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Rally’s stamina hangs on Europe Page 02

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A week or seven days; pick one Govt directs GENCO Holding Company to resolve Nandipur power plant issues within a week

ISLAMABAD

F

AMER SIAL

RUSTRATED with the lethargy of the GENCO Holding Company (GHC) in resolving issues related with the construction of the stalled 425 MW Nandipur power plant in the heart of the power shortages hit, Punjab, the government has directed the company to settle all the lingering issues within a week. An official source said that the directions were given at a specially convened meeting on June 8 to review the progress of the under implementation projects in the public sector. He said the local banks were asking for a new sovereign guarantee for their loan as the price of the imported machinery has increased. He said the foreign banks were reluctant to release their committed amount without the start of actual work on the site. More than 60 percent completed proj-

RAGHURAM RAJAN Emerging markets around the world – Brazil, China, India, and Russia, to name the largest – are slowing. One reason is that they continue to be dependent, directly or indirectly, on exports to advanced industrial countries. Slow growth there, especially in Europe, is economically depressing. But a second reason is that they each have important weaknesses, which they have not overcome in good times. For China, it is excessive reliance on fixed-asset investment for growth. In Brazil, low savings and various institutional impediments keep interest rates high and investment low, while the educational system does not serve significant parts of the population well. And Russia, despite a very well educated population, continues to be reliant on commodity industries for economic growth. Hardest to understand, though, is why India is underperforming so much relative to its potential. Indeed, annual GDP growth has fallen by five percentage points since 2010. For a country as poor as India, growth should be what Americans call a “no-brainer.” It is largely a matter of providing public goods: basic infrastructure like roads, bridges, ports, and power, as well as access to education and basic health care. And, unlike many equally poor countries, India already has

ect near Gujranwala suffered a delay of more than two years due to inter-ministerial row over legal interpretation, despite the fact that the country is going through prolonged load shedding. The ruling PMLN in Punjab has already accused the federal government of delaying the project intentionally to cause power shortfalls in Punjab because the province is under its rule. The Economic Coordination Committee of the cabinet had approved the $329 million project in May 2007. The Chinese Dongfang Electric Corporation (DEC) was given the contract of the project in December 2007. It will be one of the most cost efficient power plant in the public sector as 150 mmcfd of gas is committed for it, the source added. The project came to a halt even though three gas turbines and generators were placed on their foundations and major portion of civil works for the plant and equipment was completed. The project plant and machinery arrived at the Karachi port in April 2010. The plant and

machinery valuing $80 million is lying at Karachi port and the contractor has claimed $20 million for inspecting, testing, repairing and re-purchase of the damaged plants. GHC was directed to immediately resolve the issue, the source said adding that as the same model will be applied later on for resolving the 525 MW Chichon-Ki-Malian Combined Cycle Power Plant which is estimated to cost $ 354.5 million. He said GHC has been asked to resolve the issue so that the release of the withheld amount by the local banks is made to restart the project. The source said that the commissioning date for the first gas turbine of 95 MW will be rescheduled to October 2012 from the contractual commissioning of October 2010. Dates for the second and third gas turbines of 95.4MW each and for the fourth combined cycle turbine of 139 MW will also have to be rescheduled. As per the actual plan the project was to be completed in 2011.

Monday, 11 June, 2012

Dear China, Please invest more in South Asia Yours greedily, Bemused businessmen ISLAMABAD NNI

The business leaders have demanded greater inflow of Chinese investment in South Asia and creation of development fund to inject finance in mutually interested areas, which will have multiplier effect on economic cooperation between the two biggest civilizations of the World. This ideas was presented during the 3rd South Asia-Sichuan Business Promotion seminar (SASBPS) inaugurated by Mr. Qu Mu Shi Ha, Vice Governor of Sichuan Provincial Government on June 8, 2012 in Chendgu city of China and addressed by Mr. Yu Xiaodong, Deputy Secretary General of CCPIT, Beijing . Mr. Tariq Sayeed in his speech at inaugural session presented salient features of Investment climate stating that all eight countries had pursued liberal investment policies offering 100% equity, Tax holidays for at least five years, High margin of profits, sovereign guarantee, 0% to 5% duty on import of raw materials and preferred treatment for investment in Export Processing Zones and asked the Chinese entrepreneurs to get maximum benefits through investment, which was more powerful tools to maximize economic cooperation between China and South Asia. Haji Fazal Kadir Khan, President of FPCCI also spoke on the occasion and stated that Pakistan is proud to play the role of the rotating president country at the China South Asia Business Forum. Mr. Sherani invited Chinese investment in power sector projects, exploration of coal and other mineral resources, nuclear power stations, hydroelectric power, ship-building, hightech machinery, infrastructure & construction etc; through joint ventures. He thanked the CCPIT for providing stalls and allied logistical facilities for display of Pakistan products at Commodities Fairs in Kunming and Chengdu.

