned profits of Pounds 1.41m pre-tax and exceptional items for the 11 months to end-December. For the previous 12 months the group, which has been restructured and now operates under a new management team, achieved pre-tax profits of Pounds 2.06m. Turnover for the period under review totalled Pounds 15.31m (Pounds 17.03m). Exceptional items accounted for Pounds 701,000 (nil) and tax for Pounds 542,000 (Pounds 868,000). Extraordinary provisions of Pounds 3.06m reflected reorganisation costs and a deferred tax write-off. Excluding exceptional items, earnings per share emerged at 7.5p (10.8p) basic or at 7p (9.5p) fully diluted. An unchanged final dividend of 3.85p makes a same-again 5.5p total. 
ID: 3832
HEADLINE: FT  23 APR 91 / UK Company News: Exchange rate movement hits Kingston Oil &amp; Gas 
TEXT: IN ITS first set of results to be reported in sterling, Kingston Oil &amp; Gas, the production and development group, made Pounds 608,624 in 1990, compared with Pounds 720,673 in the 18 months to December 31 1989. Kingston's directors maintained that the conversion from dollars to pounds was adversely affected by exchange rate movements over the period. Turnover rose to Pounds 3.43m (Pounds 2.84m for 18 months), but operating profits were down at Pounds 583,702 (Pounds 699,286). Earnings worked through at 4.86p per share, against 7.07p, and the final dividend is a proposed 1p, to make 1.56p for the year. The total pay-out in the 18-month period was 1.66p. Last August Kingston bought Orcol Fuels, a waste oil reclamation business, for Pounds 4.5m, providing the company with its first UK earnings base. 
ID: 3833
HEADLINE: FT  23 APR 91 / UK Company News: BP nightmare haunts sale of stake in BT 
TEXT: AS MINISTERS finalise their proposals for the sale of part of the government's 48.6 per cent stake in British Telecom, the 1987 flotation of British Petroleum is weighing heavily on their minds. BP was the last major secondary sale, valued at Pounds 7.5bn, including a Pounds 1.5bn rights issue, and proved something of a nightmare. Although considered a one-off because of the collapse in the stock market government officials believe there is much to be learnt from the issue. The shares were originally offered at a 20p discount to the 350p market price. But when the world's markets crashed in late October potential investors were looking at a 70p loss. No-one is expecting a collapse in the market this year; however, even the smallest of movements between pricing the BT sale and trading in the new shares could have a significant effect on the issue. A fall in the market wipes out potential investors' discounts while a rise leaves the Treasury open to Labour accusations of a giveaway. Government advisers believe the key lesson from the BP sale is that the time between pricing and trading was too long. Government sales normally take three weeks, a week to print and send the prospectus after pricing is announced, a week for investors to receive and fill in the form and a final seven days for allocation and processing. If the prospectus could be sent out without the price officials believe they could shave off seven days. This was suggested in the sale of the regional electricity companies but rejected on the grounds that two weeks can create as much nervousness as three. For the BT sale to be made BP-proof and immune from market movements the gap between the pricing and trading needs to cut to less than two weeks. Shareholders need a guarantee that their discounts will not be wiped out by movements in the market. If this can be achieved Government advisers believe they may be able to do without sub-underwriters. (Primary underwriters were dispensed with in the last privatisation). There are two other main lessons to be learnt from the BP sale. The first is that ringfencing allocations to different markets is counter-productive. In 1987 BP wanted more shares to be sold abroad. Government officials now believe it was a mistake not to do so since it would have generated greater competition between the institutions. The Treasury is expected to introduce more flexibility into the BT sale, allowing more than half of the shares to be sold in foreign markets, creating fierce competition between institutions, thereby maximising the price. The second lesson is that while advertising can work wonders in druming up interest in a issue - more than 6m people registered for the BP shares - it does not mean that those registered will buy shares. A little more than 200,000 of the 6m parted with their money. As a result much of the funds earmarked for advertising may end up paying banks and building societies bigger commissions to trade BT shares, making it easier for the small investors to take part in the sale. 
ID: 3834
HEADLINE: FT  23 APR 91 / UK Company News: Cronite puts two problem offshoots into receivership 
TEXT: CRONITE GROUP, the Birmingham-based industrial holding company, said yesterday that it was putting into receivership two of its subsidiaries where irregularities, including misappropriation, had been discovered. The shares, suspended at 12p on April 5, rose to 23p when were restored to listing after the announcement. The bigger of the two subsidiaries is Cronite Alloys, which recycles stainless steel. The other is Abtex, which manufactures hand portable fire extinguishers. The company said it also intended to close or dispose of two other businesses, Hy-Tech, a machining company, and North American Cronite, a sales organisation. Accounts for the five months to end-February, also published yesterday, showed total losses for the four companies, including closure costs, of Pounds 3.05m. At the pre-tax line, the company incurred a Pounds 2.18m loss. That compared with a Pounds 1.22m profit for the year to end-September. Cronite said it had discovered that Alloys had suffered a shortfall in expected income amounting to about Pounds 400,000 while management accounts had overstated the value of certain stock by Pounds 500,000. At Abtex, continuing trading difficulties had been exacerbated by misappropriation of stock. Concluding that continuation of losses at these two subsidiaries would have an unsustainable effect on cash requirements, Cronite had requested Barclays, its bank, to appoint receivers. Mr James Lindsay-German, chief executive, said he could not comment on whether the irregularities would give rise to any legal action. The decision follows investigations by Arthur Anderson, the accountants. Cronite said Barclays had confirmed the availability of facilities for the remainder of the year, subject to an Pounds 8.2m maximum, and with this arranged it hoped it would be able to develop its profitable businesses. But there will be no interim dividend owing to a shortfall in distributable reserves. At the trading level, five-monthly losses at discontinued businesses were Pounds 1.87m (against Pounds 70,000 for the 12 month period) while profits at the rest of the group were Pounds 262,000 (Pounds 2.4m). Net assets per share were 31.1p (48.2p). The deterioration follows a sharp fall in profitability during the previous year when pre-tax profits of Pounds 1.2m were about half their 1989 level. 
ID: 3835
HEADLINE: FT  23 APR 91 / UK Company News: Clydesdale Inv net assets fall 10% 
TEXT: The net asset value per share of The Clydesdale Investment Trust was 95p at the half-year ended March 31 1991, a fall of 10 per cent from 106.13p at the same time last year. Total income for the period fell from Pounds 369,000 to Pounds 295,000, and after interest and expenses of Pounds 103,000 (Pounds 111,000) pre-tax revenue was left at Pounds 192,000 (Pounds 258,000). The interim dividend is unchanged at 1p, and comes from earnings per share down from 1.39p to 1.07p. 
ID: 3836
HEADLINE: FT  23 APR 91 / UK Company News: Proudfoot sale 
TEXT: Alexander Proudfoot has sold its BAS subsidiary group of debt collection and in-house legal recovery services for Pounds 5.5m to Matahari 388, which is backed by a syndicate led by Foreign &amp; Colonial Ventures. 
ID: 3837
HEADLINE: FT  23 APR 91 / UK Company News: Greencore offer nearly three times subscribed 
TEXT: THE OFFER for sale of Greencore, the formerly state-owned Irish Sugar group which is being floated in London and Dublin, has been about 2.8 times subscribed. Yesterday the company said applications had been received for 111.8m shares, against the 39.46m available. The offer price was IPounds 2.30. Stripping out shares for which firm undertakings had been received and which have been fully allotted, and those laid aside for employees and beet growers, 15.52m shares were available generally. These attracted 87.86m applications and they are being scaled down as follows: Applications for 100 to 299 shares will result in the allocation of 100 shares; for 300-599, 200; for 600-999, 300; for 1,000 to 2,499, 400; for 2,500 to 4,999, 700; for 5,000 to 9,999, 1,250; for 10,000 to 15,999, 2,000. Applications above 16,000 shares will receive one seventh of the amount requested. The sale, which marks the first big privatisation of an Irish state concern, is of 55 per cent of the shares. Dealings are expected to commence on Friday. 
ID: 3838
HEADLINE: FT  23 APR 91 / UK Company News: Travis Perkins declines to Pounds 20.36m 
TEXT: THE RECESSION in the UK housebuilding industry has caused pre-tax profits to fall for the second year in succession at Travis Perkins, the builders' merchant and timber group. Last year profits fell by almost 38 per cent, from Pounds 32.8m to Pounds 20.36m. In the previous 12 months pre-tax profits fell by 16 per cent. Mr Tony Travis, chairman said: 'The current year will be another difficult one for the construction industry. The first three months of this year, particularly January and February, were very poor. First-half profits, therefore, will be down sharply on those achieved in the corresponding period last year. 'The downturn is such that it will be very difficult to catch it up during the rest of the year - even allowing for a recovery in the second half of the year.' Pre-tax profits last year were reduced by about Pounds 4m charged against bad debts: 'Bad debts, as a proportion of sales, were about three times higher than we would expect in a normal market,' said Mr Travis. Redundancy costs reduced profits by a further Pounds 1.5m. There was an exceptional charge of a similar amount to cover the final costs of integrating the Travis Arnold and Sandall Perkins businesses, merged in 1988. There was a net reduction of about 400 staff last year, achieved through a combination of natural wastage and redundancy. The group, on the other hand, raised about Pounds 3m from property sales. Turnover fell by 3.6 per cent from Pounds 360.9m to Pounds 347.7m. Volume sales were down by about a tenth. Profits in the second six months fell by more than half to Pounds 6.9m. This compares with a 21 per cent fall to Pounds 13.5m in the first half. 'The last quarter of 1990 was particularly gruelling, with bad debts and redundancy costs adding to overheads as building activity continued to decline,' said Mr Travis. The group declared a final dividend of 5.5p making a total payment of 8p, the same as in 1989. Dividends were 1.7 times covered by earnings per share of 13.8p (22p). COMMENT About three quarters of Travis Perkins' sales go to the housing market for repair, maintenance and improvement, as well as new house building. It is therefore an ideal recovery stock as mortgage interest rates come down and confidence in the housing sector starts to pick up. The company has no debt and is well managed - gross margins actually improved slightly last year in one of the most difficult periods for construction sales. The problem is in gauging the timing and likely extent of the recovery. Housebuilders have reported a rise in sales since interest rates began to fall in February. Much of this, however, will be stock and it will take time for a recovery to work through to building material sales. The company is right to be cautious. Profits this year could slip further to about Pounds 18m. This would put the group on a prospective p/e of 19 which looks expensive. Hold for the long term and buy on weakness. 
ID: 3839
HEADLINE: FT  23 APR 91 / UK Company News: Mrs Fields warns of loss as Gulf war hits sales 
TEXT: Shares in Mrs Fields cookie company yesterday slumped 4 1/2 p to 11p after warnings that it had fallen back into the red in the last financial year. In a brief statement, the USM-quoted company said its preliminary results for the year to the end of December 1990 would be published late next month and the company would show a net loss. It is expected to blame television coverage of the Gulf war for keeping people at home and depressing sales of cookies on the high street. The company had previously been scheduled to announce its results today, and the announcement dashed hopes that it would build on its modest return to profit in 1989. Last September, Mrs Fields reported lower net losses of Dollars 2.63m (Dollars 3.53m) for the first half, fuelling hopes that the full-year result could reach about Dollars 3m (Pounds 1.75m) against 1989's Dollars 1.53m. After it floated on the USM in 1986, Mrs Fields acquired a notoriety for disappointing shareholders, most notably in 1988 when it clocked up a net loss of Dollars 18.9m. Founders Mrs Debbi Fields and her husband stepped back from day-to-day management last year. 
ID: 3840
HEADLINE: FT  23 APR 91 / UK Company News: Arncliffe shares suspended at 83p 
TEXT: Arncliffe Holdings, the Leeds-based housebuilder, has requested a temporary suspension of its shares, pending the conclusion of negotiations on a capital injection and a strengthening of the board, writes Michiyo Nakamoto. 'We have been in negotiations for some time and they are now at an advanced stage,' directors said. Once the negotiations are completed, the group plans to announce both results for the year to October 31 and details of the proposed capital investment in the group. The shares were suspended at 83p. In the half-year to April 30, Arncliffe suffered an 83 per cent plunge in profits to Pounds 148,000 (Pounds 868,000). Profits were hurt by a sharply higher interest charge of Pounds 1.09m (Pounds 593,000). The group said at the time that it was working to reduce borrowings as quickly as possible. Turnover dropped 18 per cent to Pounds 7.52m (Pounds 9.18m) and the interim dividend was passed (2.25p). Earnings per share were 1.94p (11.28p). 
ID: 3841
HEADLINE: FT  23 APR 91 / UK Company News: Cash call at Synapse as losses mount 
TEXT: The anticipated recovery at Synapse Computer Services is taking longer to achieve, said Mr Michael Goodman, chairman, as the company revealed losses up from Pounds 294,000 to Pounds 974,000 pre-tax in the six months to January 31. At the same time the USM-quoted company launched a rights issue of 2.02m new ordinary shares at 72p each on a 4-for-7 basis, to raise Pounds 1.3m. 
ID: 3842
HEADLINE: FT  23 APR 91 / UK Company News: Institutions attempt to install new management at Budgens - Board considering a number of options for future 
TEXT: A GROUP of institutional shareholders is attempting to remove Mr John Fletcher as chairman of Budgens and install a new management team at the troubled grocery chain. IEP Securities, Electra Investment Trust, and Gartmore Investment Trust, which together hold 27 per cent of the shares, have put a proposal to the board 'concerning the future direction of the company'. This is understood to involve the appointment of three new directors including Mr John von Spreckelsen, and two associates, Mr Christian Williams and Mr Graham Rigby. Mr von Spreckelsen is credited with having rejuvenated KAFU-Wasmund Handelsgesellschaft, a supermarket chain which is based in Bremen, Germany. The group's proposal is said to be 'under active consideration' by the Budgens' board although the company stated that it was also reviewing a number of other options for developing the business. In recent years, Budgens has recorded poor results having suffered from high borrowings and the disruption caused by setting up a new distribution centre. Yesterday one analyst described the performance of the company as 'utterly disastrous'. Earlier this year, the company announced a severe drop in interim pre-tax profits from Pounds 4.71m to Pounds 505,000 and analysts suggested it might only make Pounds 1.5m in the full year. Budgens, formerly known as Barker &amp; Dobson, runs a chain of 95 neighbourhood grocery stores. It has faced stiff competition from Marks and Spencer and is seen as being under further threat as J Sainsbury and Tesco again express interest in developing their high street outlets. Mr Fletcher, who became chairman and chief executive of Budgens in 1985, failed to consummate a planned merger with Wm Low, the Scottish-based supermarket chain, in 1989. This followed a highly ambitious but ultimately abortive attempt to buy Dee Corporation for Pounds 2bn. Budgens has recently strengthened its board through the appointment of Mr Derek Pretty as finance director in December 1989 and Mr Keith Clarke as managing director in April 1990. Budgens' shares, which have fallen sharply during the past two years, closed 2p higher yesterday at 47p. 
ID: 3843
HEADLINE: FT  23 APR 91 / UK Company News: Boddington makes strong attack on Devenish board 
TEXT: BODDINGTON yesterday launched a blistering attack on Devenish, the West Country brewer, accusing it of wasting millions of pounds of shareholders' money. In a document sent out to Devenish shareholders, containing details of its Pounds 127.7m hostile takeover bid, Boddington, the pubs, hotels and health-care group, accuses the Devenish board of wasting more than Pounds 80m on advertising new brands marketed under the Newquay Steam label. Boddington says the investment by Devenish 'was ill-conceived from the outset' and alleges that its failure has had an adverse effect on the company's profitability. It accuses Devenish of U-turns in its strategy in first buying wholesalers only to sell them later, and queries the value attributed in the company's accounts to the brewery. For good measure, it says plans by Devenish to expand the number of its pubs 'has failed to materialise'. Mr Hubert Reid, managing director of Boddington, said: 'Devenish's decision to invest in brewing and brands was a grave mistake. 'It was also badly executed. Its board is guilty of poor judgement and then poorly carrying out those decisions.' A spokesman for Devenish denied the charges and said there was nothing substantially new in the document which still failed to address the fact that Boddington's hostile bid 'substantially undervalues' the company. 
ID: 3844
HEADLINE: FT  23 APR 91 / UK Company News: Empire 'oui' to 125p cash bid 
TEXT: EMPIRE STORES Group, the mail order retailer, has recommended its shareholders to accept the 125p per share cash offer from Redoute Catalogue, part of La Redoute, the French catalogue retail group. Mr Martin Mays-Smith, chairman of Empire, recommended the offer although the board believed it did 'not fully reflect the value of Empire'. Empire claims a 7 per cent share of the UK mail order market. Its shares were unchanged yesterday at 127p. The recommendation was not supported by Gecos, the Italian retail group which holds 24.2 per cent of Empire, has been a shareholder since 1984 and has two representatives on the board. It is taking independent advice and will clarify it's position by May 1. It could remain a minority holder even if Redoute's offer succeeds, and if sufficient other holders did not accept, the listing might be kept. Redoute said last night it was pleased with the recommendation, but concerned about a 'very gloomy trading statement' made by Empire as part of its recommendation, and the lack of a profit forecast for the financial year ending this weekend. The first closing date for Redoute's offer is tomorrow but Redoute has already promised to extend this to May 8. Redoute said from the start that its offer, launched in mid-March, would not be increased. This followed its purchase of a 12 per cent stake in Empire from Great Universal Stores, the retail, property and finance company, and a promise to GUS that the subsequent offer would be final. Redoute already held almost 26 per cent of Empire when it bought the GUS stake, giving it 37.9 per cent. Mr Mays-Smith said Empire was recommending the offer, which values the group at Pounds 49m, because trading had worsened since the group announced an interim loss of Pounds 951,000 in January. Sales had 'held up less well than we had expected' he said, and 'sales in recent weeks have been particularly disappointing'. The group had also suffered a rise in bad debts. He said 'as a result the group's results in the current year will fall short of those for which we had hoped at the time of my interim statement'. Another reason for the recommendation was that the UK mail order industry was being shaken up following the sale of Grattan to Otto Versand, the German retailer, and the possible sale by Littlewoods of its mail order side. This was likely to make the market more competitive. Also the performance of Empire's shares, if it remained independent, was likely to be affected by Redoute's holding. The recommendation to shareholders also said they should accept 'unless a higher offer is announced'. However, analysts said the chances of a rival bid were slim given Redoute's stake. If a rival bidder had been interested it would probably have shown its hand by now. Mr Mays-Smith said the group was not in discussions with any other bidder. 
ID: 3845
HEADLINE: FT  23 APR 91 / UK Company News: Boot bucks sector trend with 19% rise to Pounds 6.4m 
TEXT: TAXABLE PROFITS of Henry Boot &amp; Sons, the Sheffield-based construction and property group, rose by 19 per cent to Pounds 6.36m in 1990 to provide a rare profits advance in what was a very difficult year for most construction groups. Turnover declined to Pounds 131.03m (Pounds 136.13m), but earnings rose 15 per cent to 76.1p (66.1p) per share. The company proposed a final dividend of 18p to make a total of 25p. This compares with 21p in 1989. Mr Jamie Boot, managing director, said the group had a much lower exposure to residential and commercial property markets than many construction companies which have suffered as a result of falling demand in these markets. Boot has no borrowings. At the end of 1989 Boot had cash of about Pounds 9m. This position is thought to have remained largely unchanged at the end of last year. The company, of which the Boot family owns just over 50 per cent, said the construction market had of late become more difficult. It warned that it was unlikely 'that the past level of growth in earnings will be maintained in the foreseeable future'. 
ID: 3846
HEADLINE: FT  23 APR 91 / UK Company News: Reduced offer for Coats offshoot 
TEXT: AN INTERNATIONAL investor group has reduced its bid for Consoltex, the Montreal-based fabric maker, from CDollars 38 to CDollars 33 per share and Coats Viyella, which has owned 81 per cent of the Canadian company for the past decade, has said this was fair value and it would accept. In February, Consoltex reported 1990 profits of CDollars 9m (Pounds 4.54m), or CDollars 3.14 per share, on sales of CDollars 169m, up slightly from 1989. At that time the investor group was willing to pay CDollars 38 per share. Coats stood to collect to well over CDollars 110m. However, in the first quarter of this year, Consoltex incurred losses of CDollars 596,000, or 20 cents per share (profits of CDollars 2.7m, or 95 cents per share). Sales dipped 25 per cent to CDollars 34m. Federal and Quebec sales taxes were applied to apparel for the first time on January 1, causing a deep decline in clothing sales and thus fabric sales. Consoltex expects some improvement in the rest of the year as interest rates come down and the economy picks up steam. The old offer was withdrawn and 'a revised investor group' made the new offer, subject to 90 per cent acceptance, said Coats and Consoltex. Details will be mailed early in May. Consoltex would not reveal the principals behind the investor group. 
ID: 3847
HEADLINE: FT  23 APR 91 / UK Company News: Ricardo Intl expands 
TEXT: Ricardo International is buying Advance Technology Design, a gas turbine consultancy, for Pounds 550,000 payable in shares or loan stock. The first tranche will be 300,757 shares valued at 96p. 
ID: 3848
HEADLINE: FT  23 APR 91 / Guinness Mahon losses soar 
TEXT: GUINNESS MAHON, the merchant banking group which is 65 per cent owned by the Bank of Yokohama, warned yesterday that it would report a heavy loss in its interim results because of mounting bad debts. The company is making a Pounds 30m provision for loan losses, and will report an after-tax loss of Pounds 35m for the six months ending March 31. An interim dividend is unlikely to be declared. The group will seek to raise Pounds 50m through a rights issue. This will have the full support of the Bank of Yokohama. The Pounds 50m will more than double the Pounds 45m level to which Guinness Mahon's capital has been reduced by the losses. Mr Geoffrey Bell, chairman of Guinness Mahon, said yesterday that the losses had been incurred mainly because of the bank's policy of lending to the property and small company sectors, both of which had been badly hit by the recession. The bank had also lent Pounds 5m to Polly Peck, which collapsed last year. The provisions were decided on after a team from Bank of Yokohama came to the UK to examine the Guinness Mahon loan book, Mr Bell said. It was decided to deal conservatively with all possible losses to avoid having to make further provisions later on. No management changes are planned, but Mr Bell said that the Bank of Yokohama would be placing more people in London to keep a closer watch on operations. The Japanese have three representatives on Guinness Mahon's 12-person board. The news triggered a sharp fall in Guinness Mahon's share price. The stock closed at 42p, down 8p on the day. This compares with the 146p per share paid by Bank of Yokohama. The Japanese group bought its stake for Pounds 95m in 1989 in the first significant acquisition of a merchant bank by a bank from Japan. Guinness Mahon's other leading shareholder is publisher Mr Robert Maxwell with 9 per cent. Last year, Guinness Mahon announced losses for the 12 months of Pounds 7.5m and cut its dividend. 
ID: 3849
HEADLINE: FT  23 APR 91 / The Lex Column: Ratners 
TEXT: Judging by the reaction to yesterday's figures, investors think Ratners has turned some kind of corner. The shares have underperformed the market by a third in a year and by a half over three years, so a change was overdue. Last year's small rise in pre-tax profits to Pounds 112m was a reasonable performance, especially when measured against other retailers. But there was no hiding the dilutive effect of the undigested Kay Jewelers acquisition in the US. Worryingly, too, costs in the UK rose much faster than sales. Ratners is trying to persuade investors that it has grown up. Out has gone the image of the mindless pursuit of sales. In its place is a sober management culture in which costs must be contained to protect the bottom line from the effects of flattening turnover. It all looks appropriate, comes perhaps six months late and is arguably inevitable at such a low point in the economic cycle. In the medium term, Ratners will push ahead with the integration of Kay in the US and try to grow organically towards 50 per cent market share in the UK. Less expansionist shareholders might prefer to see the company exploiting its UK leadership by forcing immediate price increases on a sector where volume growth has tailed off. On forecast profits of Pounds 125m, the shares at 177p are on a prospective p/e of nine, backed by a solid yield of 8 per cent. If Ratners can prove that it has cracked the US market, its shares will doubtless more than make up lost ground. The rating seems fair until then. 
ID: 3850
HEADLINE: FT  23 APR 91 / The Lex Column: Retail sales 
TEXT: The quirky nature of the latest UK retail sales figure leaves the markets in the dark on consumer spending just when guidance is most needed. Analysts were yesterday kicking themselves for forgetting that the last VAT rise in 1979 led to a near-7 per cent jump in sales on the month, followed by a 10 per cent plunge the month after. But the rise in the VAT rate this time is insignificant compared with last, especially since many retailers were prompt to announce that they were not passing it on. If there has been a real underlying recovery, it will be the more welcome after a run of seven months in which retail volume was down on the year before. It is also the more vexing to have to wait another month to find out. That apart, the prospects for a consumer-led recovery are as opaque as ever. It might be thought that real wage increases would be an important determinant. But it remains to be seen what will happen if workers settle for low nominal rises on the basis of plunging headline inflation, only to find that the stubbornness of core inflation leaves them worse off than before. The markets may have to settle for guidance on production rather than consumption. Next Tuesday's quarterly survey from the Confederation of British Industry, which ought to show the first signs of revival, will be the most closely scrutinised for a long while. 
ID: 3851
HEADLINE: FT  23 APR 91 / The Lex Column: AT&amp;T/NCR 
TEXT: American Telephone and Telegraph's five-month bid for NCR looks to be over bar a little more shouting. Sunday's improved offer from Ma Bell delivers the Dollars 110 per share demanded by NCR, at least on the basis of the AT&amp;T price at Friday's close. While the target company is demanding still more protection for shareholders in the event of AT&amp;T stock slipping back, there is a limit to which such guarantees can be reasonably extracted. An agreed deal has always been on the cards, though Wall Street's strength is helping resolve a corporate battle which has been grubby even by US standards. AT&amp;T has been beleaguered on several fronts. It may have scuppered NCR's plan to put 8 per cent of the votes into the hands of its employees but, as things stand, it is due back in court soon to try to remove another poison pill. The telecoms giant has managed to unseat only four members of the NCR board and is faced with the ousted chairman continuing the fight as chief executive, while staff morale at both companies may soon become an issue. With all these problems banking up, it seems prudent to take advantage of the healthier share price, pay a little more and hope NCR goes quietly. The all-paper nature of the new offer is crucial, since it would allow AT&amp;T to account for the takeover without having to write off goodwill against earnings. AT&amp;T shareholders nevertheless face some short-term dilution. They will also have a long wait for the benefits, though that is not to say they will not come. It is just that the precedents for merging computer and communications businesses - very much a 1980s idea - are not terribly auspicious. 
ID: 3852
HEADLINE: FT  23 APR 91 / The Lex Column: The Bundesbank marks time 
TEXT: FT-SE Index: 2,490.8 (-29.3) Despite the headlines about the surging dollar, the real story in the foreign exchange markets still looks to be the weakness of the D-Mark. Given the dissent among the Group of Seven, there might seem a hint of perversity about this. Germany argues for monetary tightness and the US for laxity, yet money continues to flow from the D-Mark to the dollar. Allowing for the difficulty of measuring the unified German economy, it is not even clear that money supply growth in the two economies is wildly different by now. With the help of such mishaps as Chancellor Kohl's election defeat at the weekend, sentiment on the D-Mark is running downhill. To an extent, one can see the market's point. The way ahead for the US economy is pretty clear, apart from matters of timing. The outlook for Germany is profoundly unclear on virtually everything, including basic economic policy. The risk premium on the D-Mark, as measured by the interest rate differential, has been rising steadily for the past six months and now stands at a full 3 percentage points. For the Bundesbank, the immediate problem is that the US interest rate cycle may already have hit bottom, so that a rise in German rates may be needed merely to stop the differential widening further. It is hard to see how the Bundesbank can reassert its authority other than by catching the market unawares with the timing and extent of its next rate rise. By definition, if the Bundesbank gets it right there could be shocks ahead for the other members of the ERM. 
ID: 3853
HEADLINE: FT  23 APR 91 / Letter: The case for an international adviser 
TEXT: Sir, Your leader ('The new consensus', April 20 ) spots the irony in the announcement on the same day last week of Sir Terence Burns' promotion from chief economic adviser to permanent secretary to the Treasury, with news of a record rise in unemployment and an accelerating fall in industrial production. Later you support the need for some sort of National Economic Assessment - while your Job in the News article below the leader sought a bright, pragmatic economist for Sir Terence's old job. Following the failures in economic management in the 1980s, perhaps you should have gone further. Fiscal policy is now on auto-pilot and monetary policy is dictated by exchange rate considerations. British economic prospects depend largely on what is happening to the rest of the world. The Treasury no longer uses macro-economic forecasts to steer the economy. Nor does it produce reliable forecasts for others. This job, and the National Assessment, should be handed over to independent well-financed economic research institutes. The Treasury's forecasting errors for the British economy are well known. But it is possibly worse at predicting international economic prospects on which our future now rests. The 1990 budget forecasts, for example, predicted that the US current account deficit and the Japanese surplus would increase while the large German surplus, despite unification, would remain broadly unchanged. This suggests that Sir Terence's old post, as chief economic adviser, might also be abolished. Instead, the government should appoint an international economic adviser, so as to be better informed on what is going on in the rest of the world. Moreover, in looking for candidates, it should consider an American, German, French or even a Japanese. Brian Reading, 83 Shakespeare Tower, Barbican, EC2 
ID: 3854
HEADLINE: FT  23 APR 91 / Letter: Letting up on house pressure 
TEXT: Sir, Your editorial (Housing and inflation, April 16) suggests that lowering the value of housing would help to curb inflation. The only sound long-term way of reducing price pressure on housing is to increase supply, and that would naturally follow a full revival of the letting sector. Sadly, that can happen only when all political parties are in agreement, since too many fingers have been burnt for landlords to enter the letting market with confidence. In the meantime you can hold back house price inflation with high interest rates in the same way as a dam holds back water - the pent-up demand is still there, and will manifest itself when it is able to. DB Robb, Durley Gate, Savernake, Marlborough, Wilts. 
