Democracy under siege in Pakistan
Pakistan plunged deeper into the political abyss after former Prime Minister Benazir Bhutto was killed in a suspected suicide attack on Dec. 27 at an election rally in Rawalpindi. The opposition leader, aged 54, had survived a previous attempt on her life in Karachi when she returned from exile two months ago. Police said at least 16 people died and more than 60 were injured in the attack. The Interior Ministry said it suspects Al-Qaeda was involved in the gunfire-cum-bomb attack on Bhutto's political rally, but added it could not confirm reports about the terrorist network having claimed responsibility. The Government has ordered a judicial inquiry into Bhutto's killing. Islamic terrorists, fighting an insurgency in north-western Pakistan, had previously threatened to kill Bhutto.
She returned from a self-imposed exile in October after spending years out of Pakistan where she had faced corruption charges. Her return was the result of a power-sharing arrangement with President Musharraf, but analysts , there were always plenty of doubts about the effectiveness of the agreement. The latest incident of violence threatens to derail the fragile attempts of President Parvez Musharraf to restore democracy in a strife torn nation. It also puts a big question mark over the entire process, which many political analysts term farcical, and casts doubts over the upcoming general elections, scheduled for Jan. 8. But, Interim Prime Minister Mohammedmian Soomro said that the polls will be held as scheduled.
Another Former Prime Minister Nawaz Sharif said his opposition party will boycott national elections next month, and asked Musharraf to step down. "Under the present circumstances and under Musharraf, neither is campaigning possible nor is a free election," Sharif said. Musharraf appealed for calm while US President George W. Bush asked Pakistanis to honor Bhutto's memory by continuing with the democratic process for which she so bravely gave her life. Bush condemned the attack as a cowardly act by murderous extremists. "The manner of her going is a reminder of the common dangers that our region faces from cowardly acts of terrorism and of the need to eradicate this dangerous threat," said India's Prime Minister Dr. Manmohan Singh.
Meanwhile, the stock exchange, central bank and all markets remained closed after President Musharraf announced three days of national mourning. Domestic flights were canceled and some train services were suspended Riots erupted across Pakistan following the Bhutto's death, prompting the government to deploy army on the streets of some cities to restore law and order. Violence broke out in Karachi, Lahore, Peshawar, Rawalpindi and in dozens of towns across the southern province of Sindh, including Bhutto's hometown of Larkana.
Despite the political turmoil and expectations of manipulation by President Musharraf, elections had generated some hopes in Pakistan. Many hoped that even a flawed election was seen to be better than the sham democracy President Musharraf had been running for eight years as a military ruler. These hopes have now been dashed. Bhutto's killing is a setback to Pakistan and could destabilise the political process and the move towards democracy. What's worse, without Bhutto's charismatic and courageous leadership the Pakistan People's Party (PPP) will find it tough to return to power. Sharif is believed to be a weak leader, which means that Pakistan may not have a secular and democratic future for a long time to come.
Impasse over spectrum allocation continues
There is no end to the current stalemate over spectrum allocation. The Department of Telecommunications (DoT) accepted telecom regulator TRAI's recommendations on new subscriber-based criteria for spectrum allocation while the GSM lobby COAI asked the Government not to allocate radio frequency before the Delhi High Court gives it verdict on the thorny issue. The DoT accepted a spectrum review panel's recommendation that existing wireless players (both GSM and CDMA) be allocated additional spectrum only after they increase their subscriber base 2-6 times.
DoT also endorsed the Government appointed spectrum panel's recommendation that GSM operators be given additional spectrum in quantities of 1 MHz, as against the current norm of granting it in tranches of 1.8 MHz to 2.2 MHz. To this effect, an affidavit would be filed in the telecom tribunal TDSAT and the Delhi High Court, where COAI has challenged the new spectrum allocation norms and grant of permission for the use of dual technology.
The Government panel set up to examine the issue of spectrum allocation also suggested setting up of a new committee with technical experts to arrive at a scientific method for allocation of additional spectrum. The new panel will give its report in six months. Till such time, TRAI recommendations on the matter should be implemented, according to the DoT.
Meanwhile, reports suggested that the DoT is unlikely to grant spectrum to Reliance Communications (RCOM) and others before the next Delhi High Court hearing, on January 3. The Letters of Intent (LOIs) will not be issued before January 3, a business news channel said. The channel also reported that Telecom Minister A. Raja will meet Solicitor General in the first week of January on the current logjam over spectrum allocation.