What happened to IndIa?

a very strong entrepreneurial class, a reasonably large and well-educated middle class, and a number of world-class corporations that can be enlisted in the effort to provide these public goods. Satisfying the demand for such goods is itself a source of growth. But, also, a reliable road creates tremendous additional activity, as trade increases between connected areas, and myriad businesses, restaurants, and hotels spring up along the way. As India did away with the stultifying License Raj in the 1990’s, successive governments understood the imperative of economic growth, so much so that the Bharatiya Janata Party (BJP) contested the 2004 election on a pro-development platform, encapsulated in the slogan, “India Shining.” But the BJP-led coalition lost that election. Whether the debacle reflected the BJP’s unfortunate choice of coalition partners or its emphasis on growth when too many Indians had not benefited from it, the lesson for politicians was that growth did not provide electoral rewards. In any event, that election suggested a need to spread the benefits of growth to rural areas and the poor. There are two ways of going about that. The first, which is harder and takes time, is to in-

crease income-generating capabilities in rural areas, and among the poor, by improving access to education, health care, finance, water, and power. The second is to increase voters’ spending power through populist subsidies and transfers, which typically tend to be directed toward the politically influential rather than the truly needy. In the years after the BJP’s loss, with a few notable exceptions, India’s political class decided that traditional populism was a surer route to re-election. This perception also accorded well with the median (typically poor) voter’s low expectation of government in India – seeing it as a source of sporadic handouts rather than of reliable public services. For a few years, the momentum created by previous reforms, together with strong global growth, carried India forward. Politicians saw little need to vote for further reforms, especially those that would upset powerful vested interests. The lurch toward populism was strengthened when the Congress-led United Progressive Alliance concluded that a rural employment-guarantee scheme and a populist farm-loan waiver aided its victory in the 2009 election. But, while politicians spent the

growth dividend on poorly targeted giveaways such as subsidized petrol and cooking gas, the need for further reform only increased. For example, industrialization requires a transparent system for acquiring land from farmers and tribal people, which in turn presupposes much better land-ownership records than India has. As demand for land and land prices increased, corruption became rampant, with some politicians, industrialists, and bureaucrats using the lack of transparency in land ownership and zoning to misappropriate assets. India’s corrupt elites had moved from controlling licenses to cornering newly valuable resources like land. The Resource Raj rose from the ashes of the License Raj. India’s citizenry eventually reacted. An eclectic mix of idealistic and opportunistic politicians and NGOs mobilized people against land acquisitions. With investigative journalists getting into the act, land acquisition became a political land mine. Moreover, key institutions, such as the Comptroller and Auditor General and the judiciary, staffed by an increasingly angry middle class, also launched investigations. As evidence emerged of widespread corruption in contracts and resource allocation, ministers, bureaucrats, and

Mr. Annisul Huq, Immediate Past President of SAARC CCI proposed for creation of South Asian Development Fund by China, opening up Chinese banks in all South Asian countries and deepen cooperation in energy and food security, which in return will help reinforce Chinese economic growth. Mr. Kosala Wikramanayake, Vice President, SAARC CCI from Sri Lanka, Mr. Fazal Kadir Sherani, President, FPCCI, Mr. Suraj Vaidya, President FNCCI, Nepal, Mr. M. A. Momin, Director, FBCCI, Bangladesh, Mr. haroon Rashid, Vice President FPCCI and Executive committee Member of SAARC CCI Pakistan, representatives of FICCI, India, MNCCI, Maldives and CNCCI and other such important organizations presented their view point at the seminar. In addition to ambassador of Bangladesh, Maldives, Nepal, and representatives of diplomatic missions from Afghanistan, and Sri Lanka, Mr. Hasan Habib, Consul General of Pakistan consulate in Chengdu also presented view points to enhance economic cooperation between China and South Asia. While moderating the session, Iqbal Tabish, Advisor to UNESCAP Business Forum and Secretary General of SAARC CCI said that vast potential for economic cooperation was available, which needed to be tapped through collaborative efforts at both public and private sector level in China and South Asia. The seminar identified power generation and energy, mining, textiles and garments, infrastructure development, construction of ports and shipping, hydro power and non-conventional energy resources, agro-processing, as areas of mutual cooperation for investment and industry transfer. Seminar was followed by B-2-B meetings amongst South Asian and Chinese businessmen and signing of MoU between CCPIT Sichuan Council and the Federation of Indian Chambers of Commerce and Industry.

