State-owned lenders 'in loan rates rip-off'
Bailed-out banks offering uncompetitive interest rates to new mortgage customers
Simon Read - The Independent
State-owned banks were accused yesterday of ripping off borrowers by charging over the odds on mortgages. Analysts said the majority of lenders rescued by the Government in the banking bailout charged more than average for home loans. Only Royal Bank of Scotland bucked the trend.
"Some state-funded banks appear to place a higher priority on getting out of Government ownership, rather than helping with competitive rates the customers who supported them," said Michelle Slade, of the financial website Moneyfacts.
"The large amount of money pumped into some well-known banks is still a sticky point with many taxpayers. Many hoped that the state-owned banks would be at the front of the queue for unlocking the mortgage market, but this isn't the case."
Moneyfacts analysts compared interest rates offered by the biggest mortgage lenders with the market average, basing their research on a two-year, fixed-rate deal for someone able to put down a 25 per cent deposit on a home. They found the Cheltenham & Gloucester was the worst culprit among the state-owned lenders. C&G – part of Lloyds Banking Group which is 41 per cent owned by taxpayers – charges interest of 4.57 per cent compared to the average of 4.19 per cent.
The second state-owned lender in Moneyfacts's list of shame is Northern Rock – 100 per cent owned by the taxpayer – which charges 4.37 per cent. In third place is the Halifax, also part of Lloyds Banking Group which charges an interest rate of 4.27 per cent. Lloyds defended its mortgage lending, saying: "We have one of the deepest and widest ranges of mortgage products available and work incredibly hard to maintain a comprehensive range.
"Our 75 per cent loan-to-value fixed rates start as low as 3.74 per cent and the rate can be further reduced by at least 0.2 per cent if customers also have a Halifax current account and pay in a minimum of £1,000 each month."
However, other analysts said it made sense for state-owned banks to keep new mortgage lending to a minimum. Andrew Hagger, of the website Moneynet.co.uk, explained: "Banks were bailed out by the Government on the back of some risky lending practices, so you can see why they are keeping their rates out of the best buy tables.
"From a taxpayer's points of view, it doesn't look like the banks are playing fair, but unfortunately ... it is not that simple. They've got enough on their plates without having to cope with the new business that more competitive rates would bring."
Michael White, of Email Mortgages, agreed, saying: "State-funded banks are caught between a rock and a hard place. Having taken government money to survive, their priority has been improving their balance sheets so they will not require further rescue packages down the line, which does not marry up with the provision of mortgage products at competitive rates."
However, topping the Moneyfacts poll was the 84 per cent state-owned RBS, where the average rate for a two-year fixed deal was 3.84 per cent.
"Given that many state-backed banks are required to lend significant amounts of mortgages, you could expect more of them to be offering relatively competitive deals," said David Black, an analyst at Defaqto.
King's Cross to Beijing in two days on new high-speed rail network
Malcolm Moore - Telegraph
Passengers will be able to travel by train from King's Cross to Beijing in just two days on trains that travel almost as fast as aeroplanes under ambitious new plans from the Chinese.
The network would eventually carry passengers from London to Beijing and then to Singapore. It would also run to India and Pakistan, according to Wang Mengshu, a member of the Chinese Academy of Engineering and a senior consultant on China's domestic high-speed rail project.
A second project would see trains heading north through Russia to Germany and into the European railway system, and a third line will extend south to connect Vietnam, Thailand, Burma and Malaysia.
Passengers could board a train in London and step off in Beijing, 5,070 miles away as the crow flies, in just two days. They could go on to Singapore, 6,750 miles away, within three days.
"We are aiming for the trains to run almost as fast as aeroplanes," said Mr Wang. "The best case scenario is that the three networks will be completed in a decade," he added.
Mr Wang said that China was already in negotiations with 17 countries over the rail lines, which will draw together and open up the whole of Central, East and South East Asia. Mr Wang said the network would also allow China to transport valuable cargoes of raw materials more efficiently.
"It was not China that pushed the idea to start with," said Mr Wang. "It was the other countries that came to us, especially India. These countries cannot fully implement the construction of a high-speed rail network and they hoped to draw on our experience and technology," he said.
China is in the middle of a £480 billion domestic railway expansion project that aims to build nearly 19,000 miles of new railways in the next five years, connecting up all of its major cities with high-speed lines.