ID: 3855
HEADLINE: FT  23 APR 91 / Letter: Interim solution for Treuhand 
TEXT: Sir, Your article 'So much to do, so little time' (April 9) mirrors precisely the fundamental problem of managing change. David Goodhart's report on the Treuhand's fear that lack of appropriate management resource could lead to wastage of money on a massive scale echoes the gap being experienced by many more developed commercial and industrial organisations. Their recourse has been to interim management. For a long time the concept of short-term executives has been one of a stop-gap solution. That this is no longer the case is a tribute to the high-level experienced people from all over Europe who are prepared to roll up their sleeves, tackle a specific assignment, achieve significant results and move on to the next project, adding value through their business skills, motivation, and lack of emotional excess baggage. If the Treuhand wishes to attract the type of manager who will enjoy the challenge of participation in the resurrection of a market economy, the interim management route is an obvious solution. Derek Mortimer, managing partner, Triple A, 18, Lawrence Avenue, New Malden, Surrey 
ID: 3856
HEADLINE: FT  23 APR 91 / Visionary seeks an equal chance: Lech Walesa, the Polish president, who begins a state visit to Britain today, outlines his hopes for his country's future in an interview with FT writers 
TEXT: Poland's first democratically elected president, Mr Lech Walesa, arrives in London today for a three-day state visit. He is a complex mixture of intuitive vision, political shrewdness, religious conviction, unexpected naivety - and personal charm. It is a combination which helped him play a key role in the collapse of communism, and is now being used to win Poland a place in Europe and woo foreign investment. Last week in Warsaw he talked to FT correspondents about Poland's hopes and fears, starting with the prospect of 2m unemployed before the year is out. Q: Will you have to ask Poles for 'blood, sweat and tears'? A: I don't agree with this perspective. Poland can't afford unemployment. It has so much work to do, so many needs. Our problem is not over-production but shortages. We have an educated society but antiquated systems and machines. That's why we need help from abroad. Even if Poland had twice as many people we could not catch up with the west in 20 years. So let foreign business come here, then there won't be unemployment and I can save the country. Are you saying there won't be unemployment? No, no. There could be more than 2m unemployed. The point is there should not be any, given the size of our needs. What will you be seeking in Britain? I'll be doing some blunt talking. Europe is not Europe without Britain, but there are mistakes in western thinking. Europe fears that we'll take away markets. But I'm convinced there is work for all here in Poland for 10 years just to fill in the gaps in our economy. We should learn to assess our potential on a Europe-wide scale. Look at Nowa Huta (a big steel works). Its pollution is destroying Krakow. Shouldn't we give up producing steel and buy from France which has non-polluting factories? But then France has to help find work for the 60,000 who lose their jobs. We allow imports of all goods but the west is not buying ours. Why are we being punished? We could end up like Romania which has nothing but shortages. If we don't find a common language my farmers won't allow the import of food from the west. But this is not what should be happening. We want to join the European institutions. But Europe is afraid to let us in. Yet, it's so simple. We should all stand at the starting line as if in a race. I'll be on a bicycle, others on tractors, some in cars. Who wins is his affair. That's the thinking we should have - everyone should have an equal chance. Computers should have a hand in all this. The computer should fire a public starting signal. It should not be a confidential one so that someone gets an unfair lead. That places a lot of faith in computers. Comecon tried that and failed. That's true. But the first fruit is always full of worms. What do European leaders say when you make these points to them? No one has countered my arguments yet. They may complain that the way I put my views is too brutal but no one has found convincing counter-arguments to my vision of European development. Do you see these leaders as short-sighted? No, but things are changing so fast, and they can't take all factors into account. I have a great advantage. I'm not tied to any party. Politicians as a rule are limited by their political affiliations and programmes. It is said you model yourself on Pilsudski. (Marshal Jozef Pilsudski, who gained enormous popularity by defeating the Red Army at the gates of Warsaw in 1920 and later established an increasingly authoritarian regime in the inter-war years.) Is that right? No. Of course, I respect Pilsudski. But I'm a different person. Look at the contrast in our achievements. Pilsudski won great victories with enormous losses and people were very enthusiastic. We have achieved an enormous victory over communism without bloodshed - but people aren't happy. We've achieved so much and so subtly. We've handed Europe victory on a plate, and the opportunity to link all Europe up on a healthy basis. Yet just look what Europe is doing. (At this point the president screws up his face in a gesture of fastidiousness and waves his hands from side to side.) It does not want to get involved . . . it hums and haws. Generations have fought for this great chance. Well, now we have it. The question is, Will we screw it up? Everything ought to be possible - entry into Nato, into the European Community, everything. But what are we doing? Just waiting for the next earthquake. It's amazing. Incredible. If there'd been the usual victory with corpses all over the place there would have been enthusiasm. Somehow everything has changed. It used to be the Germans who did the fighting and the Jews the trading. Now it's the Germans who are fighting for peace, the Jews who are fighting and the Poles who are trading. Maybe that's why things are upside down, everybody is playing unfamiliar roles. What about the situation to the east? This is a new era. Of course, new nations and social groups want their freedom. They are casting aside their chains. Take the Czechs and Slovaks. Now they're arguing. But this is just the initial phase. After that they'll start coming together again. Modern economies transcend national boundaries and dangers like Chernobyl are also no respecter of borders. Five years ago I said that the Soviet Union had only one option - to dissolve itself. But no one took me seriously. I'm now saying that it will dissolve but come together again on new principles, on logical principles. As for Poland, we need foreign investment because it also gives us security. Having a Frenchman or an Englishman here with his factory is like having a division of troops. You in the west have over-production. You can make money out of our shortages and our stupidity - and we have plenty of that. We can't just escape in your direction because it is already full up. I want to turn round the escape routes. That's where business can be done. Business should come here rather than wait for people to flee west. Come and set up a factory here. Make money. Some people say, 'Walesa is selling Poland cheap'. Our people are intelligent but we received our education under communism. We need western help to show us how to do things. We don't want charity or sentiment. We have to be taught in the brutal school of life. The quicker we start the quicker we'll learn. You won power because the communists could not deliver economically. But aren't things getting worse for many? If I was to run for election now I'd get 90 per cent. The new government (led by the prime minister Mr Jan Bielecki) is full of competent people. True, they are from the third division. They're not well-known. But that's how I wanted it. They want to join the first division and they'll work hard to get there. You know how the first division acts. They sit there smoking their pipes and thinking about things. That's OK in other conditions but not now. I'm a man who gets down to resolving problems. I don't ask whether it's the done way or not. I raise issues. People don't always understand my motives. But the president must always have answers and propose his own solutions - he can't allow himself to be taken by surprise. I'm not taking a conventional approach and you should be careful how you assess what I am doing. My role is a fluid one, searching for solutions and forcing people into democracy. Let parliament get angry. Let them rebel. I want to force people to think. I want to provoke them out of the theories of communism. After 50 years of communism you cannot just impose a better system on people. The thing is to provoke them and point them in the right direction. But if there was a threat (to democracy) and events go in a wrong direction then something decisive would have to be done. We won't get to democracy with an apathetic society. People have been fooled by politicians in the past and have to understand what's going on. That's why I provoke them into arguing and thinking. I don't want them sitting on sofas smoking pipes. That's for 50 years' time. Interview by Anthony Robinson, Martin Wolf and Christopher Bobinski 
ID: 3857
HEADLINE: FT  23 APR 91 / Letter: Pensions below 60 still a matter of discretion 
TEXT: Sir, Richard Waters' article on pensions in the Finance Bill ('Revenue paves way for curbs', April 18) gives a strong inference that pension ages below 60 are no longer allowed in any circumstance. The change in clause 33 of the Finance Bill amending allowable retirement ages applies only to schemes approved by the Inland Revenue under mandatory approval. Few occupational schemes are approved under this route. The vast majority, probably more than 99 per cent, are approved under Revenue discretionary approval. The clauses on discretionary approval give the Inland Revenue very wide powers. For instance, in some circumstances for certain occupations, footballers and deep sea divers for example, they have approved pension schemes with normal pension ages considerably below those allowed under mandatory approval. There is nothing in the Finance Bill which changes or restricts such practice. The Inland Revenue is believed to be currently reviewing its discretionary practices. An announcement is now expected in September in the form of the issue of new Inland Revenue Practice Notes. These notes summarise how it exercises its discretion granted to its under the legislation. It could well be that for ordinary schemes under its discretionary powers the Inland Revenue restricts pension ages to the band from age 60 to 75, irrespective of sex. However, until the issue of new Practice Notes or some other announcement, it is not actually known what the Inland Revenue's attitude with regard to pension ages will be for the vast majority of pension schemes. Paul Greenwood, William. M. Mercer Fraser, 44/45 West Street, Chichester, West Sussex 
ID: 3858
HEADLINE: FT  23 APR 91 / Leading Article: The price of British gas 
TEXT: ONE OF the most important moments so far in the short history of regulating Britain's privatised but still over-mighty utilities is almost upon us. British Gas is in the final stages of negotiations with its regulator, the Office of Gas Supply, to determine the formula which will set the prices paid by 17m domestic gas customers from April 1992. The Ofgas review of domestic prices began in June of last year and has been a wide-ranging affair. It needs to be; last year, gas prices went up twice - by 7.5 per cent in March and by between 3.3 and 3.7 per cent in November. These increases were justified under the current formula, which links the price of gas to the retail price index, minus 'x', plus 'y', where 'x' is a 2 per cent efficiency factor and 'y' is the cost to British Gas itself of obtaining raw fuel. It is to be hoped that Ofgas, with the help of two external accountants, is taking a robustly sceptical view of both the 'x' and 'y' factors. Although the British Gas publicity machine has been active in recent months in presenting the results of its own customer surveys, there remains a suspicion that this private sector near-monopoly still needs to shed more than a few pounds in weight. It has not, to take just one example, been driving particularly hard bargains on the pay front. Searching inquiry As for the cost of British Gas's raw materials, there are also good grounds for searching inquiry. The company's dominance of the retail market does not necessarily give it the strongest possible incentive to obtain the lowest cost supplies and there is, at the very least, room to question British Gas's efficiency as an operator of its own gas fields. At the point of privatisation, it was impossible for any outsider to unscramble British Gas's accounts to make a fair judgment on these points. Ofgas will have let down gas customers very badly if it has failed to sort out the figures. Ofgas has also served notice that it intends to reconsider the appropriate return for British Gas, the value of its assets and new ways in which it can be held accountable for standards of service. The next stage of this lengthy process, due in the next week, is that British Gas has to inform Ofgas whether it accepts the regulator's proposed pricing formula. If it does not, the matter is automatically referred to the Monopolies and Mergers Commission for detailed examination. MMC involvement There is a very strong case for MMC involvement, not least because it would expose to public scrutiny the detail of Ofgas's case and British Gas's response. One of the biggest problems caused by the misjudged privatisation of British Gas, which was allowed to keep most of its monopoly power, is that the kind of public disclosure which was to some extent required of a nationalised industry can now be resisted on grounds of commercial confidentiality. As the rules stand, however, British Gas can avoid a bruising run-in with the MMC simply by agreeing to the Ofgas plan. It is to be hoped, in that event, that one element in the Ofgas proposal is that there should be full public exposure of its analysis. There is no point in Ofgas setting itself up as a policeman of the meter man's punctuality if its essential calculations about prices are lost in obscurity. Nor should the politicians who designed the regulatory regime in gas make the mistake of thinking that these are matters of little interest to voters. Energy prices are uncontroversial so long as they are relatively stable. But the new gas price formula will cover the period from 1992 to 1997. It will only take a modest oil and gas price shock in that period to turn the arcane algebra of Ofgas into front page news. Regulating a company as powerful as British Gas is not easy, and so far Ofgas has had only modest success in stimulating competition in the industrial gas market. For domestic customers, Ofgas looks like remaining the only protection against the abuse of monopoly power. That is why its next move on prices needs to be rigorous and visibly so. 
ID: 3859
HEADLINE: FT  23 APR 91 / Observer: Concentrated 
TEXT: After two Finns had been drinking together for three days, one suggested it was time they had something to eat. 'Look', said the other, 'did we come here to drink or talk?' 
ID: 3860
HEADLINE: FT  23 APR 91 / Observer: Hard tug 
TEXT: One person who won't be at today's annual general meeting of National Westminster Bank - although he probably should be - is John Tugwell who has been handed the unhappy job of sorting out NatWest Bancorp. He is the one banker who knows how bad things really are at NatWest's problematic US subsidiary. Then again, since he arrived in New York less than a fortnight ago and only five days before NatWest Bancorp revealed it lost Dollars 191m in the first quarter, perhaps his absence can be excused. Even by US banking standards NatWest Bancorp has been doing pretty badly, and 50-year-old Tugwell says he has been working day and night since he first arrived. He has rented an apartment on Manhattan's East side and is intent on rallying his 7,500 troops by being NatWest's man in the trouble spot. Parachuting Tugwell into the top spot at NatWest Bancorp is a risk both for him and his employer. Having been involved in the 1977-78 acquisition of National Bank of North America, he is closely associated with NatWest's expensive acquisition strategy in the US. With interest rates falling there, the injection of yet more of the parent's capital means Tugwell may be able to stage-manage an impressive turnaround. If he can, then he's well placed to follow in the footsteps of Tom Frost, NatWest's chief executive, who made his name in the US. But if matters take a turn for the worse, Tugwell could face a similar fate to Midland Bank's John Harris. Once viewed as the next chief executive, Harris never recovered from being sent to keep an eye on Midland's disastrous Crocker acquisition in California. Unlike Harris, who had to work alongside a US chief executive, Tugwell has been given sole responsibility for NatWest's US operations. It is make or break time all round. 
ID: 3861
HEADLINE: FT  23 APR 91 / Observer: Nipped in bud 
TEXT: After excellent vintages for three years running, Bordeaux faces a black year in 1991 as a result of a sharp bout of frost over the weekend. In itself, frost is not all that unusual at this time of year. But the attack last Saturday night fell in parts as low as - 7 deg C, and it followed a particularly mild spell which had brought on the vegetation of the vines unexpectedly early. In consequence, the total Bordeaux vintage this year is already expected to drop by around half, from 800m to 400m bottles. Moreover, not merely will the quantity be down, the quality will also be jeopardised. Some vineyards will be much worse hit than the average; the harvest in Medoc may be down by 70 per cent, and the vintage in some individual vineyards in St Emilion, Graves, Entre-Deux-Mers and Pomerol may be completely wiped out. Wine experts, who last year were groping for superlatives to describe the recent run of superb vintages, are now groping for comparisons for an equally disastrous frost. 
ID: 3862
HEADLINE: FT  23 APR 91 / Observer: Programme trade 
TEXT: While Manchester United seek stock-market flotation, Sheffield Wednesday, who beat them in Sunday's Rumbelows League Cup final, might turn to the FT Ordinary index to appreciate just how long it had been since they last won a Wembley final. It was 1935, the year the Ordinary was launched. On Sunday, the index (base 100) stood at 1980.1. We are told that the 1935 Wembley programme cost one old penny. Sunday's cost Pounds 3 - a 720-fold increase. 
ID: 3863
HEADLINE: FT  23 APR 91 / Observer: Wrong signal 
TEXT: There is an awful lot of humbug talked about top executives' pay. Even so the news that Sir Ian MacLaurin, Tesco's retailing superstar, is taking home Pounds 1.5m is bound to raise eyebrows. He is not in the same league as Sir Ralph Halpern, Burton's ex-chief executive, and he has made a lot of money for Tesco shareholders. But the problem with such seemingly massive pay increases today is twofold. They send the wrong sort of signal to a workforce under pressure to squeeze costs. Second, tying management incentive schemes so closely to earnings-per-share growth - perhaps at the expense of balance sheet prudence - can be dangerous. It is time companies spelt out the terms of their executive incentive schemes in the annual report right from the start. Then bonanzas like MacLaurin's would not be such a surprise. 
ID: 3864
HEADLINE: FT  23 APR 91 / Observer: Top of the bill 
TEXT: Forget the opening of Miss Saigon on Broadway. It will be thoroughly upstaged by this year's biggest first night on October 12, bringing the first performance of John Godber's comedy Happy Families at the Caxton Theatre in Grimsby . . . the Questor's in Ealing . . . the Progress, Reading . . . not to mention 47 more. The whole lot are building their autumn season of amateur theatricals around the play, thanks to what used to be called British Telecom which has extended its arts sponsorship into the cut-throat world of amateur dramatics. Sponsors usually avoid amateurs like the plague. But when consultant James Cook proposed the commissioning of a new play for simultaneous performances by the 64-strong Little Theatre Guild, BT saw the PR possibilities. The idea has been taken up by 50 members of the guild, which represents the top league of Britain's 12,000 theatrical groups. In July all the directors involved will gather at the BT Training Centre to be guided by Godber, who has written Happy Families with amateurs in mind - a cast of a dozen, heavily weighted towards women. The event will cost BT around Pounds 50,000, and be repeated in two years time, perhaps with Alan Ayckbourn as the playwright in charge. The sponsor will use the first nights for entertaining customers. You have been warned. 
ID: 3865
HEADLINE: FT  23 APR 91 / Arts: Osud - Semper Opera, Dresden 
TEXT: One's heart goes out to Dresden. With blackened stone ruins still peering out of the rubble in parts of the city centre and socialist architecture dominating the rest, the people now face another form of reconstruction - their economy, their livelihood, their self-esteem. With industry at a standstill, tens of thousands out of work and a growing disillusionment with the promises made at reunification, what priority does music have in people's lives? The city's two main music institutions - the Semper Opera and the Dresden Philharmonic Orchestra  - will survive, but much of the cultural substructure will not. The first night of Osud was less than three-quarters full. That says less about the Dresdeners' lack of curiosity (or about ticket prices, which are still extremely low), than that they have other preoccupations in these hard times. Osud marks the end of an era: it is Joachim Herz's last production in Dresden. He has worked there in comparative obscurity for the past ten years, but his production style and cantankerous personality have made him superfluous to the incoming artistic team led by Christoph Albrecht. Herz's decision to take the Saxon state government to court over the ending of his contract makes a sad spectacle. Osud illustrated two classic traits in postwar German opera production - a natural animation of the stage, releasing the inner impetus of the music, which is Herz's inheritance from Walter Felsenstein; and a congenital tendency to over-interpret. Act one was beautiful. Reinhart Zimmermann's permanent set consisted of a gently stepped wooden platform, which together with Eleonore Kleiber's costumes preserved the period charm of Janacek's setting. Behind lay a wall of large slanted mirrors, reflecting the stations in Zivny's relationship with Mila - the first rapture of eyes meeting, the exchange of roses after one of Zivny's concerts. But the chief distinction lay in Herz's choreography of the spa scenes - the sedate bourgeoisie, the carefree couples, the brood of schoolgirls - so that everyone on stage was an individual, without a trace of the artificial movement that has become synonymous with Herz's successors at the Komische Oper. The domestic setting of Act two was suggested by little more than a settee, a kitchen dresser and a precipitous flight of stairs. Here Herz depicted the interlocking pressures on Zivny - mother-in-law, creative crisis, marriage strains, alcohol problem - through a series of equally convincing vignettes. Having respected Janacek's awkward but viable dramatic outline thus far, Herz then made a complete mess of the final act. Zivny's tortured solos were transposed to the beginning, as he wrestled with skeletons of the past (bombed-out buildings, machine-gunfire and the usual German militaristic cliches) in an attempt to reactivate his creative inspiration. After a shortened conservatoire scene, with Mila reincarnated as the impressionable student Souckova, Zivny ended up in a mental clinic. For anyone who saw the ENO and Dusseldorf stagings in the mid-1980s, both of which were faithful to Janacek's original, Herz's solution was nothing more than a piece of interpretative hack-work. No such reservations about the musical performance, which was consistently inspired. The rhythmic buoyancy and clean, light-fingered articulation of the orchestral playing under Hans Zimmer showed that the Staatskapelle can be as idiomatic in Janacek as they are in Richard Strauss. Zivny was sung by Michael Rabsilber, whose pointed Germanic high tenor and sensitive acting made him a near-ideal interpreter. In spite of being handicapped by dark glasses and a spooky white cape, Kerstin Witt as Mila's mother acted the disintegrating old harridan to the hilt. But the chief glory of the performance lay in Vlatka Orsanic's Mila, a vibrant, radiant soprano who phrased her soaring lines with moving eloquence. 
ID: 3866
HEADLINE: FT  23 APR 91 / Management (The Growing Business): Clubbing together in a local network 
TEXT: Local authorities should be required to assess the economic impact on small and medium-sized businesses of all policy proposals they make. This is one of the recommendations made in a study* of local support networks carried out by accountants Coopers &amp; Lybrand Deloitte and Business in the Community. Councillors and local government officers should be encouraged to think through the impact of their programmes on local firms with the aim of reducing the burden on business. The models for this suggestion are the economic impact assessments required by the European Commission and the UK government on draft legislation. A first step to building a healthy local business environment is to identify key players in the community, the study says. These would include the local council, businesses, the Training and Enterprise Council (Tec), enterprise agencies, chamber of commerce and higher education. These organisations should agree the outline of the future economic development of the area and identify their role in achieving it. Enterprise agencies should be best placed to counsel small businesses; the chamber could provide information on continental European markets; while the local authority economic development unit might have details of sites available. The availability of information about local business support also needs to be improved, the report says. Businesses requiring assistance should be able to get help by making not more than two telephone calls. Many organisations advocate the grouping of different help organisations under one roof but the development of information technology makes this less necessary, the study argues. However, the use of information technology between providers of business support is patchy and compares unfavourably with the systems in use in continental Europe. The study urges better publicity about business support groups through the publication of directories and free magazines. The local authority also has an important role to fulfil in promoting a positive image of the area. As a next step Business in the Community has set up a target team to investigate good practice in other European countries which could be applied in the UK. *Local support for enterprise. Available from Peter Vernon, Coopers &amp; Lybrand Deloitte, Hillgate House, 26 Old Bailey, London EC4M 7LP. Tel 071-583 5000. Free. 
ID: 3867
HEADLINE: FT  23 APR 91 / Management (The Growing Business): Lower overheads and increased productivity: Subcontracting - Charles Batchelor on the benefits of off-site production 
TEXT: Elf Holdings, a Slough-based company which supplies audio equipment to schools, is well into a programme to run down its own manufacturing operations and to subcontract the work to Remploy, which provides manufacturing services to a wide range of businesses. Elf will cease manufacturing at its Brighton factory and hand over responsibility for making products such as cassette recorders and public address systems to Remploy's factory in Islington, north London. Some of the Brighton employees will switch to repair and service work but the overall result will be the loss of 10 jobs, reducing Elf's workforce to 22 people. Chris Crump, managing director of Elf, expects that the move to subcontracting will reduce production costs and relieve it of the burden of coping with an uneven order flow. (Remploy produces for many companies so it can control its own workload.) Elf, which has sales of Pounds 2m, will assemble kits of components and deliver them to Remploy though it may later arrange for its suppliers to deliver directly to the subcontractor. Crump, who joined Elf a year ago to ginger up a flagging performance, says he considered moving production to Slough but this would still have required him to make a judgment on the size of the workforce he would need to meet fluctuating demand. Sourcing products from the Far East was not an option either because schools frequently require modifications to the standard items Elf supplies. The complexity of many products has meant that large companies in areas such as automobile manufacture and engineering have long moved to extensive subcontracting of specialised components. Increasingly, smaller companies are turning to subcontracting, either to reduce the cost of getting started or to bring down the overheads of a long-established activity. Small and medium-sized businesses, those employing fewer than 500 people, account for no less than 82 per cent of Remploy's customers and 61 per cent of its turnover, the company calculates. 'It is even more important for the smaller company, with its limited resources, to focus on certain activities and subcontract out the rest,' says Brian Small, managing director of Ingersoll Engineers, a Rugby-based consultancy. The present recession, which has made companies even more aware of the need to reduce costs, is providing a spur for more businesses to subcontract out parts of their operations. Manufacturing savings, together with reductions in other areas such as premises and stocks can allow businesses to finance the restructuring of their operations from their own resources, says Small. Frequently the crunch comes when a business decides it needs to modernise its production capacity. Gent, a Leicester-based manufacturer of fire detection and alarm equipment, took a hard look at its metal fabrication shop when it was planning a move to a new factory. 'We had lots of ancient small presses and turning machines making rings, contacts, even screws,' says Andrew Robinson, managing director. 'We realised our main strength was electronics so we didn't want dirty, oily activities alongside. In addition our tooling was getting old and it would have taken a big investment to replicate.' Gent, which has sales of Pounds 24m and which forms part of RTZ Corporation, shed most of its metal fabrication activities. The buy-in value of the abandoned components was only Pounds 500,000 a year and the profit improvement was less than Pounds 100,000 but the saving in terms of the 'distraction value' to management of these peripheral activities was significant, Robinson says. But there are further considerable benefits to be gained from buying in or subcontracting parts of a company's activities: Deciding to buy in rather than make can have an important impact on the market-awareness of a company, argues Brian Small. Companies which make a fetish of manufacturing all or most of the components required are less likely to be oriented towards the needs of their customers. Small businesses may be able to improve quality control by handing over responsibility for manufacturing to a large, more sophisticated subcontractor. 'If something goes wrong Remploy's quality control can pick it up,' says Robert Belcher, managing director of Manrose Manufacturing, a supplier of domestic fans. Both Remploy and Manrose's supplier of plastic mouldings have obtained BS5750, the main UK standard for quality control, but Manrose itself has yet to qualify. Increasingly, customers are requiring suppliers to conform to this standard. A subcontractor can help a customer even out uneven order flows and hold-ups in the supply of components. Hayward Tyler Fluid Dynamics, a Luton-based manufacturer of specialised pumps, has subcontracted out fabrication and plating operations accounting for 5-10 per cent of total activities as part of a far-reaching restructuring programme. Hayward Tyler employs 250 people, down from 440, and has sales of Pounds 20m. 'This will give us flexibility,' says Roger Harrop, chief executive of Hayward Tyler and of its parent company, Sterling Fluid Systems. 'It will be easier to switch off a subcontractor than our own people.' The company's plating shop had anyway only been used for three days a month, he adds. Sub-contracting can also improve a company's cash flow. Instead of paying weekly wages to the shop floor workforce the company moves to paying the subcontractor on 30 or 60-day terms. The company can also set the cost of the subcontractor's services immediately against profits whereas investment in capital equipment usually takes place over a number of years. But the decision to subcontract out parts or even all of a business's manufacturing operations can be highly charged. Some companies believe the benefits of subcontracting outweigh the loss of total control of their activities. Others are sensitive about admitting that they are sticking their own label on someone else's product. Production specialists say that before considering whether to buy-in rather than make a particular item managers must decide which activities are core to their company's survival. High value items and products which involve confidential design features and manufacturing techniques should always be made in-house, says James Byers of Ingersoll Engineers. Stock items such as nuts, bolts, bearings and washers, or loss-makers essential to the company's range should be contracted out. In addition, managers must be prepared for a short-term disruption of production when they subcontract work out. 'We had a few teething problems in the first six months,' says Gent's Andrew Robinson. 'It was not easy to get someone else to make items which our own skilled workers had been making for 20 years.' Managers must monitor the relationship with the subcontractor very closely. One start-up business which subcontracted out the plastic injection moulding on which it depended was set back for a year when it was forced to replace a large number of products which customers returned as being faulty. 'We assumed there would be someone at the subcontractor who had an overall view of the project but there wasn't,' says the company's executive director. But the difficulties do not always lie with the subcontractor. Companies are frequently unrealistic in their forecasts of production volumes, says Edward Selby, business manager of Remploy's southern region factories. Managers sometimes misjudge the market for their product but they may also deliberately exaggerate volumes to negotiate a keen price from the subcontractor. Nor is it unknown for managers to order wildly excessive volumes of raw materials. 'If a customer thinks his product will sell for a number of years he buys a massive quantity of raw materials. If a juggernaut pulls up outside your door with three years' worth of materials it is difficult to tell the customer you can't let them in,' Selby explains. Subcontracting should not be seen as an easy way of disposing of the complexities of running a manufacturing operation, the experts warn. But properly handled it can have a significant impact on costs and on the ability of a smaller company to service its customers. 
ID: 3868
HEADLINE: FT  23 APR 91 / Management: The Growing Business - Capitalists go public 
TEXT: BRITISH venture capital companies are increasingly willing to consider making direct investments in small publicly-listed companies, according to UK Venture Capital Journal*. This would mark a significant shift in the industry's traditional role and could confuse investor perceptions of venture capital. The journal signals three reasons for this development: The increasing size of venture capital investments in recent years, in particular the industry's involvement in financing buy-outs, means there would be little difference in scale between the funding needs of quoted and unquoted companies. Thirty four per cent of the 1,700 companies with a full stock market listing are capitalised at less than Pounds 20m while 70 per cent are valued at less than Pounds 100m. There is little difference between the management style of smaller quoted companies and those remaining private. As their portfolios mature more venture capital com-panies have holdings in com-panies which have obtained a listing. Investments in listed companies are potentially attractive because they are more easily disposed of while smaller quoted companies have traditionally outperformed large companies, the journal notes. On the downside venture capitalists might be hard put to explain to their own backers why they should invest in quoted companies by means of a venture capital company when they could invest directly in the stock exchange. The venture capitalist would also have difficulties gaining the same detailed information from a listed company that he demands when making a private company investment. Despite these drawbacks more venture capitalists are inserting discreet clauses in their fund-raising prospectus which would allow them to make direct investments in listed companies, the journal notes. Among recent listed company deals it identifies a Pounds 14.2m investment in Hunter Saphir, a food group, in the form of convertible preference shares, by 3i, County NatWest Ventures and CIN Venture Managers. *12 Barley Mow Passage, London W4 4PH. Tel 081-994 8009. 
ID: 3869
HEADLINE: FT  23 APR 91 / Management In Brief: The Growing Business 
TEXT: The Loan Guarantee Scheme, under which the government guarantees 70 per cent of the value of loans to small businesses unable to provide normal security, is to come under scrutiny. The Department of Employment has commissioned a private consultancy to evaluate the scheme which has backed 27,900 loans worth Pounds 890m since 1981. William Stevens, 26, has been appointed secretary general of the European Venture Capital Association (EVCA), an organisation which promotes the interests of venture capital in Europe. Stevens, a Belgian and a graduate of the European School of Management, has worked at EVCA as project manager since 1989. He replaces Yves Fassin who has held the post for the past three years. A new guide to help businesses which are considering setting up in France and executives who are going to live there has been published by accountants BDO Binder Hamlyn. Doing business in France describes financial and legal implications of running the French branch or subsidiary of a firm based in another country. It covers accounting and audit, foreign investment restrictions and tax. Available from Sally Brunning, BDO Binder Hamlyn, London EC4M 7BH. 54 pages. Free. 
ID: 3870
HEADLINE: FT  23 APR 91 / Technology: Technically Speaking - Software directive makes users losers 
TEXT: Computing policy is undoubtedly too important to be left entirely to the technical experts, but problems arise when officials and politicians try to resolve arguments between differing computer factions without fully understanding the implications of their actions. Look at the current state of affairs resulting from Brussels' seemingly meritorious efforts over the past couple of years to protect suppliers of computer software from piracy, a mess compounded by the peculiar procedural requirements of the European Parliament. To recap briefly. Two years ago, an EC directive was drafted with the aim of harmonising measures to outlaw software piracy across the member states. It specifically forbade unauthorised reverse engineering - analysing a piece of software to understand what its does and how it does it. That proposal was flawed in that while reverse engineering is used by software pirates, it is also a key technology for computer manufacturers. They need to be able to attach their equipment to that of their competitors; computer users have to be able to modify and extend their existing software. It is unlikely the authors of the draft fully understood the implications of their work. The directive suited PC software suppliers and the larger manufacturers - namely IBM and Digital Equipment - but outraged their smaller competitors and customers. The competitors, including Groupe Bull and Olivetti, formed a lobby called the European Committee for Interoperable Systems (ECIS); users formed the Computer Users of Europe. There was a second dimension. IBM and Digital saw the directive as a way of defending their software against the Japanese. The issue became a war or words fought between the US and Japan in the cockpit of Europe. Commissioners in Brussels and Members of the European Parliament in Strasbourg are by now no doubt heartily sick of the issue. They have been lobbied mercilessly by representatives from all sides of the dispute for the past 12 months. A compromise solution or 'Common Position' was reached in December which proved satisfactory to the software suppliers and the big computer manufacturers, but left ECIS together with computer users across Europe concerned about the legitimacy of reverse engineering for maintenance or to facilitate the interconnection of one maker's computer with another. These issues were addressed in a series of amendments which came before the European parliament last week. Some 235 MEPs voted for the amendments, 89 voted against and 197 abstained. But under EC rules a minimum of 260 MEPs have to vote in favour of an issue for it to pass. The directive now goes back to Brussels for final ratification later this year. Some nations - the Netherlands, Italy and Spain among them - are expected to adopt the measures as they stand; France, Germany and the UK will have to modify their existing copyright law. The overall result is that the big manufacturers and the software suppliers seem to have all they wanted; the smaller manufacturers are discontented but prepared to live within the terms of the directive while users are confused and angry. What is now likely to happen is a series of court battles in each member state as users squabble among themselves to define the exact interpretation of the directive with regard to reverse engineering. There is still the possibility that new proposals can be put to the Commission after the effects of the directive have been assessed in practice. Perhaps the commission's own drafting mechanism would benefit from a spot of reverse engineering? 
ID: 3871
HEADLINE: FT  23 APR 91 / Technology: At the sharp end of a supply chain - Dave Madden explains how United Stationers has turned the distribution of its goods into a fine art 
TEXT: Distribution is one of the duller business ghettos - dusty warehouses, broken pallets and diesel oil. But the image, and the reality, are beginning to change. As Fiat shows off its robot-controlled inventory stacks in glossy advertisements and IBM switches off the lights in its automated warehouse in Greenock, it is clear that this Cinderella operation has a new set of high-tech glad rags. Britain's high street retailer Marks and Spencer has long appreciated that sophisticated distribution processes are an important part of supply chain management. They influence customer loyalty, product differentiation and profit margins. According to Lee Iacocca, chairman of Chrysler: 'The company with the best distribution systems and service level will win all the marbles.' In short, advanced logistics is no longer a luxury. One consequence of this shift is the emergence of a new type of wholesale service company where distribution is just as important as the product that is shipped. Take paper clips. If you are an office products wholesaler, how do you get retailers to buy such a simple, undifferentiated item from you, rather than from any number of your competitors? The answer, in the US at least, is 'value-added' distribution. United Stationers, the country's biggest office products distributor, can sell and ship a single pencil or one box of paper clips and still make a profit. The same is true on all 25,000 items in its catalogue, from pens to filing cabinets. And if a customer places an order by 6.00 pm it will be delivered by 9.00 am the next morning to any location in the US. Not surprisingly, this demands an extensive physical operation. United Stationers, based near Chicago, sells products from around 400 manufacturers to some 10,000 retailers across the US, via 14 regional distribution centres. This physical network is entirely dependent on a complex computing and telecommunications infrastructure: Amdahl 5995 and IBM 3090 mainframes supported by robotic storage devices from Storage Technology as well as telephone and satellite communications networks. In all an incremental investment of some Dollars 200m (Pounds 115m). United's customers obtain information on the company's inventory via a computer network which connects their machines to United's system of 1,400 PCs. This automates the ordering process and allows clients to see whether United has a particular product in stock. 'Our customers enter upwards of 70 per cent of our orders for us,' says Patrick Murray, IT vice president. 'We do it in lots of different ways. We talk to everybody's computer. We do it in batch mode, we do it online - however a customer requires it.' Ultimately, Murray expects United's terminals to be on the desks of his customers' customers too, and he intends to apply the same technology to links with his own suppliers. Ordering is only part of the value-added process. The sooner the retailer knows that United has shipped goods, the sooner he can bill his customer and collect his money, says Murray. Similarly United uses the system to get the latest manufacturers' pricing information to these retailers, so that they can manage their prices too. Giving retailers such access to and control over the ordering and inventory process, and the imperative to turn orders around in hours, has had serious implications for United's warehousing operation. Items are not stored in pre-defined areas. Rather, they are put in the next available bin, as dictated by United's disparate product range: boxes of pencils and desks do not take up the same shaped space. The warehouse map is computer-controlled and the system tracks every individual batch of items. Surprisingly, this random binning is not completely arbitrary. The system is able to analyse the inventory and track 'hot' products - high moving items - and guide them to where they are most accessible. When a piece of inventory is manually put into store, staff use radio frequency data entry terminals, complete with bar-coded reading guns, to update the control system directly on line. The logical extension of all this, says Murray, is to use similar tools and the same bar code in the transportation and delivery process so that a driver can verify that the right carton has been dropped at the right door, and give proof of delivery. United hopes to introduce such an innovation this year. The same integrated technology feeds United's sales and marketing effort. Its primary marketing tool is a catalogue of products, and United publishes and distributes some 4m copies a year. But because the catalogue becomes out of date almost immediately after it is issued (with products being added or dropped), Murray has to provide regular updates. He is hoping in the near future, however, to produce an electronic catalogue, with colour pictures, dimension data and moving price information. At the hub of United's operation is a central IT development and operations staff. Typically this is pared to the bone - 40 people to manage data and voice communications, systems operations and a help desk (there is no computer expertise in the regional centres). In addition, Murray has 100 staff in applications development and product introduction. The effect of this technological commitment is two fold, Murray says. First, United has grown significantly - it is now a Dollars 1bn company, and one of just four national office products distributors in the US. Second, its technology culture has enabled United to set pioneering service levels. For example, Murray explains: 'We are doing lots of small orders. About 80 per cent of what we sell is not in the same packaging that it came to us in. We don't sell a whole carton of paper - we'll sell one ream. Now the service we provide for our reseller says you go out to each of your customers and you take the orders the way they want them. 'You send the orders to us and we'll package them in such a way that they can be delivered directly to the end user and you don't have to add labour. When we put the label on the box the label says it came from you not from us. Our dealer doesn't have to handle the merchandise at all. The most profitable dealer is the guy who never sees the merchandise, absolutely never sees it at all.' The downside is that higher expectations become institutionalised. Because United delivers anywhere in the US by the following day, and guarantees to be in stock on all of its inventory, that has become the service norm. Similarly United cannot afford to let up on its technical innovation. Murray claims that the company currently has a lead of six to 12 months, but 'the competition is pretty good at copying - so we better have the next thing coming up to keep the gap open. To get the order we've got to be the easiest company to do business with,' he says. 
ID: 3872
HEADLINE: FT  23 APR 91 / Technology: Digital's load gets lighter 
TEXT: While the price of computers has halved over the past five years, the cost of distributing the finished product has continued to rise. Faced with the need to sell twice as many computers just to maintain revenues, computer companies have begun to focus on how they can reduce the cost of their distribution systems. Digital Equipment, with European sales of Dollars 5.2bn (Pounds 3bn) in 1989/90, has halved its distribution costs over the past five years. One way it has done this is by cutting the computers in stock, down from 12 weeks' supply to three and a half weeks. Further ways of cutting the costs have been created at Digital's European distribution centre in the Netherlands. Staff at the Utrecht centre no longer carry order papers around the warehouse. Instead, the warehouse is served by fork-lift trucks fitted with small keyboards, visual display units and a miniature laser gun for reading barcodes. The day starts with the driver signing on to the computer and taking note of the first instruction of the day. This information consists of a string of numbers which defines the precise location of the computer to be collected, including the aisle, shelf and position of the computer in its box as well as the order for the computers to be stacked, with the most robust equipment at the bottom. When the driver approaches the box he confirms it is the correct one by reading the barcode label on the side with the laser gun. 'The technique eliminates all possibilities for error,' says Co Berendsen, manager of the Utrecht centre. An attempt by a driver to collect the wrong box generates a warning signal and if he ignores this he will not receive instructions for his next collection. Berendsen says that the introduction of radio communications has cut the time taken by the fork lift trucks to do the job by 40 per cent. 'Accuracy has also increased and the trucks no longer do journeys around the warehouse without a load.' 
ID: 3873
HEADLINE: FT  23 APR 91 / Poll on councils 
TEXT: Nine out of ten Conservative MPs would like to see local government move towards a single-tier of councils, according to a poll by Access Opinions, an independent research company. 
ID: 3874
HEADLINE: FT  23 APR 91 / Row over jobs study 
TEXT: MR MICHAEL Howard, em-ployment secretary, yesterday said a study by his department showed Labour's economic policies could cost 2.2m jobs. His figures were dismissed as 'complete nonsense' by Mr Tony Blair, shadow employment secretary. 'It is quite wrong that Department of Employment officials are being used to bolster Conservative Central Office propaganda,' Mr Blair added. 
ID: 3875
HEADLINE: FT  23 APR 91 / Labour plan for details on pollution 
TEXT: A LABOUR government would require industry to give full details of all pollution it emits, Ms Ann Taylor, the party's environment spokesman said yesterday. The flow of information on the environment would also be improved by the setting up of a national inventory of toxic waste emissions. Other proposals included the ending of international trade in toxic waste. Ms Taylor said it was wrong that Britain should be 'a dustbin for other countries'. 