high-level corporate officers were arrested, and some have spent long periods in jail. The collateral effect, however, is that even honest officials are now too frightened to help corporations to navigate India’s maze of bureaucracy. As a result, industrial, mining, and infrastructure projects have ground to a halt. Populist government spending and the inability of the supply side of the economy to keep pace has, in turn, led to elevated inflation, while Indian households, worried that no asset looks safe, have taken to investing in gold. Because India does not produce much gold itself, these purchases have contributed to an abnormally wide current-account deficit. Not much more was required to dampen foreign investors’ enthusiasm for the India story, with the rupee falling significantly in recent weeks. As with the other major emerging markets, India’s fate is in its own hands. Hard times tend to concentrate minds. If its politicians can take a few steps to show that they can overcome narrow partisan interests to establish the more transparent and efficient government that a middle-income country needs, they could quickly re-energize India’s enormous engines of potential growth. Otherwise, India’s youth, their hopes and ambitions frustrated, could decide to take matters into their own hands. Courtesy: Project Syndicate


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Monday, 11 June, 2012

news

WALL STREET WEEK AHEAD:

Rally’s stamina hangs on Europe NEW YORK

s

REUTERS

PAIN is expected to ask the euro zone for help with recapitalizing its banks, a deal that could ease markets’ most immediate concern about the region’s financial crisis. The euro zone’s deputy finance ministers will hold a conference call on Saturday to discuss the request, five senior European Union and German officials told Reuters on Friday. At a minimum under adverse scenarios, several of Spain’s banks would need about 40 billion euros or $50 billion of capital to meet core Tier 1 requirements under the Basel III standards, the International Monetary Fund said in a report released on Friday night. “All eyes are on what will happen with Spanish banks over the weekend. The level of uncertainty is high and the fear in the market has certainly elevated,” said Amy Wu, equity derivatives strategist at RBC Capital Markets in New York. Wu noted that the volatility skew in options, which had decreased gradually throughout the week, has moved back up. Volatility skew, which is affected by sentiment and the supply-demand relationship, measures the premium for downside puts compared to upside calls. Christine Lagarde, managing director of the IMF, said it is urgent that Europe fix its banks and create a system for more unified bank supervision with a single deposit insurance fund. “Let me be clear: The heart of European bank repair lies in Europe. That means more Europe, not less,” she said, in prepared remarks released Friday night. The speech was set for delivery before a Leaders Dialogue in New York. Investors and U.S. policymakers worry Europe’s political and financial woes will threaten the fragile U.S. economic recovery. Besides Spain’s weakened

Investors celebrated US stocks’ best week in 2012 on Friday, but a cloud hangs over Wall Street

banks, parliamentary elections are scheduled in Greece on June 17. The results could decide whether the country continues austerity measures it agreed to as part of an international bailout or whether Greece leaves the euro zone. bad neWs priCed in: Wall Street has been hit hard by other concerns, including signs of a slowdown in U.S. growth and shrinking demand in China, the world’s No. 2 economy. But some market participants said investors have priced in bad news out of the euro zone. “I don’t think a lot more downside is in the cards at this point” unless there is another shock, said Natalie Trunow, chief investment officer of equities at Calvert Investment Management in Bethesda, Maryland, whose firm manages about $13 billion in assets. The broad S&P 500 index fell 6.3 percent in May, its largest percentage drop since September. The Dow’s 6.2 percent drop and Nasdaq’s 7.2 percent loss in May were their largest monthly declines in two years. On June 1 the S&P 500 ended below its 200-day moving average for

the first time this year, but the index clawed its way back above the key level and rallied later in the week on hopes Europe would find solutions to its problems. “The market has been basically expecting bad news since earlier this year, so we have been pretty well hedged to the downside. Now, it’s the rally that is scaring people.” Wu said. “You don’t want to be that person having to explain to your boss why you missed the rally.” For the week, the Dow advanced 3.6 percent, the S&P 500 rose 3.7 percent and the Nasdaq jumped about 4 percent - their best weekly percentage gains since December. The U.S. economic calendar in the coming week includes data on the Producer Price Index and retail sales on Wednesday. Reports on the Consumer Price Index and initial weekly jobless claims are set for Thursday. Data on Friday includes the Empire State manufacturing index, U.S. industrial production and the preliminary reading for June on consumer sentiment from the Thomson Reuters/University of Michigan surveys.