The world's fastest train, the Harmony Express which has a top speed of nearly 250mph, was unveiled at the end of last year, between the cities of Wuhan and Guangzhou. Wholly Chinese-built, but using technology from Siemens and Kawasaki, the Harmony Express can cover 660 miles, the equivalent of a journey from London to Edinburgh and back, in just three hours.
Mr Wang said the route of the three lines had yet to be decided, but that construction for the South East Asian line had already begun in the southern province of Yunnan and that Burma was about to begin building its link. China has offered to bankroll the Burmese line in exchange for the country's rich reserves of lithium, a metal widely used in batteries.
Currently, the only rail line that links China to South East Asia is an antiquated track built by the French in Vietnam a century ago. The Asian Development Bank has recently agreed a second £27 million loan as part of the £93 reconstruction of Cambodia's network, which should finish by 2013. The cost of the lines from Cambodia to Singapore and then from Vietnam to China could be roughly £400 million.
"We have also already carried out the prospecting and survey work for the European network, and Central and Eastern European countries are keen for us to start," Mr Wang said. "The Northern network will be the third one to start, although China and Russia have already agreed on a high-speed line across Siberia, where one million Chinese already live."
One stumbling block is China's desire for the high-speed tracks to run on the same gauge as China's domestic network. Vietnam has agreed to change its standard gauge, but other countries are still in negotiations.
"From our point of view, the biggest issue is money," said Mr Wang.
"We will use government money and bank loans, but the railways may also raise financing from the private sector and also from the host countries. We would actually prefer the other countries to pay in natural resources rather than make their own capital investment."
As for passengers, Mr Wang predicted that in a decade's time, visa restrictions on travel through Asia "will be further lifted".
Obama wants high-speed rail system
City workers face highest tax bill from next month
Nick Clark - Independent
Fears that London faces an exodus of bankers increased yesterday as it emerged that many will have to pay more income tax from next month than in any of the capital's rival financial centres around the world.
The new 50 per cent rate of tax for income over £150,000 comes into force on 6 April, and the hike will see the City become the most expensive of eight financial centres for high earners, according to Financial News. This has increased concerns that London's status as one of the world's pre-eminent financial markets could suffer.
British bankers earning £1m in basic pay and bonus currently pay £403,689 in employee tax and social security. That figure is at least £60,000 lower than if they were based in Geneva, Paris or Frankfurt, and only those based in Hong Kong or Dubai pay less. From April, London will demand the heftiest tax bill for that bracket, as it rises to £491,279.
KPMG, the accountancy group that compiled the data, found that London would be most expensive domicile for bankers on a combined pay and bonus of £500,000, but that it was more competitive than Frankfurt and Paris for those earning £250,000 a year.
Ian Hopkinson, head of people services tax at KPMG, said: "This is very stark, the facts speak for themselves. If you earn above £250,000, London goes from being very competitive to completely uncompetitive."
The results come after Chancellor Alistair Darling introduced a bonus "supertax" of 50 per cent on those awards above £25,000, which expires on 6 April, and could reap the Treasury £2.5bn.
Mr Hopkinson said: "Tax as an issue is now front and centre for financial services firms." Many fear that the increase in taxes will drive talented financial services professionals abroad. Boris Johnson, the Mayor of London, said up to 9,000 bankers could quit the capital in protest at the bonus tax.
Britain's outdated tax laws fuel the corporate exodus
EADS grounds $40bn US air tanker bid
James Quinn - Telegraph
European defence giant EADS has dropped out of a nine-year, two-horse $40bn (£27bn) race to provide the US Air Force with a fleet of air tankers after accusing the American government of skewing the competition in rival Boeing's favour.
EADS and US partner Northrop-Grumman last night took the dramatic decision not to make a bid for the 179 plane contract after studying the latest terms drawn up by the US Department of Defence (DoD).
The pairing, which actually won the contract in 2008 only to be stripped of it after a political backlash in support of US rival Boeing, branded the competition for one of the largest military programmes in US history as unfair and unworkable.
"The acquisition methodology outlined ... would heavily weigh in the favour of the smaller, less capable Boeing tanker," said Ralph Crosby, chairman of EADS North America, whose bid would have been based on the Airbus A330. Boeing will propose the use of its smaller 767 jet.
Mr Crosby and Wes Bush, Northrop's chief executive, stressed that after working through the 1,000-plus pages within the latest request for proposals issued by the DoD, it was in neither company's interest to pursue a joint bid.