ID: 3876
HEADLINE: FT  23 APR 91 / Parliament and Politics: Tories to direct fire at Labour over-spending: Local Elections 
TEXT: TODAY's expected announce-ment of the proposed replacement for the poll tax will signal a Tory bid to fight the second half of the local election campaign on their own terms - by directing attention at high-spending Labour councils. Foreshadowing the new phase of the campaign, Mr Chris Patten, the Tory party chairman, yesterday launched a document giving examples of Labour 'mismanagement, inefficiency, failure and lunacy', such as the non-collection of council rents, and high levels of debt per head. 'They don't collect the money owed to them, they fritter away funds on pointless projects, and they obstruct competition for local services,' he said. Tomorrow's press conference - only the party's second of the campaign - will see Mr Patten, together with Mr Michael Heseltine, the environment secretary, and Mr Michael Portillo, the local government minister, emphasise the claim: 'Conservative councillors cost you less.' The Tories' determination to put their poll tax troubles behind them was underlined in a speech by Mr John Wakeham, the energy secretary, as he called on the party to unite behind the prime minister and the party's central beliefs. 'The Conservatives united are an almost unbeatable force; the Conservatives disunited are not long off the opposition benches,' he said. Labour, however, remains confident that the method of financing local government will continue to be the main issue in the campaign, and that the government's proposals are still vulnerable. The opposition has changed its earlier tactics of attacking the new charge as the 'son of poll tax'. It has tacitly admitted that the new tax is different by publishing a range of ministerial criticisms of a property tax, to indicate the likely extent of disagreement among Tory MPs over the basis of the system. 'There is root and branch opposition to any form of property tax from the top to the bottom of today's Tory party,' Mr Bryan Gould, shadow environment secretary said yesterday. While Labour officials acknowledge that the party may not be able convincingly to accuse the new charge of being a form of poll tax, they believe it will still be attacked as unfair and too complex. The opposition will point, in particular, to the way in which a banding system will reduce the progressive nature of the tax, the use of capital values alone to determine the band into which property falls and the fact that the single-person discount is not linked to ability to pay. Mr David Blunkett, Labour's local government spokesman, also cast doubt on the trustworthiness of the amounts for projected bills under the new system, claiming they were 'fairy-tale figures'. 
ID: 3877
HEADLINE: FT  23 APR 91 / Silver shines amid antiques-trade recession: Saleroom 
TEXT: ONE market, that for silver, seems to have bucked the recession in the antiques trade. London dealers were busy in New York at the weekend paying extraordinary prices for silver and other ornate works of art. SJ Phillips gave Dollars 159,500 (Pounds 92,544) for a Louis XIV silver pitcher, made by Francois Guillou, which had belonged to Henry Ford II and carried an estimate of just Dollars 25,000. The same dealer paid Dollars 330,000 (estimate Dollars 80,000) for an ornate French silver, gold, and hardstone neo-Gothic clock set with emeralds, made in 1881. Another London dealer, Partridge, secured for Dollars 66,000 an English Victorian parcel gilt 'Gothic' ewer set with enamel and jewels, made in Birmingham in 1855 by John Hardman. In 1983 it was sold for Dollars 5,000. One of the rare private collections of pre-revolution French silver sold for Dollars 2m at Christie's. All the 72 lots found buyers. The collection had been assembled by the late Rodolphe and Williamina Meyer de Schauensee. English furniture was less popular at Sotheby's, and a pair of George III kingwood and satinwood parquetry collector's cabinets of about 1770 sold for Dollars 88,000, below forecast. At Christie's, however, there was a satisfactory price of Dollars 660,000 paid for a George III walnut and parcel gilt secretaire-bookcase made in the mid-18th century. Buying was selective in an auction of Chinese export porcelain and works of art at Christie's in London yesterday. Two large 19th century hand scrolls depicting battle scenes doubled their forecast, selling for Pounds 24,200 to London dealer Sydney Moss. But an interesting punch bowl made in China in the late 18th century was bought in at Pounds 7,000. 
ID: 3878
HEADLINE: FT  23 APR 91 / Names allege that Lloyd's kept them 'in the dark' 
TEXT: A GROUP of Names were kept 'in the dark' about the true state of loss-making Lloyd's syndicates that they backed in the early 1980s, Mr Michael Lyndon-Stanford, QC, alleged yesterday in the High Court in London. Mr Lyndon-Stanford, representing 24 Names on syndicates managed by Oakeley Vaughan Underwriting Agents, now in liquidation, was outlining why the Names are taking action against the Corporation of Lloyd's. Nine other Oakeley Vaughan Names are consenting to the action while 15 more Oakeley Names are involved in supplemental actions. The case, in which the Oakeley Vaughan Names allege that the Corporation of Lloyd's was negligent in failing to supervise the Lloyd's insurance market, was adjourned yesterday until Monday. The delay is necessary to allow the judge, Mr Justice Gatehouse, to study extensive background documentation. The 24 plaintiffs suffered gross losses of more than Pounds 5m as a result of their membership of syndicates 168, 420/423, 551 and 862 in the 1980, 1981 and 1982 underwriting years. Total losses by the 250 or so Names who were members of the syndicates amounted to more than Pounds 30m. The Names are seeking to prove that Lloyd's owes Names a duty of care, and that in failing to supervise the Oakeley Vaughan agency properly, Lloyd's was at least partially responsible for the loss. Mr Lyndon-Stanford said that during 1980 and 1981 the authorities at Lloyd's received information indicating that the Oakeley syndicates were guilty of 'overwriting' - accepting more premiums than allowed according to Lloyd's rules - and also, along with Oakeley's sister broking company, breaching other market regulations. Following subsequent internal investigations, Lloyd's had taken disciplinary measures against a number of insurers linked to the Oakeley Vaughan agency. The Names say Lloyd's had not ensured that Names were informed of the problems. 'Names therefore continued to back Oakeley Vaughan syndicates in ignorance of its real position,' said Mr Lyndon-Stanford. 
ID: 3879
HEADLINE: FT  23 APR 91 / Discrimination decline is seen in Ulster employment 
TEXT: NORTHERN Ireland's new fair-employment laws are beginning to reduce religious discrimination in the workplace, Mr Bob Cooper, chairman of the province's Fair Employment Commission, said yesterday. Mr Cooper's comments followed publication of the commission's first broad religious profile of the Ulster workforce, based on information from all public and private-sector companies employing more than 25 workers. The data cover almost 350,000 people - about two thirds of the province's workforce. The breakdown showed that 61 per cent of those employed were Protestant and 33 per cent Roman Catholic. A further 6 per cent were described by the commission as 'non-determined'. The commission estimates the total working population to be about 62 per cent Protestant and 38 per cent Roman Catholic. Although the figures generally suggest the numbers of Roman Catholics in jobs are almost in line with those available for work, the small percentage variation has a significant difference on unemployment rates. Male Roman Catholics remain twice as likely as Protestants to be unemployed with under-representation and are particularly under-represented in senior positions. Roman Catholics are also under-represented in the public sector, where their they are reluctant to apply for jobs with the security forces. Profile of the Workforce. Fair Employment Commission, Andras House, 60 Great Victoria Street, Belfast, BT2 7BB. Pounds 5. 
ID: 3880
HEADLINE: FT  23 APR 91 / UK News (Employment): PO strike vote 
TEXT: THE UNION of Communication Workers was last night meeting to decide whether to hold a strike ballot following the rejection by the union of a 6.8 per cent pay offer from Post Office to 14,500 counter and clerical staff. 
ID: 3881
HEADLINE: FT  23 APR 91 / UK News (Employment): Tecs anniversary 
TEXT: MR JOHN MAJOR, the prime minister, yesterday hosted a reception for chairmen of Britain's network of Training and Enterprise Councils on the first anniversary of their establishment. 
ID: 3882
HEADLINE: FT  23 APR 91 / UK News (Employment): Police chief to challenge suspension 
TEXT: MISS Alison Halford, assistant chief constable of Merseyside, is launching a legal action challenging her suspension on disciplinary charges. Miss Halford was suspended in December and is to face a disciplinary tribunal for alleged discreditable conduct, neglect of duty and falsehood after the appearance of a Sunday newspaper story. Lawyers acting for Miss Halford are seeking a judicial review asking the High Court to quash her suspension and other decisions taken by the senior officers' discipline committee of the police authority. 
ID: 3883
HEADLINE: FT  23 APR 91 / Noriega order 
TEXT: MR JUSTICE MUMMERY yesterday agreed in the High Court's Chancery Division to continue orders freezing bank accounts in Britain containing money alleged to have been misappropriated from Panama by General Manuel Noriega, its former leader. 
ID: 3884
HEADLINE: FT  23 APR 91 / BBC travel change 
TEXT: MOST OF the BBC's transport services in London are to be contracted out with the loss of 114 staff jobs. More than 40 companies tendered for the contracts which will save the BBC Pounds 500,000 a year. Vehicle maintenance and management car contracts will stay in-house. 
ID: 3885
HEADLINE: FT  23 APR 91 / Teaching standards criticised 
TEXT: ONE IN three primary school pupils is not being taught to read and write properly, the schools' inspectorate said yesterday, writes Andrew Adonis. In a report on the implementation of the national curriculum, the inspectorate spoke of widespread teacher shortages, cramped conditions, few schools with adequate libraries and insufficient instruction in basic reading and writing skills. Only in two thirds of schools was the teaching and learning of English held to be satisfactory. English Key Stage 1, HMI, HMSO Pounds 2.75. 
ID: 3886
HEADLINE: FT  23 APR 91 / FT Law Report: British Gas employees to get inequality compensation 
TEXT: FOSTER AND OTHERS v BRITISH GAS PLC House of Lords (Lord Keith, Lord Templeman, Lord Ackner and Lord Jauncey): April 18 1991 BRITISH GAS is a state controlled statutory body with special monopoly powers for the provision of public services and accordingly, though it is a commercial enterprise, its employees, like public sector employees, can rely directly on the European Community equal treatment Directive when complaining of a discriminatory retirement policy operating before UK enactment of equality legislation. The House of Lords so held when allowing an appeal by Mrs M Foster and five other female employees of British Gas plc (formerly the British Gas Corporation), from a Court of Appeal decision that they were not in a position to seek compensation against British Gas for discrimination on grounds of sex. LORD TEMPLEMAN said that article 5 of the EC equal treatment Directive of February 9 1976, provided that member states of the EC should apply the principle of equal treatment to working conditions, so that 'men and women shall be guaranteed the same conditions without discrimination on grounds of sex'. The UK took the view that the Directive did not render unlawful a rule that men and women must retire at pensionable age, even if that meant that women must retire at 60 whereas men need not retire before 65. In Marshall (1986) QB 401 the European Court of Justice ruled that a general policy of retiring women when they reached pensionable age at 60 and men when they reached pensionable age at 65, was an infringement of the equal treatment Directive. The Court reiterated that a member state which had not adopted measures to give effect to the Directive 'may not plead as against individuals, its own failure to perform the obligations which the Directive entails'. It ruled that where a person involved in legal proceedings was able to rely on a Directive as against the state, he might do so regardless of the capacity in which the state was acting, whether employer or public authority. It said, 'In either case it is necessary to prevent the state from taking advantage of its own failure to comply with Community law.' As a result of Marshall section 2 of the Sex Discrimination Act 1986, which came into force on November 7 1987, rendered unlawful any discrimination by any person against a woman in relation to retirement age, so that the anomaly between employees in the public sector who could rely on the equal treatment Directive, and employees in the private sector who could not, was eliminated. The position remained, however, that a woman in the public sector who was discriminated against by retirement between February 9 1976 and November 7 1987, might be able to obtain compensation for breach of the Directive. British Gas had a policy that women should retire at 60 and men at 65. It infringed the Directive. The appellant employees were compulsorily retired between December 27 1985 and July 22 1986. They claimed compensation for unlawful discrimination. The House of Lords referred to the European Court the question whether British Gas was a body of such a type that the appellants were entitled to rely directly on the Directive. The Court gave its ruling on July 12 1990. By paragraph 22 it said that article 5 (1) of the Directive might be relied on in a claim for damages against 'a body whatever its legal form which has been made responsible, pursuant to a measure adopted by the state, for providing a public service under the control of the state and has for that purpose special powers beyond those which result from the normal rules applicable in relations between individuals'. Accordingly, the question for the House was whether British Gas was such a body. By the 1972 Gas Act, replacing the 1965 Act and repealed by the 1986 Act, the British Gas Corporation was established as a body corporate. The secretary of state was authorised to make regulations with regard to the appointment, tenure and vacation of office by Corporation members. Section 2 provided that it was the Corporation's duty to develop and maintain an efficient and co-ordinated system of gas supply for Great Britain. Thus British Gas was a body which was made responsible pursuant to a measure adopted by the state, for providing a public service. By section 4 the Corporation was directed to report to the minister, who was authorised to give it appropriate directions for securing its efficient management. By section 7 he was authorised to give it general directions as to the exercise and performance of its functions in relation to matters affecting national interest. By section 8 it was ordered to report annually to the minister on the exercise and performance of its functions, policy and programmes. By section 29 of the 1972 Act, 'no person other than the Corporation shall . . . supply gas to any premises except with the consent of the Corporation'. That section conferred on British Gas 'special powers beyond those which result from the normal duties applicable in relations between individuals'. Accordingly, British Gas was a body which was made responsible pursuant to a measure adopted by the state for providing a public service under the control of the state and had, for that purpose, special powers beyond those which resulted from the normal rules applicable in relations between individuals. British Gas could therefore not take advantage of the state's failure to comply with the equal treatment Directive. The appellants' complaints of unlawful discrimination were dismissed by the industrial tribunal and the Court of Appeal on the ground that, for the purposes of the Directive, British Gas was a private individual against whom the Directive could not be enforced. Before the European Court and before the House, British Gas repeated the arguments which had found favour in the courts below. It submitted it was a statutory corporation engaged in commercial activities; it did not perform any of the traditional functions of the state; and it was not the agent of the state. It argued that the European Court could not have intended to made the Directive enforceable against a commercial concern. Those submissions were irrelevant to the tests laid down in the Court's ruling. The sole question were whether British Gas, pursuant to a measure adopted by the state, provided a public service under the control of the state, and exercised special powers. British Gas submitted that the secretary of state did not possess the control contemplated by the Court because it had wide powers in the performance of its functions. It submitted that monopoly in the supply of gas was not a 'special power' contemplated by the Court, and that the Court in its ruling had not clearly provided that nationalised industries carrying out commercial functions were to be regarded as organs of the state. The principle laid down by the European Court was that the state must not be allowed to take advantage of its own failure to comply with EC law. British Gas's policy was no doubt thought to be in its commercial interests. The advantages of that policy would accrue indirectly to the state which provided, through British Gas, a supply of gas for citizens generally and was entitled to surplus revenue. If British Gas were allowed to escape the consequences of an admitted breach of the Directive, the state would be taking advantage of its own failure to comply with EC law. In those circumstances there was no justification for a narrow or strained construction of the Court's ruling. Applying the words of the ruling, the 1972 Act created a body which provided a public service to citizens generally under the control of the state, which could dictate its policies and retain its surplus revenue. British Gas had a special monopoly power created by the legislature. It was therefore a body against which the Directive might be enforced. The appeal was allowed. The proceedings were restored to the industrial tribunal to assess compensation. Their Lordships agreed. For the appellant employees: James Goudie QC and John Cavanagh (Bruce Piper &amp; Co). For British Gas: Michael Beloff QC and Elizabeth Slade (CEH Twiss, British Gas solicitor). 
ID: 3887
HEADLINE: FT  23 APR 91 / Second bidder likely to pull out of ECGD sale 
TEXT: A SECOND company is likely to pull out of the bidding for the short-term credit insurance business of the Export Credits Guarantee Department. Management of Cobac, the private sector Belgian credit insurance company, is to recommend to its board this week that it pulls out. The decision will embarrass the government as it will weaken the field further, just as the controversial privatisation legislation is scheduled to come before the House of Lords. Eagle Star was the first of the six shortlisted bidders to withdraw and another, Sun Alliance, is still considering whether to submit a bid by the April 30 deadline. Mr Jason Hadick, Cobac managing director, said that the move reflected doubts about the availability of re-insurance cover for credits to politically risky developing countries. Whitehall policy on this meant that British exporters 'would be at a structural disadvantage to their competitors'. He added he was 'extremely disappointed' by the move earlier this month by Mr Tim Sainsbury, trade minister, to overthrow an amendment to the privatisation bill which would have required Whitehall to provide political risk re-insurance cover for three years after the privatisation. Without such cover from the government, the newly-privatised ECGD would either have to charge very high premiums or sacrifice its rate of return, he said. Export credit bankers say they expect the bidding to end in a battle between NCM, the Dutch credit insurer, and Trade Indemnity, which dominates the UK domestic credit insurance market. They believe NCM has the edge at present, although Italy's Assicurazioni Generali is understood to have made a forceful sales pitch to ECGD management. Cobac's move comes as major exporters, including Trafalgar House and GEC, are mounting a fresh but discreet campaign to prevent what they see as a concerted effort by the Treasury to withdraw government support for exports to developing countries, including those sold under long-term credit. The business of insuring such credits will remain a government responsibility even after the privatisation of ECGD's short-term business. 
ID: 3888
HEADLINE: FT  23 APR 91 / SIB may trigger investment industry shake-up 
TEXT: A SHAKE-UP of investor-protection organisations and of investment intermediaries may result from a review of investment-product retailing initiated by the Securities and Investments Board, writes Barry Riley. SIB, the chief investment watchdog, yesterday announced that it would work with the Financial Intermediaries, Managers and Brokers' Regulatory Association (Fimbra), the Life Assurance and Unit Trust Regulatory Organisation (Lautro) and other organisations to produce a formal consultative document by the autumn. The investigation of the working of existing rules - which split intermediaries rigidly into independent financial advisers (IFAs) on the one hand and company salesmen or tied agents on the other - has been triggered partly by the mass switch by almost all leading banks and building societies from independent to tied status within the past three years. SIB has been disappointed by results of public opinion surveys that suggest that the public does not understand or care about the differences between IFAs and company salesmen. Also, serious difficulties have been encountered by Fimbra, which oversees IFAs. Membership has been falling sharply, leading to financial problems that have been worsened by the burden of the investors' compensation scheme. SIB has already been requested by the Department of Trade and Industry to investigate disclosure of commissions and other details to investors, following a report by the Office of Fair Trading. IFAs complain that they must disclose much more than company salesmen. As part of its formal review of retail regulation, SIB is inviting submissions from interested parties such as investors' representatives, although it says it wants to discuss the overall framework rather than address individual points of grievance. 
ID: 3889
HEADLINE: FT  23 APR 91 / Pakistan renews drive for economic liberalisation 
TEXT: PAKISTAN yesterday announced more steps in its programme of economic liberalisation aimed at scrapping government controls and launching a drive towards privatisation, Farhan Bokhari reports from Islamabad. Mr Shujaat Hussain, industries minister, said foreign businessmen no longer needed to seek permits to work in Pakistan. They would only need an ordinary visa. Mr Malik Naeem, commerce minister, announced a new export policy, with fresh incentives for Pakistani businessmen. To boost exports, the government would provide two-thirds of the cost of setting up new institutions for improving workers' training, if business associations paid the rest. A new export-import bank providing specialised help for Pakistani exporters was announced. A marketing promotion programme would begin soon to train trade attaches serving abroad. Officials say the government intends to sell off at least one-third of Pakistan's 150-strong public-sector units by the end of this year. The exports drive is aimed at ending Pakistan's Dollars 2bn annual trade deficit. 
ID: 3890
HEADLINE: FT  23 APR 91 / Earth Day brings criticism of progress on environment laws 
TEXT: MILLIONS of Americans celebrated Earth Day yesterday amid concern about political stalemate over environmental legislation. Two controversial laws are due for renewal this year: the Resource Conservation and Recovery Act, the federal law governing disposal and management of hazardous wastes, and the Clean Air Act. Environmentalists say the outlook for both is dim, thanks to lack of leadership by the White House and in Congress. Mr Jim Middaugh, spokesman for the Environmental Defence Fund, said bills to renew and strengthen both acts were plagued more by regional disagreement than by partisan differences. In the case of the waste disposal legislation, those states with large tracts of surplus land were concerned about becoming dumping sites for those with little free land and high populations. No consensus has emerged about incineration methods. 'Do you incinerate or do you prevent production?' Mr Middaugh said. 'Some want recycling, some want wastes burned as fuels, some want that prohibited. Environmentalists generally want to see a reduction in the process of materials that create hazardous wastes.' On the Clean Water Act, there are disputes between those who want to develop stricter standards and those municipalities desperately in needs of federal funds to meet current standards. Growth plans of some cities are being limited by disputes over sewage treatment. Little progress is also expected on energy conservation measures, despite a study published by the National Academy of Sciences this month demanding action to combat the 'greenhouse effect'. The academy's recommendations included: tax incentives or regulation to achieve a 30 per cent increase in car fuel efficiency; use of new fluorescent bulbs to reduce the power used in lighting by 50 per cent; more efficient motors to reduce industrial energy demand; tougher standards for appliances; and a restructuring of energy prices to reflect their costs to the environment. The administration responded by restating its opposition to energy taxes and to more stringent federal efficiency standards. 
ID: 3891
HEADLINE: FT  23 APR 91 / Farm deal upsets Falklanders: Is the unloved FIC being paid too much? John Barham reports 
TEXT: WHEN the Falkland Islands government announced on April 6 that it planned to buy out the last big absentee landowner left on the islands, it probably expected the deal to be received as a triumph of local power over the unloved Falkland Islands Company (FIC). However, opposition to the sale quickly began to grow as purchase terms for the four FIC farms emerged. Less than a week after the announcement, a straw poll by the local radio station found that 36 of the 50 people questioned rejected the deal. The government has agreed to pay Pounds 4.85m for the farms, which cover 974,000 acres of prime land in the southern half of East Falkland. Other payments raise the net price to Pounds 5m, or 13 per cent of government revenues. Most critics focus on the price FIC won for the farms. Mr Bill Luxton, a councillor who bitterly opposes the acquisition, said: 'It's not the concept that is wrong. I'm all for getting the land out of the hands of FIC.' But he argues that the farms and their 200,000 sheep have been grossly overvalued, claiming that the Falklands have handed Anglo United, FIC's troubled parent company, a Pounds 3m 'donation'. Mr Gerard Robson, one of the councillors who negotiated with Anglo, conceded that 'with the present state of wool prices you can't argue that this is a brilliant deal.' The farms' only significant product is wool. Wool prices have crashed to a 50-year low and no farmer is making money. So the Falklands should have received a discount from FIC instead of paying a premium. However, FIC says it had another potential buyer who had offered as much as Pounds 6m for the farms. Officials admit that covering losses at the farms, which produced 29 per cent of last year's wool output of 2,591 tonnes, will raise the acquisition price to Pounds 8m over the next three years. Mr Derek Howatt, chief financial officer, says the purchase may push the government into an operating deficit this year. Still, the legislative council is unlikely to reject the sale. Mr Robson, like most councillors, says it is worth paying a premium to wrest control of the islands' economy from FIC, which, established by royal charter in 1852, wielded almost feudal powers in the Falklands until the 1970s. Naturally, many people are questioning the wisdom of making the government a big landowner at a time when state economic intervention is being rolled back all over the world. However, Mr Ronald Sampson, the government chief executive, says: 'We will take a very hard commercial line in running the business. But we will not announce redundancies in the medium term. If (the farms) have no long term future they will be allowed to go to the wall.' The government can also be criticised for failing to loosen FIC's grip over the islands' economy. Its shipping, retail and service operations remain intact. These sectors are probably the most lucrative part of FIC's operation. Although Anglo United refused a government offer to buy FIC outright, it decided to give the government 'for no consideration' a half-share in its subsidiary Darwin Shipping. Darwin is a charter company that handles nearly all the islands' foreign trade. By making the government a partner, FIC probably expects it will be less anxious to break its oligopoly. Strangely, the sale has highlighted the islanders' lack of self-confidence. The Falklands remain very much a colony with appointed officials such as Mr Sampson running local government. All big decisions must first be approved in London, sometimes at cabinet level. British officials say in private that the islanders often fail to grasp complex issues, such as the land deal, fully. For their part, islanders fear that the British government subordinates their interests to its own political aims. Conspiracy theorists suspect that obscure geopolitical or vested interests were the 'real' reason behind the land sale. They say the government was suspiciously quick to accept a sale that may not be in the islands' best interests. The Falklands have grown rich quickly through the sale of fishing licences. This year licences will raise Pounds 23.7m for the treasury. The government had earlier convinced the islanders to save as much of the windfall as possible. But now it has agreed to a deal that will cost this year's budget surplus. Mr Ray Evans, a farmer, says: 'If they could only give a solid reason for paying such a high price, it would calm a lot of people.' But Mr Rodney Lee, once a farm hand and now the owner of a successful sheep farm, summarises the islanders' dilemma: 'I've done a lot of bowing and scraping in my time. We have been dictated to all our lives. All that ended after the (1982 Argentine) invasion. But we don't have many local people who are qualified to take complex decisions.' 
ID: 3892
HEADLINE: FT  23 APR 91 / Congress looks into Sununu's travels 
TEXT: THE US General Accounting Office, the investigative arm of Congress, has begun an inquiry into the dozens of trips taken by Mr John Sununu, the White House chief of staff, using military aircraft for what may have been personal and political purposes. The investigation was requested by Congressman John Conyers, chairman of the House government operations committee. The Michigan Democrat lost no time in pouncing on the opportunity to discredit Mr Sununu, who is heartily disliked by many congressional Democrats. An account of Mr Sununu's trips was given in the Sunday editions of the Washington Post and US News and World Report magazine. The Post said Mr Sununu had taken more than 60 trips in the past two years which included visits to New Hampshire, his home state, and to Colorado ski resorts. Mr Sununu reimbursed the government for the trips at the rate it would have cost him to fly commercially. However, his use of military aircraft costs thousands of dollars more. On one trip, to Aspen, Colorado, he reimbursed the government Dollars 1,076 (Pounds 601). However, according to the Post, the cost to the Air Force was more than Dollars 30,000. Administration officials rushed to Mr Sununu's defence, portraying the use of military aircraft as necessary so that the chief of staff could maintain constant communications with the president. 
ID: 3893
HEADLINE: FT  23 APR 91 / Taiwan moves to end 'state of war' 
TEXT: TAIWAN'S National Assembly yesterday rapidly finished revising the constitution to end a state of war with China that has lasted for 43 years - in the absence of opposition and independent delegates who walked out in protest. Chiang Kai-shek's nationalist Chinese government suspended the constitution with additional emergency clauses, and declared a 'Period of Communist Rebellion' just before it was driven to Taiwan by Mao's Communist forces in 1949. The removal of the clauses allows President Lee Teng-hui to end the period of 'Communist Rebellion' in early May and usher in a new era of constitutional democracy for Taiwan. Taipei hopes it also signals the start of a new relationship with the communists in Peking, from whom it is expecting a positive response. Both governments still staunchly claim sovereignty over all of China including Taiwan, but a rapprochement of some sort has been forced upon them by growing interchange between their peoples in recent years. The opposition Democratic Progressive party and a number of other groups oppose the National Assembly's adoption of a constitutional reform package that allows the president to keep emergency powers. 
ID: 3894
HEADLINE: FT  23 APR 91 / Kuwaiti politics shows dark side 
TEXT: THE LIGHTS may be on again in Kuwait City, but not, it seems, for the fledgling opposition parties. Their attempt yesterday to hold a press conference to comment on the composition of the new government, just hours before the visit of Mr James Baker, US secretary of state, left everyone literally in the dark as the plug was pulled on the lighting system of the ballroom at the International Hotel. 'Things are really going to get hot here now. We can already see what this new government is going to be like,' said one opposition leader as his colleagues, journalists, television crews, the hotel management - and the wife of a US senator, dressed in medical garb - milled in confusion around the ballroom. The seven main opposition groups had called their press conference for 10am. The management of the hotel then claimed that no booking had been made, therefore no press conference could be held. On to the scene came Mrs Cindy McCain, whose every second sentence reminded the listener that her husband is Senator John McCain (Republican, Arizona). Senator McCain's political career has, apparently, not been prospering of late. Mrs McCain was also due to give a press conference in the ballroom about the work of her American Voluntary Medical Team, which she founded five years ago and which explained her attire. Sadly for Mrs McCain, who travels with her own television team, she failed to grasp the attention of the audience, and, after a few minutes, offered to donate the rest of her allotted time to the gentlemen from the opposition. At this point, the hotel management had to come clean. There was not going to be an opposition press conference in the hotel now, or perhaps at any time. To emphasise the point, the ballroom was plunged into darkness. Questions about the origin of the order met no response. 'It's obvious what is behind this,' said Dr Sami al-Katrash, an economist from the University of Kuwait, carefully avoiding greater precision. Mr Mohammed al-Kabiri, a former ambassador who in the last eight months had the unusual distinction of being jailed in Kuwait by both his own government and Iraq, was less cautious. As the press conference informally reassembled in the open air, Mr al-Kabiri said the newly constituted government was not representative of anyone. The occupation and liberation of Kuwait had changed nothing, he asserted, except that the opposition was now stronger and was determined to see the introduction of democracy, especially freedom of speech. 
ID: 3895
HEADLINE: FT  23 APR 91 / Hong Kong stumbles badly in its battle of wills with China: Peking is out-manoeuvring colonial officials over the contentious issue of who will control a proposed Pounds 7bn airport, reports John Elliott 
TEXT: HONG KONG is losing on points in a tense diplomatic battle with China over plans to build a HKDollars 100bn (Pounds 7bn) international airport, which Peking is refusing to back until it has achieved extensive control over the project. The British colony is not prepared to concede such control before it returns to Chinese sovereignty in 1997 and it is threatening to shelve the project indefinitely. This is creating uncertainty which is knocking business confidence - yesterday the local stock market plummeted by 2.32 per cent, the biggest fall since the start of the Gulf conflict last August. Hong Kong's colonial government has also lost points recently to China on three other occasions while trying to defend its constitutional rights. The latest occurred yesterday when Mr Gordon Wu, a prominent construction entrepreneur, was invited to Peking for talks on plans drawn up by a group of Hong Kong Chinese property developers to take over the project and finance it themselves for about HKDollars 60bn. Mr Wu's ace card would be to suggest to China that he and the other developers could build the airport rapidly after 1997 if Hong Kong refuses to come to terms in the next few weeks. Infuriated Hong Kong government officials see this as a spoiling tactic at a time when they are trying to persuade China to come to terms. Another loss on points came last week after Hong Kong refused to publicise details of its options for the project, despite considerable local pressure. Top Peking officials provocatively said that they were willing to publish their ideas as soon as Hong Kong agreed, so that local people could judge which alternative they prefer. This led to an outspoken debate in the colony's Legislative Council last Wednesday when legislators turned on Britain and Hong Kong, not China. But perhaps most humiliating of all was a lecture read to Hong Kong officials recently by China about fiscal discipline, control of public borrowings, and maintenance of fiscal reserves. This was not a new line, because China has been arguing that the airport project will drain reserves and weaken the economy before 1997. The humiliation arose because the Chinese, who are not themselves renowned for strong fiscal discipline, read the lecture from Hong Kong's 1979 budget speech delivered by Sir Philip Haddon-Cave, the then powerful financial secretary. The inference was that, in order to build a massive British memorial to over 150 years of colonial rule, Hong Kong's current top officials had over-ridden the strict financial ethics on which the colony had thrived. China acknowledges a new airport is needed to replace existing congested facilities. But it has been objecting to the plans since late 1989, initially for a mixture of political and economic reasons. Now it is seeking a continuing say on the project - for example the right to examine financial borrowing and contract decisions - in addition to having seats on an airport authority board. 'It wants control,' says a senior official. Hong Kong says it is only prepared to consult China. It argues that any further consensus-seeking measures would slow the project and establish a precedent for China to gain virtual control of other medium- and long-term economic and fiscal decisions before 1997. Hong Kong's aim now is to persuade China that it is not bluffing when it says that it would prefer to shelve (or effectively cancel) the project and expand its existing Kai Tak airport. This refusal to give Peking a precedent for control is backed by Mr Douglas Hurd, the British foreign secretary, who failed to reach agreement during a recent visit to Peking and who would have to sanction any final breakdown with the Chinese. The airport is now estimated to cost HKDollars 100bn at 1990 prices and is the world's largest new infrastructure project apart from Gulf reconstruction. Officials had hoped the private sector would finance 40 to 60 per cent of the HKDollars 127bn plans (at 1988 prices) originally announced in 1989, which included linked port developments to be carried out later. Recently it has emerged that the expected private sector element has dropped to only about 25 per cent of the HKDollars 100bn - including bonds, loans, equity stakes and franchises for parts of the airport. But whatever the percentage, the government now believes that China's support is essential. It fears China would attack the project if there were no agreement and that this would scare off financial backers because franchise periods and debt repayments would not start before 1997. It might even deter six pre-qualified international construction consortia which are now waiting to be invited to submit tenders for the Lantau Fixed Link. Business confidence, on which Hong Kong depends, would slump. Politics apart, Hong Kong could build the airport without the private sector. It has HKDollars 75bn of basic fiscal reserves, plus an Exchange Fund which has a secret amount of accumulated investment earnings, believed to be about HKDollars 50bn-70bn (in addition to HKDollars 40bn needed to prop up the currency and about HKDollars 60bn transferred temporarily as investments from the fiscal reserves). Most of the Exchange Fund earnings could be used for the airport, but the government does not regard this as a viable option because it would be strenuously opposed by China and, possibly, by Hong Kong people. So the future of the project before 1997 depends on agreement with China. This is a dramatic turnround from two years ago, when Hong Kong saw no need even to consult Peking fully on the plans. As late as last year top officials were saying they would go ahead on their own if China did not fall into line, using public sources for the bulk of the funds. Hong Kong is learning painfully about China's determination to protect its inheritence over the final six years of British rule. 
ID: 3896
HEADLINE: FT  23 APR 91 / Saddam seeks policy to partner brute force 
TEXT: THE Iraqi government's decision to launch negotiations with Kurdish opposition leaders is the latest sign that President Saddam Hussein is attempting to remain in power by means of political flexibility as well as brute force. It might be going too far to suggest that President Saddam, who has just deployed his security forces to crush Kurdish and Shia Moslem rebellions in the north and south of the country, is in a conciliatory mood. But the Ba'athist leadership, weakened by the allies' crushing victory over the Iraqi army in Kuwait, is desperate to secure popular support by implementing - or appearing to implement - a programme of liberalisation. It is almost as if Mr Saddam has been studying recent events in the former communist dictatorships of eastern Europe; he is trying to tinker with the old system without allowing it to collapse. Even those Iraqis who supported the government are now aware that three decades of Ba'athist rule has suppressed rather than resolved the sectarian and ethnic problems of Iraq. The appointment of Mr Saadoun Hammadi, a Shia Moslem, to the post of prime minister (previously occupied by Mr Saddam) is one of the most visible signs of the new mood in Baghdad. For the first time someone other than the president has been allowed to assume a high profile, with Mr Hammadi addressing the people and announcing plans for political reform and economic liberalisation. Iraqis, however, believe this is partly to deflect domestic and international attention from the unprepossessing personality of Mr Saddam until the pressure eases. With the president portrayed for the time being as a symbolic figure, any policy disasters can be laid at the door of Mr Hammadi. Iraqi newspapers, closely controlled by the state, are even allowed to criticise Mr Hammadi and for the first time in recent memory cartoons of a senior official have appeared in the newspapers. Al-Qadisiya, the Defence Ministry newspaper, led the way with a half-page of satire in which cartoonists reminded Mr Hammadi of the shortcomings of the system. Ordinary Iraqis, even some Ba'athists, remain very sceptical about the ability of the regime to change. Post-defeat calls for radical reform have been replaced by a sense of helplessness and despair. From the Kurdish north to the predominantly Shia Moslem south people feel that they have no control over their own lives after the destruction of much of their infrastructure by the allies and the crushing of the internal uprisings across the country. Those Kurds trickling back to their homes in Kirkuk and Suleimaniya do not hide their sympathy for the opposition or their fear of the government. Journalists who went on government-organised trips to the holy Shia cities of Najaf and Kerbala in the south were confronted by the defiant stares of local men and women. Damage in the south is much more serious than in the Kurdish north. Even in Baghdad there are indications that the army's suppression of the rebellion has provoked militant feelings among Shia intellectuals. The prospect of anarchy in a fragmented Iraq and the unconvincing political performance of the multi-party Iraqi opposition has done something - in Baghdad at least - to persuade people to give the government's much-heralded reforms a chance to work. Kurdish leaders themselves are reluctantly talking to the government despite what they regard as previous betrayals, although they are insisting on international guarantees for any autonomy plan accepted by the regime. Many Iraqis, however, fear that President Saddam will backtrack as soon as he feels that his grip on the country is secure. He has pledged in a number of speeches that the process of reform is irreversible, but Iraqis say he has a long way to go before they will take him at his word. 