Austere growth? KEMAL DERVIS The German government’s reaction to newly elected French President François Hollande’s call for more growth-oriented policies was to say that there should be no change in the eurozone’s austerity programs. Rather, growth-supporting measures, such as more lending by the European Investment Bank or issuance of jointly guaranteed project bonds to finance specific investments, could be “added” to these programs. Many inside and outside of Germany declare that both austerity and more growth are needed, and that more emphasis on growth does not mean any decrease in austerity. The drama of the ongoing eurozone crisis has focused attention on Europe, but how the austerity-growth debate plays out there is more broadly relevant, including for the United States. Three essential points need to be established. First, in a situation of widespread unemployment and excess capacity, short-run output is determined primarily by demand, not supply. In the eurozone’s member countries, only fiscal policy is possible at the national level, because the European Central Bank controls monetary policy. So, yes, more immediate growth does require slower reduction in fiscal deficits. The only counterargument is that slower fiscal adjustment would further reduce confidence and thereby defeat the purpose by resulting in lower private spending. This might be true if a country were to declare that it was basically giving up on fiscal consolidation plans and the international support associated with it, but it is highly unlikely if a country decides to lengthen the period of fiscal adjustment in consultation with supporting institutions such as the International Monetary Fund. Indeed, the IMF explicitly recommended slower fiscal consolidation for Spain in its 2012 . Without greater short-term support for effective demand, many countries in crisis could face a downward spiral of spending cuts, reduced output, higher unemployment, and even greater deficits, owing to an increase in safetynet expenditures and a decline in tax revenues associated with falling output and employment. Second, it is possible, though not easy, to choose fiscal-consolidation packages that are more growth-friendly than others. There is the obvious distinction between investment spending and current expenditure, which Italian Prime Minister Mario Monti has emphasized. The former, if well designed, can lay the foundations for longer-term growth. There is also the distinction between government spending with high multiplier effects, such as support to lower-income groups with a high propensity to spend, and tax reductions for the rich, a substantial portion of which would likely be saved. Last but not least, there are longer-term structural reforms, such as labormarket reforms that increase flexibility without

leading to large-scale lay-offs (a model rather successfully implemented by Germany). Similarly, retirement and pension reforms can increase long-term fiscal sustainability without generating social conflict. A healthy older person may well appreciate part-time work if it comes with flexibility. The task is to integrate such work into the overall functioning of the labor market with the help of appropriate regulation and incentives. Finally, particularly in Europe, where countries are closely linked by trade, acoordinated strategy that allows more time for fiscal consolidation and formulates growth-friendly policies would yield substantial benefits compared to individual countries’ strategies, owing to positive spillovers (and avoidance of stigmatization of particular countries). There should be a European growth strategy, rather than Spanish, Italian, or Irish strategies. Countries like Germany that are running a current-account surplus would also help themselves by helping to stimulate the European economy as a whole. Slower fiscal retrenchment, space for investment in government budgets, growth-friendly fiscal packages, and coordination of national policies with critical contributions from surplus countries can go a long way in helping Europe to overcome its crisis in the medium term. Unfortunately, Greece has become a special case, one that requires focused and specific treatment, most probably involving another round of public-debt forgiveness. But insufficient and sometimes counterproductive actions, coupled with panic and overreaction in financial markets, have brought some countries, such as Spain, which is a fundamentally solvent and strong economy, to the edge of the precipice, and with it the whole eurozone. In the immediate short run, nothing makes sense, not even a perfectly good public-investment project, or recapitalization of a bank, if the government has to borrow at interest rates of 6% or more to finance it. These interest rates must be brought down through ECB purchases of government bonds on the secondary market until low-enough announced target levels for borrowing costs are reached, and/or by the use of European Stability Mechanism resources. The best solution would be to reinforce the effectiveness of both channels by using both – and by doing so immediately. Such an approach would provide the breathing space needed to restore confidence and implement reforms in an atmosphere of moderate optimism rather than despair. The risk of inaction or inappropriate action has reached enormous proportions. No catastrophic earthquake or tsunami has destroyed southern Europe’s productive capacity. What we are witnessing – and what is now affecting the whole world – is a manmade disaster that can be stopped and reversed by a coordinated policy response. Courtesy: Project Syndicate