The withdrawal comes three months after the pair warned they might pull out of the running, a plea which led Robert Gates, the US Defence Secretary, to promise a "fair and highly transparent process" to replace the US's aerial refuelling tanker fleet, some planes in which are close to 50 years old.
EADS pointed out that although the bid documents "signal a preference for a smaller aircraft" the DoD has chosen its aircraft over those of Boeing in each of "the last five consecutive competitions".
The search for a replacement for the ageing air tanker fleet began in 2001, with Boeing originally handed the contract, until a congressional investigation found the company conspired with the US Air Force to inflate the value of the deal.
Then in 2008, after EADS and Northrop were awarded the contract, the decision was declared void after Mr Gates said the competition had been flawed.
Boeing is expected to deliver its tanker proposal to the DoD by May 10, with a decision expected by the end of the year.
Europe's white elephant
Europe bars Wall Street banks from government bond sales
• Leading US banks blamed for triggering financial crisis
• Policymakers propose a rival European monetary fund
Elena Moya - Guardian
European countries are blocking Wall Street banks from lucrative deals to sell government debt worth hundreds of billions of euros in retaliation for their role in the credit crunch.
For the first time in five years, no big US investment bank appears among the top nine sovereign bond bookrunners in Europe, according to Dealogic data compiled for the Guardian. Only Morgan Stanley ranks at number 10.
Goldman Sachs doesn't make the table. Goldman made it to number five last year and in 2006, and number eight in 2007, the data shows. JP Morgan was in the top ten last year and in 2007 and 2006 but doesn't appear this year.
"Governments do not have the confidence that the excessive risk-taking culture of the big Wall Street banks has changed and they still cannot be trusted to put the stability of the financial system before profit," said Arlene McCarthy, vice chair of the European parliament's economic and monetary affairs committee. "It is no surprise therefore that governments are reluctant to do business with banks that have failed to learn the lesson of the crisis. The banks need to acknowledge the mistakes that were made and behave in an ethical way to regain the trust and confidence of governments."
European sovereign bond league tables are now dominated by European banks such as Barclays Capital, Deutsche Bank, and Société Générale, the Dealogic table shows. Their business model is usually seen as more relationship-based, while US investment banks have traditionally been focused on immediate deal-making.
Being left out of government bond sales means missing out on one of the top fee-earning opportunities this year, given the relative drought in mergers and acquisitions and stock market flotations. Western European governments need to raise an estimated half a trillion dollars this year to refinance debts and pay for bank bailouts and rising unemployment.
Banks typically take a percentage of the total deal value for underwriting a bond issue, which could run into tens of millions given the ballooning sovereign debt sales this year. On a 1% fee, Barclays Capital would have pocketed $92m (£61m) from the $9.2bn European bonds it helped sell this year.
Barclays may have profited as a domestic anchor of UK debt sales, as a certain level of "nationalism" has surfaced according to Philip Augar, author of Chasing Alpha and other books about investment banking. "People have done as much as possible to take care of their own financial institutions," Augar said.
The National Bank of Greece featured in the top 10 for the first time in at least five years, according to Dealogic. Greece left Goldman and Morgan Stanley out of its most recent bond sale, and also dropped hedge funds from its list.
Petros Christodoulou, the head of Greece's debt management office, told the Guardian the bond issue had been directed to more "long-term" investors as they were seeking market stability. Greece has had tense relationships with Goldman recently after it emerged that the US bank had helped hide the real level of the country's public debt with derivatives contracts. The country also denied reports about the bank selling a stake of its debt to the Chinese government fund.
Investment banks insist their business areas are separated by confidentiality walls, but countries have been furious about some of their trades appearing to conflict – either on their own books, or on behalf of clients.
Goldman Sachs said its overall position in the European sovereign bond market had improved this quarter once US dollar denominated deals were included. It said its own data showed it ranked fourth in European sovereign bond sales this year.
Greece, Spain, Germany and France are also pushing for changes in the credit default swap market, where investors can bet against the possible default of a country, ultimately bringing more instability.
Britain, Spain, Ireland and Belgium have not used Wall Street firms in the largest 10 deals of the year, according to Dealogic.
Britain used Barclays, Deutsche, RBS and Royal Bank of Canada in its $7bn issue last month, the data shows. Spain has also used Santander, as well as Barclays, Citi and SocGen in recent issues.
