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DHAKA TRIBUNE
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Monday, May 26, 2014
World Cup: money making no-brainer or costly folly? n AFP, Rio De Janeiro The World Cup will cost Brazil more than $11bn, a sum that sparked outraged protests and sent economists dashing for new data on an old question: is hosting global sports events worth it? The protesters who have taken to the streets, sometimes violently, say Brazil would be better off spending on education, health and transport - areas where the gaping divide between rich and poor is most conspicuous in this sprawling country of 200 million people. But Brazil’s leaders say hosting the tournament is about more than building stadiums and throwing a party. “The Cup is not an economic panacea but a catalyst for Brazilian development,” tourism minister Vinicius Lages told AFP. “It was a key factor behind Brazil finally overhauling its infrastructure.” He predicted the event would add about $13.6bn this year to the Brazilian economy - the world’s seventh-largest at $2.25tn - thanks to a tidal wave of foreign and domestic tourists. Then there is the long term impact. According to a 2012 report by consulting firm Ernst & Young and the Getulio Vargas Foundation, a Brazilian economics institute, the cup “will produce a surprising cascading effect on investments.” The report estimated the Cup and 2016 Olympics in Rio de Janeiro will between them create 3.6 million jobs and add four percentage points a year to economic growth through 2019.
But it also warned that Brazil must ensure the benefits accrue to the entire population. Ernst & Young said Brazil would be judged on its ability to “capitalize on the Cup’s legacies, turning them into permanent assets” thereby “reaching another socioeconomic and structural level.”
Brazilian way
‘Logical politics, absurd economics’
The experts are not unanimous. In March, a report by ratings agency Moody’s forecast the World Cup would have a negligible effect on the economy, given Brazil’s sluggish growth since 2011. Senior analyst Barbara Mattos said the tournament “will provide shortlived sales increases that are unlikely to materially affect earnings.” Meanwhile, she warned, “disruptions associated with traffic, crowding and lost work days will take a toll on business.” Studies show little long-term financial gain from sports extravaganzas, said Wolfgang Maennig, an economics professor at Hamburg University in Germany. “There have been many investigations into the benefits derived from World Cups and Olympics, mostly showing that any benefit is just temporary,” said Maennig. “For Germany (in 2006) there were high hopes but in the end people said, ‘Great event, great fun but did we gain financially? No.’” Maennig, an Olympic rowing champion in 1988, said Brazil’s decision to
Youngsters play football next to a mural with the portraits of famous football players at Tavares Bastos shantytown (favela) in Rio de Janeiro, Brazil AFP build some of its shiny new stadiums in far-flung host cities with no discernible footballing tradition was “politically understandable -- but absurd in terms of pure economics.” Then there are the intangibles that are impossible to calculate accurately. Maennig said a repeat of mass protests like those that marred last year’s Confederations Cup, a World Cup
warm-up tournament, could nullify any financial gains by damaging Brazil’s brand. “If there is violence, that will be a huge negative for Brazil’s image. But if Brazil can show it is a friendly country, then that would be a huge plus,” he said. Brazil expects 600,000 foreigners and 3.1 million domestic tourists to at-
tend the tournament, spending an estimated $2,500 each. If things go well, there is plenty of room for long-term tourism growth. Despite world-famous attractions ranging from its rainforests to its beaches to its Carnival, the country received just six million tourists last year. The Eiffel Tower alone received two million more.
Professor Rafael Alcadipani, a World Cup specialist and the Getulio Vargas Foundation, pointed out that the economy was struggling compared to when Brazil was awarded the Cup seven years ago. “Then, it seemed Brazil was finally getting its act together. But people underestimated the costs, the public cash thrown at stadiums of doubtful longterm value,” he told AFP. “I think a more modest and concentrated event would give a better result.” President Dilma Rousseff, who is up for reelection in October, says Brazilians should welcome the legacy of Cuprelated investment. “Nobody coming here will put the airports, ports, urban mobility schemes, stadiums in their suitcase when they leave. This is our legacy,” she insisted. But her chief of staff Gilberto Carvalho admits in the wake of ongoing protests that the government has been “incompetent in having a dialogue with Brazilian society regarding the World Cup.” Lages called for patience on all sides. “We must not over-inflate expectations. This is about long-term planning,” said the tourism minister. Sergio Bampi, a computer science professor and logistics expert at Rio Gande do Sul federal university in the southern host city of Porto Alegre, meanwhile urged realism. “The thing many people don’t realize is that Brazil does things in its own fashion. This is not Europe,” he told AFP. l
Sony, still a Walkman in an iPad age, say analysts n AFP, Tokyo