TRUE CAPITALISTS ARE PRO-MARKET, NOT PRO-BUSINESS STEPHEN L CARTER Since the failure of the effort to recall Wisconsin Governor , a has been slithering through the commentariat: Publicemployee unions are down and out. They aren’t, of course. They remain as formidable as ever, and will spend the current election cycle doing what they do, spending tens of millions of dollars to elect candidates who favor their interests. We might be better off if the unions had less political clout — as long as the pro-business groups that get up to the same mischief were less powerful, too. Or so argues , a regular contributor to Bloomberg View and a professor at the University of Chicago Booth School of Business, whose new book, “A Capitalism for the People: Recapturing the Lost Genius of American Prosperity,” was recently in Bloomberg View. Despite the charmingly misleading title, the volume is not a paean to forced equalization of income or the strict regulation of industry. Quite the contrary. Zingales, who seems to be something of a moderate libertarian, wants to rescue markets and competition from the forces that threaten them: overregulation on the left and, on the right, a pro-business (as opposed to pro-market) ideology. Crony Capitalism: This last distinction is what makes his book so fascinating. The great threat to our economic

future, in his telling, is crony capitalism, along with other forms of rent- seeking that have become ubiquitous in a complex regulated state. Although much of the argument might seem to be standard publicchoice theory, Zingales provides an enormous service by laying out such persuasive evidence. Most of the book is devoted to setting forth an original, middle-ground program for getting us out of our current economic mess by reducing the opportunities for rent-seeking and increasing the opportunities for competition. No reader, including me, is likely to agree with everything Zingales says. But he provides a useful corrective to the sloganeering and cant that inform so much of our public debate about economic policy. Zingales considers the free market both a moral and economic imperative. He recognizes the current tide of populist anger, reflected in different ways in both the Tea Party and Occupy movements — and that much of the anger is directed against capitalism in general and big business in particular. The real trouble, he contends, is the death of the Horatio Alger myth. People no longer believe that hard work and following the rules will get you ahead. The game, they believe, is fixed. Zingales thinks they’re right. Special interests — particularly big business and big labor — hold too much influence over the divvying up of resources that has become among the

most important functions of government. His solution, however, is less regulation, not more. He prefers fewer and simpler rules, and a government that encourages entrepreneurship without trying to become an entrepreneur. prediCtably, Zingales sCoFFs at nearly all bailouts: “As with the punishment of children, the costs of financial distress have an important incentive effect.” Were policymakers right in thinking that without the 2008 bailout, the banking system would have collapsed? Zingales is skeptical. Government officials got their information from the very financial institutions they were charged with monitoring. Naturally, he writes, every call from to said, “Buy the toxic assets.” At the same time, he tells us that he has become a supporter (sort of) of the , which separated commercial and investment banking and was repealed in 1999. In economic terms, he concedes, the costs probably outweighed the benefits. But the rule had a simplicity that even a “six-year- old can understand”: “Banks should not gamble with government- insured money.” simple rules: Simple rules, he says, are better than complex ones, in part because they can actually be subjected to democratic debate, in part because it is harder “to hide the loopholes.” If the basic problem slowing us down is a government built around secret favors

for special interests, then simpler rules will leave space for fewer favors. Then there is the matter of taxes. Zingales would tax at the applicable personal rate, and in return would slice the corporate income tax to avoid the problem of double taxation. In this way, as any number of economists have pointed out, taxes would be assessed on the profits distributed to the actual owners of the corporation. But Zingales identifies a different advantage. It is much easier for corporations than for individuals — even very wealthy individuals — to lobby for special treatment in the tax code. If corporations aren’t being taxed, or are being taxed only a little, their incentives to seek rents through the tax code evaporate. He also sees the entire spectrum of deductions on individual returns as an instance of special interests grabbing federal subsidies. He would abolish all deductions while cutting all tax rates, a change that would (he and others insist) produce the same amount of revenue. Here I register a small but important point of disagreement. Tax simplification is indeed imperative, and doing away with deductions is an attractive idea. But the special treatment for charitable donations. Everything else the government might choose to subsidize through the — home buying, child care, and so on — it can support directly, with full trans-