Goldman Sachs, JP Morgan and Morgan Stanley have exploded in wealth and power over the past decade. In their glass towers in Canary Wharf, or in Goldman Sachs' European headquarters on Fleet Street, reception rooms regularly welcome prime ministers, world business leaders and multibillion-pound investors.
"The power of big investment banks was a factor in the banking crisis, and it's up to regulators and customers to stand up to them, and not picking them is one of the ways," Augar said.
But the power accumulated is too large to wane, the author said. "I doubt this will last," he said. "The US investment banks will be back in Europe before too long because they are very powerful and they have a very big footprint in Europe."
The EU is also trying to curb US financial power by creating its own monetary fund – a replica of the Washington-based IMF.The need of a European fund has emerged during the Greek crisis, as European politicians have insisted financial troubles should be resolved at home.
Currency devaluation needs new export markets on Mars to prove a panacea
Currency adjustment has once again moved centre stage. Here in Britain, with a general election of ever more uncertain outcome looming, we worry about the possibility of a sterling crisis.
Jeremy Warner - Telegraph
In Asia, it tends to be the opposite problem that exercises policymakers – how to resist the steady upward pressure on exchange rates. And in Europe, it's about how to reform a currency union whose fault lines have been laid bare by the financial crisis.
The last of these problems is at one and the same time the most difficult and the easiest to address – the most difficult because it requires eurozone members to move beyond the present loose structure of sovereign states to a more integrated federal approach ultimately involving loss of fiscal independence.
But also the easiest in that the transition has already started of its own accord. Greece in effect surrendered its fiscal sovereignty with last week's austerity package and others will surely follow before the crisis is over.
The notion of a European Monetary Fund, resurrected over the weekend by the German finance minister, Wolfgang Schauble, as a means of bailing out countries that run into financial difficulties, is but a staging post to the centralised Treasury functions that are essential to the single currency's long term survival.
The euro's founding fathers always realised that this is where the project would end up, but it has taken a banking crisis of historic proportions to accelerate an evolution that might otherwise have taken decades.
The other key ingredient to successful currency union is the free movement of labour across borders. For obvious reasons this is proving more difficult to achieve than in the US, where whole tracts of the population will regularly up sticks in economically depressed states to move to more prosperous ones.
Yet even on this front, there is more cross border movement in Europe than you might expect given the language and cultural differences, particularly at the youth, higher and lower ends of the labour market.
A number of the eurozone's peripheral member states might envy Britain its currency weakness, yet having taken and largely squandered the advantages of low German interest rates, they must now live with the consequences. Leaving the euro is not an option for these countries. The resulting currency and interest rate chaos would make the present deflationary adjustment in wages and benefits look like a stroll in the park by comparison.
Currency reform in China is moving at an altogether slower pace, notwithstanding remarks over the weekend by Zhou Xiaochuan, governor of the People's Bank of China, to the effect that the dollar peg may be reaching the end of its natural life.
On closer examination, his remarks were not as dramatic as widely reported. In fact, all he is talking about is a move back to the policy which existed before the financial crisis, when the renminbi was confined to a crawling peg which allowed an appreciation of around 5pc a year. When the crisis hit and exports collapsed, even this controlled appreciation was withdrawn, to be replaced by a simple dollar peg.
Mr Zhou seems to be saying that it may soon be appropriate to return to the crawling peg, but with the recovery still fragile, not quite yet. This falls a long way short of the sort of step change adjustment demanded by the US.
Would it make much difference to imbalances even if the US were to persuade China of the merits of such a revaluation? I've got my doubts. Over time, economies that are structurally adapted to maintaining big current account surpluses tend to find ways of coping with stronger exchange rates. Look at Germany and Japan. If the nominal exchange rate rises, relative Chinese and Western wages would adjust to compensate. And if they didn't, the difference in labour costs is already so vast that China could easily maintain competitiveness.
In any case, even a violent adjustment in the exchange rate of itself wouldn't make much difference to domestic demand in China. Outside capital goods necessary for infrastructure development, western produce is generally too expensive for Chinese consumption.
The collapse in world trade that accompanied the financial crisis has made the Chinese leadership painfully aware of the need to move away from the old export led growth model and develop self sustaining sources of internal demand.