ID: 3897
HEADLINE: FT  23 APR 91 / S Korea's industry giants pick their core businesses 
TEXT: MOST OF South Korea's largest chaebol, the highly diversified conglomerates which dominate the country's economy, have selected the three subsidiaries which they will develop as core businesses under a government plan to increase industrial specialisation and international competitiveness. In submissions to the Office of Bank Supervision and Exchange - the government banking watchdog - which were released yesterday, all but six of the conglomerates nominated their three 'core' business groups. The selected subsidiaries will be freed from restrictions on bank lending which were imposed on the chaebol in 1984 and which were aimed at limiting economic concentration. The six which have not yet selected core businesses have had the deadline extended from last weekend until the end of this month. The selections have raised concerns about overlapping investments and fierce competition in several industrial sectors. Many of the chaebol have chosen subsidiaries from the same industries for specialisation. Twelve of the 30 conglomerates, for example, have selected petrochemicals. Cars and electronics were also common choices. The new policy, which will be implemented from June 1, is intended to increase specialisation among Korea's business giants by providing credit incentives to concentrate on a smaller number of activities. The government argues that more focused investment in technology and productivity is needed to increase Korean competitiveness in international markets. Chaebol subsidiary companies other than the three selected will see existing credit controls tightened. The Ministry of Finance said the government was deciding how to apply the squeeze. While the chaebol oppose the existing policy of credit constraints, they have strongly criticised the government's moves to make them specialise. A statement by the Federation of Korean Industry, which represents the large business groups, compared the new policy to a lottery. Most industry observers believe it will be difficult for the government to enforce the policy and, in particular,to prevent funds flowing from selected group companies to other subsidiaries. There were few surprises in the subsidiaries selected by the various companies. Samsung Group, the largest of the conglomerates, which last year recorded sales of Dollars 43.4bn (Pounds 24.2bn), selected Samsung Electronics, Samsung Shipbuilding and Heavy Industries and Samsung General Chemical as its core businesses. Hyundai Group, the second biggest conglomerate, and Lucky Goldstar, the third biggest, also selected petrochemicals as one of their choices. Daewoo Group, the fourth largest chaebol, did not select Daewoo Motors, its 50-50 joint venture with General Motors of the US. But it did select Daewoo Shipbuilding and Heavy machinery, which will soon start to manufacture mini-cars. As well as free access to bank credit, the companies chosen will have restrictions on real estate purchases lifted. ----------------------------------------------------------------------- TEN BIGGEST GROUPS AND THEIR SELECTED COMPANIES ----------------------------------------------------------------------- Group                  Selected subsidiaries ----------------------------------------------------------------------- 1. Samsung                 Samsung Shipbuilding &amp; Heavy Industries Samsung Electronics Samsung General Chemical ----------------------------------------------------------------------- 2. Hyundai                 Hyundai Motors Hyundai Petrochemical Hyundai Precision Industries (Shipbuilding) ----------------------------------------------------------------------- 3. Lucky Goldstar          Lucky Ltd. (petrochemicals) Goldstar (electronics) Goldstar Electron Devices ----------------------------------------------------------------------- 4. Daewoo                  Daewoo Corporation (textiles, construction trading) Daewoo Electronics Daewoo Shipbuilding ----------------------------------------------------------------------- 5. Sunkyong                Yukong (oil refining) SKI (textiles) SKC (audio and video tapes) ----------------------------------------------------------------------- 6. Ssangyong               Ssangyong Cement Ssangyong Oil Refinery Ssangyong Motors ----------------------------------------------------------------------- 7. Hanjin                  Korean Airlines Hanil Development (construction) Hanjin Shipping ----------------------------------------------------------------------- 8. Hyosung                 Tongyang Nylon Hyosung Heavy Industries Hyosung Corporation (trading) ----------------------------------------------------------------------- 9. Korea Explosives        Korea Explosives (chemicals) Kyungin Energy (oil refining) Hanyang Chemical ----------------------------------------------------------------------- 10. Kia                     Asia Motors Kia Machine Tool Kia Steel ----------------------------------------------------------------------- Source: Office of Bank Supervision and Examination ----------------------------------------------------------------------- 
ID: 3898
HEADLINE: FT  23 APR 91 / Danube hydro plan talks get nowhere 
TEXT: HUNGARY yesterday attacked a Slovak plan to divert the Danube river, accusing it of breaking international law, after talks about the controversial hydro-electric project broke up in disagreement, writes Nicholas Denton in Budapest. Slovakia appeared determined to continue with the Bos-Nagymaros project, despite Hungary's opposition. Mr Vladimir Meciar, the Slovakian Prime Minister, even made a veiled threat to complete construction within Slovakia's own territory, according to Hungarian officials. 'It would infringe the integrity of Hungarian territory,' an official said of a Slovak scheme to divert the Danube. Mr Meciar refused to rule it out as one way of circumventing Hungarian opposition. 'Slovakia will not give up its intention to continue construction,' he said. Digging a new channel was one of nine possibilities being considered. Hungarian public opinion is so concerned about the environmental consequences of Bos-Nagymaros that the issue was at the centre of opposition to the country's former Communist regime. Slovakia, on the other hand, has done 90 per cent of the work on its side of the river. 
ID: 3899
HEADLINE: FT  23 APR 91 / Chevenement plans political come-back 
TEXT: THE enfant terrible of the French Socialist Party, Mr Jean-Pierre Chevenement, who resigned earlier this year as defence minister in protest against the Gulf war, is planning a come-back to national politics and shows every sign of intending to live up to his reputation. Yesterday he announced that he would be standing for parliament again, in a by-election in his old Belfort constituency, which is being voluntarily vacated by one of his loyal followers, Mrs Gilberte Marin-Moskovitz. Under the French system, a politician who becomes a minister automatically surrenders his parliamentary seat, and it is then filled by the next person on his electoral list. Only the generosity of his successor, as in this case, allows him a chance of recapturing it. Despite Mr Chevenement's resistance to official policy during the Gulf crisis, the Socialist party spokesman yesterday said that it would support his campaign. 
ID: 3900
HEADLINE: FT  23 APR 91 / Yugoslav industrial output tumbles 
TEXT: INDUSTRIAL production in Yugoslavia fell just over 23 per cent last month compared with a year earlier. Croatia, the independence-minded western republic, was hardest hit ; its output fell by 29 per cent. The three-month figure for the predominantly ethnic Albanian province of Kosovo was 31.2 per cent below that for the same period last year. The republics of Serbia, Croatia and Slovenia are all resisting the market reforms proposed by Mr Ante Markovic, the prime minister. These reforms call for the total overhaul of the country's financial and banking system and introduction of a restrictive monetary policy. The programme aims to break the hold over the economy of local political authorities. Mr Markovic criticised the republics sharply last week for sabotaging his plans and he appealed to the federal parliament to back the reforms in the 'transitional period' while the country's leaders sought a resolution to the political crisis. He said Dollars 5bn-Dollars 6bn in loans from the International Monetary Fund and western banks depended on the republics' compliance with the programme. Yugoslavia's foreign debt totals Dollars 16.1bn and its trade deficit is more than Dollars 4.5bn. In his address to parliament, Mr Markovic announced a 30 per cent devaluation of the dinar. He also outlined plans for restructuring the banking system and the privatisation of state enterprises which the governments of the republics have brought to a standstill. Mr Markovic this week faces a battle in parliament for the approval of his economic reforms. 
ID: 3901
HEADLINE: FT  23 APR 91 / Poll puts fate of Chancellor in question 
TEXT: SUNDAY'S Social Democrat victory in a key German state election, giving the party control of the Bundesrat, the upper house of parliament, is certain to strengthen the trend towards co-operation between government and opposition. For the first since the process of German re-unification began it has also placed a question-mark over the future of Chancellor Helmut Kohl himself. Mr Kohl admitted yesterday that the loss of Rhineland-Palatinate, his home state, was a 'bitter defeat' but said that his government could not duck unpopular decisions. He added the Social Democrats would now enjoy 'a new dimension of responsibility' but stressed there would be no strategy change in Bonn and that he was not considering early retirement. Mr Kohl, echoed by other leading members of the ruling Christian Democratic party, did say, however, that the generation change at the top of the party had to be speeded up. Mr Theo Waigel, head of the CDU's sister party, the Christian Social Union, called the result a 'disaster'. Mrs Anke Fuchs, SPD general secretary, said that Mr Kohl was politically exhausted and had sunk to the level of unpopularity of 1989 before being saved by German unity 'which he manipulated for electoral ends'. However, despite the boost to the SPD, the party has still to find a convincing leadership team, and as it gets drawn into accepting more responsibility for national politics will find it more difficult to score points at Bonn's expense. In national opinion polls the centre-right coalition continues to comfortably lead the SPD. In the Rhineland-Palatinate itself the SPD will negotiate first with the liberal Free Democrats, also coalition partners in Bonn, but may following Hesse and Lower Saxony with a 'red-green' coalition. In Bonn the SPD will use its blocking power in the Bundesrat to stop the coalition's plans to abolish two local taxes mainly levied on companies. 
ID: 3902
HEADLINE: FT  23 APR 91 / Meciar may lose job as Slovakia's premier 
TEXT: MR VLADIMIR MECIAR, Slovakia's controversial prime minister, could lose his job after forming a break-away populist political movement. His Public Against Violence (PAV) party and the Christian Democratic Movement (CDM) are now negotiating to form a new coalition government in Bratislava, the Slovak capital. Mr Jan Carnogursky, CDM's leader and currently deputy prime minister, is widely favoured to succeed Mr Meciar. Earlier this month, the volatile Mr Meciar antagonised his party's leadership by forming a rival wing called PAV-Platform for Democratic Slovakia. He also aroused suspicion in the federal capital, Prague, by holding talks in Moscow with the Soviet military about resuming arms production at workless Slovak weapons factories. He is now expected to split formally with PAV at its congress later this month and set up a new party. While Mr Meciar is mistrusted by leaders of the PAV, whose ratings have plummeted in recent opinion polls, but is very popular with ordinary Slovaks. President Vaclav Havel has called for a referendum in the Slovak and Czech Republics on the emotive issue of independence for the former. Parliament is expected to adopt the proposal shortly and the referendum could be held this summer. 
ID: 3903
HEADLINE: FT  23 APR 91 / World News in Brief: Abortion pill scare 
TEXT: France has banned women who smoke heavily or are aged over 35 from taking its controversial RU 486 abortion pill. The health ministry announced the decision after a 31-year-old woman who smoked heavily died of a heart attack earlier this month following treatment with RU 486. 
ID: 3904
HEADLINE: FT  23 APR 91 / World News in Brief: Gamekeeper caught 
TEXT: A former prisons minister in the Australian state of Queensland found himself on the other side of the bars when he was jailed for a year for fiddling expenses. 
ID: 3905
HEADLINE: FT  23 APR 91 / World News in Brief: ANC warns on sanctions 
TEXT: African National Congress deputy president Nelson Mandela said security forces were conniving in South African violence and urged foreign governments to consult blacks before lifting sanctions. Meanwhile, the ANC said it planned mass protests against plans to grant the freedom of Johannesburg to former British prime minister Margaret Thatcher. 
ID: 3906
HEADLINE: FT  23 APR 91 / Survey of The Computer Industry (33): Reaching a far wider audience - Object Oriented Programming 
TEXT: THE computer industry throws up new jargon with monotonous regularity and nowhere is this more true than in the software sector. Software developers appear to adore arcane language and have produced a succession of intriguing, high-sounding phrases to describe the artefacts they create. Non-procedural programming languages, life-cycle management, user-friendly systems and relational databases are examples from the last decade. The start of the 1990s has seen the arrival of another: object-oriented. Its main virtue for the marketing department is its universality. It can be applied to virtually every facet of software. In the last couple of years databases, languages, design methods and systems architectures have all become object-oriented. However, behind the awkward American-English (it should, of course, be object-orientated), there is a serious intent. Object-oriented design suddenly achieved a higher level of legitimacy when, last month, the important US software company Microsoft announced its membership of the Object Management Group (OMG), an industry group founded to promote object-oriented standards. IBM is expected to follow and OMG can now boast all of the prime movers in software technology as its members. OMG was founded in 1989 by a group of companies who wanted to push the object-oriented approach into the limelight and supervise the creation of common standards. Membership has tripled in the last year and now numbers over 100. Although OMG is primarily a technical body, it will exert a crucial influence over the design of future computer systems. The concepts of object-oriented design reach into the heart of information technology systems and the OMG and its members will be responsible for laying the foundations of the new order. That IBM and Microsoft should suddenly make their interest public at this time is no surprise. The commercial exploitation of object-oriented design is just beginning, with bullish predictions for growth for tools which conform to the emerging standards. In a report sponsored by the OMG, Ovum, the UK researcher, forecasts a European market worth Dollars 196m this year, rising to Dollars 1.6bn by 1996. The US market is expected to be even larger with total product revenues of more than Dollars 2bn by 1996. Ovum's analysis is based on growth in three areas: languages and tools, developers' tools, databases and CASE tools. 'Object technology has emerged from the early days of religious fervour and is experiencing rapid acceptance,' says Ovum. Although it is a new way of looking at computer systems, object-oriented design has its roots in the past. The approach views computer systems as a set of objects, which can be directly related to objects in the real world. An invoice is an object; a manufactured product is an object and they are both represented as such within an object-oriented computer system. Object-oriented design evolved out of the same research at Xerox Palo Alto Research Centre (PARC) which produced the windows-icon-mouse-pointer interface popularised on the Apple Macintosh. Similar interfaces, such as Microsoft's Windows 3, are also available for IBM-compatible personal computers. The Apple Macintosh and Microsoft's Windows 3 are both described as object-oriented interfaces and, while this is true, the object-oriented technology goes much further than a better user interface. Object-oriented evangelists in the software industry talk of a paradigm shift in thinking about how computer systems can be built. Objet-oriented design includes several important ideas which help to clarify systems design and make better use of existing technology. The formal definition of object-oriented systems covers useful concepts such as inheritance and code re-use. Inheritance allows different objects to share the same characteristics. All invoices, for example must contain an invoice date - a characteristic which is inherited by every object called an invoice. The re-use of code is of more pragmatic use and can be seen in some personal computer software. A PC equipped with Microsoft Windows 3, for example, will use the same display-screen driver program (the software which sorts out text and graphics) in many different applications. Language developers are in the frontline in object-oriented technology with Microsoft and Borland both offering language compilers which are described as object-oriented. Database developments have been restricted to specialist suppliers such as Objectivity and Ontologic. But both Oracle and Ingres among others are reported to working on the technology and will deliver products later in the 1990s. Suppliers of computer-aided software engineering (CASE) tools, especially those at the technical end of the market, have been at the forefront of the technology with US companies such as Interactive Data Environments (IDE) and Cadre Technologies leading the way. More important, the OMG is well on the way to formulating the first of the standards which will allow object-oriented systems to work across different computer systems. The OMG published its draft architectural specification last year and has requested tenders for the technology which will form the core of a method to control objects and the communications between them. Later this year it is expected to publish a formal definition of what an object is and this is likely to spur on the tool, language and database providers to produce object-oriented products. Object-oriented design promises to change computer systems design beyond recognition in the next decade. One of the advantages of the approach is that it opens the door to computing power - what was once called programming -to a much wider audience. Although complex objects, such as invoice transactions, will still need professional expertise, less crucial processes can be engineered by users themselves. They will be able to combine their objects with those that already exist within a system and produce their own customised working environments. 
ID: 3907
HEADLINE: FT  23 APR 91 / Survey of The Computer Industry (32): A story of niche markets - Expert Systems, great expectations and disappointments 
TEXT: WHEN recruitment expert Mr Nigel Schollick retires in 1995, the knowledge gained in 30 years of interviewing and recruitment will keep working. His judgments on skills and personality, from 'tactless' to 'shy on the phone', will be delivered on people he will never meet, through the medium of a software product called STARS II. It is an expert system which performs preliminary interviewing and delivers some guideline judgments to the human interviewer. This is a typical example of what expert systems are supposed to do - distill the expertise of individuals and deliver them in rule-based systems. Five years ago, there were predictions that expert systems would be a good area for software sales, comparable with spreadsheets in the 1980s. By drawing on the advice of expert systems, not-so-expert people would be enabled to perform skilled tasks with the minimum of training, a process described as de-skilling. In fact, the expectations have been largely disappointed: some of the most vaunted expert systems pioneers have collapsed in the shake-out of the last couple of years. From the Japanese, who so publicly waved the banner of Artificial Intelligence (AI) research as a platform for government investment, very little has emerged. Expert systems are nevertheless the most visible of all the AI techniques to have surfaced in commerce. Expert systems have become the domain of a few small specialised companies, working in niche markets, rather than a recognisable market sector. However, they have penetrated various unrelated niche markets, not by presenting any mystique-laden breakthrough, but by integrating with software that users know and understand. The story of the STARS product is typical of niche usage, because it uses an expert front-end to accepted psychometric testing techniques. The system is for use by in-house interviewers, and has been designed to help non-experts (rather than personnel specialists) through the first tricky and time-consuming steps of staff interviewing. Mr Schollick, of European Personnel Counsellors based in Buckinghamshire, has built his interviewing skills into STARS II. His expertise is packaged in the wording of the questions, and in the expert rules which dictate which questions the system asks. STARS II chooses its own path through the labyrinth of up to 300 questions per interview, selecting the questions in the light of the previous answers. It delivers judgments from a possible 2,000 descriptions - along with carefully-worded suggested questions to probe sensitive areas. These help the human interviewer prepare for the face-to-face interview that no computer can emulate or replace. STARS supplies a consistency of decision making, and a short cut in assessing applicants. This is typical of the niche approach. Expert systems seem to be winning acceptance largely as an extension of other applications, and particularly in industries which are comfortable with advanced technology. The best known examples come from finance and industry. One Australian bank uses an expert system to judge credit card applications. In the UK, ICI uses the technique to assist paint analysis. The Financial Times Business Information report on Successful Expert Systems, published in 1989, cited 20 large UK organisations using expert systems, including a few in mainstream areas. Mr Tim Johnson, director of London-based research company Ovum, points to the commercial basis which is necessary to win wide acceptance of any AI techniques. 'A lot of systems are for diagnostics - problem tracking of some sort, or providing consultancy, everything in fact from diagnosing medical conditions to finding errors in the production process for gas turbines. Another interesting usage is as a front end to access text databases, to help find the way through the maze of what information is available,' says Mr Johnson. Ovum's report on the European market for expert systems, Knowledge Based Systems: Markets, Suppliers and Products, puts the total for product revenues in expert systems at Dollars 70m in 1990 with US revenues of Dollars 128m: excluding expenditure on consultancy and customisation. Mr Johnson notes that the UK, once a hotbed of development, no longer provides Ovum with ready examples of advanced technology. In part, he blames the dissolution of the UK Alvey programme, which funded a number of AI research projects, although there are some signs of life in the AI community, and Ovum is about to publish a new report on Natural Language, the first update since 1985. 'Since Alvey declined, we've had to travel to France or the US to find the latest technology, there seem to be fewer people in the UK to talk to. The US in particular has progressed more rapidly because US companies were quick to adapt when they realised that the early products of research were not quite what people wanted,' he explains. Neuron Data, the US company Ovum cites as having the largest share of the expert systems market in Europe, has just opened a UK direct sales operation in London, a sign of its confidence in the future. Neuron Data sells Nexpert Object, an expert 'shell' which puts the emphasis on integration. This means working with existing databases, on over 30 different platforms, including Macintosh, PCs, workstations, minis, and IBM mainframes, and with different graphical user-interfaces for ease of use. 'Expert systems are just another software technology,' says Mr Richard Stow, Neuron Data's UK sales and marketing manager who would like to distance expert systems from the AI tag. 'To customers it's just one technology among many others. The old world of AI - to which Neuron Data never subscribed - was about specialist hardware, very complex software needing esoteric programing skills, systems with guru-level intelligence which learn from experience - no mention of integration or portability. The old world has gone: what predominates is now a view of expert systems from the developer's perspective,' says Mr Stow. He divides Neuron Data users into three categories; the end users, the providers of packaged software, and systems integrators such as Andersen Consulting. Among notable US Nexpert users are Manufacturers Hanover Trust, which has built a system called Inspector, for monitoring fraudulent or high-risk deals, and computer manufacturer Tandem, which uses online expert diagnostics for its Integrity S2 system. Mr Stow believes the UK market is probably 12-18 months behind the US in terms of take-up of expert system technology, but it will catch up. Andersen Consulting has about 25 users worldwide, including four UK sites for its Expert Configurator which is built on to the MAC-PAC manufacturing (MRP II) package on IBM AS400s. The expert front end allows the user to match up a specific task needing certain machines with existing tasks and schedules. 'We'd like to think that expert systems are becoming a mainstream technology,' concludes Mr Stow. 'In the future you might see companies amassing knowledge-bases - with PC networks and shared information, you might even be able to put a value on knowledge as a corporate asset.' 
ID: 3908
HEADLINE: FT  23 APR 91 / Survey of The Computer Industry (31): Consultants come under software attack - Case, engineering approach fails to match expectations 
TEXT: THE adoption of traditional engineering principles has helped to improve both the quality of computer software and the process which creates it. Software developers have turned increasingly to the disciplines of engineering to solve the problems which have plagued computer users since the beginnings of the industry in the 1950s. The engineering method, first adopted by the military and academic community in the 1970s, is universally acknowledged - if not universally applied - throughout the computer industry. It has spawned a large and growing market for tools, consultancy and re-training. It has caused businesses to re-evaluate their use of information technology and promised to change the skill needs of the industry. Software engineering makes labour-intensive program coding obsolete and offers greater control over the design and maintenance of software. In spite of significant backing from industry leaders such as IBM and DEC, the engineering approach has not delivered its expected promise. Its supporters face new challenges. The shift away from proprietary, monolithic systems to multi-vendor, networked systems makes it harder to build information technology systems and has increased the pressure on software engineers. Mr Richard Barker, head of Oracle Software's software engineering operations, says this is the biggest problem facing the software industry in the 1990s. 'The problem of designing one logical program to run across multiple hardware platforms will occupy the next few years,' he says. The engineering approach will play a leading role in solving the problem. Until quite recently, software production was haphazard and mysterious. Good results were achieved by a mixture of luck and schooled intuition. However, in the 1980s the engineering analogy grew in credibility and software production was increasingly seen as a craft rather than an art. It was subject to scientific laws and the design and production of a computer program could be defined in the same way that an engineer specifies a bridge or a motor car. This change coincided with increased use of computers as design aids across industry. Computer-Aided Design (CAD) - and the workstation technology it inspired - could be applied equally well to software design and developers quickly discovered how to apply it to their own products. The results were lumped together under the umbrella name of computer-aided software engineering (Case) and packaged up for a market, eager to find ways to build better software at low cost. Software pioneers such as Mr James Martin went as far as to say that the application of formal engineering methods to business systems design not only improved the quality of software, they could also give a business edge in the market. The vision is yet to be fulfilled. For every moderate success, there is equal evidence of failure. Consultant Butler Cox noted in a report, published at the end of the 1980s, that Case tools only worked successfully, where a formal design method - such as Mr Martin's information engineering - had been introduced. In other words, the principles of systems engineering must precede the use of software engineering tools. However, there are other reasons for the apparent slow progress. Mr John Lowrie, who worked with Mr Martin on Information Engineering Facility and now leads Information Architechs, puts some of the blame on consultants: 'The consulting world took over the whole concept of Case and it resulted in complete culture shock in user computer departments. Case changes the skill needs - de-skilling the programming back-end job and re-skilling the front end analysis and design. 'It is a fundamental change and means that companies need a lot of change management - an ideal market for consultants,' says Mr Lowrie. He sees this attitude running against real advances in the software technology: 'Consultants are not interested in producing the best software technology - they just want to put in armies of consultants.' A more compelling reason for the failures of software engineering is that the technological goalposts have moved. Early Case tools were conceived at a time when software was built for a single machine and operating environment - usually a large IBM mainframe or a DEC minicomputer. The information technology systems of the 1990s will be based on networks of PCs, clusters of database 'servers' and high-speed transaction processing computers. 'The current tools were based on the software technology of 1983-84. We are now moving into second-generation products based on late-1980s technology,' says Mr Lowrie. He is cautious about raising expectations too soon. 'I don't think anyone really knows the answer yet - it is very early days. Our view is that we can evolve into other environments because in Case you are maintaining designs not machine code. But it is few years off.' Information Architechs, launched in autumn 1990 as a spin-off from British Gas, says its future developments in Case are aimed at multiple-platform applications. 'We are attracted to the idea that future systems will be based on client/server databases and local-area networks of personal computers,' says Mr Lowrie. Mr John Lewis, vice-chairman of IPSYS, UK software engineering company, is cautious and points to IBM's problems with its Systems Application Architecture (SAA) as an example of the difficulties. 'IBM announced SAA four years ago to provide a model for bringing its three main hardware architectures together. But its hasn't brought out much of it yet. At the same time it has its AIX/Unix developments, which lie outside SAA,' says Mr Lewis. He sees Unix playing an increased role in software engineering, as a development environment and as a platform for applications. IPSYS is working on Case tools to support Unix alongside proprietary environments. 'It is a question of economics. If you set up IBM's AD/Cycle you need an expensive dedicated mainframe and PS/2 for every programmer. The cost is between Pounds 3m and Pounds 4m. With Unix workstations you can set up an equivalent system for about Pounds 1.5m and get far more power for your money,' he says. Oracle says it has plans to extend its Case products so they can produce applications for multi-vendor networks. At the end of this month, Oracle will announce a new generation of Case products which will allow designers to specify the characteristics of the target environment and customise the system. This Oracle says, has implications for users. The company intends to include more features which let the user extend the system and define new objects. The company anticipates that within the next five years the distinction between the development of a system and its live running will disappear. This is a little optimistic. But there is no doubt that this is where software engineering is heading. 
ID: 3909
HEADLINE: FT  23 APR 91 / Survey of The Computer Industry (30): Systems that shed fresh light on information - Geographic Information, 'the biggest step forward since the map' 
TEXT: COMPUTER-based geographic information systems seem set to take their place among those developments which will embody the information age. They are described by the government as 'the biggest step forward in the handling of geographic information since the invention of the map'. The systems facilitate the display and manipulation of data among such established users as the large utilities and national and local government - organisations that have traditionally made extensive use of paper maps - and are increasingly recognised as an accurate and effective marketing tool by a variety of commercial organisations. GIS, essentially systems which allow the analysis of stored information on a geographic basis, consist of both graphic and alphanumeric data. Automated mapping provides pictorial representation of maps and plans using precise numerical information, while text-based data covering any number of factors such as cabling, sewers, parks, schools, types of housing and so forth are combined to facilitate analysis and planning. The main benefits of their use, according to the Chorley Committee of Enquiry set up by the Department of the Environment in 1987 to investigate the handling of geographic information, include fast and easy access to large volumes of data; the ability to analyse spatial characteristics of data and to search for particular characteristics or features in a given area; to link or merge one data set with another; and to produce flexible forms of output such as maps, graphs and summary statistics tailored to meet particular needs. Mr Glenn Carver, a GIS consultant with information management company CMG, comments that access to data and its proper management are important elements in the successful use of GIS. 'A well managed GIS in a local authority could, for instance, hold all the data for the various departments, updating and distributing information to each department as changes were made. So, a map referenced by, say, a postcode could be called up on screen, and depending on the information required, be marked differently. 'Thus the housing department could ask for all empty council property to be displayed, highways for all traffic light systems, and social services for all registered child-minders,' he says. Such systems, however, require an enormous effort of data input, and Mr Carver notes that from the initial decision to develop a GIS, to final implementation, normally takes between five and eight years. 'It is a massive undertaking, you certainly can't just dip your toe into GIS. But we are talking about the complete integration of information within an organisation. It is vital for users to think and plan strategically, and it is part of our job to help them do so.' The extent of the undertaking may have slowed the progress of GIS and until recently confined its use to governments and utilities, but the technology is being increasingly recognised as a powerful commercial tool, enabling companies more tightly to target groups of people as potential customers for specific projects and services. Retailers, such as Gateway Stores have recognised how GIS can help support decisions about store location, while sectors such as the oil industry look to GIS to improve transport, distribution and work scheduling decisions. A number of systems providers and consultants are active in the market in this country, these include McDonnell Douglas, the leading aerospace company whose information systems division recently announced its Spatial Modelling System, which, according to Mr Barrie Laver, who is director of the company's Applied Graphics Group, puts paid to the long-standing gripe of academics that GIS is merely an adjunct to computer aided design. 'Spatial database systems are distinguished by their ability to link graphics and text, thus creating smart graphics which provide a visual window into the administrative database,' he says. Pinpoint Analysis, another company active in geographic information systems, provides demographic and geographic information which, the company claims, when combined with clients' internal information will ensure more effective targeting and delivery of products and services. Pinpoint is among the leading suppliers of highly detailed digital address and road data for use in GIS and has built up a wide range of databases including a market-specific classification system geared to the financial services market, and a profiling system which analyses UK neighbourhoods into marketing-oriented categories. In keeping with the increasingly high profile of personal computers, Pinpoint offers Geopin, a geodemographic information system which runs on a desktop computer and was developed specifically to meet the needs of marketers. Mr Martin Higgings, a GIS consultant with Pinpoint, explains that the system was designed for users who are not computing experts, but who are increasingly aware of the relevance of geographic information systems to their business and so require the facility to perform complex analyses with the help of simple pull-down menus. The PC version of Geopin can be extended into a networked system and a compatible mainframe version is also available. The technology for GIS is well and truly in place, but it is the data needed to make it work which, as well as requiring a considerable time effort, may not always be easily available. The Chorley report noted, for example, that 'information needs to be seen as a corporate resource and be more widely shared between departments and organisations', adding that 'the full potential of geographic information systems will only be secured by co-ordinating the interests of the widely dispersed community of users.' 
ID: 3910
HEADLINE: FT  23 APR 91 / Survey of The Computer Industry (29): The potential of pictures - Multi-Media, tools to create  more informative systems 
TEXT: A group of 12 computer hardware and software manufacturers has put its name to a trademark. This is not in itself so remarkable. The establishment of a trademark does not require any great degree of commitment. However, the object of this collection of companies is to establish a way forward for the personal computer industry - and that future will encompass television pictures and sound as well as the more conventional aspects of data processing. The name for this is multimedia, and the trademark is MPC - Multimedia Personal Computing. Most computer systems are constrained to store and display information in ways more acceptable to machinery than human beings. Text or numbers are the norm, and, where pictorial information is kept, it is most often in a form more akin to a cartoon or drawing than to a photograph. The storage of sound for computerised manipulation is not any more advanced. There are exceptions to this - a good example being the Domesday Project machines, which use a BBC micro to access all sorts of geographical and demographic data from a video disk, for display on a television screen. However, in the mainstream of computing such applications are rare. One of the leading suppliers is VideoLogic, a British company. It provides a board which can go into an IBM-compatible PC or Macintosh. It can capture television pictures and sound for editing and inclusion in a presentation alongside other computer data. Integration of video, audio and conventional data within a data processing system is known as multi-media. A multi-media system should enable the user to manipulate and view all such data. He could, for example, press a help button, and not only view a manual but bring up an interactive tutorial, where a film can be seen and heard of a teacher explaining a topic of interest. Such manipulation should be an integral part of the system's capabilities. In a windowed environment, this would mean that the user would see the film in a window alongside other data, and be able to drag it around the screen or desktop or re-size it. If such machines were readily available, it is easy to see what their potential would be. Wherever pictorial information was needed it could be invoked as easily as more normal text. For example, a travel agent could store the whole of his catalogue of holidays, and then show a customer film of a chosen spot, with appropriate sound track, as well as the normal textual descriptions. Sceptics might argue that all this is more appropriate to killing martians on a screen and certainly the games or leisure market is where much of the development of such systems has taken place. Multi-media enthusiasts, though, such as Mr Bill Gates of Microsoft, believe that, by the end of the 1990s, it will be the norm, and that computer users will expect to be able to deal in all forms of data, and interact with their machines in far more sophisticated ways than they do now. 'Beethoven's Ninth Symphony is most readily enjoyed if it is delivered in audio form,' says Mr Gates, in a piece on the subject published in Encyclopaedia Britannica. He has a point. One wonders in what other form it might be delivered, apart from a printed score. Obviously, whilst the latter might be useful to a musician, it leaves a lot to be desired to the layman. Merely to provide conventionally-displayed computerised information can be just as limiting because it does not provide the user with a form of data readily interpreted by the most appropriate human senses for the information under review. Multi-media promises to deliver information in the most appropriate fashion, but with the same degree of control that you experience with any other computerised data. A company might, for example, need a system to enable them to look at geographical data. You could start by displaying a map. From there, the user might select a town and look at a picture of the architecture, or at a list of companies which have offices there, and then at pictures of their products. Those pictures could be revolved or walked around to enable the viewer to see them from any angle. They could be accompanied by a spoken sound track describing what is on view. At each stage, the correct medium would be used to communicate the information. It would be easy to dismiss this as just another piece of enthusiastic marketing, a product looking for a problem. However, that would be to ignore the way other products have blossomed, and, if not changed the world, certainly made an impact. Spreadsheets, for example, were originally intended merely to provide a way of doing cash flows, to take the pain out of re-calculating when information changed, but that in itself could not account for their phenomenal success. Users have driven that change, and spreadsheets are now embedded within the corporate culture to such an extent that it is hard to imagine how we could have managed without them. The Multi-media PC will not be an end in itself, rather it will provide the tools necessary to create more colourful and informative systems. Doubtless it will provide the games player with an even more realistic view of his imaginary worlds, but it could also bring the benefits of computing to a wider business audience than hitherto. At least, that is what the gang of 12 are banking on. 