Russian President Vladimir Putin (centre) applauds as Rosneft President Igor Sechin (right) shakes hands with Pirelli's CEO Marco Tronchetti Provera during an agreement signing ceremony at the St. Petersburg International Economic Forum 2014 (SPIEF 2014) in St Petersburg on May 24. The Saint Petersburg Economic Forum is touted as Russia's answer to Davos, an annual meeting of global business leaders which President Vladimir Putin has attended every year since 2005 and often uses to sign major deals and rub shoulders with state leaders AFP
Forget apps, old-school mobiles ring in a comeback n AFP, Paris They fit in a pocket, have batteries that last all week and are almost indestructible: old-school Nokias, Ericssons and Motorolas are making a comeback as consumers tired of fragile and overlywired smartphones go retro. Forget apps, video calls and smiley faces, handsets like the Nokia 3310 or the Motorola StarTec 130 allows just basic text messaging and phone calls. But demand for them is growing and some of these second-hand models are fetching prices as high as 1,000 euros a piece. “Some people don’t blink at the prices, we have models at more than 1,000 euros. The high prices are due to the difficulty in finding those models, which were limited editions in their time,” said Djassem Haddad, who started the site vintagemobile.fr in 2009. Haddad had been eyeing a niche market, but since last year, sales have taken off, he said. Over the past two to three years, he has sold some 10,000 handsets, “with a real acceleration from the beginning of 2013”. “The ageing population is looking for simpler phones, while other consumers want a second cheap phone,” he said. Among the top-sellers on the website is the Nokia 8210, with a tiny monochrome screen and plastic buttons, at 59.99 euros. Ironically, the trend is just starting as the telecommunications industry consigns such handsets to the recycling bins, hailing smartphones as the way ahead. Finnish giant Nokia, which was undisputedly the biggest mobile phone company before the advent of Apple’s iPhone or Samsung’s Galaxy, offloaded its handset division to Microsoft this year after failing to catch the smartphone wave. But it was probably also the supposedly irreversible switch towards smartphone that has given the old school phone an unexpected boost.
‘Back to basics’
For Damien Douani, an expert on new technologies at FaDa agency, it is simply trendy now to be using the retro phone. There is “a great sensation of finding an object that we knew during another era - a little like paying for vintage sneakers that we couldn’t afford when we were teenagers,” Douani told AFP. There is also “a logic of counter-culture in reaction to the over-connectedness of today’s society, with disconnection being the current trend.” “That includes the need to return to what is essential and a basic telephone that is used only for making phone calls and sending SMSes,” he added. It is also about “being different. Today, everyone has a smartphone that looks just like another, while ten years ago, brands were much more creative”. It is a mostly high-end clientele that is shopping at French online shop Lekki, which sells “a range of vintage, revamped mobile phones”. “Too many online social networks and an excess of email and applications, have made us slaves to technology in our everyday life. But Lekki provides a solution, allowing a return to basic features and entertainments,” it said on its website. A Motorola StarTac 130 - a model launched in 1998 - and repainted bright orange was recently offered for 180 euros, while an Ericsson A2628 with gold coloured keys for 80 euros. “We have two types of profiles: the 25 to 35 year-olds attracted by the retro and offbeat side of a telephone that is a little different, and those who are nostalgic for the phone that they used when they were younger,” said Maxime Chanson, who founded Lekki in 2010. “Some use it to complement their smartphone, but others are going for the vintage, tired of the technology race between the phone makers.” l
Sony’s latest bid to halt years of losses and resuscitate its brand has provoked snorts of derision among analysts who say it falls a long way short. The criticism came after Sony president Kazuo Hirai on Thursday pledged to drag the electronics giant out of a painful restructuring in the current fiscal year and pointed to ultra-high-definition technology as a possible saviour for its money-losing TV unit. Hirai, appointed in 2012 to revive a company mired in losses, has centred his attention on shaking up a troubled consumer electronics business, including the television unit, which alone has lost about 790bn yen ($7.8bn) over the past decade. A week ago, Sony shocked investors with a $1.26bn annual loss - after several earnings downgrades - and warned it would be in the red again in the year to March 2015. Sony lost money in five of the last six years and Moody’s downgraded its credit rating on the firm to junk in January. Hirai said the company was aiming for a 400bn yen operating profit in the next fiscal year, but that did little to impress analysts. Sony has long relied on profits it generated from a lesserknown insurance business, as well as movies and music operations to fill some of the yawning deficit in its higher-profile electronics segment.
“Our impression is quite negative. We believe the firm needs to engage in a radical restructuring,” said Deutsche Bank analyst Yasuo Nakane. He added that Thursday’s session “revealed absolutely no new information, ideas or strategies such as to change our view on the company”.