But this cannot be conjured up overnight. Domestic demand is already expanding at a rate considered dangerously high. To go faster requires both more widely available consumer credit, to make big ticket items accessible to ordinary consumers, and a more reliable social safety net, to discourage excessive saving.
Looking at what's just happened to the big deficit nations, where the collapse of the credit boom has exposed a system of social entitlements which seems to be fiscally unaffordable, you can see why China would want to take its time in introducing the Western model.
Everyone, it seems, wants a lower exchange rate, yet it is a logical impossibility for all countries to have one. Britain is almost unique among large advanced economies in having devalued against both the euro and the dollar, and through the dollar, the renminbi too.
If the single currency hadn't existed we would be engaged in a beggar thy neighbour devaluation race to the bottom. Small wonder that others look on with a degree of envy. As yet, it is not much more than that, for with world demand still so depressed, the comparative advantage of a low exchange rate is quite limited.
But there are already rumblings in Europe to the effect that membership of the single market should require membership of the single currency. If the euro doesn't weaken soon, this will in time become a potentially acute source of tension.
There is little in this crisis that the world economy hasn't seen before in some shape or form, and certainly it has raised nothing new about the problems associated with fixed exchange rate systems. Many of these were apparent as long ago as Bretton Woods, when British delegates correctly pointed out that without floating exchange rates, there was no obvious mechanism for correcting trade imbalances other than to place equal and opposite obligations on surplus and deficit nations to adjust domestic demand accordingly.
Fifty six years later, and there is still no sign of these obligations being recognised among today's big surplus nations. To the contrary, almost everyone, deficit nations alongside the surplus ones, now have their eyes firmly set on exporting their way out of trouble. It scarcely needs saying that unless we are about to discover new export markets on Mars, the world economy has something of a problem.
The big risk for Britain is not a falling pound but a devalued Government
Broker admits court’s tax ruling has put paid to City exodus
Miles Costello and Catherine Boyle - The Times
Hundreds of City traders are rethinking plans to leave the UK for tax purposes in the wake of last month’s landmark court ruling against a British businessman based in the Seychelles, it emerged yesterday.
The interdealer broker Tullett Prebon led the Square Mile’s revolt over the Treasury’s plans for a one-off bonus levy and a 50 per cent rate of income tax announced in December.
Terry Smith, chief executive, said that the broker would be offering its 950 UK staff the option of relocating to less onerous offshore tax jurisdications, such as Geneva and Zurich.
Mr Smith said at the time that Tullett was responding to requests from teams or desks of brokers who were desperate to escape the tax clampdown and had asked to work abroad.
But Mr Smith said yesterday that far fewer brokers than expected were likely to take up the offer. He blamed a February Court of Appeal ruling in a long-running tax battle between HM Revenue & Customs and Robert Gaines-Cooper.
The Court of Appeal ruled last month that the Reading-born entrepreneur, who claimed to have severed links with the UK in the 1970s, was liable to pay UK tax despite spending fewer than 91 days a year in Britain. This was because “the centre of gravity of his life and interests” remained in the UK, the court said.
Mr Smith said: “We’re still reviewing the options but I wouldn’t think that the number is going to be that high. The matter of Gaines-Cooper versus HMRC since then has made it much more difficult to relocate.
“For us, we would need whole trading desks or product classes to relocate. Any of our staff who went would probably have to relocate entirely, taking their wives and children with them. But they don’t know now whether even coming back on a client visit would mean they would qualify as residents. I wouldn’t say that it’s not possible but it’s less feasible than it was before.”
He also said that the court ruling cast doubt on whether traders would be able to return to the UK once their tax transfer was complete.
In the wake of the Gaines-Cooper ruling, which Mr Gaines-Cooper is seeking leave to appeal to the Supreme Court, lawyers said that they were advising their high-net-worth clients to cut all ties with the UK if they do not want to risk similarly painful dealings with HMRC.
While those who move abroad because of a full-time contract with an employer usually find it easier to maintain links with the UK, people who do not have full-time employment will find it more difficult.
Several law firms contacted by The Times yesterday said that they advise clients to take their children with them, sell their UK property, resign British company directorships and even change their club memberships to international memberships to prove to the Inland Revenue that most of their life is outside the UK.
Matthew Woods, partner in wealth planning at Withers, the law firm, said: “There are quite a lot of people who haven’t taken advice and assumed that their non-dom or non-resident statuses were safe, but they may not be.
“The safest thing is to sell up and move out but, in practice, very few people are going to want to do that.”