The GSM mobile operators, who had pulled out of the spectrum review committee alleging bias against them, accepted the panel's report. On the other hand, RCOM and fellow CDMA operators assailed the DoT move. RCOM slapped a legal notice on the DoT and urged it to accept the report by the Telecom Engineering Cell (TEC). The ADAG company also said that the DoT must direct GSM companies to return additional spectrum of over 50 MHz.
Separately, COAI - the GSM lobby group - said that all pending application of existing players for extra radio frequency be considered as per the earlier subscriber-linked policy issued in March 2006. Reports also said that Telecom Minister A Raja had asked the Telecom Commission to review the annual spectrum charges that service providers pay as licence fee. TRAI has proposed that operators pay a higher revenue for radio frequencies along with a one-time fee for every additional MHz of spectrum.
Indian energy sector exhibits rich potential for investment in diverse streams: CII - KPMG
Long term vision and adequate policy & regulatory support necessary to achieve sustainable self-sufficiency in the energy sector: CII - KPMG Report
The Indian energy sector is exhibiting a rich potential for investment in diverse streams, driven by the surging economy and the resultant demand supply gap in the short run; and by the need to achieve sustainability and self-sufficiency in the long run. A long term vision, and adequate policy and regulatory support is necessary to realize this potential, according to a report jointly released by CII and KPMG. The report titled ‘India Energy Inc. – Emerging Opportunities & Challenges’ was released recently at the CII - India Energy Conclave 2007.
India’s power and upstream energy sectors need investments to the tune of US$120 – 150 billion over the next five years. The report emphasizes the need for strong private sector participation to complement public sector and to bring in the required capabilities & technologies. Policies have increasingly recognised the need to promote private investment. Private interest in captive coal mining, oil and gas exploration and in power sector has shown significant progress and is also envisaged in nuclear sector.
By world standards, India’s current level of energy consumption is very low. For the year 2004 – 05, the total annual energy consumption for India is estimated at 572 Mtoe (million tons oil equivalent) and the per capita consumption at 531 kgoe (kilograms oil equivalent). With a target GDP growth rate of 8-10% and an estimated energy elasticity of 0.80, energy requirement is expected to grow at 6.4-8.0%. This would mean a five-fold increased in India’s energy requirement over the next 25 years.
Energy transport infrastructure such as ports, railways, pipelines and power transmission networks need significant investment. The policy now allows private participation in all these areas and some private sector activity is already under way. Tariff reform in the energy sector and distribution reform in the power sector are two important steps that need to be successfully carried out. Tariff reform to phase out subsidies or to target them effectively and distribution reforms to bring efficiency in the power sector are vital.
Along with private participation, there is a move to bring in market mechanisms in the energy sector under an independent regulatory oversight. A gradual approach is important till the supply side position improves and more players enter the sector so that markets can work effectively.
The report also highlights the key opportunities in the sectors:
.Coal - India has vast reserves of coal and participation of the private sector in captive mining, across different user industries, is an immediate opportunity for investment. 38 coal fields have been identified and are in the process of being allocated, involving a total capital requirement of around USD 1.5-2 billion. Investment activity is also seen in other parts of the value chain including washeries.
.Oil - A number of private investors have entered this segment attracted by the government’s policies for upstream exploration and production. There is a huge potential in refining due to the strategic advantages of low cost and location; and India is already a net exporter of products. The downstream marketing sector is also now open to private participation.
.Gas - Gas discoveries of around 700 bcm in the last decade point towards a tremendous promise. While in the near term, potential for LNG may be limited due to inability of key sectors such as power to absorb high international prices, in the longer term there would be place for LNG as the share of Natural Gas in India’s energy mix increases. Gas coverage in at least 30 cities, is likely to see active interest from both private and public players in the next few years.
.Nuclear - India has one of the largest reserves of the nuclear fuel - thorium. However, the nuclear energy programme will continue to be uranium based until commercial production based on thorium becomes feasible. If the Indo-US nuclear deal goes through, there will be a boost to nuclear energy and private participation in this sector would be expected.