parency and opportunity for debate. The charitable world it cannot, both because the bureaucracy would lack the needed information and because government support would swiftly put an end to the diversity of civil society. I would turn the deduction into a refundable tax credit, to encourage giving even by those who are most poorly off, and to acknowledge formally that a dollar given to support the institutions of civil society is no less important than a dollar given to support the operation of the bureaucracy. At the same time, Zingales does see the tax code as a vehicle for certain incentives — not by creating a welter of deductions but by deciding what to tax. Consider his approach to campaign-finance reform. Rather than fussing around in arguments over who should be able to give how much to whom, Zingales would prefer a progressive tax on all campaign contributions, as well as all money spent on lobbying. If it costs me $250 in taxes to make a $1,000 contribution, I am going to think twice. The bigger the contribution, the bigger the tax bill. The genius of capitalism, he tells us, “is not private property, not the profit motive, but competition.” He sees competition as important in the public as well as the private realm — a proposition that I will take up in a future column. Courtesy: Bloomberg


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Monday, 11 June, 2012

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03

APPLE’S WAR WITH GOOGLE HEATS UP:

Google continues to upset the Applecart SAN FRANCISCO

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g

REUTERS

ORE than ever, the consumer electronics juggernaut finds itself in a pitched battle with the online search giant - in smartphones, cloud computing and the never-ending competition for the hearts and minds of the best software developers. Apple on Monday is expected to announce its own mapping application, challenging the position of Google Maps as one of the most-valued features on the iPhone. It will unveil closer integration of its iPhone apps and iCloud storage service with all its devices, the latest riposte in its battle with Google’s Android smartphone software. It may promote the latest in Siri, the voice interface that the company thinks can continue to set the iPhone and the iPad apart from the Android pack. And there will likely be a new line of Macintosh laptops too - underscoring the leverage that a full line of hardware products can bring to what is mainly a software war with Google. Apple is looking to differentiate its mobile devices from Google’s Android by further enticing consumers deeper into its app ecosystem, said Carolina Milanesi, analyst at Gartner Research. “It’s all about loyalty and

When Apple Inc kicks off its annual conference for software developers on Monday, all the power players in the Apple universe will be on hand, save the one that is in many ways driving the agenda: Google Inc

basically leveraging the opportunity of selling more to them,” she said. “I don’t think the consumers in the mass market are necessarily tied into the Android ecosystem in the same way that consumers on the Apple side are.” Battling in many arenas, the rivals employ different weapons. Apple’s vise-like grip on its ecosystem - with the closely managed app store and its seamless integration with the hardware - stands in sharp contrast to Google’s free-for-all approach. The open system approach, reminiscent of Microsoft Corp’s hugely successful strategy of creating standard-setting software that runs on a variety of hardware, has allowed Android to capture the market lead in smartphones (albeit with nothing close to Apple’s profit margins). Android has also helped create several potent hardware rivals to Apple. Samsung Electronics’ Android-driven Galaxy SIII is drawing favorable comparisons to iPhone and Amazon.com Inc’s cheaper Kindle Fire is challenging Apple in tablets and digital content. Apple’s expected move to replace Google Maps with its own mapping application is a particularly dramatic example of how the rivalry be-

tween the companies has been evolving. Google has invested huge sums in its mapping technology over the years, and about half of its map traffic now comes from iPhones and iPads. Among other things, the traffic from those devices reveals valuable location data that helps improve the mapping service and provides features like real-time traffic reports. Apple has spent three years preparing to take mapping back. It has integrated technology from acquisitions such as 3D mapping company C3 Technologies, Canadian startup Poly9 Group and mapping service Placebase, said ISI analyst Brian Marshall. “As Apple builds out its Siri service, they build out the iCloud infrastructure and more capability into its operating system, location data is going to become important,” said Sterne Agee analyst Shaw Wu. “This could help their advertising business too.” multi-pronged battle: In what was seen as a pre-emptive move against Apple’s upcoming maps service, Google on Wednesday showed off its own mapping capabilities, including soon-to-belaunched 3D features. While Google executives avoided any comment on the possibility of being ousted as a default service on Apple devices, one executive said the integration with Google’s search engine provides a mapping service that is far more useful than a product that simply uses a “geocoder. Apple began to use its own geocoder - technology that uses geographic coordinates to create a digital map - for the Google-based maps on its