Complaints fall on stony ground
The taxman replied to only a third of all public complaints in July, an official report found, as it emerged that HMRC staff rank themselves bottom of government departments for morale and commitment to targets. Michael Fallon, co-author of a Treasury Select Committee report, said he was “particularly alarmed by the low level of staff morale and engagement at HMRC, and its effect on performance. We are deeply troubled by the apparent absence of any plan to ameliorate the situation and call on HMRC management to re-double their efforts here.”
The Coca-Cola tax?
New York mayor proposes 12 cents-a-can levy on sugary soft drinks
New Yorkers who enjoy sugary soft drinks face paying an extra tax after the city’s mayor proposed a levy of 12 cents per can.
Michael Bloomberg says tax could raise $1billion of much-needed money for schools and health care.
He suggested New York’s state legislature adopts a levy of 1 cent per fluid ounce (around 30ml) of sweetened soda such as Coca-Cola.
That would mean a can, which in the U.S. typically measure 12fl oz, would cost an extra 12 cents, or 8 pence.
It is uncertain whether New York state sales taxes, which range between 7 and 8.875 per cent, will be calculated on the price of a can with or without the levy included.
Mr Bloomberg said the soda tax would promote good health by discouraging people from buying soft drinks that are loaded with sugar.
Mr Bloomberg, a billionaire and former smoker, had already forced through a ban on smoking in bars in New York while the state also has a ban on unhealthy 'transfats' in food.
He said in his weekly radio address yesterday: ‘In these tough economic times, easy fixes to our problems are hard to come by.
‘And it would keep thousands of teachers and nurses where they belong: in the classrooms and clinics.’
The city’s health commissioner, Dr Thomas Farley, and his predecessor, Dr Thomas Frieden, have advocated such a move.
Last year, after state governor David Patterson proposed the idea, public anger over the plan meant that it was eventually dropped.
At the time Mr Bloomberg said the idea was ‘just not one that we’re going to be pursuing’ after noting the ‘enormous outcry’.
But now the mayor is throwing his weight behind the controversial tax after calculating that public opinion has shifted due to New York’s dire public finances.
The renewal of the plan also comes at a time when the governor has been weakened and distracted by scandal.
During testimony about the budget before the state legislature in January, Mr Bloomberg - whose history of using his office to tackle public health issues includes an anti-soda advertisement campaign and banning smoking in bars - called the proposal ‘far-sighted.’
Dr Richard Daines, the state health commissioner, said he had noticed a difference.
‘What I think you’re seeing is really a momentum shift in favor of doing it,’ he told the New York Times.
Dr Daines added that the new tax differed from the one proposed last year in that it would be levied directly on soda producers and the estimated $1billion in annual revenue would be dedicated to the health care budget, rather than to the general fund.
Mr Bloomberg said the tax would also benefit education.
Africa spends $20billion annually on food imports
Bassey Udo - NEXT
Africa's annual food import bills was yesterday put at about $20billion (about N3trillion), apart from additional $2billion (about N300billion) estimates from support received yearly in the form of aid from various international agencies to combat the continent's food crisis.
This revelation came at the opening of the meeting on Financial Mechanism in support of African Agribusiness and Agro Industries Initiative (3ADI) organised as part of the three-day high level conference on the development of agric business and agro-industries in Africa in Abuja.
Need to support agric business
Sanusi Lamido Sanusi, the Central Bank of Nigeria (CBN) governor, who underscored the need to bring agriculture to the front burner of Africa's, particulalry Nigeria's, development through policy support, said a situation where one in every three Africans are under-nourished and food imports are that high is "very disturbing." The precarious state of agriculture in Africa, he noted, is worsened by the impending food crisis, a fast growing population, and endemic poverty among the people, pointing out that in most African countries, agriculture supports the survival and well-being of more than 70 percent of the population.
"Agriculture provides the opportunities to address extreme poverty, where the proportion of people living below the poverty line of less than $1 a day increased from 47.6 percent in 1985 to 59 percent in 2000, and still growing, with about 26 percent (more than 200million) of the people, particularly women and children, undernourished, with limited access to food, clothing and shelter," he said.
Arguing that the huge financial resources spent on food imports and aid could have been utilised in developing agriculture in the continent, Mr. Sanusi said the situation is even more distressing when the global food insecurity statistics are considered.