ID: 3911
HEADLINE: FT  23 APR 91 / Survey of The Computer Industry (28): Advanced technology lifts desktop publishing systems - DTP, new software products for a maturing market 
TEXT: INNOVATIVE software producers are giving a lift to the maturing market for desktop publishing systems. Publishers of larger magazines and newspapers may once have only considered buying, say, a dedicated newspaper production system from one of the leading suppliers, such as Atex or Systems Integrators (SII) of the US, or N. D. Comtec, a division of Norsk Data of Norway. However, publications across Europe and the US are produced on Apple Macintosh's range, for example, using standard or enhanced software packages from Quark (X-Press) or Aldus (PageMaker), which started life as suppliers of desktop publishing software. These advanced software products operate on the standard DTP 'platforms,' such as IBM's PC, the Mac or other computers that can be bought 'off the shelf' to produce a wide range of magazines and newspapers. The Spanish newspaper, El Sol, in Madrid is just one example of a large circulation daily paper produced on a Mac system, using software from Quark X-Press. 'Many of the most innovative of these newspaper and magazine software systems are produced in the UK - they achieve great results on what, initially, were desktop platforms,' says Ms Laurel Brunner of Seybold, the independent information resource group for publishing technology.* Among these new UK software systems which operate on the Mac are those from DPS Typecraft; Talbot of Bournemouth, and QED of Cheltenham. Meanwhile, across the DTP industry, the Dollars 1.83bn European market is the biggest in the world, and set to continue growing as technology has brought 500 years of graphic communications techniques to the computer industry. Sales of Dollars 3.9bn are forecast by 1994 - by then, there will more than 97,000 new desktop publishing installations up-and-running in Europe, with at least 18,000 of them located in this country, according to a report from Frost and Sullivan, the leading market research group.** But the rate of growth is likely to slow after 1992, as software and scanning input devices take an increasing share of sales from hardware and new DTP systems. While most DTP software programmes are English-based, companies such as Apple and Adobe have tackled the language problem, with increasing sales in non-English speaking countries. Several leading Arabic newspapers and magazines are prepared in London on Apple Mac systems using Diwan software. They include such daily broadsheet newspapers as Sharq al-Awsat, Al-Hayat and Sawt al-Kuwait which are produced in London and transmitted electronically to the Middle East for printing. Because a large proportion of software comes from the US, many packages are English-based, and the UK is - and will remain - the largest market in Europe for DTP installations, with sales reaching Dollars 737m in 1994. A typical DTP system includes a personal computer, a high resolution monitor; a 'mouse' or other hand-controlled digitiser for positioning text and graphics; plus software for word processing, graphics and page-composition; and a laser printer. DTP systems, which may or may not be networked, are generally at the low end of a larger market for electronic publishing systems. Colour continues to be a big topic in the DTP world - as systems move on from basic monochrome to colour, the biggest issue is how users can achieve colour-tone consistency across various computer screens, proof printers and presses - a facility which is especially important to advertising agencies, for example. Innovation abounds in all areas of the market, with higher performance PCs and new software packages. For example, the processing speed of Postscript, the page-description language from Adobe, has been significantly enhanced in the past year as somputer speeds have increased. Vendors of proprietory hardware for professional publishing systems are also 'porting' software on to the Macintosh platform. Apple has announced a new operating system, called System 7, which give a new environment for many applications, particularly publishing. One of these new enhancements is called 'Publish and Subscribe' which allows users on a DTP network to call up 'live' material, such as text, artwork or up-to-the-minute price lists. In the European market for DT systems, analysts expect an upsurge in demand in a number of application areas, particularly the production of magazines, advertising literature and public consumption information. Scanning - and particularly the input of higher definition with greater grey-scale and colour - is expected to push up the cost of scanners and attendant software. Sales of core hardware, personal computers and printers in Europe could be worth almost Dollars 1.3bn by 1994. *The Seybold Report, Eastbourne, (0323 410561) **European Market for Desktop Publishing: Frost and Sullivan, London; Dollars 3,800; 071 730 3438. 
ID: 3912
HEADLINE: FT  23 APR 91 / Survey of The Computer Industry (27): Some severe image problems - Computer Leasing, collapse sparks an eventful year 
TEXT: STATISTICALLY speaking, 1990 was a dull year for the UK computer leasing sector. Figures released last month by the Equipment Leasing Association (ELA) show a 4 per cent decline to Pounds 2.25bn in computer/office equipment leased by its members, who represent more than 80 per cent of the UK leasing industry. This is the first decline registered for at least eight years, although 1987 produced only minimal growth following exceptionally strong demand from the financial services sector in the preceding year. According to Mr Brian Hassell, ELA chairman, 'the decrease in 1990 reflected the general slowing down in the economy.' In all other respects, the last 12 months have been extraordinarily eventful. Starting last April with the British &amp; Commonwealth subsidiary Atlantic Computers, a succession of independent equipment leasing companies have collapsed or found themselves in serious difficulties. With 1,800 employees at the time the administrators were called in, Atlantic was once the world's third-largest computer leasing specialist. Its customer list in 1983 included the UK Atomic Energy Authority, BAT Industries, Hanson Trust, ICI and Penguin Books. Its 1988 turnover amounted to Pounds 756.9m. The most prominent of the subsequent casualties was Blackspur Leasing, the specialist printing-press leasing company, and ICS, a diversified leasing group whose turnover, at its peak, was approximately Pounds 70m. In addition, the trading position of Capital Computers - another computer leasing specialist - has deteriorated to such an extent since the end of March 1990, according to the most recent directors' report filed at Companies House, that it has been considering 'the sale of all or part of its lease portfolio to third party companies and is also taking steps to review its position in the leasing market place.' While the increasingly recessionary business climate has undoubtedly been partly to blame for the problems that companies have encountered, in certain cases lax management and the questionable structure of the profferred leases also played a role. Atlantic pioneered an arrangement called the Flexlease which offerred customers the ability to take advantage of advancing technology by upgrading their computers yet which appeared - at least initially - to be extremely attractively priced. Unfortunately, the Flexlease concept also resulted in the accretion of contingent liabilities due to the leasing company's commitment under certain circumstances to make good its customer's payments over the final year or years of the lease. Not surprisingly, this year's collapses appear to have been the Flexlease's death-knell. According to Mr Geoff Sewell, director general of the European Computer Leasing &amp; Trading Association (Eclat), 'it is very rare now that anyone tends to look at the Flexlease, although most of the operating leases written give customers the option of going back and renegotiating a new deal.' With the Department of Trade and Industry investigating Atlantic and the fraud squad in at ICS, the collapses have also left the industry with a severe image problem. This can itself have serious knock-on effects. One of the factors cited by Capital Computers for the deterioration in its performance was 'the lack of confidence in the leasing market . . . following the failure of the number of leasing companies trading in the UK.' Perhaps the chief beneficiaries of the turmoil in the independent leasing sector have been the computer manufacturers themselves, particularly IBM. Ms Carolyn Jacks, director of Grosvenor Consultancy Services, the leasing consultant, says the situation 'provided a marvellous opportunity for the computer manufacturers to market their own lease offering as the safe alternative.' The annual European computer leasing survey commissioned by Solihull-based Eclat underlined 'the increasing dominance of IBM's captive financing subsidiaries.' More than 70 per cent of the survey's respondents ranked IBM among the top three competitors in the industry, versus 16.2 per cent for Comdisco, its nearest rival. A year earlier, IBM had polled 54.9 per cent, versus 27.5 per cent for Atlantic in second place. The survey also claimed to reveal 'a rising trend of involvement by IBM' in used equipment and buy-back transactions - a field traditionally dominated by the independent leasing companies with their often painstakingly acquired expertise in the market for second-hand computer equipment. Though competition remains intense, the pressures being brought to bear on the independents are now prompting expressions of mild concern from some industry observers. Mr Sewell says: 'Few people can specify five years ahead the equipment that will meet their needs. 'The independent sector gives them the option of mixing and matching to meet their technical requirements. Without them we would be back to the original position at the end of the 1970s where the only alternatives available were finance leases.' Mr Sewell stresses, however, that 50-60 per cent of the installed computer base is still leased through independent leasing companies. According to Ms Jacks: 'For the manufacturers, leasing is a sales-aid method which assists with marketing their new products - they cannot be expected to provide their customers with the ability to change suppliers readily.' 
ID: 3913
HEADLINE: FT  23 APR 91 / Survey of The Computer Industry (26): Saboteurs are on the loose - Networking, the art of knowing a Lan from a Wan 
TEXT: MR Gordon Douglas is not a happy man. He manages user relations for the European end of Netware Users International (NUI) the 80,000-strong user group for Novell's Netware, the world's most popular networking software. Local area networks (Lans) are on the up and up, and Netware is the code that binds them together allowing dozens of people to share files and peripherals such as printers. What concerns Mr Douglas is that software saboteurs are on the loose, networks are their prime target and publishing houses in Germany are printing their methods. 'They publish books that tell you how to plant a virus. You might as well bring out a title on how to make an atom bomb in your living room,' says Mr Douglas. His anger at the virus authors becomes understandable as he details the precautions NUI and Novell have been forced to take. 'Virus attack has been the main issue in the last 12 months, and preventing it is very expensive. A lot of leading companies do not allow employees to use diskettes at all, so they can't unwittingly introduce a virus into a network. The problem with networks is that they are meant to be open to many users.' Mr Douglas talks of protective shells, software that checks a program every time it is entered on to the network to make sure the code has not changed. NUI has pressured Novell to improve the security features written into Netware. Since Netware is a computer operating system in its own right it is not easy for the virus peddlars to get details of its workings. Documentation is a closely guarded trade secret. But the interface between Netware and the users' floppy disks became a focus for attention. 'Novell has now boosted protection for files entered through Netware. I won't say exactly what they've done, NUI tested the new release by running a virus specifically designed to attack MoveIl networks,' says Mr Douglas. Metware's extra defences repelled the virus. A successful virus attack can corrupt networked data across a company. 'They can act in a nasty way. You find all your storage for the last year has gone. Generally the motivation isn't for gain through blackmail, it's just anarchy,' says Mr Douglas. His scorn for the unseen enemy is very real. The other current passion the networking community admits to is economy. 'Security and money are the two big concerns at a typical user group meeting. In the past, networking solutions had to be high-tech and expensive. Now the emphasis is on cutting costs,' he adds. Mr Douglas reels off the quick fixes users are resorting to. One site has found it can use power lines as a medium for the local area network (Lan) rather than co-axial cable. If you don't mind the odd hiccup in non-essential data transmission this makes some sense. 'It's daft but cheap]' is the Douglas verdict. Mr Gary Dyson has been in a good position to observe the rise of the Lan. In 1985 he broke away from IBM with two colleagues and formed Persona Faculty. The dual role company selling products (Persona) and training services (Faculty) was started up to exploit networking. In 1988, Dyson's Pounds 825 a day training courses attracted just 50 end users. In 1990, 1,500 people signed up to get the most out of their networks. Two factors contributed to this growth says Mr Dyson. The political war over the management of data, with corporate IT departments reluctant to see too much power shipped down to the users, was resolved. The idea of a Lan of PC workstations has been absorbed into the corporate computing model. International standards have moved on, reconciling the IBM sponsored Token-ring with Ethernet, a networking protocol with its roots in the Digital Equipment world. 'The user shouldn't have to worry about choosing between them. They both offer adequate performance, says Mr Dyson.' Faculty has ridden out the collapse in hardware sales. 'In these times you can't sell hardware because companies have got enough. But networking means they can turn their PC resources into a system. You make the employees more productive. They cope better with fewer people,' he says. If the Lan is now an accepted standard, what are the big corporate buyers doing to squeeze extra value out of it? As is usually the case in the computer industry, any vaguely fresh idea is the cue for a crop of buzzwords. The Lan world has now spawned groupware. Referred to in the same breath as joint authoring and discussion databases, groupware allows users to pool documents across a network. The secret of the software is to co-ordinate contributions without the user being aware of this stage management. Although it is portrayed as structured discussion it is probably better compared to the notorious bulletin boards used to disseminate hackers' tips. Lotus Notes is one of the pioneering groupware products. Price Waterhouse, management consultants, use it to control activity on the international front, when consultants work for a common client across national boundaries. Ms Susan Challenger, an international marketing manager at Lotus, admits that Notes may have fuelled the buzzword business. 'We're probably to blame, but groupware is a means to exploit network software rather than just sticking a program on a network and sharing it,' she says. Lotus finds that network versions of popular programs now make up as much as a third of its sales. Ms Challenger confesses that the distinction between the Lan and its less famous sister the wide area network (Wan) is not something to tax Lotus's network development teams. 'When does a Lan become a Wan? I don't know. I prefer to think of everything in Lan terms,' says Ms Challenger. Perhaps a recent Dataquest survey offers the best explanation for the low profile of Wans. European Lan spending is predicted to grow from Dollars 2.6bn in 1989 to Dollars 5bn by 1993. Over the same period Wan spending will increase by a modest Dollars 100m, from Dollars 400m to Dollars 500m. Interconnection between Lans is proving an attractive alternative to Wans managed by expensive mainframes. And LANS are big in Japan. The high cost of office space in Tokyo forces a rigorous assessment of every square foot. Encouraging staff to share peripherals is one way of keeping the rent in check, with a Lan saving precious space. 
ID: 3914
HEADLINE: FT  23 APR 91 / Survey of The Computer Industry (25): Mix of cussed independence and some mutual self interest - The User Groups, an idiosyncrasy of the industry 
TEXT: HEWLETT Packard has an invitation to show off its new Series 700 workstation later this month at its user societies' annual general meeting. However, this arrangement is not quite as cozy as it looks. Mr Steve Chatterton, chairman of ADUS UK (the HP Apollo workstation user group) has asked HP's main rivals IBM, DEC, Silicon Graphics and SUN, to bring their their top workstations, and to compete in a demanding benchmark test devised by ADUS. HP is confident that it will not be embarrassed in its own backyard - on paper the 700's specification is superior - but there is little doubt that the move has ruffled HP's feathers, and it is taking the challenge seriously -to the extent that its worldwide workstation manager will attend. This little drama illustrates the curious mix of cussed independence and mutual self interest that characterises relations between user groups and their suppliers. The fact that user groups exist at all is testament to this ambivalence. Fiercely protective of their separateness, yet loyal, and often genuinely proud of their particular affiliation, in the same way that some people are bound to their cars, user groups remain one of the idiosyncrasies of the computer business. At once ginger group, talking shop and social club, historically these associations were the users' response to the technical complexities of computing and the too often dictatorial tendencies of predominantly US-based hardware vendors. They have developed over the last 20 years into sizeable organisation in their own right: the IBM CUA has 1,500 members, and the DEC group, DECUS, turns over Pounds 500,000 in the UK annually in spite of administrative costs donated by DEC. These national groups are invariably affiliated to larger pan-European or international organisations or groups such as the National Computer Users Forum (NCUF) the UK user groups' user group. Does this complex network have anything other than a self-sustaining role? In particular, when so many of the old loyalties and dependencies between vendor and customer are threatened by open system environments, is their much point in vendor specific user groups? The short answer seems to be yes. First, one of the primary functions of these groups is educational. 'They act as a forum for sharing best practice. The IBM CUA serves as a peer-to-peer information exchange both informally and through its extensive seminar programmes. It helps us to avoid re-inventing the wheel,' says Mr Michael Moore, CUA chairman. DECUS's formal mission is similar exchange, both within the group, and between the group and DEC, says Mr Steve Dawes, chairman. As long as computing remains technically difficult, and in the short term at least it can only get harder in a multi-vendor, open systems world, then the user groups' basic role seems assured. The same is true of their place as lobbyists. This function is increasingly elevated to a formal consultative status. So, for example, DECUS submits annual System Improvement Requests to the DEC main board, a list of technology developments derived from polling individual members worldwide. At the same time, says Mr Dawes, the UK group is constantly plugging away at local issues - anything from invoicing or licensing practice to an upgrade path for companies using non-standard DEC hardware from the long-defunct Systime. Nonetheless the prospect of open environments is making its mark. The fundamental challenge of open systems has prompted a basic restructuring of the ICL CUA, says Mr David Stewart, its chairman. The 35 erstwhile individual special interest groups under the CUA umbrella, have set up a policy and review forum to consider, for the first time, their common problems, and in particular to clarify a single voice in dealings with ICL over open system and UNIX issues. Mr Stewart argues that the users' voice generally has not been articulate enough to influence open systems standards, and so far suppliers have dominated the debate. He thinks that ICL will be delighted by the CUA's initiative to define its own coherent set of priorities. Similarly, Mr Moore and Mr Dawes report that open systems issues are beginning to preoccupy their respective groups. Yet, paradoxically, they also comment that IBM and DEC have never been more attentive in their dealings with their users. 'IBM is relying more and more on user organisations,' says Mr Moore. Witness the 50 senior IBM technical staff who attended the CUA's Common Europe Conference in Brighton this month, just to listen to users, he comments. So what is going on? Could it be, the argument goes, that far from undermining these user groups, open system, multi-vendor environments, could actually stimulate them? User groups are persuaded that, as customers become more transient, then suppliers will appreciate just how critical they are in marshalling customer opinion, and ultimately, in keeping their loyalty. Does this work out? In part, perhaps. Certainly the days of user coercion are long gone. Mr Richard Owen, HP's workstation marketing manager, who will have to face the ADUS challenge, remarks that HP has long been a customer-led company. 'ADUS is one place we can listen to them,' he says. However, the rub, Mr Owen argues, is that whilst user groups are peopled by technologists - MIS managers and systems administrators - then they will not drive IT strategy, and in the long term, it is that, rather than the practical consequences of open computing, that will marginalise them. 
ID: 3915
HEADLINE: FT  23 APR 91 / Survey of The Computer Industry (24): Innovation under scrutiny - R &amp; D, from technology push to market pull 
TEXT: AS the shock waves of fiercer competition and accelerating structural change flow through world computer markets, debate is intensifying on both sides of the Atlantic about the policy measures needed to stimulate faster innovation in information technology industries. The debate is broad because the nature of innovation and the ingredients which contribute to it are hard to pin down precisely. Most studies identify a wide range of contributing factors, including the macro-economic environment, industry structure, education and training, management culture and capital markets. Most of these elements, however, respond to policy changes only over the longer term. Hence the search for faster-acting remedies has frequently focused on deepening the technology base by stepping up investment in research and development and encouraging research collaboration between companies and universities. Since the early 1980s, subsidised joint research programmes such as Esprit have constituted the main thrust of European Community efforts to enhance the competitiveness of its electronics industry. In the US, there has been a growth of industry consortia such as Sematech, the MCC and the SRC. The trend has been inspired partly by the mounting costs of staying at the forefront of electronic technologies and partly by the widespread belief that government-orchestrated collaboration has played a decisive role in the rise of Japan's electronics industry. So far, industry performance has not perceptibly improved. Many larger US computer makers, including IBM, are suffering a severe profit squeeze, while in Europe the industry is fighting for survival as heavy losses at companies including Philips, Nixdorf and Bull have prompted drastic retrenchment and restructuring. Why has the industry failed to respond? One explanation was given in a recent paper by Dr Brian Oakley, former head of the Alvey programme, a five-year electronics industry research project launched by the UK government in the mid-1980s. He says that though Alvey achieved its technical goals, few of the participating companies turned the resulting research into successful products. That suggests that the weak link in the innovation chain is not a shortage of good technology but companies' failure to exploit it commercially. A broadly similar conclusion is supported by a number of recent studies of government-sponsored industry collaboration in Japan. These suggest that government schemes played only a minor role, and that the Japanese industry's strength owes much more to the stimulus of fierce competition on its home market and to the structure and organisation of individual companies. In successful Japanese electronics manufacturers, research and development are much more tightly integrated with production and marketing than in western industry. A team approach ensures the rapid feedback of information between all concerned - including suppliers and sub-contractors - at every stage of the process. Unlike western companies, which have traditionally viewed innovation as a sequence of separate leaps forward, in Japan it is a continuous process achieved by simultaneous incremental advances across a broad front. Typically, Japanese manufacturers have many more, smaller development projects under way at once than do their western counterparts. The benefits of the Japanese system include shorter product development cycles and greater flexibility in responding rapidly to market changes. Furthermore, by spreading their development effort across so many different projects, Japanese companies are less vulnerable to the consequences of individual product failures. Stung by Japanese competition, many western technology companies are seeking to speed up innovation by attacking barriers between research, product development and manufacturing. IBM, Hewlett-Packard, Philips and Daimler-Benz have all recently taken steps to strip away layers of bureaucracy which slow down their response time. However, turning technology into manufactured products efficiently is only one aspect of the challenge facing the computer industry. Indeed, as even Japanese suppliers are discovering, it is no more than a necessary condition for staying in the race. As technology becomes ever more mobile, component prices continue to fall and product lives grow shorter, many types of computer hardware are becoming low-margin commodities. That trend - which is being accelerated by the spread of open systems standards - is compelling manufacturers to seek more of their value-added downstream by competing on functions, services and software. As this process gathers momentum, the driving force behind the computer industry's development is shifting from technology push to market pull. Increasingly, innovation is stimulated by the way in which computer power is applied, rather than by the specifications of the equipment used to deliver it. That has placed more influence in the hands of users, particularly larger ones, and is obliging suppliers to tailor information systems ever more closely to the organisation and specific requirements of individual customers. A number of western manufacturers, such as IBM and ICL, have responded to that trend by directing more of their marketing effort into alliances with partners which possess intimate knowledge of specific industry sectors. Japanese computer companies are starting to realise that they can no longer rely simply on technical and manufacturing excellence to sustain their growth. Fujitsu's recent acquisition of ICL was heavily influenced by the Japanese company's desire to improve its access to European markets and to benefit from the British company's expertise in systems integration. Over the longer term, this is likely to mean that computer manufacturers' competitive performance will depend critically on the sophistication and quality of demand in their main markets. Furthermore, as information technology becomes more pervasive and deeply-embedded, the economic benefits it confers will be found increasingly in its application, rather than its production. However, the heavy preoccupation among western policy makers with technology as the main competitive battlefield suggests that they have still to absorb the full implications of these trends. If their efforts to strengthen the performance of the computer industry are to bear fruit, they will almost certainly need to widen their focus beyond the supply side and place more weight on measures to stimulate vigorous demand. 
ID: 3916
HEADLINE: FT  23 APR 91 / Survey of The Computer Industry (23): Moore's law passes the test of time - Memory Devices, a prime driving force in computer developments 
TEXT: THE prime driving force behind the panoply of developments in computing has been the ever-increasing availability of memory. It is considered quite normal for a portable computer to have more main memory and on-line disk storage than could have been crammed into a mainframe system 15 or 20 years ago. A significant element in such developments has been the fundamental law of semiconductor manufacturing first postulated by Mr Gordon Moore, chairman of Intel. This states that the number of transistors which can be designed into a given circuit area doubles every 18 months. This law has held true since Intel developed the first semiconductor memory in the late 1960s. This held just 1,024 binary bits, roughly equivalent to 20 words of text. In the intervening 20 years, the capacity of a conventional Dynamic Random Access Memory (Dram) has risen to 4 Mbits, the equivalent of about 77,000 words of text. The next big step, to Drams holding 16 Mbits, will take that figure to about 300,000 words per chip. The availability of this capability to store programs and data has created a large demand for it, which in turn has led to a continual stream of new players entering the market and, in their turn, dominating it. At the start it was US manufacturers such as Intel, National Semiconductor, Mostek and Motorola. However, in a highly competitive market with high demand, and with other product lines such as microprocessors to service, they were soon overtaken by other companies that specialised in memory production. These were the Japanese suppliers that still dominate the semiconductor memory business, such as Hitachi, NEC and Fujitsu. It is they that have taken the lead, not only in memory product, but also in research and development in the area. Few US companies now bother making memory chips at all. Because of the nature of semiconductor manufacture, where the investment required to make devices of this capacity is large whether 1m or 2m are produced, the volume production skills and benevolent investment climate of Japan was always likely to make those companies significant in the market. Similar circumstances are leading manufacturers in other Asia Pacific countries to target the Japanese suppliers. Well-known names from Singaporean, Tiawanese and Korean consumer electronics, such as Samsung, Goldstar, Daewoo and Hyundai, are established as suppliers of leading edge devices that rival the dominant Japanese for capacity, quality, quantity and price. There is a certain irony in this last factor, for they are proving to be highly price competitive at a time when their presence is creating the potential of an over-supply of components. This same sequence of events brought the Japanese suppliers to prominence in the first place when their aggressive pricing on world markets pushed most US semiconductor manufacturers out of the memory business and prompted the imposition of trade tariffs and sanctions by the US. The fact that Moore's Law continues to hold true means that it is perfectly possible to predict the future capacity of memory devices, and when they might appear. Not only brute capacity will feature, for by the turn of the century it is confidently predicted that a wide range of special purpose memory devices will have appeared. For example, the turn of the century should see a technology capable of producing 512 Mbit memory chips but there is, according to companies such as Fujitsu, a more important market in using some of that potential capacity to produce other functionality on the same chip. It could be possible, for example, to provide logic circuitry on a 256 Mbit chip that will allow the memory to be customised to suit the requirements of a specific application. Fujitsu suggest it would be possible to include several current state of the art 32-bit processors in just one corner of such a memory chip, with other logic such as analog to digital converters - important for turning real-world measurements into a form which can be handled by a digital computer - also squeezed on to the same device. Such a memory could have wide-ranging applications in industry, engineering and commerce, simply because it would be re-programmable. Another area which is expected to see rapid developments is the Flash Eprom, a type of Erasable Programmable Read Only Memory which offers high capacity, non-volatility and a fast re-write capability. What this means in practice is that companies such as Intel, which is a leader in this particular technology, can produce memory cards the size of a credit-card for portable computers and other space/size critical applications that can be written to with applications and data, stored safely without the need to be electrically refreshed, be read from as often as needed, and be erased and over-written as required. In all but two important areas, price and capacity, this is an excellent semiconductor analogy of the magnetic hard disk system. Even the most enthusiastic semiconductor suppliers do not see the technology, which boasts 1Mbyte memory cards, taking over from the hard disk in the near or medium-term future as the prime vehicle for on-line data storage. For shear on-line, available data storage capacity, the magnetic disk is still waiting to be beaten. It is also unbeaten on the classic measure of price per megabyte of storage. The manufacturers show no signs of giving up such advantages without a fight. Conner Peripherals, the leading US purveyor of small disk systems, has helped to open up the burgeoning notebook PC market by producing systems using disks just 2.5 inches in diameter, yet capable of storing more than 20 Mbytes of data. At the other extreme, high capacity 5.25 inch disks are being cascaded together in desk-side PC systems from the likes of Dell and Compaq to provide over 1 Gigabyte of capacity - more than many a mainframe system. The long-standing role of magnetic tape as the medium for storing archive data is under threat. Variations on the CD-ROM, based on established Compact Disk Technology, are providing much higher capacities in a safer and more usable form. In addition, they are starting to prove an excellent delivery vehicle for comprehensive published data, such as directory information. Most important of all, they open up new markets for companies to publish vital product information such as documentation. Using multi-media systems, such information can be shown in many new forms, including speech, videos and animations, as well as the old standby of text. 
ID: 3917
HEADLINE: FT  23 APR 91 / Survey of The Computer Industry (22): Testing the water for entry to mainstream - Imaging and Scanning, an immature technology grows up 
TEXT: THE technology for scanning documents is most commonly seen in the ubiquitous fax machine. It is not complex: a scanner detects the presence of shaded dots on the page and then converts this information into an easily manipulated stream of ones and zeros. In spite of the relative simplicity of the technology, document scanners for reading this information into computers are still rare. Scanners have, for the most part, been eschewed as an immature technology although the big banks have long used scanners for automatically reading cheques and simple forms, and supermarkets and manufacturers have bar-code readers to identify products. For at least 10 years, market forecasters have been predicting an explosive growth in the use of scanning and its related applications, most notably document image processing (DIP). So far, almost all the projections have proved to be optimistic, many of them wildly so, but there are at last signs that DIP is about to enter the mainstream and that market growth rates are accelerating. As a result, all the big computer and office equipment suppliers are introducing products and investing heavily in research and development. There are several reasons why image processing has remained a niche activity. The specialist equipment can be expensive; in addition to the scanners for reading documents or other items, a user must have software to manage the information, terminals with big clear screens for displaying the images, and powerful computers and high capacity disks for holding large amounts of information. Software for converting the scanned image into character-based text (optical character recognition) and for managing the movement of images (usually known as workflow) has only recently reached a point where it is widely available, reliable and cost-effective. Most of the products available have not been developed with specific applications in mind. This means that potential users must customise their systems and develop their own application specific software. Inevitably, this has limited the market. 'The problem is that vendors have been selling the technology as a technology, not as a solution to a business problem,' says Mr David Kelly, document management systems marketing manager for computer supplier NCR. Users often end up developing simple, sometimes ineffective systems: 'If you look at the applications, they are not very sophisticated, nor as widespread as the technology will allow,' he says. Image systems have been developed separately from other business applications. The big banks and insurance companies which have invested in DIP systems have all struggled with the issue of how to integrate their image applications with their traditional business applications. The technical problems of putting effective image systems together have been compounded by a simple one of scale: a normal A4 page of wordprocessor text takes up about 1 kilobyte of computer memory or disk space, but a scanned A4 page can take up as much as 30K to 80K of memory (depending on complexity). Such large volumes of information can quickly fill up magnetic disks and clog up communications networks. Each of these obstacles is now being tackled and to a large extent overcome. The cost of raw computer power has fallen rapidly over 10 years, while optical disk technology has solved the storage problem: each compact disk can store thousands of scanned images. Compression techniques, high-speed local area networks and high band width communication lines have solved the document distribution problem and now make it feasible for scanned images to be distributed across large companies. Scanners have improved and fallen in price, with the Japanese taking a growing market share. At the top end, specialist scanners for reading cheques can read up to 400,000 documents a day, some reading both sides. Full colour scanners, although still expensive, are also finding their way into some desk top publishing applications. The biggest market for document scanners is at the low end, where quality is improving and costs are falling. Kurzweil, a leading supplier, has a system in the Pounds 15,000 bracket which can read up to 50 pages a minute at a high-quality 400 dots-per-inch resolution. Hand-held scanners for attaching to personal computers are available for a few hundred pounds. Last year, an international group called the Scanner Programmers Interface Association announced they were developing international standards to make it far easier to use scanners with simple office software programs. Until now, fax machines, photocopiers and computer-attached scanners have been separate devices serving separate purposes. But some suppliers believe that eventually the use of 'scan servers' will become widespread: documents will be scanned once and automatically indexed, after which any user on an office network can make copies, distribute them electronically, or manipulate them on-screen. Xerox, developer of the photocopier and the inventor of the windows graphical user interfaces used by Apple and others, is leading the way. It announced in October 1990 that in the US the Xerox Docutech Production Publisher 'will ignite a revolution as profound as the introduction of the first plain paper copier in 1959'. The system can be used to scan colour images from paper, manipulate them on-screen using 'cut and paste' techniques, and print up to 135 high quality copies a minute. But it is not cheap: an initial configuration costs in the region of Dollars 220,000. The most impressive examples of document image processing in use can be seen in the financial sector, where the big paper-bound institutions have developed corporate-sized systems. Norwich Union, for example, recently revealed its new mainframe-based insurance claims handling system, based on IBM's Imageplus system. Eventually, it intends to deliver document images to as many 10,000 terminals throughout the organisation. The benefits of image processing can be seen at Royal Life, part of the Royal Insurance Group. It installed an Olivetti Filenet document image processing system in late 1989 to store copies of its pension plan documents. It has spent a bout Pounds 500,000 on the computer hardware and about Pounds 300,000 on software. The Filenet system is being used to hold about 180,000 executive pension plan documents which have been scanned in and are then stored on video disks which can hold up to 40,000 A4 pages. The Filenet scanner is theoretically capable of scanning 40,000 A4 pages a day; Royal Life uses it to process 3,000 a day (it is not an automatic process; each document needs to be scanned, checked and indexed in a process which takes about 20 minutes per page). Before the system was installed, the paper files were kept in vast archives. Existing policies took several days to retrieve manually and new policies took between eight and 30 days to process. Financial intermediaries frequently complained about the long delays. Now, new policies can be processed within 24 hours, while checking on existing policies is immediate. 'We can get any A4 page off the system in between two and 17 1/2 seconds,' says Mr Alex Littlejohn, Royal Life's customer service manager. The fastest growth in demand for image processing applications is being seen at companies such as Royal Life, where there is a serious paper storage and management problem which is affecting business efficiency. According to market researchers Ovum, the price of a typical multi-user DIP system will fall from Pounds 750,000 to Pounds 400,000 over the next four years, attracting thousands of new customers. 
ID: 3918
HEADLINE: FT  23 APR 91 / Survey of The Computer Industry (21): Computer virus is the biggest threat to companies - Security, or confidentiality, integrity and availability 
TEXT: WHEN computer systems were monolithic machines in air-cooled offices, locked away from most of the employees, the security of the data was relatively easy to guarantee. But the pervasiveness of personal computing and computer networking now means that almost every employee in many large companies has access to the main computer. Ensuring the data is not maliciously altered or misappropriated is therefore increasingly difficult to achieve. Most organisations are beginning to realise the importance of sound security measures. According to accountants Price Waterhouse, security accounts for 9 per cent of expenditure on new computer systems, up from 5 per cent, five years ago. Today only 5 per cent of companies spend nothing on it compared to 25 per cent in the mid-1980s. One difficulty for commercial organisations is that there is no single source of risk: instead companies have to secure what is known as the 'CIA' of computer data: 'Confidentiality' - so that only those who are authorised to see or alter the information can do so. 'Integrity' - to ensure the information is not changed. 'Availability' - to guarantee the computer is operating correctly when required. One of the biggest threats to companies is the computer virus, says Mr Peter Jenner, business manager of PA Consulting's security consultancy centre. In the UK, both Rolls-Royce and British Rail, for example, have experienced viruses this year. Viruses, computer codes which replicate themselves from one computer to another and destroy the integrity of the data, come in a wide variety of forms, many with exotic names. With the 'cascade' virus, for example, all the characters fall from the top of the screen into a pile at the bottom. While with the 'Italian' virus a ping-pong ball bounces across the computer screen. Virus checking software is available from companies such as Sophos, of Abingdon, SS International, of Berkhamsted, and International Data Security, of London. It works by checking for the individual pattern that every virus leaves in the program. However, virus developers see the increasing sophistication of anti-virus software as a challenge to develop ever more complex viruses, says Mr Chris Frost, senior manager in the European data security division of Price Waterhouse, making it increasingly difficult to spot the interloper. The latest stealth viruses change their identification code every time the program is loaded - so the detection system cannot look for a specific string of code. Other viruses are armoured to prevent detection. When they latch on to a program they encrypt it entirely, making it difficult for the scanning software to detect where the virus code begins and ends. Other viruses have even been developed that remove themselves altogether from the program when the detection software is run. As often as not, viruses are introduced into a company by an employee bringing in his or her own floppy disk to play computer games at lunchtime. Far more sinister is the hacker who breaks into the computer system by imitating the sign-on procedure of a company employee - by using his or her computer password. The biggest problem with computer passwords is that employees often do not take them seriously - they are likely to use the name of their spouse, children or pet dog as the password, all of which can be easily guessed by the would-be hacker. Or they use series of easily guessed numbers, or even the word 'password' itself. To overcome this the latest software packages contain lists of unacceptable passwords - up to 20,000 words of them in some cases. More secure means of preventing unauthorised access to computer systems are on the market or under development. One is biometric devices, such as retina scanners, thumbprint recognition machines and sign-on machines where users have to sign their name. While somebody can change their password into a computer system easily enough, it is impossible to change a thumb print, or a retina, but this can bring drawbacks. Once a hacker has taken a thumbprint, for example, they can gain access to the computer system repeatedly without anyone noticing. More complex are combinations of hardware and software. Dynamic password tokens, for example, use devices about the size of a credit card which produce a new numeric password every few seconds. This change is controlled by an algorithm, or mathematical formula, which is synchronised with the mainframe's software. To use the system the user types in a name and password, and then types in the password that is displayed at that moment on the token. Once a hacker gets into a computer system the results can be horrendous. The widespread use of computer systems in financial applications - payroll, funds transfer or bill payment - has offered organised crime a lucrative opportunity for replacing the security van robbery with split-second electronic fraud. Most frauds are discovered by regular checks, but expert computer systems are helping to minimise the cost of these. In the case of a bank, for example, the expert system would be programmed to know that a Pounds 1,000 transaction at an exclusive clothes shop would probably be genuine, whereas a transaction of the same amount from the local supermarket would not. There is a growing awareness among computer companies that their operating systems software must be made more difficult to crack. ICL, for example, now offers a high-security version of its VME operating system for commercial use which incorporates mandatory controls: files cannot be moved from one section of the computer to another - from accounts, say, to manufacturing. Such security measures have also been adopted for the Unix operating system, with the latest version of Posix - which interfaces between Unix and the applications software - having the capability to create these mandatory controls. Last but not least, computer manufacturers and consultants are selling their wares as disaster recovery companies. Back-up sites and mobile computer units are there to ensure that even if your computer room is flooded or struck by lightning, your business is not destroyed as well. 