smartphones late last year, a move that was seen as a precursor to Apple using its own map software. Another software upgrade that fans and developers are hoping for is Siri, a popular voice-enabled personal assistant service that Google has yet to match. The service could come out of its beta testing phase and show up on the iPad when Apple unveils iOS6 or the next version of its mobile operating software. Siri, which has been plagued with connectivity and other issues, is still in beta test version. Apple’s global war on Google and Android in the courts is one sign of how seriously it is taking the potential threat. The consumer device giant is seeing limited success, though, in courtrooms for various patent infringement cases it has against Android manufacturers. Apple said this week it is mulling a legal order to stop the U.S. launch of Samsung Galaxy S III phone later this month. Samsung is one of the biggest Android phone manufacturers. In another of the many lawsuits worldwide pitting Apple against Motorola Mobility, now owned by Google, a federal judge canceled a scheduled trial as neither could prove damages. That decision particularly hurts Apple because the iPhone maker was seeking an injunction barring the sale of Android products, said Brian Love, a professor at Stanford Law School. “The Android side is likely thrilled to simply have the case go away,” Love said. Apple declined to comment on the case. maCbooK redesign in tHe WorKs: Where Apple has the upper

hand is in its hardware - groundbreaking in design, vastly popular with consumers for its ease of use. The redesigned MacBook laptops to hit the stage next week are expected to include high-definition screens and Intel Corp’s Ivy Bridge cutting-edge processors. Some even expect the iPad’s “retina” display to show up on the MacBook line. This would be Apple’s first big redesign of the MacBook Pro since mid2009. With the new lineup, it hopes to fend off budding competition from rival manufacturers who are pushing a spate of new, thinner laptops called “Ultrabooks.” Windows 8, a new version of Microsoft’s flagship operating system that runs on tablet computers as well as PCs, will bolster PC makers’ ability to offer premier computers rivaling Apple’s MacBook line. Already, about 20 touch-enabled ultrabook designs with various styles of foldable, detachable or sliding keyboards running the new Windows 8 system are in the pipeline. The MacBook line generated 13 percent, or about $5 billion, of Apple’s fiscal second-quarter revenue. Unit sales of the aging lineup were up 7 percent from the previous year but were down 23 percent sequentially. Whatever the case, Apple fans and partners can look forward to a fairly actionpacked week. “Apple is very serious about getting far in front of Windows 8 and Ultrabooks,” said Barclays analyst Ben Reitzes. But “software and services will be the focus, with major enhancements to Maps, iCloud and Siri, which developers and users can take advantage of.”

China’s slowing inflation, output growth add easing pressure BLOOMBERG China’s consumer prices rose the least in two years in May and industrial output and retail sales trailed estimates, adding pressure for more loosening after this week’s interest-rate cut. Inflation slowed to 3 percent from a year earlier, the National Bureau of Statistics said today, compared with the 3.2 percent median forecast in a Bloomberg News survey. Production increased 9.6 percent, lower than a projected 9.8 percent gain, and retail sales increased 13.8 percent, the Beijing-based bureau said in separate statements. Today’s data adds to concerns that global growth is stalling as Greece teeters on the edge of exiting the euro, prepares a request for a bank bailout and U.S. job growth weakens. Premier may introduce additional stimulus to protect a full-year growth target of 7.5 percent even as the nation wrestles with bad loan risks from local government debt. “These data should defeat any remaining complacency that the policy response has been adequate to maintain steady growth,” said Shen Jianguang, chief Asia economist for Mizuho Securities Asia Ltd. in . “More dramatic easing, especially in housing and local government financing vehicles is urgently needed and necessary to avoid a hard landing in the Chinese economy.” Shen, who previously worked for the European Central Bank, said he expects at least one more reduction in interest rates and three cuts in banks’ reserve requirements this year.

Bloomberg News surveys. Nations are acting to shore up growth as the global economy suffers its steepest slowdown since the recession ended in 2009.

BoRRowING CoSTS Australia and lowered interest rates over the past two weeks while the left the door open at a June 6 press conference for a cut in borrowing costs. Federal Reserve Chairman told a Congressional committee this week that policy makers will discuss later this month whether to do more to spur growth. China’s May growth was below 10 percent for a second straight month, today’s data showed, the first time that’s happened in three years. Power output rose at the second-slowest pace in three years excluding distortions caused by the timing of the Lunar New Year holiday. Retail sales, which aren’t adjusted for inflation, rose the least in almost six years, except for the January and February holiday months. Growth in sales of home appliances slid to 0.5 percent compared with a 15.4 percent gain in May last year, after the government ended incentive programs. At the same time, deliveries of passenger vehicles to dealerships by automakers including Toyota Motor Corp. and Honda Motor Co. rose 22.6 percent last month from a year earlier to 1.28 million units, the China Association of Automobile Manufacturers said in Beijing today. The rebound came after sales fell 0.1 percent in May last year as Japanese automakers cut production after ’s earthquake.