"Ten million people die annually of hunger-related diseases, out of which half are children who die of malnutrition. About 850 million people were food insecure in 70 lower income countries. As at the end of 2008, only 11 African countries had attained the 6 percent annual agricultural growth target, while overall average growth rate increased from 3.6 percent to 4.5 percent," he disclosed.
He attributed this to a combination of agriculture related risks, including weather, market and price instability, as well as limitations in government structures, weak infrastructure, wars/social upheavals, lack of the leadership political will, and access to finance.
A huge finance gap
Total agribusiness financing in Africa, he hinted, is projected at $620.4billion (about N1,023 trillion) till 2050, at the rate of $6.5billion (about N975billion) as against current average level of $3.25billion (about N450.4billion) per annum.
Apart from the steep decline in Official Development Assistance (ODA) to sub-Saharan Africa from $1,450billion in 1998 to about $713 million in 2002, the apex bank's boss said that the allocation for agriculture by most African governments, including Nigeria, have remained far below 10 percent of their budgets, despite that agriculture accounts for between 20 and 50 percent of their gross domestic products (GDP).
He also identified other challenges associated with finding traditional agriculture financing models, particularly insurance against losses as a result of unstable price movements, absence of private banking support and lack of business skills and information on friendly loan terms.
Declining contribution to GDP
On the Nigerian experience, he observed that though agriculture is regarded as the mainstay of the nation's economy, its contribution to the GDP has consistently dropped from 66 percent in the 1970s to 32 percent in the 1990s, with some intervention helping to raise the level to about 42 percent in 2009.
"Though agriculture employs over 70 percent of the total population, more than 90 percent of the output is accounted for by smallholder farmers, while contribution to GDP is an average of 41.40 percent between 2003 and 2007. The percentage bank's credit progressively declined from 17.5percent in 2002 to 4 percent in 2007, with only farmers in the rural areas having little or no access to the 35 percent of financial services to 65 percent of the total population," he said.
Collaboration
The Financial Mechanism document is being promoted by the CBN in collaboration with some United Nations agencies like United Nations Industrial Development Organisation (UNIDO), Food and Agriculture Organisation (FAO), and International Fund for Agricultural Development (IFAD), as well as international development partners, like the African Union (AU), and African Development Bank (AfDB).
The objective is to mobilise the opinions of professionals in the banking and finance sectors, investors, entrepreneurs and governments in Africa, with the view of finding strategies to promote increased financing and investment in agribusiness and agro-industries in the continent.
Director General, UNIDO in Africa, Kande Yunkela, said this is the time for the continent to take a closer look at the impact of the global food crisis, saying it is partnering with the Bank of Industry (BOI) to work out the framework and strategy, adding that there is a need to address the fundamental issue why only an average of three percent of the population invest in agric business.
Africa: The poorest continent is rising. Really.
Pakistan's yarn industry on verge of collapse
Nasir Jamal - Dawn
Pakistan's yarn producers on Monday warned against total collapse of the entire textile exports from the country during the last quarter of this fiscal year (April-June) unless the government revoked its controversial decision to restrict cotton yarn exports.
“By the end of this month 70 per cent spinning industry will have no cotton to spin yarn because nobody is prepared to import cotton at the international price of 0.80 cents per lb and convert it into yarn to sell it at a 10 per cent loss to the domestic textile ancillary industry,” All Pakistan Textile Mills Association (Aptma-Punjab) chairman Gohar Ejaz told a press conference.
He said the industry would be facing cotton shortages to the tune of 3.7 million bales to June. “Importers are reluctant to import cotton at the current high global prices because the quota restrictions on yarn export had created an atmosphere of uncertainty. He said domestic yarn prices had slid 5.0 per cent since the textile ministry restricted yarn export quota to 35,000 tons a month effective from this month. On the other hand, global yarn prices had soared 5.0 per cent since Feb 26 when the ministry notified reduction in export quota under the pressure of value-added textile sector.
Earlier, the ministry had restricted yarn exports to 50,000 tons a month from January on the demand of the ancillary industry. The objective of restricting yarn exports was to ensure its availability to domestic value-added textile sector at lower-than-international prices.
“The fresh quantitative reduction on yarn export is also contrary to the assurance extended by President Asif Zardari and the federal cabinet to the spinners at their meeting with him in Lahore on January 17 that yarn exports would not be curbed further till June,” Gohar said.
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