ID: 3919
HEADLINE: FT  23 APR 91 / Survey of The Computer Industry (20): Makers plan more powerful machines - Workstations, market continues to grow 
TEXT: COMPUTER workstations are 'not just for 'techies' anymore', Sun Microsystems, market leader, has declared. These high performance desktop computers have until recently been aimed primarily at engineering and scientific applications. Sun and others see a new market opportunity for workstations as high-powered business computers. 'The mass penetration of workstations into markets dominated by personal computers, minicomputers and mainframes isn't a future event - it has already happened,' Sun claims. The marriage of computer workstation performance with the vast software base of the PC is luring dozens of computer makers and software developers into this emerging market. PC companies such as Compaq Computer and Apple Computer are planning to build more powerful desktop machines based upon Reduced Instruction Set Computing (RISC) microprocessors borrowed from the engineering workstation world. Workstation manufacturers such as Sun, Digital Equipment and Hewlett-Packard are targeting business users as well as their traditional engineering and scientific markets. The technical features and market characteristics that divide the PC and workstation markets are fast disappearing. Business applications are increasingly being ported to varieties of the Unix operating system which is widely used on engineering workstations. The raw data processing power of the PC vies with that of low end workstations. Distribution patterns are also overlapping. Traditionally, workstations have been sold primarily by direct sales forces or through value-added resellers who add specialised software. Increasingly, however, workstations are being offered by the computer dealers and retail outlets that dominate the PC market. However, as workstations enter the business market a conflict between PC and workstation software standards has arisen. While Microsoft's DOS operating system dominates the PC world, Unix - in various forms - is the operating system of choice for workstations. Backers of the Advanced Computindustry consortium of 21 companies, have declared their support for both a future unified version of Unix and a future version of Microsoft's OS/2 operating system. Members of the group acknowledge that they are hedging their bets, until it becomes clearer which way the business workstation market will move. The emergence of workstations as business computers has added to the fierce competition in all sectors of the Dollars 7.5bn workstation market. Sales of workstations are expected to total Dollars 9.2bn this year and reach over Dollars 12bn in 1992, according to Dataquest, the market research company. Sun Microsystems is the clear winner in workstations, with a dominant 32 per cent market share. Sun's combination of the Sparc Reduced Instruction Set Computing (RISC) microprocessor and SunOS version of Unix has attracted several licensed cloners who offer Sun-compatible computers. Sun's strategy has been to establish Sparc as an industry standard and mostly through the success of its own products it is succeeding. Industry analysts predict that Sun will continue to lead the workstation market throughout the early 1990s although International Business Machines may aggressively challenge Sun. 'By 1992-93 Sun and IBM may tie for first place among workstation vendors,' predicts Ms Vicki Brown of International Data. IBM has made a remarkable resurgence in the workstation market since its introduction, a year ago, of a range of products based upon its own RISC design. The company sold Dollars 1bn-worth of its RS/6000 workstations in 1990 and gained a 6.6 per cent share in the market. Sales are expected to rise to Dollars 1.7bn-Dollars 2bn this year. Hewlett-Packard, the number two workstation vendor, lost market share in 1990 but is expected to make a strong recovery this year with the recent introduction of a new product range. Using an enhanced version of the Reduced Instruction Set Computing (RISC) architecture upon which its minicomputers are based, HP has taken a technological leapfrog to produce machines that greatly outperform comparably priced workstations from its main competitors. HP's new top of the range Series 700 Model 730 workstation is twice as fast as IBM's fastest workstation, and 3.5 times the performance of Sun Microsystems Sparcstation 3, HP claims. Digital Equipment saw its share of the workstation market reduced in 1990 to 17 per cent from 23 per cent in the previous year, according to IDC. Digital is aggressively supporting Ace, the Advanced Computing Environment initiative, and plans to upgrade its DEC station product line with new workstations based upon the powerful R4000 Mips computer RISC chip, when that device becomes available. 'Marketing prowess and execution - not pure technology - will ultimately determine the winners in the workstation market,' predicts Ms Brown of IDC. A challenge for all workstation participants will be to maintain profit margins as average workstation prices fall and to adjust to new distribution channels as the market for workstations expands. ------------------------------------------------- Market share of workstation shipments worldwide ------------------------------------------------- % ------------------------------------------------- Sun Microsystems            32.4 Hewlett-Packard             21.2 Digital Equipment           16.2 Intergraph                   7.0 IBM                          6.7 Silicon Graphics             5.9 Sony                         2.8 Next                         1.0 Others                       7.2 ------------------------------------------------- Source: International Data ------------------------------------------------- 
ID: 3920
HEADLINE: FT  23 APR 91 / Survey of The Computer Industry (19): 'Let the industry do what it does best' - Reverse Engineering, conflict and compromise 
TEXT: REVERSE engineering, the practice of unravelling a competitor's product to learn how it works in order either to emulate it or to attach proprietary equipment, achieved unlikely political notoriety last year after a European Commission draft directive designed to protect software makers unleashed one of the fiercest bouts of lobbying ever witnessed in Brussels or Strasbourg. The purpose of the draft directive was both simple and honourable; to protect the creators and suppliers of personal computer software who are being cheated annually of about Pounds 3bn in Europe through unauthorised copying of their products. The idea was to eliminate existing disparities between the copyright protection systems for software in the member states as part of the Commission's general plans for the harmonisation of EC law for 1992. As such, it was supported to the hilt by organisations such as the Business Software Alliance, the Software Publishers Association, and the Federation Against Software Theft. The Business Software Alliance, established by six of the world's leading PC software suppliers - Aldus (desk top publishing) Ashton Tate (database) Autodesk (computer aided draughting) Lotus (spreadsheets) Microsoft (operating systems) and Wordperfect (word processing), has taken a leading role in initiating legal proceedings against companies it believes guilty of software theft. However, what turned a commonsense measure designed to protect software companies in a uniform manner across Europe into a political hot potato was the fine detail in the draft. Computer manufacturers realised quickly that the provisions of the directive would specifically forbid unauthorised reverse engineering and in doing so, hamper their efforts to compete with the leaders of the industry such as International Business Machines (IBM) and Digital Equipment Corporation (DEC). A campaign led by the hastily formed European Committee for Interoperable Systems (ECIS), to persuade members of the European parliament and the Commission to modify the directive was immediately initiated. The software suppliers, together with IBM and DEC who saw the opportunity legally to forbid Japanese manufacturers access to their technology, took the opposite line and for some months the two lobbies fought a fierce war of words. It was not surprising that the Commission's draftsmen failed to anticipate the scale of the row they were to precipitate. Reverse engineering, while simple in concept is complex in detail and the extent to which it is used is essential. Furthermore, its use in the computer industry is rarely appreciated by outsiders. It is an easy concept to understand in conventional engineering. Automobile manufacturers routinely take their competitor's vehicles apart to see what makes them tick. So what is reverse engineering in computer software? It is software archaeology, according to Mr Gilles Lafue, a software specialist with Andersen Consulting. 'It consists of extracting the software's functionality (what the software does) and the design (how it does it) by analysing the software's implementation - that is, programming code, data structures, files and databases.' It is necessary because of the dominant position of a small number of manufacturers who are able to set de facto standards for data processing systems. That means essentially IBM and DEC. Other manufacturers must so design their equipment that it can be connected to IBM's or DEC's if they are to have a share of the data processing cake. To do so, they have to understand the design of the connection, or interface, in great detail. That knowledge can be acquired either directly from IBM or DEC - leaving the competitor at the mercy of the industry leaders - or it can obtained by reverse engineering with or without their permission. Of course, reverse engineering can be used to create a competitive product through copying or improving on the original which is why software makers are keen to have it banned. Many of the best software innovations are not patented but simply hidden away in thousands of lines of computer code to prevent copying; legal reverse engineering, the software specialists complain, would be tantamount to a plagiarist's charter. It was not simply hardware manufacturers and software houses who were upset. Europe's computer users realised their ability to carry out essential maintenance on their software would be hindered by the directive. (Maintenance, in the software business, means modifying and extending existing programs rather than repair.) A compromise position was reached in December last year when a version of the directive was agreed in Brussels which provided for: Classification of software as literary works A definition of originality A common term of protection in accordance with the Berne Convention Legal reverse engineering in limited circumstances. These circumstances are when the retrieval of information is confined to the parts of the original program necessary for inter-operability, when the information retrieved is not communicated to third parties except to the extent necessary for the operation of the new program and the information retrieved is not used to create or market a program that infringes a copyright in the original program. The compromise proved broadly satisfactory to the hardware manufacturers and to the software suppliers. However, the issue has continued to spark controversy. Earlier this month, the European parliament's committee on Legal Affairs and Citizen's Rights proposed 11 amendments to the draft directive which clarify the scope of the directive for research and analysis and the status of interfaces between hardware and software under copyright law. It has resulted in a new round of lobbying with ECIS in the forefront of a campaign to persuade MEPs to vote in favour of most of the amendments. Meanwhile, the Business Software Alliance which represents over 800 publishers of PC software, has decided it is time to call a halt. In an open letter to the legal affair committee earlier in the year it said: 'After over a year of extended lobbying, it was finally possible last December to reach a compromise that virtually the whole computer industry could accept. We believe that it is now time to include all of the lobbying and political debate and let the industry get back to what it does best - producing hardware and software - under the terms of this compromise'. 
ID: 3921
HEADLINE: FT  23 APR 91 / Survey of The Computer Industry (18): Software takes the driving seat - Mid-Range Systems, hardware architectures under review 
TEXT: THE undeniable driving force in much of the mid-range systems market is systems software, and in particular Unix and the broader issues of open systems. These, in turn, are changing some of the rules that govern mid-range hardware architectures. Unix is insinuating its way into a position of dominance in the mid-range market, and the leading manufacturers are all reacting to it. Some, such as Digital Equipment (DEC), have arguably come to it somewhat later than others, while IBM is at last showing some signs that is taking the subject seriously. The operating system is starting to have an impact on the way mid-range systems are designed and built. Reduced Instruction Set Computer (RISC) chip sets are increasingly the order of the day, for example, and those systems manufacturers that do not have their own designs are signing supply and technology licensing agreements with those that do. DEC is committed to the RISC chips produced by MIPS Computer, so much so that it holds a minority stake in the company. The MIPS-based DEC Station systems are still largely at the low-end of the company's product range, but MIPS has a new, more powerful 64-bit processor on the drawing board, which is likely to form the basis of any successor to DEC's successful VAX minicomputer architecture. These chips lie at the heart of the new consortium of leading hardware and software companies, known both as the 'Gibraltar Group' and the Advanced Computing Environment (ACE) group, which is aiming to build a new industry standard for both the lower reaches of mid-range systems and workstations. Most estimates suggest that the first new machines built to this standard will not appear for three years. Evidence to bear this out comes indirectly from DEC, which is pressurising its existing VAX users into updating their applications code to take advantage of future RISC systems within three years, otherwise they will be effectively locked out of future open systems developments. The company plans to shift to RISC-based systems and away from the VAX architecture in the long term. Prime targets for the ACE group are Sun Microsystems, which claims to own about 60 per cent of the workstation and low-end mid-range market place, and a newly reinvigorated IBM, which has scored some significant recent successes with its own RISC-based machines, the RS/6000 range. Sun Microsystems is fast becoming an important player in the mid-range market, not only for its own systems but also for its SPARC RISC-chip set, which is being aggressively marketed to other systems vendors. Several names in the mid-range market, with UK's ICL leading the way, have signed up to use the SPARC chip set and have established their own systems in the market place. The chip set offers systems builders a scalable platform, allowing them to develop machines that range from 12 mips (million instructions per second) workstations to 100 mips superminicomputers, all running the same operating system and applications software. Stretching from the desktop workstation through to large corporate server systems, the IBM RS/6000 has ruffled some feathers among established Unix mid-range suppliers by winning an order for 2,500 systems from Barclays Bank. This cuts across the standard industry perception that IBM only pays lip-service to Unix, and even then takes an alternative stance by having its own version of the system, a extensively re-engineered superset of the Unix standard called AIX. From the company's early efforts in the RISC-based workstation and mid-range markets with the 6150, which were generally considered to be down on performance and up on price in comparison with the competition, the completely re-worked RS/6000 series looks like making a success of itself. This, in turn, may prompt IBM to take an even more positive stance about it, rather than always managing to give the impression that it is something of an afterthought to other, more strategic product families. In this context, the company's main mid-range offering is the AS/400 family. Though by most other manufacturer's standards it would be considered a large success, sales of these machines have generally been considered as somewhat disappointing. It has largely been seen as the replacement for the company's old System 3/X line of minicomputers which have a good, if stolid reputation in the traditional small and medium-sized business market. System 3X replacement sales have been good for the AS/400, but its penetration into new markets, especially those dominated by DEC with its VAX systems, has not been excessive. The machine has been plagued recently with technical problems, particularly in the area of disk storage. It has been found that disk drives for the machine are suffering from excessive vibration which causes disk crashes and consequent failure of the system. What has made this worse is the fact that the system software is spread across all drives used on an AS/400, which means they all must work for the system to work. AS/400 users are subject to the changing pricing policies that can come with such proprietary systems. Recent changes in IBM's software pricing for this machine have left users that upgrade their existing systems facing a 50 per cent jump in software costs for enhanced code that had previously been free. One growing trend in the mid-range market is towards multiprocessor systems built around common devices such as the Intel i486 processor. One of the leading contenders, Sequent, has systems available using as many as 18 of these devices, offering a capability of servicing up to 500 users. NCR has recently announced systems using a similar architecture which, like the Sequent system, runs Unix. Once again, the basis of the trend is towards scale in both the hardware architecture and the applications software to give mid-range users maximum flexibility. Such systems go some way towards meeting the growing need for fault tolerance by the simple expedient of using a lot of processors. This is only a partial solution, however, and rarely satisfies those users with business-critical applications that demand the maximum in reliability. That market place remains the domain of two main contenders, Stratus Computers and, the market leader, Tandem. The latter's Integrity S2 machines use multiple processors, but instead of tasks being shared out among a number of small units, these use large processors to run the applications together, monitoring each other's output and voting between them to discover and isolate faults. 
ID: 3922
HEADLINE: FT  23 APR 91 / Survey of The Computer Industry (17): Right-size gains credence - Mainframes, life in the old system yet 
TEXT: THE mainframe computer will it not lie down and die. It continues to demonstrate it has a viable, long-term place in information processing and management, in spite of the inevitable effects of the recession, and the continuing suggestion that it is to be supplanted by a collective of mid-range, workstation and PC systems. One of the main assumptions in the suggested demise of the mainframe, and one which has had a significant impact of late, is downsizing. This is the concept that, as technology allows the same performance to be packed into an ever-smaller physical size, so the need for the big boxes will diminish to an eventual vanishing point of economic non-viability. The evidence is now starting to point away from this inevitability. Instead, the term 'right-sizing' is starting to gain credence. With that credence comes an appreciation that the mainframe will continue to have an important role. What is more the corollary of downsizing, that the technology will be exploited to add more power and performance to a system of any given physical size and price, will provide continued justification for that role. Right-sizing takes as its basis the fact that different types of applications in information management require different systems architectures to run them most efficiently. Therefore, while it is far more sensible to run a highly user-interactive mix of spreadsheeting, graphics and text report writing applications together on a PC, the same platform is totally inadequate as the host of a large, on-line transaction processing system. Here, there is really no alternative to a large mainframe installation and an extensive disk farm of on-line data storage. As such on-line transactions processing (OLTP) systems are the life-blood of most large corporations, such as the financial institutions, there is unlikely to be any significant reduction in either the role of or demand for mainframe systems. The main differentiator that defines mainframes, minicomputers and workstations/PCs, is the relationship between an application's data and functionality. An application that is data-rich but functionally poor, such as OLTP or large database management, is ideally suited to a mainframe solution. Applications with the inverse ratio suit the workstation/PC, while the minicomputer matches applications which require a reasonable mix of these two elements. The fact that there is still very much a role for mainframes has not meant a healthy flow of business for the manufacturers. Industry-leader IBM indicated that the slump in its business, thought to have been stemmed following a good fourth quarter last year, looks set to continue for at least the first half of this year. The company has laid the blame on the spreading recession throughout Europe and Japan, though US analysts, such as Mr Ulric Weil of Weil Associates, have suggested that downsizing aspirations by customers is also having a considerable impact on the company's mainframe sales. There is a negative impact felt from the problems in computer leasing business, which has been a significant sales route through which IBM has reached its customer base. The recession is, a big worry for IBM's mainframe business, for it has followed smartly on its introduction of a complete new range of systems, the System/390 range, described by Mr Tony Cleaver, IBM chairman and chief executive, as the biggest and most important announcement for a quarter of century. In spite of that significance, sales of systems in the range have been slow, except for a small increase which occurred during the fourth quarter last year. Then, sales of the most powerful, six processor systems, the ES/9000 Model 900, and the top of the entry-level machines, Models 330 and 340, rose sharply. This looks as though it has been a temporary excursion, and that sales will continue slowly. As well as the problems of recession, the machines mark a fairly radical step function both in performance and compatibility with the the existing IBM mainframe product family, the 370 Series. There are only a limited number of bridges between the two families, and users of 370 series machines may first have to upgrade their existing systems to one of the configurations at which a transition to the equivalent ES/9000 can be made. There have also been some missed compatibility opportunities in fairly obvious, even rather silly areas. For example, the upper range of the ES/9000 series is water-cooled, as are the 370 series machines, yet they use different diameter piping to supply the coolant. In spite of the continued reliance on proprietary architectures and operating systems from the mainframe suppliers, there are signs that open systems concepts are now penetrating deeply. Amdahl, for example, is still the only mainframe supplier to offer an implementation of Unix as a native operating system on its machines. Others, including IBM, only offer it as a guest running under the proprietary operating system. Unix on the mainframe has been a slow starter, but some users see it as a way out of being locked in to not only proprietary systems, but the pricing that can go with them. It offers opportunities in providing more coherent communications between different hardware platforms, a fundamental element of open systems, if they are all running broadly the same operating system. If Unix does become more prominent on mainframe systems, it offers the chance of greater freedom for the IBM plug compatible systems manufacturers, which include the likes of Amdahl and Fujitsu. These have built their businesses on making hardware that runs IBM software but is cheaper and/or more readily available than IBM kit. Any significant switch to Unix in the market could allow both them and the users a wider, more competitive choice of sources for applications software. It could reverse the current situation and allow a native Unix to act as host to a manufacturer's existing proprietary operating system. This would provide current users of proprietary systems with continuity as well as broadening the choice of upgrade path. 
ID: 3923
HEADLINE: FT  23 APR 91 / Survey of The Computer Industry (16): Smaller but more powerful - Printers, concerned about scale 
TEXT: THE trend to downsizing where applications previously carried out on a mainframe can now often be done on a mini; and the power that one expected from a mini now being available in today's top of the range PCs is having a profound effect on the market for printers. On the one hand, advanced features and performance is required and yet, at the same time, the market will not bear prices which appear to be out of all relationship with the falling prices of the PCs to which the devices will be connected. Some users want colour, others need improved quality such as higher resolution (in dots per inch) while many departments need to handle multi-part forms. Furthermore, a growing proportion of users need a graphics capability to handle a variety of text fonts and sizes as well as charts and more complex images. This is a facility which is widely available, especially in the non-impact page printers. One long-felt business need is colour to enable, for example, profits/losses to be more readily seen in a spreadsheet. The simplest way of achieving this is to use a printer with a two-colour ribbon as was used in a manual typewriter. Where this would be too slow, colour ink jet and thermal transfer printers come into their own. 'The market for high quality colour printers is one which, until now, has been supplied with high priced machines,' says Mr Richard Bright of Mannesmann Tally, printer manufacturer. 'By introducing a sub-Pounds 2,000 thermal transfer page printer we have significantly reduced the cost of colour page printing, without sacrificing print quality. What was a specialist piece of equipment is now available to general business users.' According to BIS CAP International the European colour printer market is set to expand from 170,000 units in 1990 to 500,000 in 1994 and will be worth about Dollars 1.3bn by 1994. The UK printer market is likely to grow from 45,000 units in 1990 to 180,000 in 1994. It will be worth Dollars 400m by 1994. While, no doubt, some of this growth will come from normal business users, a growing proportion will be in computer-aided design (CAD) and desktop publishing where users will be able to get a colour representation of their documents before going out to print in high volume. The widely-used laser printer with its 300 x 300 dots per inch (DPI) resolution is frequently not considered adequate for DTP. Hence, once the work has been completed on the Macintosh (or PC), the actual camera-ready artwork is prepared on a higher resolution printer often of more than 1,000 DPI. Bridging the two markets is the Qume CrystalPrint Express. Not only does this 12 page per minute (appreciably faster than the average laser printer) provide 600 x 300 resolution which is adequate for many applications it incorporates a number of interfaces (including AppleTalk) and emulations which together offer the compatibility required when the printer is a 'shared resource' on a local area network (LAN). Also vying for this market are other versatile printers such as the Kodak Ektaplus 7016 and the HP Laserjet III Si from Hewlett-Packard, the market leader in the non-impact market. While both of these are 16 pages per minute (PPM) the former incorporates a 6 PPM photocopier 'designed for those simple one or two copies tasks common in the busy office environment thus increasing productivity by reducing waiting time at the photocopier'. The latter, using HP's resolution enhancement technology together with microfine toner, is claimed to give resolution akin to that of a 600 DPI printer. One of its options is that it can have a direct high-speed connection to a LAN, such as Novell, so obviating the need for a separate PC as a printer-server. This is far more cost-effective than with many networked printers. Laser and ink jet printers are 'non-impact' unlike dot-matrix machines which tend to have a low-tech image and are often derided for their lower quality and high noise level. In spite of this they are the workhorses of industry and commerce and are able to handle multi-part forms which the other technologies cannot handle. According to Romtec, the market analyst, for those reasons plus cost they still account for 57 per cent of the UK market with laser and inkjet holding for 27 and 11.7 per cent respectively. For example, Epson which tends to be identified as the world's predominant supplier of dot matrix printers (in spite of claiming to take a growing share of the non-impact market) produces both general purpose and specialised products. A good example of the latter is its DFX-1000. This is a heavy duty system printer which will handle high-speed printing of multi-part forms at up to 300 lines per minute making it, they believe, the fastest serial impact printer in the world. However, Romtec also reports that, during the fourth quarter of 1990, Epson and Hewlett-Packard had 29.2 and 23.6 per cent respectively of the printer sales (in units) to business end users via dealers, distributors. Retailers direct sales by the manufacturers only accounted for a very small proportion. But, as the Epson business is largely in the lower-cost dot matrix market, the value of HP's sales is higher. The dot matrix market is facing tough competition - especially from inkjet printers - as users become more conscience of the image that their own printed output creates. Ms Nicky Ayre, product manager at HP says the Deskjet HP DJ500 is 'the better alternative to the dot matrix and that there is no longer a price-penalty to pay for higher quality'. She says HP is focusing on the higher quality that is being expected by the discerning users. The HP DJ500 is ideal as a personal printer where the requirement is for about 50 pages per day and is increasingly being installed in people's homes. It can be seen that there is no universal requirement. As a result, the variety of printers continues to grow. Unfortunately, it is not easy to find the collection of features that are needed at an affordable price. 
ID: 3924
HEADLINE: FT  23 APR 91 / Survey of The Computer Industry (15): It all depends on the number of chips - Semiconductors, when is a computer company not a computer company 
TEXT: MR Bernard Giroud, vice-president of Intel, takes strong exception to anyone calling his organisation a computer company. By contrast, Mr Tom Beaver, vice-president of Motorola, positively insists on his organisation being called a computer company. Regardless of how they prefer to be styled, both of these leading US semiconductor manufacturers now make products which used to be made by computer companies. As computer companies concentrate on profitable activities such as software and systems integration, semiconductor companies such as Intel and Motorola are spending more of their time manufacturing computers. Ten years ago, the computer companies simply provided customers with their computers. Now the task of traditional computer companies has shifted, says Mr Giroud. 'The end user is asking for more software, more assistance, more training,' he says. As computer companies have moved away from their older manufacturing role, Intel, the world's leading manufacturer of microprocessors, has moved in. 'We are doing what an ICL or a Nixdorf was doing 10 years ago,' Mr Giroud says. 'We are making the central processing unit that ICL used to make 10 years ago.' The reason he insists on Intel not being called a computer company is that it does not deal directly with the end users of computers. 'A computer company is a company that sells solutions to the end user. We supply hardware to the system integrators. They supply the technology to the end user, combined with the software. We are not in competition with Compaq, Hewlett-Packard or IBM.' Motorola, America's biggest semiconductor maker, sees itself as being more directly involved in the computer industry. Mr Beaver says the company regards itself as a manufacturer of standard computers, along with their operating software. The only area in which Motorola is not involved is in the provision of applications software. Five years ago Motorola established a separate computer division, which Mr Beaver heads. One of the reasons why Motorola wanted to move more decisively into computer manufacture was to help influence the debate over common operating standards. The computer industry worldwide has seen a move away from computers which are unable to communicate with those provided by other manufacturers. Customers are increasingly insisting on common standards or open systems. They are demanding that different manufacturers provide computers that can talk to one another. Motorola makes computers which use A T &amp; T's Unix operating system. The move from proprietary to open systems provided Motorola with what it saw as a commercial opportunity. 'We saw a lot of computer companies struggling through the transition from proprietary to open systems. We saw a lot of them deciding to become niche companies, specialising in banking, insurance, what have you. They're letting someone else build the hardware. We saw that as an opportunity because our corporation is good at competing in commodity products. We make computers as a commodity item,' says Mr Beaver. Mr Beaver says he sees the world computer industry today as being divided into three groups. The first consists of companies providing a mixture of computers adhering to both their own and to common operating standards. He says the American companies IBM, DEC, Unisys and Hewlett-Packard belong in this category, along with Siemens of Germany. The second group consists of companies providing computer systems to clients in particular fields, such as banking or law, and contracting out much of the hardware manufacture. He puts Wang of the US, Olivetti of Italy, Philips of the Netherlands and Nixdorf of Germany (now part of Siemens) in this group. The third group consists of companies providing products for the open systems market. NCR, Intel, A T &amp; T, Sun Microsystems and Compaq - all of the US - fall into this category, as do most of the Japanese computer companies. So, he says, does Motorola. Participating in a commodity market, he says, these companies have to sell computers on the basis of price and performance. The move by many computer companies away from manufacturing is not the only reason that some chip companies have become computer manufacturers. Mr Giroud points out that technological developments mean that computers use fewer and fewer chips. 'At the moment, you take two chips from Intel, eight chips from someone else, add the memory, and you have a personal computer. In 1984 or 1985, you needed 170 chips plus the memory to make a computer. In 1993, the 10 chips plus the memory you need today will become one chip plus the memory,' Mr Giroud says. As the number of chips used in computers shrinks, semiconductor makers effectively become computer manufacturers. 'What we are doing is we are putting a PC on a chip,' Mr Giroud says. 'The chips we are designing now have 4m to 5m transistors.' 
ID: 3925
HEADLINE: FT  23 APR 91 / Survey of The Computer Industry (14): Three-tier structure crumbles - Distribution Channels, a year of change 
TEXT: THE past year has seen big changes in the ownership of the companies which distribute computer equipment in the UK. In general, control of the leading companies has moved outside of this country. In the past 12 months Frontline, one of the most successful of UK computer distributors, has been taken over by German distributor Computer 2000, while network specialist QDL has fallen to Micro Macro, a Netherlands combine, and in the past few weeks Software Limited has been taken over by Ingram Micro of the US. These changes of ownership are arguably less important than the changes in the structures of computer distribution channels that have been taking place. A few years ago computer distribution channels in the UK could be defined quite easily. The manufacturer at the top would sell equipment to distributors, who in their turn would sell it on to computer dealers. But more recently this three-tier structure has begun to erode. Pressure on profit margins has encouraged manufacturers to remove the centre distributor tier, and to deal direct with computer dealers, and even with customers. At the same time, we have seen the growth of the super dealer, operations such as Computacenter and Technology which are large enough to deal directly with suppliers, and dealer/distributors. The two types of operation meet in the middle, with dealer-led companies such as Computacenter and Technology becoming, to all intents and purposes, distributors, and with distribution operations such as Rossendale, adding computer dealer operations to broaden their base. Pressure on margins is such that it is difficult to see, in the minds of many analysts, how an operation that deals solely as an intermediary, taking equipment from a manufacturer and passing it on to a computer dealer without gaining any extra profit margin from selling direct to users, can survive. One danger for the trade-only distributor is that the market will split, leaving such companies handling mainly the more esoteric product ranges and lower volume shipments to smaller dealers. As the bigger dealerships are beginning to show, and as smaller distributors which move back into direct sales confirms, large amounts of money can be made through a combination of relatively limited product ranges shipped at high volumes. Mr Derek Lewis, head of Technology, argues that large corporate dealerships such as his own company should concentrate on on two, maybe three ranges of computer hardware. Mr Lewis's company is a member of Comec, one of two big European dealer associations, and the implications of this are clear - if the dealers throughout Europe who are members of Comec decide on an official range of computers, they can drive a very hard bargain, forcing the margins of manufacturers down. This worries Mr Don Pinchbeck, managing director at Epson UK. He feels that 'the reseller who is pan-European can seize power from manufacturers'. Comec and the International Computer Group (ICG), which is the rival association of which Computacenter is a member, can through the combined buying power of their membership overturn the food chain, controlling the manufacturers rather than being controlled. If this happens, Mr Pinchbeck sees computer manufacturers becoming very much like the suppliers of UK supermarkets, having prices, terms and conditions dictated to them by a few all-powerful chains. A possible escape-route, he feels, involves manufacturers learning from the motor industry and moving machines tailored to individual specification straight off the production line. The manufacturer, in effect, would become a systems integrator. Other manufacturers are however exploring different routes to survival. One of the basic planks on which Compaq was founded was its determination not to sell direct, but in recent years, as the power of its equipment has increased, the company has found itself evolving what is in effect a direct sales force that does not sell direct. With the exception of the large chains, a company's individual dealers do not have the resources to sell adequately into what is, in effect, the minicomputer market. If a company will not set up the kind of direct sales force traditionally used to sell minis, it finds itself forced to do an increasing amount of hand holding for the dealers who are making the sales. Compaq UK has in the past few years hired a number of staff from mini manufacturers, and Mr Gian Carlo Bisone, head of European marketing, is no stranger to these techniques. The nature of the market accentuates these problems. Mr Bisone describes the primary characteristic of the dealer channel as being that it has no money, and Compaq pursues intricate schemes in order to inject money into it without the extra cash disappearing in the shape of increased discounts to customers. Training and joint marketing programmes are examples of how this can be done. Other manufacturers are engaged in heavy support programmes for their dealer base, and one possible consequence of such approaches is that dealers -particularly those who are not part of large associations - will become more closely bound to single manufacturers. These manufacturers may, albeit accidentally, convert their dealer base into what is effectively a direct sales force. In the UK, Apple has traditionally taken a similar approach to Compaq, attempting to keep prices and the level of its dealer expertise high, and taking a highly combative line with discount houses. However, it has created a problem for itself, in terms of sales channels, with its new low-cost range of machines. There are rumours that the company will later this year release a range aimed fair and square at the home/games market which indicates that the problem can only get worse. Selling these without overturning the applecart and forcing down prices on its higher specification machines is a puzzle Apple is still working on. Mr John Sculley, chief executive officer, has made confusing and perhaps ominous references to rapid turnover-style outlets. There is an alternative that Apple will almost certainly reject. If manufacturers in general find themselves facing lower margins on the machines they sell into distribution channels, is it not logical for them to consider reducing the number of tiers in the channels, or perhaps eliminate them completely by selling direct to users? Speaking at a conference in Dusseldorf last month, Mr Billy Ho, Mitac associate vice-president told the company's distributors that, at least for machines that are priced at commodity level, the company would have to face up to a reduction in the number of tiers in the channels. Mitac, a Taiwanese company, is one of the largest computer manufacturers in the world, although its name isn't that well known to users because it has traditionally built for other computer companies. His view was that Mitac distributors worldwide would have to begin to sell direct to users in order to increase sales and maintain profitability, and if as seems likely other manufacturers are thinking along similar lines, the future could hold increased terrors for independent dealers. John Lettice, Editor, MicroScope 
ID: 3926
HEADLINE: FT  23 APR 91 / Survey of The Computer Industry (13): Consortia add to confusion - Standards, users wait in vain for common technologies 
TEXT: THE COMPUTER industry is driven by fashion, and industry standards is the current craze. At one time, indeed, it seemed as if a genuine enthusiasm for common standards might result in lower costs and greater simplicity of operations for customers, a notion much promoted by the manufacturers themselves. The belief was that if manufacturers were prepared to agree common technologies for operating computers, connecting them together and running software, users would be saved the cost and complexity of connecting dissimilar hardware. At the same time, software suppliers would be able to write programs capable of being run on any machine, cutting the cost of the multiple versions they have to produce at present. That, however, has proved a vain hope. For most computer users, the standards issue has become hopelessly confused. The suppliers have done little to help matters, taking part in seemingly endless series of industry consortia to promote one standard or another. There are compelling financial reasons for this apparent waywardness - backing the wrong standards horse can be an expensive mistake. But somewhere along the line, the idea of common standards to which everybody in the industry adheres for the benefit of the customer has been lost. Common standards are crucial to the idea of open systems, which most observers believe will play an increasingly important part in data processing over the next decade. What is an open system? According a new handbook*, they are defined as: 'those that conform to internationally agreed standards defining computing environments that allow users to develop, run and interconnect applications and the hardware they run on, from whatever source, without significant conversion cost'. The author goes on to point out that the key factors for users are that no single supplier actually 'owns' (that is, has control of) the environments involved and that the mixing and matching of applications and hardware can be achieved without significant cost. The reality is that every supplier of any size is scrabbling to own, or at least share ownership, of any hardware or software element which looks as if it stands a fair chance of becoming a standard. The result has been a series of pitched battles which show no real signs of abating. Even the oldest standards war, the fight over how best to connect computers together in telecommunications networks, has yet to be resolved after more than 15 years. On the one hand, standards setting bodies are trying to establish a set of rules called Open Systems Interconnection (OSI) which they have now almost completely defined. On the other hand, International Business Machines (IBM) is insisting that its SNA rules will remain the way for its own machines to be connected together, while many customers are content with rules called TCP/IP devised by the US Defense Department. Or consider, for example, the latest industry initiative, a consortium of 20 leading suppliers including the US companies Compaq, the leading supplier of high performance personal computers, Control Data, the mainframe supplier and Digital Equipment, the world's principal minicomputer maker. It also includes the Japanese suppliers NEC, Nippon Kokan KK and Sony. The consortium has established what it calls an Advanced Computing Environment (Ace) whose elements include support for software operating environments from Microsoft (OS/2 version 3.0) and the Santa Cruz Operation (Open Desktop, a version of the Unix operating systems) and microprocessor chips from Intel (80/386, 80/486 and so on) and MIPS Computer Systems' (advanced reduced instruction set computing, or Risc) chips. The aim of the group is to 'unify' the industry by establishing standards combining software and hardware technologies from personal computers, computer workstations and multi-processor computers. The group does not include, however, IBM, the world's largest computer manufacturer, which frequently seems to behave as if it feels it has an inalienable right to decide which standards the industry will adopt. It is a leading light behind the Open Software Foundation, which has been developing its own Unix-like operating systems, OSF1. Some observers see the formation of the Ace consortium as a challenge to IBM; others as an attempt to displace Sun Microsystems from its dominant position in the Unix workstation market place. Sun, an ambitious, fast-growing company, has about two-thirds of the market for Unix workstations based on its proprietary Risc design called 'sparc'. It has been licensing this design widely in an aggressive attempt to establish it as the industry Risc standard. One of the first licensees was Solbourne, a workstation manufacturer. Mr Barrie Murray-Upton, its vice-president of European operations, said after the announcement of Ace: 'Why would 20 of the world's leading computer manufacturers band together to form a consortium unless they were seriously worried about the continuing success of sparc technology?' The Ace group's attempt to appear cohesive was not helped, either, by the emergence of a splinter group among the 20 declaring its support for yet another version of Unix. The upshot of all this wrangling is that customers' need for genuinely open systems has been hijacked and treated with contempt by rival industry gangs. Groups of users have attempted to establish their own ginger groups, but with only limited success - General Motors' attempt to set a manufacturing automation protocol (MAP) is one example. Earlier this year, in initiative sponsored by the user arm of X/Open, one of the earliest standards pressure groups,representing hundreds of users met in Dallas, Texas, to formulate plans to encourage manufacturers to speed up the introduction of open systems. They deliberated and drew up lists of their requirements. The resolutions, however, fell far short of an ultimatum to the manufacturers. Computer users, to some extent, have only themselves to blame for the way manufacturers treat them. *Practical Open Systems by Ian Hugo, NCC Blackwell, 108 Cowley Road, Oxford, OX4 1JF. Pounds 20. 