There is a real risk of earnings deterioration in hardware, making it unlikely that Sony will be re-rated as a premier content/network company ‘Earnings deterioration’
Hirai’s efforts to drag the TV business into the black have so far failed, but he has repeatedly shrugged off pleas to abandon a division that he insists remains central to Sony’s core business. The firm also rejected a call from a US hedge fund billionaire to spin off part of its profitable entertainment arm, which includes a Hollywood studio that produced the latest instalment of “The Amazing Spider-Man” series. Much of the losses last year stemmed
from costs tied to Sony’s exit from the personal computer business, part of its wider shakeup which has seen layoffs and asset sales -- including its Manhattan headquarters for more than $1bn. Making money in consumer electronics has been a tough ask for Japanese manufacturers in recent years as razor-thin margins and tough competition from South Korea and Taiwanese competitors dented their finances. Sony rivals Panasonic and Sharp have also suffered massive losses, although both recently reported annual profits for the first time in years after major restructurings. Japanese firms have also trailed in the global smartphone business where Apple and Samsung dominate, while digital camera sales have been decimated as consumers turn to picturetaking phones and tablets. Hirai argued that a plan to split up Sony’s TV business, exiting personal computers, driving into the medical equipment business and slashing costs would turn around Sony’s fortunes. He also pointed to stronger sales of 4K ultra high-resolution TVs, which tend to have better profit margins than lower-end models, as the firm shrinks losses in the beleaguered business. Sony is a leader in the next-generation technology which is currently found on large televisions from 50 inches and above, although a high price tag has so far been a barrier to big sales.
‘Run out of steam’
Record sales of Sony’s new PlayStation 4 games console are a potential bright spot, but the expensive launch of the system kept its games division in the red last year. “We think it is premature to assume that Sony will be able to make the structural changes needed to stem losses given smartphone and digital camera market trends and commoditisation,” Goldman Sachs said in an analysis. “Absent any news of a potential sale of the TV business after it is split out, risk of further earnings deterioration will remain. “There is a real risk of earnings deterioration in hardware, making it unlikely that Sony will be re-rated as a premier content/network company,” it added. A Japanese analyst who covers the company said Sony’s goal of a 400-billion operating profit was “too ambitious”. He also pointed to the costs tied to abandoning its PC division. He added that the firm - once a byword for cool which revolutionised the way people listened to music with its Walkman portable cassette player needed more hit products. “Mr. Hirai may have run out of steam” said the analyst, who asked not to be named. “In the absence of appealing products to drive overall earnings ... we question whether the restructuring will be adequate to the scale of the challenges facing this company.” l
Output of Ambassadors halted, iconic car of official India n Reuters, Mumbai The maker of the iconic Ambassador has halted production of the car that was long the choice of Indian officialdom, citing weak demand and a lack of funds, casting doubt on the future of a vehicle that has looked essentially the same for more than five decades. Hindustan Motors Ltd said in a statement that it had suspended work at its Uttarpara plant, outside Kolkata, until further notice. Modelled after the British Morris Oxford, the Ambassador was the first car to be made in India and was once a status symbol, but began losing its dominance in the mid-1980s when Maruti Suzuki introduced its low-priced 800 hatchback. It lost further cachet and market share when global automakers began setting up shop in India in the mid1990s, offering models with contemporary designs and technology. The Ambassador has remained the choice of a dwindling share of bureaucrats and politicians, usually in white with a red beacon on top and a chauffeur at the wheel. It is also still in use as a taxi in some Indian cities. In a statement on Saturday, Hindustan Motors cited “worsening conditions at its Uttarpara plant which include very low productivity, growing indiscipline, critical shortage of funds, lack of demand for its core product the Ambassador and large accumulation of liabilities.” The company sold about 2,200 Am-
bassadors in the fiscal year ended in March 2014, a tiny share of the 1.8 million passenger cars sold during the year in India, according to industry data. A new Ambassador in Kolkata starts at 515,000 rupees ($8,800), according to a dealer in the city. “The suspension of work will enable the company in restricting mounting liabilities and restructure its organisation and finances and bring in a situation conducive to reopening of the plant,” the company said in its statement. Some industry watchers said it would be difficult for the “grand old lady” of the Indian car market to make a comeback. “In the present shape I don’t think the Ambassador has got any chances of revival,” said Deepesh Rathore at research firm Emerging Markets Automotive Advisors. “It doesn’t make any business sense,” he said. Abdul Majeed, a partner at PriceWaterhouseCoopers India, said that to revive demand, Hindustan Motors would need to invest in shrinking the Ambassador and making it more fuel efficient, with success hardly assured. Despite its dwindling sales, the distinctive car with its bulbous design and roomy interior has many admirers and was last year named the world’s best taxi by the BBC’s popular Top Gear television show. In Kolkata, there were some 33,000 Ambassador taxis at the end of 2013.
“There are newer cabs in Kolkata of different companies now, but we still drive an Ambassador and cannot think of the city without it,” said Ashok Kumar Singh, 32, who has driven a yellow Ambassador taxi in Kolkata for a decade.
DILBERT
“She is my livelihood,” he said. Struggling with falling sales, Hindustan Motors accumulated losses exceeding its net worth at the end of its financial year ended Sept. 30, 2013, and the company has been looking for investors. l