. Hydro - India is endowed with a hydroelectric potential of about 150,000 MW. However, only 17 percent of the hydroelectric potential has been harnessed so far; with another 5 percent under various stages of development. Private participation in the hydro sector will be important to meet the target of an additional 45,000 MW of hydro capacity within the next ten years.
. Renewable Energy - India has a vast potential for renewable energy sources, especially in areas such as solar power, biomass and wind power. The current installed capacity of renewable energy is around 9220 MW, constituting about 7.3% of India ’s total installed generation capacity. India is already the fourth largest in the world in terms of wind energy potential and we are seeing significant investment activity in this area. There is a huge potential for development of solar power and bio-fuels.
According to the report, to meet its large and growing energy needs, there are certain key imperatives for the Indian energy sector:
.Private sector investment needs to complement public sector - Reliable and economic energy supply will require investment of capital as well as capabilities and efforts from both public and private sectors. The government is taking the right steps to attract private players to this sector which will need investments of around USD 120 to 150 billion over the next five years. Further clarity in areas including pricing of products and stability in policy framework is essential to further encourage private investment.
.Encourage market mechanisms with a credible and independent regulatory oversight - Market mechanisms will bring in efficiencies, and also encourage investments by minimizing regulatory risks. With an improving supply-side situation, market mechanisms have been gradually introduced in the various segments of the energy chain, and this needs to be extended to other left-out sectors like coal block allocation to encourage private sector participation.
·Reduce vulnerability to price and supply shocks - The biggest challenge is to replace coal (exhaustible in 40 years), representing 51% of the energy basket, and oil which is heavily dependent on international supply in the short term towards Natural Gas, Hydro and renewable sources. Apart from diversifying the basket, enhancing domestic production and taking equity positions in energy resources abroad are also necessary steps in reducing the effects of fuel price shocks.
.Bringing in efficiency and enhancing capacity in energy transport infrastructure - To reduce the high inter-regional disparity to match demand and supply centers, significant investments in ports and railway, pipeline and storage network and infrastructure are underway.
.Tariff reform and power sector reform - Heavily distorted power and energy prices have resulted in inefficient end-use and energy choices. Policy measures with sufficient political will are required to address these issues. Distribution reforms to cut down on network losses due to theft and pilferage are also necessary.
.Provide Government Support for Energy Efficiency - Policy framework incentivising energy efficiency is an urgent requirement. The environment should encourage energy efficiency companies to come up and operate profitably.
Oil rises for 5th straight day on Bhutto killing
Crude oil prices in New York gained through the week after the assassination of former Pakistani Prime Minister Benazir Bhutto revived concerns about geopolitical factors affecting global fuel supplies. Prices also rose after a US Energy Department report showed larger than expected drop in fuel inventories. Oil is set for a third week of gains after US stockpiles declined to the lowest since January 2005. Supplies of distillate fuel, including heating oil, dropped the most since February. Light, sweet crude for February delivery last traded at US$96.64 a barrel, up 2 cents, on the New York Mercantile Exchange at 9:07 a.m. London time. Oil was heading for its biggest annual gain in eight years. Oil prices surged to a one-month high of US$97.79 a barrel on Dec. 27 - within US$1.50 of the all-time high of US$99.29 struck on Nov. 21. Prices are up 60% from a year ago level. Brent crude for February settlement rose 13 cents to US$94.91 a barrel at 9:10 a.m. local time on London's ICE Futures Europe exchange.
Rising energy costs fuel inflation in Japan
Japan's inflation rose at the fastest pace in more than nine years in November and industrial production and household spending declined, suggesting that rising energy costs may derail the economy's longest postwar expansion. Core consumer prices, which exclude food prices, gained 0.4% from a year earlier, the statistics bureau said. Factory output slid 1.6% from a month earlier. Households cut spending 0.6%, the first drop since July. Wages fell and employment prospects dimmed as number of job seekers outnumbered vacancies for the first time in two years, the Labor Ministry said. Rising energy costs rather than consumer spending is said to be driving inflation in Japan, according to analysts. As a result, the Bank of Japan (BOJ) will refrain from raising rates amid slowing GDP growth. The yield on Japan's 10-year bond fell 4.5 basis points to 1.5% in Tokyo on Dec. 28. The Topix stock index tumbled 1.6%, capping off a 12% drop for the year, making Japan the worst performer of the world's 10 biggest markets.