ID: 3927
HEADLINE: FT  23 APR 91 / Survey of The Computer Industry (12): The high price of top performance - Supercomputers, a faster rate of change 
TEXT: AFTER only 12 years service at the Aldermaston Atomic Weapons Establishment, the world's first modern day supercomputer is already an antique. The Cray 1A, the pioneering computer designed by Seymour Cray after he founded Cray Research in the mid-1970s, has been consigned to a disused aircraft hangar used by the London Science Museum to store exhibits. Donated to the Museum by the Cray company, it will eventually be displayed as part of the Computing Collection. Weighing eight tonnes and operating at 160m floating point operations a second (Flops), a measure of supercomputing performance, it cost Pounds 8m in 1979. Now it is: 'Outdated, large and expensive for what it does by modern standards' according to the Science Museum's Mr Peter Bailes. Today's top of the range Cray, the YMP-8 with eight processors weighs considerably less, operates at a peak of 2.5bn flops and costs about Dollars 20m. The Cray 1A was designed to stand alone; Cray's newest machines are built for what Mr John Rollwagen, the company's chief executive, calls 'network supercomputing'; providing number crunching capability as part of a network of smaller computers. The rapid advances in technology which have so quickly dated the Cray 1A, have also changed the shape of the supercomputer business. Only a few years ago, there were two dominant manufacturers, Cray and Control Data of the US, supplying a tiny group of customers who both needed the power and could afford the price of the fastest available computing hardware. Today, the same customers - meteorologists, oil exploration organisations, aerospace companies and automobile manufacturers - still need supercomputer performance. Peugeot SA, for example, an organisation comprising the two French automobile manufacturers Automobiles Peugeot and Automobiles Citroen, has just ordered a Cray YMP2E, a two processor system that nevertheless delivers some 600 mips. It will be used for general automobile research and design including structural analysis, crash simulation, acoustic design and the simulation of car behaviour. The supercomputer landscape has changed irrevocably, however, over the past two years. Control Data, the US supercomputing pioneer has moved out of the area altogether, as commercial difficulties in other parts of its business made the heavy research and development investment necessary to stay at the leading edge too great a burden. Seymour Cray detached himself from Cray Research to establish a new company devoted to the development of the Cray 3, an innovative machine based on chips fabricated in gallium arsenide, a material which makes possible speeds of about three times the maximum possible from silicon. The new machine depends on a whole range of new technologies including assembly by robots and is proving a severe challenge even for a man recognised as the world's foremost supercomputer designer. International Business Machines, which for many years had tended to ignore supercomputing as a niche market where the return hardly justified the investment, changed its mind and came back to the market with a family of vector processors - conventional high performance mainframes with a bolt-on accessory giving a performance for certain applications close to that of a supercomputer. It also funded research into an advanced supercomputer being developed by Mr Steve Chen, formerly a senior designer with Cray Research. The three Japanese mainframe manufacturers, Fujitsu, Hitachi and NEC launched supercomputers of impressive performance. While critics argue that their machines are let down by inferior software when compared to the Cray range, there can be little doubt that in hardware terms the Japanese machines are set to challenge the best US designs The principal change in the market, however, has been wrought by a different kind of advance. The emergence of two new kinds of supercomputer - minisupercomputers and massively parallel machines, which offer much of the performance of a conventional supercomputer at a fraction of the cost - have opened new markets for supercomputing. Supercomputers, in fact, is a name not much to the liking of computer engineers who prefer the expression 'scientific computers'. On this basis, a high performance Sun workstation carrying out scientific and engineering calculations is in the foothills of supercomputer performance. Speed is the important factor especially where, for example, weather forecasting is involved. As Mr Bryan Little, director of operations for Cray Research in Europe, points out, the calculations involved in weather prediction can be carried out by a small machine - but by the time the answer has been delivered, the storm will have passed. Minisupercomputers have the capacity to tackle many kinds of calculation and simulation. Some approach the speed of a full scale supercomputer. FPS Computing, for example, which started out building 'go-faster' processors has launched a machine which it rates at 2.1bn flops on typical mathematical routines - close to the performance of a Dollars 20m Cray for less than Dollars 2m. The kinds of customer who can take advantage of minisupercomputing power include scientists carrying out electromagnetic analysis, structural analysis, signal processing and computational chemistry. Typical of the new superminicomputer manufacturers is Convex Computer Corporation, another company experimenting with esoteric gallium arsenide technology to give speed at low cost. Cray, faced with the first threat to its pre-eminence in supercomputing in many years, has been forced to meet the challenge from Convex and other minisupercomputer makers by launching smaller, air-cooled models in its YMP series. It also bought a US-based minisupercomputer maker, Supertek Computers, and now sells its S-1 machine. Massively parallel machines are constructed by manufacturers such as Thinking Machines of the US. These rely for their power on hundreds or thousands of individual processing chips connected together and co-ordinated by special software. Where is Europe in all this? Nowhere in conventional supercomputing. It does, however, have the skills to build massively parallel machines, using, for example, the Inmos transputer, a processing chip designed for parallel processing applications. Edinburgh University, for example, is particularly advanced in transputer-based supercomputing. But it will require funding on a substantial scale for Europe to make much headway against the US and Japan. In the latest in a long series of warnings that Europe is throwing away the supercomputing future, the Italian physicist Mr Carlo Rubbia and a panel of experts have urged the development of pan-European high speed computer communications network backed by a Community expenditure by 1995 of 1bn Ecus a year. 
ID: 3928
HEADLINE: FT  23 APR 91 / Survey of The Computer Industry (10): Unsatisfactory term, must try harder - The Schools, anxiety for the class of '91 
TEXT: THE UK schools' computer business has been going through an unsatisfactory term and there seems little prospect of improvement in the near future. The two principal manufacturers in the sector, Acorn Computers of Cambridge and Research Machines of Oxford, have been monitoring their sales figures anxiously as the financial year draws to a close and are becoming convinced that economic circumstances and legislative changes are conspiring to force into decline a market which normally expands reliably if unspectacularly. Mr Michael Fischer, chairman and chief executive of Research Machines, said the sales bonanza which usually characterises the first three months of the year had failed to materialise. 'It is pretty bad news for us,' he said, adding that the sales decline was disappointing after the company's record results last year. Its turnover was Pounds 63m with pre-tax profits of Pounds 3.25m. Mr Sam Wauchope, managing director of Acorn Computers, said sales had been uneven through the year. He did not think there would be a first-quarter sales increase and overall he believed total spending in schools would decline. School computer sales normally surge in the first quarter of the year because, with the end of the financial year in sight, special grants for computer purchase, worth perhaps Pounds 1m to Pounds 2m, become available on an ad hoc basis from the Department of Education and Science and the Department of Trade and Industry. In the current economic climate, however, suppliers are not optimistic that money will be available from these sources this year. Schools and local education authorities have traditionally raced to spend their financial allocations by the end of the financial year with the result that money from a variety of budgets becomes available for computers. This year, suppliers believe that schools are storing cash away against a bleak economic outlook. The evidence is that they are deferring decisions to buy more computers. While exact numbers have yet to be collated following the end of the government's financial year this month, it seems likely that a market that was expected to grow by 10 per cent will contract by the same amount, an overall decline of some 20 per cent. This bad news comes at the end of 12 months of unsettling volatility in what is normally a predictable market. The spread of local management of schools (LMS), which by 1993 will ensure that all schools in England and Wales with more than 200 pupils will control their own budgets, has resulted in confusion and uncertainty among those newly responsible for, but unused to, taking decisions about computer hardware and software. In the past, they have relied heavily on advice from local education authority advisers. Some will continue to do so. Also, difficulties local authorities are experiencing in administering the poll tax has added an element of uncertainty to the value of capitation grants they will make to schools. School computing is not big business - the whole UK educational computer market including colleges, polytechnics and universities is worth less than Pounds 200m. It is, however, a niche market par excellence in the computing business and those companies which have made it their own have enjoyed steady returns in recent years. The principal players, Acorn and Research Machines, derive their strength from the intimate relationship they have built up with their customers, their understanding of the educational process and their willingness to provide extensive service for modest returns. Large suppliers like IBM and Apple, while strong in the universities and colleges, have little part in school computing and are unlikely to make inroads. School computing is two markets in one - the market for educational computing and the market for educational administration. Research Machines and Acorn, with a wealth of ready-written, high quality educational software have cornered the market for educational computing in schools. They are less dominant in educational administration where there is more of a need for conventional computer power. Acorn, part of the Italian Olivetti group which developed the BBC microcomputer, has dominated the schools market since the early 1980s. Acorn systems are installed in 85 per cent of schools. It is especially strong in the primary sector where it boasts familiarity and an impressive range of educational software, with more than 1,000 programs listed in the Acorn Education Directory. Company's latest machines feature a high-performance microprocessor of its own design which has persuaded Apple Computer of the US to establish a joint company with VLSI Technology and Acorn to exploit the technology. About half Acorn's revenues of about Pounds 50m come from sales to schools. Research Machines of Oxford, privately held, is second overall to Acorn, but holds 44 per cent of the market in secondary schools and 29 per cent in colleges. About 60 per cent of its sales of Pounds 63m are to schools and it has a strong toehold in government computing and computer-aided design. Research Machines competes in both the computers for education and computers for administration sectors. Recently it won a Pounds 4m order to provide every secondary school in Northern Ireland with the hardware and software for LMS. While the combined effects of LMS, the economy and the poll tax on computer sales are depressing for the companies involved, they also raise questions about the preparedness of schools to teach the national curriculum. A recent study by the Parliamentary Office of Science and Technology - the independent body that reports to parliament on the scientific and technological implications of big issues such as food irradiation and the greenhouse effect - suggested that schools in England and Wales would need Pounds 310m during the next five years to deliver the computer education required by the curriculum. It is worrying that that sum is unlikely to be made available. It is equally worrying that nobody seems sure of how much money schools will be prepared to spend on computers in the next few years. 
ID: 3929
HEADLINE: FT  23 APR 91 / Survey of The Computer Industry (9): The shift to open systems unlocks sector - Europe, a crisis that knows no national boundaries 
TEXT: A series of stunningly defensive, whole-page advertisements from Groupe Bull in Europe's leading newspapers last month highlights the crisis facing the entire European-owned computer industry. They were used to soften the impact of the announcement of Bull's FFr6.8bn (Dollars 1.19bn) loss in 1990. Most of the leading players are trading at a loss. Those, such as Olivetti, that are still keeping their heads above red ink, are showing greatly reduced profitability. The crisis knows no national boundaries. Germany: Siemens-Nixdorf chief executive Mr Hans-Dieter Wiedig warned last month that Europe's largest computer company, formed in 1990 from the ailing Nixdorf Computers and Siemens' computer interests, would not make profits this year as he had hoped, nor was he prepared to say when it would become profitable. The difficulties of assimilating Nixdorf, which had losses of about Dollars 636m in its last year as an independent company, have proved far greater than expected. Comparex, a joint venture between BASF and Siemens selling chiefly mainframes built by Hitachi of Japan, on the other hand, made post-tax profits of DM42m, 31 per cent up on the previous year. France: state-owned Bull's loss is thought to be a record for the industry in any one year. It is made up of a FFr3bn operating loss and restructuring charges of about FFr3.8bn. The company is already well advanced with an ambitious programme of corporate changes designed to restore competitiveness and vitality. It includes cutting the number of manufacturing plants from 13 to five, reducing staff by some 5,000 over the year and rationalising research and development and marketing. Italy: Olivetti has remained consistently in the black, but its profitability has been falling. Its 1990 turnover is not expected to show much advance on the L9.031bn recorded in 1989 and its profits are expected much below the L202.8bn announced that year. It is in the process of trimming 7,000 jobs from the workforce; manufacturing activities are being rationalised both in Italy and the rest of the world as are direct and indirect distribution networks. The Netherlands: Philips is shedding some 50,000 staff worldwide; the resulting restructuring charges forced a loss of Fl 4.2bn last year; the root cause, however, was heavy losses in the information systems division. Now Philips is moving away from computer systems of its own design to those built to industry standards. The UK: International Computers, Britain's largest information technology company, while still generating good profits, was bought from STC by Fujitsu last year, leaving the telecommunications company free to concentrate on its core interests. The deal with Fujitsu came at the end of a series of abortive merger discussions between ICL and several other European-owned computer companies. Apricot Computers, manufacturing arm of the Apricot Group was sold to Mitsubishi Electric of Japan last year. In a surprising reversal of fortune, both ICL and Apricot are now selling UK-designed and manufactured computers in Japan. Smaller manufacturers have been affected by the same malaise. Norsk Data of Norway and Nokia Data of Finland are going through extensive restructuring and job losses in their attempts to return to profitability. The plight of Europe computer makers is, to some extent, a reflection of the troubles afflicting every large computer manufacturer worldwide. Customers, especially governments and the armed forces, are beginning to move rapidly from traditional, mainframe-based data processing systems to so-called 'client server systems' where the computing power is supplied by small computers and workstations networked together. There is growing demand for computers which can easily be connected into client server networks regardless of the manufacturer of origin. Industry standard or open systems are becoming preferred to proprietary designs. The shift in preference from proprietary designs to open systems took place with remarkable suddenness. It coincided with a rapid, but temporary, softening in many of the European markets. Companies such as Nixdorf which had been gearing up on the back of powerful sales of their proprietary systems suddenly found themselves facing weak markets with systems which were no longer in fashion. Europe will remain an important IT market though the US will remain dominant. According to figures from the consultancy Price Waterhouse, the world IT market was worth Dollars 212bn in 1984; the US held 55 per cent, Europe 25 per cent, Japan 10 per cent with a similar percentage for the rest of the world. By 1992, according to Price Waterhouse, the overall value of the market will have grown to Dollars 649bn. The US share will have shrunk to 44 per cent, the European share will have grown to 31.5 per cent with Japan and the rest of the world holding 14 per cent and 10.5 per cent respectively. It seems likely that US and Japanese manufacturers will profit from the growth in the European market, however, rather than the local champions. There are sharply opposed views on what, if anything, should be done to support European-owned companies. The French government which owns over 70 per cent of Groupe Bull has agreed to support its restructuring measures, but it understands that the company has to find a partner to share the load. There have been talks between Europe's main players aimed at establishing a single transnational computer company able to rationalise research and development costs and achieve continent-wide economies of scale, but they have all foundered on issue of management and control. Some, looking at the example of Unisys of the US, question whether putting together failing companies is anything more than a recipe for further failure. The European commission recently published a fiercely-debated plan to make the electronics industry more competitive based on training, standards, bilateral agreements and collaborative research and development projects. No new money would be involved. In doing so, it has moved to more of a hands-off approach to encouraging competitiveness than earlier and unsuccessful interventionist strategies. The fate of ICL within the Fujitsu organisation is being watched closely as an example of the most extreme form of survival measure. It may not be too long before others are forced to follow suit. 
ID: 3930
HEADLINE: FT  23 APR 91 / Survey of The Computer Industry (8): Windows to rooms - Graphical User Interfaces 
TEXT: SYSTEMS for managing large amounts of information are becoming increasingly important to business computer-users. For example, the concept of overlapping 'windows' on computer screens has become popular since its introduction a decade ago. In the US, the Xerox research centre at Palo Alto unveiled graphical user interfaces (GUIs) 10 years ago to replace command-driven interfaces which tend to restrict the working area of computer screens with control codes. The easier-to-use window-driven GUIs enable various sources of information and tools to be worked on in separate windows for a single project. When numerous projects are under way, it can be difficult and time-consuming to shuffle round a clutter of overlapping windows. Now Xerox has developed the 'Rooms' concept which takes the graphical user interface into a wholly new dimension. The system puts all the windows that are relevant for a single task into a separate information workspace (or room), with linking electronic doors that allow users to work on many projects at the same time. The system also allows users to collaborate with different sets of people for each project. Xerox's graphical user interface has always been object-orientated - unlike many of today's icon-driven interfaces - and is based around a concept of an electronic desktop. The rooms concept is based on research by cognitive psychologists and computer scientists at the Xerox PARC research centre. 'The system is based on the idea that personal computers are fine in their place, but what many workers and planners need to get projects under way is a large table - a place to spread out files and papers for easy access,' explains Mr Chris Lindesay, integrated systems manager at Rank Xerox. The new system allows users to co-ordinate desktops: 'With rooms, all you do is walk into your specific project office and you find it just as you last left it, with all your information close at hand,' says Mr Lindesay The concept, which is now at the advanced development stage, allows users to create a suite of rooms which can passed around, copied to disk or loaded on to other workstations. To assist users, an overview room is provided where users can see the layout of rooms on a single screen. The system, which Xerox is demonstrating at this years Which Computer? Show, supports the natural way people work, 'rather than forcing them to change what they do to suit the limitations imposed by screen-sizes and windowing systems,' says Mr Lindesay. 
ID: 3931
HEADLINE: FT  23 APR 91 / Survey of The Computer Industry (7): Advancing on many fronts - Japan, plans to build on its supremacy in laptop sector 
TEXT: JAPAN'S computer makers are betting that the next generation of computer users will fall into their laps - literally. Japanese manufacturers believe their increasing supremacy in the production and sale of laptop computers will lead to a significant expansion of Japan's role in the overall computer market. Japan's consumer electronics companies control half of the laptop and notebook market, the industry's fastest growing segment. And Japanese dominance of such critical technologies as disk drives and liquid-crystal-displays (LCDs), together with Japanese skill at shrinking components, has led such US stalwarts as IBM and Apple into joint ventures with their Japanese competitors. While laptops account for 13 per cent and 20 per cent of the European and US PC market respectively, they account for almost half of all PCs sold in Japan. Many analysts believe the European and US figures will double within three years. Japanese miniaturisation techniques are sure to help them lead the emerging palmtop and tablet markets. Japanese companies are increasingly dominant in disk drives, not only at the low end with hard drives for PCs, but at the high end for mainframes. The Japanese have worked hard to improve their software and service in Japan, and hope to begin exporting such skills in the near future. Even with their relatively limited presence in the computer-systems and software market, Japanese manufacturers exported over Dollars 20bn-worth of computer-related products last year, some 85 per cent of which were in parts and peripherals. Japanese makers are increasing their control of high density storage systems as companies such as Epson and NEC continue to gain share at the expense of small and medium-size US makers. Japanese companies are certain to widen their dominant lead in display technologies, including those related to high definition television (HDTV). Sharp, Epson, and NEC have clearly established themselves as the world's leaders in LCD technology. South Korea and Taiwan, their closest competitors, are years behind, while US makers are virtually non-existent. Such technologies are growing in importance as HDTV-related systems are used in a widening variety of applications, including workstations which are still dominated by US companies. 'There's no use in having a Rolls-Royce engine if you have a poor monitor,' says Mr Barry Dargan, an analyst at James Capel Pacific in Tokyo. Japanese producers are forging ahead in other areas, including taking industry leader IBM head-on in mainframes. Japanese producers including NEC, Hitachi, Fujitsu, and Toshiba believe their growing presence in PCs will propel them into complete systems integration, particularly as the mainframe market matures relative to PCs. NEC boasts the fastest supercomputer in the world, the SX-3. Japanese service networks continue to trail their US competitors, notably IBM. However, Toshiba and NEC continue to improve their growing sales channels in the US, while Fujitsu's purchase of ICL has catapulted Japan's largest mainframe maker into the forefront of European sales and distribution network channels. Although the Japanese still trail in the development of software for export, Japanese companies have become highly skilled at designing operating software systems for the Japanese market. Hitachi and Fujitsu, in particular, have devoted significant resources to the development of world-class software. Such investments will pay off in the future, particularly as the world moves in the direction of more open industry standards such as Unix, the operating system developed by A T &amp; T which seems destined to become a world standard for small computers. In the end, Japanese computer makers greatest strength may be the growing dominance of other Japanese industrial sectors. As Japanese industries such as automobiles, pharmaceuticals, and steel continue to expand and automate, they are sure to bring Japanese computer makers along with them. 'It's much tougher (for Japanese computer makers) to sell to GM than to Toyota or Nissan,' says Mr Steven Myers, an analyst at Jardine Fleming in Tokyo. Given that PC use in Japanese offices is one half that of Europe and one quarter that in the US, Japan's internal market is poised for a period of explosive growth. Japan's estimated Y7,000bn information technology market is the world's second largest, and is expected to more than double by the end of the decade. Most of the increase in sales will fall to Japanese makers. Japanese companies will continue to prefer to grow internally. However, more companies may resort to either taking equity positions or outright acquisitions in fields in which Japanese companies trail, such as processing technologies and software. 'The Japanese have to catch up in some areas and they know it,' says Mr Dargan. 'If they can't do it themselves, they'll engage in joint ventures or acquisitions.' Joint ventures such as NMB-Intel are bound to increase as capital-starved US companies increasingly turn to their deep-pocketed Japanese competitors. 'Small West Coast tech houses are vulnerable to being cherry-picked,' says Mr Dargan, pointing to TDK's Dollars 200m acquisition of Silicon Systems in 1989. Still, Japan's dearth of software programmers - estimated at 600,000 - is expected to top 1m by the end of the century. Such a shortfall, argue most analysts, can only partially be made up by subcontracting work to Korea and China and by buying small US producers. But Japanese computer makers remain undaunted. If anything, the only impediments most Japanese companies see in the way of their inevitable advance are political. Fujitsu, for one, has been extremely wary of a political backlash in Europe following its purchase of ICL and its exclusion from three of the five European research consortia to which ICL belonged. Consequently, Japanese makers will continue the less risky strategy of supplying European makers on an OEM basis. 'Japanese manufacturers realise they just can't take market share through competition alone,' says Mr Dargan. Japanese companies are diffusing proprietary technologies in south-east Asia as the Newly Industrialized Economies (NIEs) repeat Japan's previous policy of insisting on technology transfer in return for access to their markets. US companies, burned by their liberal sharing of technology with Japanese companies in the past, are trying to demand a more equitable sharing of know-how. 
ID: 3932
HEADLINE: FT  23 APR 91 / Survey of The Computer Industry (6): Patient expansion continues - The Japanese in Europe, a preference for joint ventures 
TEXT: WHILE European information technology companies continue to experience difficulties, their Japanese counterparts are patiently expanding their presence on the Continent and in the UK. Although Fujitsu's acquisition last year of ICL garnered the most headlines, scores of Japanese companies are developing production facilities, creating sales networks and searching for potential joint venture partners in the region. 'We very much respect the marketing and software capabilities of European firms, especially their network architecture,' says Mr Hideichi Nose, vice-president for European operations at NEC. Most observers believe that except for sales channels and some software, most European companies have little to offer their Japanese rivals besides political cover. 'European information technology companies rank very low on the list of who the Japanese fear,' says Mr David Benda, an analyst at Barclays de Zoete Wedd (Asia) in Tokyo. 'The Japanese want to have a presence in Europe. But what can they get by acquiring a company? Not much, except for distribution,' he adds. Japanese companies prefer to stay away from high-profile acquisitions, even friendly ones such as ICL. Instead, most are concentrating on establishing their own production and sales networks, preferably in the form of joint ventures. 'We have to be certain that investments in fields like semiconductors are welcome,' says Mr Taizo Nishimuro, general manager for overseas operations at Toshiba. 'It might be easier to go it 100 per cent alone or to buy out an existing firm, but it doesn't guarantee us that those actions will be welcomed by the community.' Most observers believe Toshiba will not be alone in co-operating with its European competitors. Olivetti may be forced to strengthen ties with various Japanese companies, including Hitachi which provides it with hardware on an OEM basis. Siemens sells Fujitsu mainframes and supercomputers, licenses Drams from Toshiba, and given its distribution and service networks, is a natural match for a Japanese partner. Meanwhile, Bull's increasing problems may force it to fully embrace NEC, which now provides the French company with mainframes. 'Bull has to figure out what it's going to cut, what it's going to keep, and what it's going to source out,' says Mr Steve Myers, analyst at Jardine Fleming (Securities) in Tokyo. 'It's entirely conceivable, but not certain, that Bull will become dependent on NEC hardware and choose to add value through software,' he says. Such arrangements - Japanese hardware and customised local software - are expected to increase as more production becomes application specific. Fujitsu has formed joint ventures with Quotient of the UK and the British subsidiary of McDonnell Douglas, to develop software for the banking and CAD/CAM industries respectively. Toshiba is developing CMOS chips with SGS Thomson Microelectronics of Holland, while other Japanese producers are sourcing out much of their local software and design work. Moreover, even with higher capital costs and mounting overcapacity in the memory chip market, Japanese companies have not abandoned direct investment. NEC plans to begin construction of a new computer production facility in Germany and has just completed upgrading its plant in Scotland to produce four megabit Drams. Fujitsu will soon finish a new production facility in Durham in northern England to produce similar chips. 'Investment has slowed,' admits Mr Mike Jeremy, an analyst at Baring Securities (Japan). 'But not as much as had been expected.' Many analysts argue that one of the attractions of western Europe is its position as a springboard for eastern European market. Over 60 per cent of Japanese products sold in eastern Europe are shipped from Japanese subsidiaries in the EC. 'Naturally, because of its proximity and its similar culture we do feel entering eastern Europe is easier through the west, especially Germany,' says Mr Nishimuro. As personal incomes grow in the former Comecon states, the market will shift from large-scale infrastructure projects (a relative European strength) to consumer-driven purchases sure to favour the Japanese, say most analysts. Moreover, some Japanese companies are attracted by the East's low wages and relatively well-educated workforce. Such allures may lead many Japanese companies to shift much of their assembly operations to the east, and to concentrate on more value-added production in the West. 'To the extent you put semiconductor production into western Europe, board stuffing can then be done where it's cheapest,' says Mr Myers. Political uncertainties remain the greatest fear among senior executives in Tokyo. Fujitsu, in particular, is wary of projecting a high-profile image. 'ICL is a different company,' says Mr Yuri Momomoto, of Fujitsu. 'They have their own plans which we don't know about.' Regardless, except for political sensitivities, and perhaps being privy to the setting of standards, most Japanese companies seem unconcerned with being shut out of European research consortia, largely because Japanese companies have much more to contribute than the Europeans themselves. 'It doesn't make sense to keep out the Japanese,' says Mr Jeremy. 'The Europeans will lose the opportunity to monitor them. It's a two-way street. It's no more Machiavellian than that.' In addition, many argue that dictates from Brussels may ultimately backfire. A 1990 decision by the European Commission setting minimum prices for Japanese chips allegedly being dumped in Europe may help Japanese producers beset by falling prices in the same way a similar 1985 US decree (now expired) rescued a Japanese chip industry drowning in its own overcapacity. Moreover, adds Mr Benda, as Europe continues to insist that more products be manufactured locally, more Japanese companies will come, posing a further threat to European companies. Others argue, however, that even if Japanese companies were to show that they are 'politically correct' by participating in projects such as the research consortia, it is doubtful that they would be willing to share any of their most advanced technology - something they have never done in the past. 'There must be another mechanism by which the Japanese are forced to share some of their technology,' says a Tokyo-based industry observer. 'If the Europeans don't band together and try to do something then they may as well throw in the towel.' 
ID: 3933
HEADLINE: FT  23 APR 91 / Survey of The Computer Industry (5): New generation challenges leaders - The view from the US, Louise Kehoe in San Francisco assesses changing market strategies and unveils a palmtop 
TEXT: THE US computer industry is in the midst of a broad restructuring driven by technology advances that have changed the economics of computer manufacturing. Some of the largest companies in the industry are being forced to make painful adjustments, while a new generation of computer makers is growing rapidly. Making these changes more difficult for all computer companies are the triple troubles of a recessionary domestic economy, European economic ills and the interruption of normal purchasing patterns created by the Gulf War. The effects of these problems are being keenly felt by many US computer companies, creating an industry downturn in which revenue growth has been stalled and earnings are expected to decline in the short term. While these economic problems are expected to be short lived, the fundamental changes under way in computer technology could reshape the industry in the 1990s, analysts predict. The most important technology trend is the rising power of the microprocessor - the 'computer on a chip'. The initial impact of the microprocessor was to create the personal computer, spawning a new generation of computer companies in the 1980s such as Apple Computer, which has annual revenues of Dollars 5.5bn, and Compaq Computer with Dollars 3.6bn. Networking technology, which enables large numbers of PCs to be tied together so that they can share data, transformed the PC from a stand-alone single user machine into an important element of office automation systems. The PC has had a large impact upon the way computers are used in offices. They have greatly expanded the use of desktop computers and to a significant extent displaced the minicomputer and computer terminals as standard office automation equipment. The computer workstation, also based upon microprocessors, has had a similar impact upon the technical computing field. Engineering workstations running computer-aided design programs, for example, have usurped the role of mid-range computers in thousands of laboratories and product development departments. Sun Microsystems, the workstation market leader, has established a Dollars 2.5bn market for high-powered desktop computers based upon Reduced Instruction Set Computing (RISC) microprocessors, largely at the expense of traditional computer companies such as Digital Equipment and Hewlett-Packard. However, the inroads of the microprocessor have just begun. High-powered computer systems that rival the system performance of mainframes and minicomputers are being built using multiple microprocessors. Companies such as Sequent Computer can offer mainframe-class computers built around Intel microprocessors at a fraction of the cost of IBM mainframes. Stratus Computer Systems is challenging IBM and Tandem Computers in the market for fault tolerant computers for mission critical applications using computers built around Motorola and MIPS Computers microprocessors. This phenomenon, known as downsizing, has had an impact on the entire computer industry. 'The microprocessor has turned hardware computer economics upside down,' says Mr Steven Milunovich of Solomon Brothers, in a recent report on the discontinuities in the computer industry. 'Multiprocessor systems will directly threaten mainframe and minicomputer solutions,' he says. 'Relational data bases can transform data into information. Object-oriented programming will reduce the applications backlogs that plague every level of computing. And sophisticated networks will allow users to access data seamlessly across the enterprise. Those vendors that can bridge these discontinuities to aid customers in adopting new technologies, while protecting prior investments, will benefit the most,' he says. However, hardware is only one side of the computer industry. Software and services are growing faster and have higher profit margins. Companies such as Electronic Data Systems are riding the wave of the computer services rise, providing computer users with solutions to their increasingly complex information technology needs. Another driving force behind the reshaping of the computer industry is the trend toward open-systems standards that enable different types and brands of computers to work more efficiently together. With majority of computer companies are pursuing open systems, with varying degrees of enthusiasm. For many, open systems represent an opportunity to infiltrate the customer bases of industry leaders such as IBM and Digital Equipment, HP and Unisys. The industry leaders have adopted open systems in part as a defensive move. They view open systems as a means of providing customers with complete solutions to their computing needs. One of the critical needs of the 1990s among computer users, is to find a way to tie together their inventories of computers, which have typically been acquired in a rather haphazard fashion. During the 1980s, distributed computing was in vogue. Departments of large corporations frequently installed their own computer networks or systems often with little reference to the corporate data processing centre. Now, companies are trying to tie these computers together to create enterprise-wide networks. Enthusiasm for open systems and the trend toward lower-cost computer power leads some to conclude that the large US computer hardware companies are dinosaurs. This is to ignore several factors. While the mainframe computer is challenged by new technologies, it remains a dominant sector of the computer industry providing, for example, about half of IBM's Dollars 69bn annual revenues. Open systems, based upon the Unix operating system, are certainly becoming more popular, but they represent only 12 per cent of annual computer sales. The ability of established industry leaders to adjust to rapid changes in the computer industry is frequently brought into question, but IBM is turning itself slowly but surely to address the issues of the computer market head on. IBM is focusing upon solution selling, reorganising its business units to more directly address the problems of its customers. Perhaps the best measure of IBM's success comes from the large systems integrators, who regard IBM as a direct competitor. IBM has long been the market leader in the PC sector, which it quickly recognised as a big new market opportunity in the early 1980s. In the computer workstation market, IBM has made a late, but remarkably successful entry. Last year, the company sold Dollars 1bn-worth of its RS/60000 workstations, leaping from nowhere to become the fifth largest workstation supplier. This year, IBM is expected to climb to number two or three in the workstation market and by 1993 will be neck and neck with Sun Microsystems, the market leader, according to industry analysts. Digital Equipment is undergoing a painful metamorphosis. After suffering a period of internal strife between supporters of open systems and traditionalists, Digital is putting together a coherent strategy. Digital maintains that open systems must incorporate proprietary software if the promise of the open systems movement - inter-operability among dissimilar computers - is to be fulfilled. Standard proprietary systems which adhere to standards that allow inter-operability, represent the way of the future, many in the industry believe. Computers such as Digital's VAX would retain their distinct features, but acquire the ability to work with other types or brands of computers. HP, the third largest US computer company, has overhauled its computer product line to take advantage of microprocessor power and to respond to the open systems trend. Similarly, NCR and Data General have developed aggressive open systems strategies. Unisys, in spite of financial woes, is pursuing open systems. It is too soon to count out the US computer industry leaders of the 1970s, but it seems certain that they will be forced to concede a bigger share of the market to the companies that emerged in the 1980s. ---------------------------------------------------------------------- Leading worldwide computer companies 1984 vs 1989 (dollarbn) ---------------------------------------------------------------------- Data proc.                    Data proc.     Change 1984            revenues      1989            revenues       in rank ---------------------------------------------------------------------- IBM               42.6        IBM               57.3            - DEC                6.3        DEC               12.9            - Burroughs          4.5        Fujitsu           12.3            +2 Sperry             4.0        NEC               11.5            +5 Fujitsu            3.7        Unisys             9.3            -2 Control Data       3.7        Hitachi            9.3            +6 NCR                3.6        HP                 8.2            +1 HP                 3.4        Groupe Bull        6.5            +9 NEC                3.3        Apple              5.4            +5 Siemens            2.8        NCR                5.2            -3 Wang               2.4        Olivetti           4.9            +2 Hitachi            2.2        Siemens            4.7            -2 Olivetti           2.1        Toshiba            4.6            +12 Apple              1.9        Compaq             2.9            New Honeywell          1.8        Matsushita         2.8            New ICL                1.6        Philips            2.8            +3 Groupe Bull        1.6        Nixdorf            2.8            +6 Data Gen.          1.3        Wang               2.7            -7 Philips            1.2        ICL                2.7            -3 Commodore          1.2        EDS                2.4            New TRW                1.2        Canon              2.3            New Xerox              1.2        Xerox              2.2            - Nixdorf            1.2        TRW                2.1            -2 LM Ericsson        1.1        Amdahl             2.1            New Toshiba            1.1        Sun                2.1            New ---------------------------------------------------------------------- Source: Datamation; McKinsey analysis ---------------------------------------------------------------------- 
ID: 3934
HEADLINE: FT  23 APR 91 / Survey of The Computer Industry (4): Palmtop has the punch of a PC 
TEXT: HEWLETT-PACKARD'S palmtop computer, introduced today, is the size of a cheque book and weighs just 11 ounces but the HP 95LX packs all of the punch of an IBM-compatible personal computer. Built into the HP pocket-sized computer is Lotus 1-2-3, the most popular spreadsheet program. In addition, a phone book and appointments calendar comes installed into the HP palmtop. Further programs can be loaded by inserting solid-state memory cards. A plug-in demodulator unit enables the HP 95LX to receive text messages from cellular paging systems. It is aimed at technical and scientific users of its desktop PCs, and offers the power of a machine 10 times its size. 