CREdIT GRowTh

wEAkEST INCREASE

The reserve ratio has dropped by 150 basis points in three cuts since November to spur credit growth and now stands at 20 percent for the biggest banks. The People’s Bank of China lowered benchmark lending and deposit rates by 25 basis points effective yesterday, taking oneyear borrowing costs down to 6.31 percent and one-year savings rates to 3.25 percent. It also allowed banks more leeway to set their own . China’s fell yesterday, capping the biggest weekly slide this year, after the central bank’s move intensified concerns the nation’s economic slowdown is deepening. Stocks in declined yesterday after cut Spain’s long- term credit rating while the Standard & Poor’s 500 Index rose on speculation central banks around the world will add stimulus to boost growth.

Fixed-asset investment, excluding rural households and not adjusted for inflation, rose 20.1 percent in the first five months, compared with the median economist estimate for a 20 percent gain. That was the weakest increase for a Jan.-May period since 2001, according to previously released data. China’s fell 1.4 percent in May from a year earlier, the statistics bureau said in a separate statement. That’s the third straight drop and the longest stretch of declines since 2009. The median estimate in a Bloomberg survey was for a 1.1 percent decline. Inflation in China has eased from a three-year high of 6.5 percent in July 2011, aided by government efforts to cool property prices, boost pork supplies and cut transport costs. Falling global commodity costs have helped. China yesterday announced a 5.5 percent cut in retail gasoline prices after global crude costs slumped. The move follows a reduction last month that was the first since October.

oUTLook ‘BENIGN’ Slowing inflation “is what gave the central bank the confidence to cut interest rates” on June 7, said Liu Li-Gang, head of Greater China economics at Australia & New Zealand Banking Group Ltd. in Hong Kong, who accurately forecast the consumer prices reading. “Given the falling producer prices, China’s inflation outlook remains benign and we expect another cut in banks’ in June to boost slowing economic activities.” ANZ said in a note yesterday it expects reductions totaling 150 basis points this year while further interest-rate cuts will depend on inflation. China customs data tomorrow may show and imports grew last month by less than the government’s 10 percent target this year. Overseas sales probably increased 7.1 percent from a year earlier while purchases rose 5.5 percent, according to the median estimates in

“dropped significantly” due to slower growth in fixed-asset investment. expanded 8.1 percent in the first three months from a year earlier, the fifth quarterly and the slowest pace in almost three years. Growth may slide to 7 percent to 7.5 percent this quarter, Lu Ting, head of Greater China economics at Bank of America Corp. in Hong Kong, said in a note today. “We expect the government to start and speed up more projects on the one hand and to make easier” by cutting reserve requirements and interest rates, approving more corporate bond issuance and lifting lending restrictions, he said. —Zhou Xin. With assistance from Ailing Tan in , Cynthia Li in Hong Kong, Penny Peng and Chua Baizhen in Beijing. Editors: Nerys Avery,

KARACHI: The former MNA, founder President WCCI, V.P, FPCCI and prominent social personalty Begum Salma Ahmed, hosted a reception at Bhopal House. Photo shows Speaker Sindh Assembly Nisar Ahmed Khuro, C.G. of Russia Andrey V. Demidov, C.G of Japan Masaharu SATO, Salma Murad, CEO of TANEEZ Jewlry Zeenat Saeed, Kousar Junejo and others.

‘ShARp’ dEfLATIoN “China’s producers are seeing sharp deflation, pointing to a worrying lack of final demand,” said Alistair Thornton, a Beijing-based economist with IHS Global Insight. The decline in prices, combined with the “sharp” drop in the prices gauge in May’s purchasing managers’ index “points to considerable sluggishness in domestic manufacturing activity” and should “act as a spur for the government to move more aggressively,” he said. The nation’s biggest cement producer, warned this week its firsthalf profit probably fell more than 50 percent as prices of its products

PESHAWAR: Mr Imran Samad Group Head Credits The Bank of Khyber (BOK) and Ch. Aslam Feroze Executive Director United Insurance Company (UIC) signing MOU for BOK Agriculture Loans insurance coverage in presence of BOK’s Managing Director Mr. Bilal Mustafa, BOK’s Executive Director Mir Javed Hashmat and other BOK – UIC senior officer at BOK Head Office Peshawar.


profitepaper pakistantoday 11th june, 2012