Toyota may surpass GM as top auto firm in 2008
Toyota Motor Corp. expects to upstage General Motors (GM) from the position of the world's top automobile company by sales next year after the Japanese major forecast a 5% jump in its global volume from this year. Toyota said on Dec. 25 it planned to sell 9.85mn vehicles worldwide in 2008, up from an estimated 9.36mn sales this year. If Toyota meets the 2008 sales target, it would top the record 9.55mn that GM sold 30 years ago, according to the Wall Street Journal. GM has placed this year's sales estimate at 9.3mn vehicles, and has not given a forecast for the number of vehicles it expects to produce or sell in 2008. During the first nine months of this year, Toyota sold 7.05mn vehicles sold worldwide, just shy of GM's figure of 7.06mn. Toyota's 2007 sales figure would thus for the first time place it as the world's largest auto maker on an annual basis, ending GM's more than 70-year reign.
Warren Buffett to buy 60% in Marmon Holdings
Berkshire Hathaway, the investment company promoted by legendary billionaire investor Warren Buffett, would acquire a 60% stake in Marmon Holdings for US$4.5bn. Marmon is a privately-held conglomerate controlled by the Pritzker family in Chicago. Berkshire Hathaway will take control of 60% of Marmon and acquire the rest of the company within six years at a cost based on future earnings. The Marmon acquisition is set to be completed in the first quarter of 2008. Marmon has group sales of US$7bn in annual sales and has 125 units, including operations that serve the railroad and energy industries. The company's operating income more than tripled from 2002 to 2007, Berkshire said. Marmon employs 21,500 people, mostly in North America, the UK, Europe and China. Its businesses include a dozen companies that manufacture wire and cable products for energy and construction use
GE Capital to acquire Merrill Lynch Capital
GE Capital, the financial unit of General Electric (GE) said that it will acquire the bulk of the Merrill Lynch Capital commercial finance operations, allowing Merrill to redeploy about US$1.3bn into other parts of its business. GE said the acquisition, for an undisclosed sum, will also add US$5bn in commitments to GE Capital Commercial Finance's base of US$260bn. "These strong units fit perfectly with existing and very successful GE Capital businesses," Mike Neal, vice chairman of GE said. GE Capital will buy Merrill Lynch Capital's corporate finance, equipment finance, franchise, energy and health care finance units. Merrill Lynch Capital's commercial real estate finance unit is not part of the transaction. "This transaction reflects Merrill Lynch's continued strategic focus on divesting non-core assets and optimising capital allocation," said John A. Thain, Chairman and CEO of Merrill Lynch. The deal is expected to close in the first quarter of 2008.
Apple, Fox to sign deal to rent films: reports
Apple Twentieth Century Fox are set to announce a deal that will allow consumers to rent Fox movies through Apple's digital iTunes Store, according to media reports. The agreement will allow renting of Fox's latest DVD releases by downloading a copy from the online iTunes store for a limited time, the Financial Times said. The Wall Street Journal also reported the deal in its online edition. Fox's corporate parent, News Corp, and Apple refused to comment. Walt Disney is the only Hollywood studio that currently sells its new DVD releases on iTunes but these are available for outright purchases rather for renting purpose. Paramount, Metro-Goldwyn-Mayer and Lionsgate sell older library titles. The Apple-Fox deal is likely to be announced at the Macworld show on January 14.OVL to buy 40% in Venezuelan oil block
ONGC Videsh Ltd. (OVL), the overseas arm of Oil & Natural Gas Corp. (ONGC), would reportedly pick up a 40% stake in San Cristobal oilfield in Venezuela. Venezuela's national oil company Petroleos de Venezuela (PDVSA) will hold the remaining 60% stake in the block through a subsidiary, according to reports. OVL will invest US$355.74mn, comprising signature bonus of US$173.1mn for the stake, an OVL official was quoted as saying. It would also be required to sanction a loan of US$355.74mn for the Venezuela project that covers an area of 160.16 square kilometres and is located in the Orinoco Heavy Oil belt. Production from the San Cristobal field started in October 1981. Till date, 44 wells have been drilled, of which 24 are active. The block is currently producing about 24,000 barrels of oil per day (bpd). A joint team of ONGC and PDVSA has estimated ultimate recoverable reserves at 232.38mn barrels that can yield up to 100,000 bpd.