ID: 3935
HEADLINE: FT  23 APR 91 / Survey of The Computer Industry (3): Lightweights that buck the trend; Mobile Computers - The view from the US, Louise Kehoe in San Francisco assesses changing market strategies and unveils a palmtop 
TEXT: SINCE the early 1980s, when the desktop personal computer was still in its infancy, there have been numerous attempts to create 'portable' versions of PCs. Only recently, however, have semiconductor, data storage and display technology advanced to the point where a fully-functional PC can be packaged in a compact, lightweight, carry-along unit. These technology advances are creating an increase in sales of laptop, notebook and pocket computers, with world-wide sales expected to top Dollars 8bn this year. The market for mobile computers has become one of the fastest growing sectors of the computer business. The increase in mobile computer sales comes as sales of desktop personal computers are beginning to sag, particularly in the US. By the mid-1990s, portable computers will represent close to 50 per cent of all types of PCs sold, market analysts predict. In Japan, laptop computers account for over 40 per cent of all PC sales. In Tokyo's crowded offices the smaller laptop computers are widely used on the desktop. Europe is also caught up in the mobile computer revolution with unit sales expected to rise by over 30 per cent this year. Spurring much of this growth is the new category of notebook computers - battery-powered machines that are small enough to fit in a briefcase and weigh 8 lbs or less. More than 840,000 notebook computers were sold in the US in 1990, according to International Data, a research company. It predicts that sales could rise to 1.4m units in 1991 and rise to 6.2m by the middle of the decade. The US portable computer market has so far been dominated by Compaq Computer and Tandy of the US, the Zenith DataSystems division of France's Groupe Bull, and Japanese makers Toshiba and NEC. However, over the past year, as many as 40 computer companies have announced new portable computers. Many have yet to deliver these products with delays blamed on shortages of displays, disk-drives and microprocessors. Also entering the portable computer fray are some of the largest US and European computer manufacturers. International Business Machines recently unveiled its notebook computer in its third attempt to find a place in the portable computer market. The IBM Personal System/2 L40 SX notebook computer is slightly larger and heavier than most products in this category, but it is designed to provide the full functionality of the current generation of desktop computers, whereas many notebook computers compromise performance to achieve lower weight and price. The IBM notebook features a full-size keyboard virtually identical to that found on IBM's PS/2 desktop PCs; a standard memory of two megabytes and maximum memory of 18 MB; a 60 MB hard drive and a 10-inch Video Graphics Array (VGA) display. All this comes in a 7.7 lb package priced in the US at Dollars 6,000. The recent entry of IBM into the notebook computer market, and the anticipated announcement by Apple Computer this year of notebook-sized versions of its Macintosh computers are expected to expand sales rather than to unseat established suppliers. Digital Equipment, Unisys, NCR and American Telephone &amp; Telegraph are expected to launch mobile computer products this year. Portability still comes at a premium price, with most mobile computers up to 50 per cent more than equivalent desktop machines. Competition is spurring price cuts with some companies such as AST Research offering substantially lower prices on notebook computers. Technology advances are significantly expanding the capabilities of portable computers. Flat panel colour displays have recently been introduced by Toshiba and other leading portable makers. The portable computer of the future will incorporate 'wireless communications' according to many industry experts. Last month, NEC of Japan introduced one of the first portable computers with wireless communications. The 6.6 lb laptop computer incorporates a radio transceiver which enables it to send and receive messages without a phone line. NEC is offering the wireless computer only in Japan. Leading US computer makers also see radio communications becoming an important feature of portable computers in the future. Apple recently filed a petition with the US Federal Communications Commission (FCC) that, if approved, would let computers transmit and receive information over radio waves instead of through a wired network. For today's users of portable computers, wireless communications represent a potential solution to the difficulties of hooking portable computers up to telephones. While desktop personal computers that incorporate a model generally have their own phone line, the portable computer must be plugged into a phone in whatever location the user finds himself. Yet to be resolved is one of the toughest technical challenges of building portable computers - short battery life. Although power-management systems and low-power components have significantly extended computer battery life, battery technology is advancing only slowly, computer makers complain. A new category of PCs that is beginning to show promise is the hand-held or pocket computer. This market has been pioneered by Poqet Computer of Sunnyvale, California, whose 1.1 lb IBM-compatible PC fits easily into a coat pocket or handbag. The Poqet has been picked up by Infonet, the international value-added network provider, as a portable communications terminal, for sending and receiving electronic mail and other types of messages. Mr Stav Prodromou, founder and vice-chairman of Poqet, sees pocket-sized computers creating new types of PC applications. These tiny computers are so unobtrusive, he suggests, that they could be used to take notes during a meeting. Their light weight also makes them suitable for use as an electronic appointments calendar or time organiser. Also about to enter the hand-held computer market is Hewlett-Packard, which this month will introduce a calculator-sized unit with a built-in version of the popular Lotus 1-2-3 spreadsheet. On the horizon is yet another new type of portable computers known as slate computers. These notebook-sized devices will replace the familiar keyboard with an electronic pen. The user will simply write on the 'slate' or point to icons to select functions. Numerous applications are envisaged for these pen-based computers among people who do much of their work while standing or moving around. Doctors and nurses might use them to update patients' notes or order tests, for example. Software that enables the computer to interpret hand-written notes has been developed by Go Corporation, a California start-up. Microsoft, the leading supplier of PC software, is also developing handwriting recognition software that could be used as an extension of its existing PC operating systems. Grid Systems, one of the pioneers of the portable computer market, offers a slate computer with limited handwriting recognition capabilities. IBM and Apple Computer have both expressed great interest in the potential for this new technology. Market researchers at BIS Strategic Decisions predict that sales of slate computers will top Dollars 1.5bn by 1995 and could become a Dollars 7bn market by the end of the decade. 
ID: 3936
HEADLINE: FT  23 APR 91 / Survey of The Computer Industry (2): Technology advance drives sales growth; On-Line Transaction Processing - The view from the US, Louise Kehoe in San Francisco assesses changing market strategies and unveils a palmtop 
TEXT: ON-LINE transaction processing has grown to encompass a full third of world computer market since its beginnings in airline reservation systems and banking. These interactive computer systems serve in a growing range of business applications, from production management to customer service. With sales last year of approximately Dollars 40bn worldwide, OLTP is growing at an annual rate of about 20 per cent and will be a Dollars 72bn market by 1994, according to market analysts. Growth in the OLTP market is being driven by its broadening use in telecommunications, manufacturing and retail industries, which have become big users of OLTP. Technology advances in parallel processing and microprocessor performance have downsized OLTP, creating applications and making this mode of computing available to small and medium-sized businesses as well as large corporations. OLTP has been impacted by the trend toward open systems based upon the Unix operating system. Unix-based OLTP will grow to between Dollars 18bn and Dollars 21bn by 1994, according to Dataquest, the market research company. The emergence of relational database management systems software has been a driving force in the growth of OLTP. These programs, which enable users to access information wherever it resides in a database, have become the basis for a broad range of business applications running on OLTP systems. 'Fault tolerant', or 'high availability' computers represent an important segment of the OLTP market. As businesses entrust their most critical functions to computer systems, the reliability of the systems and their ability to continue functioning through power failures, component failures, software updates and all manner of events that can bring the average computer to its knees has become vital. Traditionally, OLTP systems have been based upon mainframe computers with International Business Machines claiming the lion's share of the market. IBM holds an estimated 55 per cent share of the OLTP market, largely based upon its dominant role in mainframe computers. While IBM is expected to remain the market leader, its share of the OLTP market will decline, according to industry analysts, as microprocessor-based parallel processing systems - many of them running the Unix operating system - displace traditional mainframes. Tandem Computers, pioneered the 'fault tolerant' computer market selling its proprietary computers to banks and securities companies. Lower spending in the financial services industries have hurt Tandem's earnings over the past year but with 1990 revenues of Dollars 506.1bn the company remains the market leader in fault-tolerant computers. Last year, Tandem introduced its first open systems products, offering a range of Unix computers based upon Mips Computers Reduced Instruction Set Computer (RISC) chips. In addition to selling its Unix computers direct to end users, Tandem signed an agreement with A T &amp; T under which the telecommunications and computing company will resell the Tandem products. Biting at the heels of IBM and Tandem are a new generation of specialist OLTP computer companies led by Stratus Computer, Sequent Computer Systems and Pyramid Technology. Stratus specialises in what it terms 'critical on-line computing' or high availability computing for mission critical applications. Stratus's stronghold is in the financial services industry where it provides systems for stock trading, automatic teller networks and credit card authorisation. Stratus is, however, expanding its customer base in other fields such as retailing, manufacturing and telecommunications. Stratus recently launched a new product line based upon Intel's 860 Reduced Instruction Set Computing (RISC) microprocessor, following a trend toward the use of high performance RISC processors in OLTP. The company is also making a transition from a proprietary operating system to open systems based upon the Unix operating system. Some 20 per cent of Stratus's Dollars 404m 1990 revenues came via IBM, which sells Stratus computers on an OEM basis. Over the past year, however, Stratus's business with IBM has flattened as IBM increasingly targets 'mission critical' applications with its own computers. Stratus expects to expand its direct sales to more than compensate for the IBM shortfall. The company is in particular targeting the emerging market lligent networks' as deregulated telephone companies offer new services such as store and forward facsimile, free-phone numbers and voice messaging services. Sequent Computer Systems' products, based upon the Intel line of microprocessors running a version of the Unix operating system, demonstrate the price and performance advantages that microprocessor-based parallel processing has over traditional mainframes. Sequent's Symmetry 2000 family of computers, introduced in January, incorporates up to 30 of Intel's latest 486 microprocessors and achieves mainframe class performance at what the company claims is an 80 per cent price/performance advantage over other Unix mainframe computers and an even greater edge over traditional proprietary mainframes. The 8-year-old Sequent, with 1990 revenues of Dollars 249m, has built its business upon automating applications that cannot be cost-effectively handled by a mainframe computer. Examples range from a currency management system for British Airways to an emergency room scheduling system for a California hospital. Pyramid Technology, another OLTP specialist, achieved a remarkable 73 per cent growth in revenues in fiscal 1990, to reach Dollars 180m for the year ending last September. Pyramid, of the Silicon Valley, is about to launch a range of products based upon Mips Computer's RISC microprocessors. While the niche players of the OLTP market are making inroads, the big companies of the computer industry are not standing still. Unisys, traditionally a large supplier of mainframe-based OLTP and also a re-seller of Sequent computers, last week unveiled hardware and software products that establish its strategic direction toward open-systems based OLTP. Unisys expanded its product line with mid-range systems, which it will manufacture in-house. Based on the Intel 486 with up to five processors, the new Unisys 6000/65 has a peak performance of 118 MIPs and will run the latest version of A T &amp; T's Unix, System V4. Unisys also unveiled new Unix OLTP software including an improved version of A T &amp; T's 'transaction manager' which will improve performance and reliability, the company claims. Digital Equipment's OLTP revenues grew by approximately 35 per cent to Dollars 2.1bn in 1990, according to analysts at Hambrecht &amp; Quist, the San Francisco investment bank. Digital is emphasising fault tolerance. DEC launched its first specifically fault-tolerant computers early last year but according to industry analysts the products failed to have a significant impact on the market. Last month, DEC unveiled its second generation fault tolerant products - a new range of aggressively-priced VAX minicomputers designed for mission critical applications which analysts predict will do much better. Hewlett-Packard is also taking a stab at the fail-safe computer market through an investment in Sequoia Systems, a small manufacturer of fault-tolerant computers. HP will resell Sequoia's machines and gain access to its technology. As competition mounts, the OLTP market will become increasingly segmented, analysts predict. Increasingly, the ability to perform OLTP will become a prerequisite of commercial computing systems or all sizes. 
ID: 3937
HEADLINE: FT  23 APR 91 / Survey of The Computer Industry (1): On the brink of disaster - The effects of recent changes in the computer industry have been shattering for many companies. Almost every mainframe or minicomputer manufacturer in the US and Europe is demonstrating declining profitability, if not actual losses. Alan Cane reports 
TEXT: THE WORLD'S large computer manufacturers have become used to rehearsing the superficial reasons for the present crisis in the information technology business, a malaise which has brought many of the best-known names in data processing to the brink of disaster. These include: The spread of open systems, computer networks based on standard industry components which cannot command the gross profit margins inherent in proprietary designs. The gross margin built into a mainframe computer sale can be 70 per cent or more; for PCs and workstations, it can be less than 30 per cent. A seemingly never-ending decline in the cost and growth in the power of data processing equipment which has further squeezed manufacturer's margins. A high performance workstation can cost less than Dollars 1,000 for every million instructions per second (mips) of computer power. Mainframes typically cost more than Dollars 100,000 per mips. For many, but not all, tasks it is possible to substitute low cost workstation power for mainframe power. The growing importance of service suppliers and systems integrators who put together hardware and software from disparate sources to satisfy their customers' requirements. New competitors for the traditional industry as a result of this change include management consultancies such Anderson Consulting and Price Waterhouse as well as software houses and value added resellers. A slackening in demand for computer systems which has been apparent in the US for some time and is becoming evident in Europe. The reasons are complex; they include saturation in some areas of the market, dissatisfaction with the results of continued computerisation and, in the UK at least, high interest rates. The effects of these changes have been shattering for many companies. In the US, Unisys, the result of a merger between Sperry and Burroughs only five years old, lost Dollars 436.7m in 1990 and suspended payment of dividends on both its common and preferred stock in an attempt to reduce debt which stood at Dollars 3.7bn at the end of that year. In Europe, Groupe Bull, the French state-owned manufacturer announced a loss of Pounds 700m for 1990 and said the French government had agreed to provide Pounds 400m in capital support to the company over 1991-92 in addition to Pounds 270m earmarked for research and development into Bull's open systems designs. Unisys and Bull are simply the most spectacular victims of the sickness affecting the industry; almost every mainframe or minicomputer company in the US and Europe is demonstrating declining profitability if not actual losses. Earnings per share at IBM, the world's largest computer company, for example, have been on a plateau for six years now. The company has spent more time and money than most over the past three years in attempting to bring its expenses into line with sales, but earlier this month it shook the stock market with a warning that its sales in the first quarter of 1991 would be significantly weaker than expected; Wall Street analysts were downcast after the company's apparently strong recovery in 1990. The key to what is happening is the uneven nature of the picture. Suppliers of PCs, workstations and high powered small systems have not been damaged to anything like the same extent as mainframe and minicomputer manufacturers. Compaq Computer, for example, the world leader in high powered PCs reported sales in 1990 of Dollars 3.6bn, up 25 per cent from 1989, while net income was Dollars 455m, up from Dollars 333m the previous year. Its growth was chiefly driven by international sales, up 54 per cent, while revenues grew only 5 per cent in the US. Apple Computer, a PC pioneer which has tended to go its own way in technological development, had comparatively stagnant sales and earnings in 1990, but began a spectacular turnaround after the launch of new, aggressively priced computers featuring its proprietary 'Macintosh' technology. Pyramid Technology of the US which makes high performance mid-range computers using the 'Unix' operating system increased revenues by 93 per cent last year and its pre-tax profits by 110 per cent. The Pyramid machines are colloquially described as 'Unix hot boxes'; for prices between Pounds 34,000 and Pounds 500,000, they will outperform a mainframe. Other hot box suppliers include Arix and Sequent. New players are entering the industry, often from unexpected directions. Nippon Steel, for example, the world's largest steelmaking concern has developed notebook computers which it is marketing in the US and Europe as part of a broad plan to diversify into computers and communications. All of this is evidence that the traditional computer business is being displaced by a new industry, with which it has little in common, as surely as the traditional Swiss watching making industry was brushed aside by Japanese electronic timepiece manufacturers. This new computer industry has its origin not in traditional data processing but in the semiconductor industry and its expression in PCs and workstations. The traditional industry is characterised by proprietary computer designs which lock customers into individual suppliers; prices are set to yield high gross profit margins which are used to finance substantial direct sales forces. These are the primary conduits between the manufacturer and the customer. Applications software is developed chiefly by the customer's own software staff, perhaps with the help of a software house. The new industry is very different. Machine designs are similar between suppliers because they are based on widely available, industry standard microprocessors. Most of the research and development work has been carried out by the semiconductor manufacturer. Compaq, for example, spends about half the industry average on research and development. Because margins are so narrow, direct sales forces are economically unviable and sales take place principally through 'channels' - dealers, software houses, value added resellers and systems integrators. The key to success, as in the case of Compaq, is a strong positive relationship with the channel. Operating software is standard - usually a variation of the Unix system. Applications software is packaged, developed by software specialists who prefer to write programs which will run on a wide variety of machines rather than tie themselves to a single manufacturer. The question, therefore, is whether the members of the old industry are sufficiently flexible to become new industry players, or whether they are doomed to extinction. Against this background, arguments about the value of state aid to national champions appear increasingly redundant. At present, most experts agree that only IBM is safe; it has the determination, flexibility and, most important, the financial security to change course decisively. The future of the Japanese mainframe manufacturers, Fujitsu, Hitachi and NEC, IBM's chief competitors is unclear. They continue to prosper in their fast growing home market, but have yet to face the challenge of open systems and networked computing which is causing their Western competitors so much heartache. Swiss watchmakers found salvation in fashion. An equivalent safe haven for the traditional computer industry is not yet in sight. 
ID: 3938
HEADLINE: FT  23 APR 91 / (CORRECTED) Survey of The Computer Industry (11): Take your partners and consolidate - UK, an industry still to be reckoned with 
TEXT: Correction (published 25th April 1991) appended to this article. THE British computer industry is not what it once was. International Computers Limited (ICL) is owned by Fujitsu, Apricot has sold its computer hardware division to Mitsubishi, Sinclair Research is now part of Mr Alan Sugar's Amstrad computer organisation and Acorn Computers has long been part of the large Olivetti empire. That does not mean that it is no longer a force to be reckoned with. Not only have some British computer companies, notably Amstrad, survived the market consolidations of the 1980s, but leading international manufacturing facilities have come to the UK. In addition, smaller, home-grown companies with innovative hardware and software products, such as London-based Psion, have built their own specialist markets. This has taken place against a background of declining government investment in high technology, the opening up of European markets in preparation for 1992 and the push for development of open computer systems. ICL, for example, has been behind a push in both the public and private sector over the past few years to encourage the use and evolution of standard, open computer systems in the powerful mid-range and high-end mini and mainframe sectors. However, it seems that the open systems aren't always good news for UK computer interests. According to Mr Tim Taylor, marketing director of ACT-Logsys, it is open systems which played a large part in inducing Apricot to sell its hardware division to Mitsubishi. ACT-Logsys, a new company formed from a part of Apricot which was not sold off, specialises in consultancy and support for large public and private sector clients. 'One of the reasons we decided to find a partner for Apricot hardware was that with standardisation and globalisation, it was getting much harder for a UK supplier to survive on a worldwide scale,' says Mr Taylor. That search for a partner eventually led to Mitsubishi buying the company. He adds that the drive for standards has somewhat levelled the technology playing field and is forcing many of the smaller players to move into specialist markets to survive. Ironically, as computer companies founded by British nationals have either been sold or folded, international companies, such as Compaq Computer and Connor Peripherals have moved in to take their places. Compaq, in particular, has seen a spectacular rise to success for its UK company - headed by Mr Joe McNally, UK-born managing director. Mr McNally says that, in many ways, Compaq in the UK is just as much of a British company as ICL had been. Compaq has spent more than Dollars 76m on its Scottish manufacturing facility in the past three years. Compaq has built up an annual UK turnover in excess of Dollars 1bn thanks largely to a combination of the revenues generated by the factory and the company's sales in the UK. It was perhaps a sign of the times when Compaq found wholehearted and very senior UK government support for location of the factory in Scotland - although other Compaq European subsidiaries were lobbying heavily to have it elsewhere. Mr McNally recalls fondly one of the main elements in finally clinching the deal to build in Scotland. 'Former prime minister Mrs Margaret Thatcher personally put pen to paper and wrote to our US chairman Mr Rod Canion,' says Mr McNally. 'That played an important role in terms of him deciding to come here - although we did have a lot of support from the government and the Locate in Scotland office,' adds Mr McNally. He suggests that investing as heavily as it has in the UK has produced a lift in sales to public sector bodies, which have in the past largely turned to Apricot for their personal computers. He says that public sector sales for Compaq in the rest of Europe account for only 8 per cent of its business. In the UK, that figure has recently risen to 18 per cent. 'Clearly the Scottish factory has been an influence,' he suggests. But while Compaq is enjoying the benefits of increased public sector and corporate sales, the recession has hit the lower end of the PC industry hard, particularly in the retail sector. IBM-compatible PCs have become commodity consumer electronics products and suffer the same ups and downs as home fax systems, stereos and satellite television. Amstrad, British electronics company, for example, is feeling the bite of the recession. 'Business is not very good at the moment, but everyone is suffering,' admits Mr Alan Sugar, Amstrad founder and chairman. 'But that's no consolation. It's been bloody slow and probably will be for the next six or seven months -even if interest rates drop 2 or 3 per cent. It was a bad January and February and the satellite business suffered in February. Things are starting to move again, but not in the volumes we had before Christmas,' he says. Mr Sugar, however, has bounced back many times before and is expected to weather this recession well. At last month's CeBIT exhibition in Germany, he bullishly announced three new products - designed to help lift his share of the portables and small desktop computer markets and to pioneer participation in the colour laptop computing sector. Correction (published 25th April 1991). IN TUESDAY'S computer industry survey, we suggested incorrectly that Sinclair Research was part of the Amstrad organisation. In 1986, Amstrad purchased the right to use the Sinclair trade name together with Sinclair's intellectual property rights, patents and stocks of home computers. Sir Clive Sinclair, however, retained ownership of Sinclair Research. 
ID: 3939
HEADLINE: FT  22 APR 91 / Tunisia counts the cost of the Gulf war: Loss of tourism has dealt a serious blow to the ailing economy 
TEXT: THE GULF war has dealt a sharp blow to the economy of Tunisia. The loss of foreign income from tourism and decline in domestic employment come at a time when industrial growth had been resuming after three years of drought, locust plagues and severe austerity. President Zine El Abidine Ben Ali has pushed through measures aimed at liberalising the management of Tunisia's economy, while maintaining austerity. A budget deficit equivalent to 8 per cent of gross domestic product in 1986 was turned into a surplus of 4 per cent last year but the Ministry of Planning forecasts no increase in the country's GDP this year. The government recognises that austerity is all the more necessary today and has gone ahead with plans to cut five days' pay from all salaried workers. The government expects exports of goods and services to suffer a shortfall of TD850m (Dollars 895m), a figure which rises to more than TD1bn if the loss of loans from Arab funds is included. This year could turn out to be the first since independence when the number of job losses is greater than the number of new jobs. The Ministry of Planning estimates that 51,600 jobs will be lost and 48,000 created - this at a time when 55,000 young Tunisians are entering the labour market every year. The social repercussions are grave. Ever more violent confrontations between the police and Islamic fundamentalist militants from the major opposition party, En Nahda (The Renaissance) has led to a climate in which the promises of greater freedom of expression which accompanied President Ben Ali's assumption of power have all but disappeared. The fallout from the war is expected to cost the balance of payments TD600m. The Tunisian government was quick to react and, three months ago, seized the opportunity of a routine IMF review of the country's position to activate the enlarged facility it had arranged with the Fund in 1988, but never drawn down. The IMF is expected to agree to Tunisia drawing SDR138m (Dollars 190m) - a sum equivalent to its quota with the Fund. Preliminary government estimates give loss of export income and suggest three sectors will be badly affected: Tourism and transport where half of Tunis Air's fleet is grounded - TD470m. This figure is predicated on a 50 per cent decline in foreign visitors during the first six months of the year; Exports of goods - TD330m of which one third is accounted for by textiles; Transfer payments - TD50m, the bulk of which are remittances from Tunisians working abroad. To these figures must be added the loss of TD200m worth of loans from Kuwaiti and Arab development funds which will lead to the delay of major projects. A lower volume of imported capital goods and the decline in local spending will cut the import bill by TD350m, but this will still add TD600m to initial estimates of the balance of payments deficit. The domestic economic consequences of the Gulf war will thus be severe, despite the fact that an exceptionally plentiful rainfall should deliver a very good crop, thus reducing the need to import cereals. This would be all the more welcome as US aid has been cut by three-quarters. The US Congress appeared somehat disgruntled at Tunisia's refusal to join the coalition against Iraq. The benefits Morocco drew from sending troops to the Gulf stand in sharp contrast - Saudi Arabia gave King Hassan Dollars 700m last autumn. Although most sectors of the economy have felt the repercussions of the Gulf war, tourism has been one of the immediate casualties. It accounts for one-fifth of foreign earnings and ensures the livelihood of 800,000 people. To a net loss of 13,500 jobs must be added the pressure on hotel owners to shed labour if the number of foreign visitors does not pick up fast. In the transport sector, job losses will amount to 2,700. The construction industry is also likely to be affected since many new hotels (Tunisia adds 5,000 beds every year) will not get the go-ahead. The manufacturing sector, where only a third of the 15,000 new jobs planned for 1991 will be created, could be further hit by an economic slowdown among major client countries such as France. The Tunisian government has been quick to draw up a list of capital expenditure cuts and increase the price of certain items such as petrol. If tourism picks up faster than expected, the government will be spared the worse. If public frustration grows, however, the risks of social and political unrest will be only too clear. 
ID: 3940
HEADLINE: FT  22 APR 91 / World News in Brief: O'Faolain dies 
TEXT: Sean O'Faolain, whose beautifully crafted short stories won him a reputation as the 'Irish Chekhov,' died in Dublin following a brief illness. He was aged 91. 
ID: 3941
HEADLINE: FT  22 APR 91 / World News in Brief: Bulgarian monarchy 
TEXT: Bulgaria's exiled King Simeon said at the weekend that the restoration of monarchy would be the best way to revitalise his country after four decades of communist rule. 
ID: 3942
HEADLINE: FT  22 APR 91 / World News in Brief: Scud kills 300 
TEXT: Up to 300 people were killed in an Afghan government Scud missile attack on the rebel-held north-eastern town of Asadabad, a rebel spokesman said. 
ID: 3943
HEADLINE: FT  22 APR 91 / World News in Brief: Tamils shoot 22 
TEXT: Tamil separatist guerrillas shot and hacked to death 22 Sinhalese villagers on Saturday night in east Sri Lanka, police reported. 
ID: 3944
HEADLINE: FT  22 APR 91 / International Company News: Cross Border M&amp;A Deals 
TEXT: ----------------------------------------------------------------------- BIDDER/INVESTOR   TARGET          SECTOR       VALUE   COMMENT (Pounds) ----------------------------------------------------------------------- General Re (US)   Royal RE (UK)   Reinsurance est 100m Continues UK withdrawal from sector ----------------------------------------------------------------------- Hewlett-Packard   Joint venture   Computers     n/a    HP takes 26 (US)/Hindustan                                         per cent stake Computers (India) ----------------------------------------------------------------------- Tate &amp; Lyle (UK) Bundaberg Sugar  Sugar        142m    Tate increases (Australia)      Production           bid 10 per cent ----------------------------------------------------------------------- ILVA (Italy)     Cookson Plibrico Furnace     23.7m    Major part International    lining               of  .. (UK) ----------------------------------------------------------------------- Cookson (UK)     Metacon          Steel         n/a    .. Cookson (Switzerland)    casting             reshuffle ----------------------------------------------------------------------- Vesuvius Italia  Unit of Sanac    Slide gates   n/a   Another Cookson (UK/Italy)       (Italy)                              move ----------------------------------------------------------------------- Halma (UK)       Tradinco         Electronic   2.6m   Complements Instrumenten     instruments         existing Apparaten (Holland)                  instrument ----------------------------------------------------------------------- Nestle (Switz)/  Joint venture    Food          n/a   Duo want stake BSN (France)                                          in Cokoladovny ----------------------------------------------------------------------- Trelleborg       Unit of Monarch  Solid         n/a   Trelleborg (Sweden)         (US)             industrial          says it's tyres               world's biggest ----------------------------------------------------------------------- Solvay (Belgium) Unit of          Polyethylene  n/a   East German buy Wienerberger     Orbitaplast      pipes (Austria)        (Germany) ----------------------------------------------------------------------- Source: FT Mergers &amp; Acquisitions International ----------------------------------------------------------------------- 
ID: 3945
HEADLINE: FT  22 APR 91 / International Company News: NRI Tokyo Bond Index 
TEXT: --------------------------------------------------------------------- PERFORMANCE INDEX --------------------------------------------------------------------- Average December 1983 = 100             yield     Last     12 wks     26 wks 18/4/91        (%)     week        ago        ago Overall             154.10       7.07   153.61     152.17     144.85 Government Bonds    152.01       6.89   151.23     150.19     141.68 Municipal Bonds     155.77       7.20   155.32     154.56     147.19 Govt.- guaranteed Bonds             158.57       7.26   158.29     156.87     149.59 Bank Debentures     151.11       7.12   150.80     149.11     143.56 Corporate Bonds     156.65       7.40   156.79     153.73     147.16 Yen-denom. Foreign Bonds             161.20       7.93   160.89     157.30     150.23 Government 10-year*   6.57                6.67       6.50       7.31 --------------------------------------------------------------------- * Estimated par yield --------------------------------------------------------------------- Source: Nomura Research Institute --------------------------------------------------------------------- 
ID: 3946
HEADLINE: FT  22 APR 91 / Sun Alliance lends Aldington Pounds 500,000 
TEXT: SUN ALLIANCE insurance company, the UK's biggest household insurer, will disclose in its annual report and accounts today that it has given an interest-free loan, estimated at Pounds 500,000, to Lord Aldington, its former chairman. The loan is to cover the legal costs of his nine-week libel case against Count Nikolai Tolstoy in 1989. The directors justify the decision on the grounds that the case arose from his duties as the company's chairman. Earlier this month Sun Alliance reported a 1990 loss of Pounds 181m due to claims arising from bad weather and the recession. The loan to Lord Aldington is repayable if he recovers costs. The legal bill has been estimated at Pounds 500,000 plus other expenses of about Pounds 100,000. The company says that Mr Nigel Watts, a Kent property developer and a co-defendant in the libel action, had claimed that Sun Alliance wrongly refused to pay a Pounds 50,000 accident policy after his brother-in-law died in 1975. At the trial Lord Aldington's counsel said there had been a 'disgraceful campaign' to force Sun Alliance to reverse its decision over the insurance claim. The court was told Mr Watts had circulated 10,000 copies of a pamphlet, written by Count Tolstoy, attacking Lord Aldington's war record. It alleged that as a senior officer in Austria at the end of the Second World War he repatriated thousands of Cossacks and anti-Tito Yugoslavs to the Communists knowing they faced torture and death. At the end of the trial Lord Aldington, a former deputy chairman of the Conservative party, was awarded record Pounds 1.5m damages plus costs but neither Count Tolstoy nor Mr Watts were able to pay that sum. 
ID: 3947
HEADLINE: FT  22 APR 91 / Economics Notebook: A challenging descent from heaven 
TEXT: assassinated head of the Treuhand agency charged with privatising East German industry - resigned as state secretary of the German Economics Ministry in 1980, he left to run a steel company. As announced last week, Sir Peter Middleton, who is resigning as permanent secretary of the UK Treasury next month, will move to the City as a director and deputy chairman of the Barclays Bank group and to head Barclays' newly-formed markets and investment banking division. Once in the Square Mile, he will be rubbing shoulders with other ex-Treasury knights. Sir Geoffrey Littler, one of Sir Peter's former deputies, was appointed last week to be chairman of NatWest Investment Bank. Sir Douglas Wass, Sir Peter's immediate predecessor as permanent secretary, is co-chairman of Nomura International. The amakudari, or 'descent from heaven', of these eminent gentlemen will doubtless gild their final working years. But what does it tell us about Britain, and is it good news for the country? Just as Downing Street was announcing Sir Peter's departure from the Treasury, the Confederation of British Industry reported a sharp fall in industry's research and development since 1988. The report showed that industry-funded R&amp;D in Britain, in proportion to output, was about half Japanese and German levels. The coincidence of these two news items gives powerful backing to an argument put forward earlier this year by Mr Walter Eltis, the director general of the National Economic Development Office*, to the effect that Britain's poor investment record in manufacturing and fragile international competitiveness can be partly linked to too great a concentration of national effort in the areas of finance and banking. Mr Eltis cited figures showing that investment in financial services in Britain rose 313 per cent in volume terms between 1979 and 1990 while investment in manufacturing barely rose at all. In the 11 years, financial sector investment as a share of total investment in plant and machinery rose to 29.4 per cent from 11.7 per cent. But while the UK had put a 'great many eggs into the financial basket', the recent history of UK banking had exposed miscalculations and weaknesses such as the catalogue of loss-making decisions at the Midland Bank. Mr Eltis concluded that excessive inflation, poor real rates of return and a pro-housing bias in the UK's financial institutions had also crimped investment. But 'the impact on the direction of investment of an apparently hyper-profitable City, the superiority of which now appears in part illusory' was a factor. Worryingly, Mr Eltis suggests that the recent woes in UK banking and insurance cast doubt over the ability of Britain's financial sector to reap the promised harvest of the Europrean single market. It will be up to Sir Peter Middleton and the other mature madarins who make a bee-line for the City to prove him wrong. **** A bias in favour of finance is not an exclusively British preserve. When Mr Jacques Attali, the president of the European Bank for Reconstruction and Development, sought a vehicle to turn his vision of a united European economic area stretching from the Urals to the coast of Portugal into reality, he thought of a bank. At last week's inauguration of the EBRD in London, there were plenty of people suggesting that a better way of helping eastern and central Europe move to democracy and develop the market economy would be for the west to lower trade barriers to products in which the former communist countries have a comparative advantage. In Washington last week, the Czechoslovak foreign minister Mr Jiri Dienstbier was giving the same message to President George Bush. The progress being made towards reaching association agreements between the European Community and Hungary, Poland and Czechoslovakia shows that the EC is responding to these pressures. In London last week, Mr Henning Christophersen, an EC Commission member, acknowledged that the former communist states 'had no real economic prospects' without free access to the industrial world's markets. This view was echoed by Mr Attali, who said the EBRD would prepare a strategy for opening up trade relations between east and west. What this would entail was unclear, however. Like much else concerning the business operations of the EBRD, it is a question of wait and see. **** Is the Organisation for Economic Cooperation and Development ripe for expansion? A South Korean delegation will visit the OECD this week for talks about joining the 24-nation Paris-based economic think tank of industrialised countries. Mexico is also a likely candidate, while several east European countries have also expressed an interest in joining. New members are only admitted to the club with the unanimous agreement of existing members. South Korea's human rights record could pose problems. But it is a member of the EBRD which has the promotion of pluralism and democracy among its goals. *In 'The State of the Economy 1991', published by IEA, 2 Lord North Street, London SW1P 3LB at Pounds 9.95. 
