Tag: Approved

Badluck Descalzi?

WHEN Eni, Italy’s oil major, this week revealed a return to profit in the fourth quarter and a long-term commitment to keep the barrels flowing, there was much to cheer. Three years on from Claudio Descalzi’s appointment as CEO, Eni has made spectacular oil and gas discoveries even as its peers retrenched amid the oil-price slump. Sanford C. Bernstein, a research firm, says only half in jest that it is “evolving into an actual oil company”.

But a cloud hangs over the firm, which is 30% state-owned—and over Mr Descalzi (pictured) personally. He is caught up in an Italian probe into alleged corruption in a deal Eni struck in partnership with Royal Dutch Shell in Nigeria, just as he is seeking reappointment as CEO in April. The company’s response to the scandal, especially its treatment of independent board members, raises questions about its commitment to good corporate governance.

In 2011, Eni and Shell jointly paid $1.3bn for a huge offshore oil block, known as OPL 245, which has more than 9bn barrels of probable reserves. Over $1bn of this flowed to a shell company. That firm, Malabu,…Continue reading

SINCE his election as president, Donald Trump has not softened his criticism of China over its alleged meddling to control the value of its currency, the yuan. On the contrary, he has called China “the grand champion” of currency manipulators. The kindest interpretation of this is that Mr Trump is out of date, as his own government could tell him.

America’s Treasury makes a six-monthly assessment of the foreign-exchange policies of its big trading partners. The criteria it uses to identify currency manipulators are regarded by many economists as inadequate. They do not include, for example, the domestic purchasing power of a currency. Nevertheless, even by those flawed criteria, China is far from the champion. Indeed it seems to have quit the tournament altogether.

The Treasury uses three measures: whether the country runs a sizeable surplus in trade with America; whether its current-account surplus exceeds 3% of GDP; and whether it spends more than 2% a year to buy foreign assets to suppress the value of its currency. Over the past year, no country has checked all three boxes. China, in the latest report, only met…Continue reading

“A SEA of sameness.” A veteran of the Mobile World Congress (MWC), Ben Wood of CCS Insight, a consultancy, was not expecting much from the mobile industry’s main trade show this week in Barcelona. As one product launch followed another, it was easy to lose track. Whether it was LG, Huawei or Wiko, they all showed off yet more black rectangles with slightly varying specifications.

Another reminder of the smartphone business’s maturity was that the most talked-about new device was the Nokia 3310 feature phone (pictured), an updated version of a phone first made 17 years ago. With limited internet connectivity, it appeals partly as a “digital detox”, said Arto Nummela, chief executive of HMD Global, a Finnish startup with ex-Nokia executives which licenses the brand.

The mobile industry is far from done in terms of genuinely new products. But the action has moved to parts of the business that do not lend themselves to splashy events and massive crowds (the tent erected by Huawei, a Chinese maker of all sorts of telecoms gear, to launch its new P10 smartphone was huge, but hundreds were still left waiting outside). Most innovation in…Continue reading

IT HAD been billed as a bridge between Europe’s two main financial hubs. It has become, however, a symbol of their growing competition—and of the uncertainty into which Brexit has plunged the EU’s markets. A planned merger between Deutsche Börse (DB) and the London Stock Exchange (LSE), both listed companies, seems on the verge of collapse. This week the LSE rejected the latest demand of the European Commission (EC) to sell parts of its business to allay competition concerns.

The €29bn ($30bn) merger was first announced a year ago and is the companies’ third attempt to join forces since 2000. It brings together the operators of the British, German and Italian stock exchanges, as well as some of the largest clearing-houses in Europe. Before it would approve the deal, the EC launched an investigation into its impact on competition. Last September it identified a number of concerns, including about the derivatives market once the clearing-houses merged. In early February the LSE sought to ease that concern by confirming the sale of its Paris-based clearing unit, LCH.

Not good enough, the EC countered a few weeks later: the sale…Continue reading

Latest episode of Dynasty

“THE de facto dismantlement of the Samsung Group” was how South Korea’s semi-official news agency, Yonhap, spun the news on February 28th that the sprawling conglomerate would scrap its Future Strategy Office, a management organisation of some 200 senior staff, and devolve power to individual affiliates as part of broad reforms. The office had become for many South Koreans a vexing symbol of Samsung’s secretive goings-on.

Longtime Samsung-watchers were less impressed. The parallels with an earlier disbanding of the same office in 2008, when it was known as the Strategy and Planning Office, were striking. Then, Lee Kun-hee, Samsung’s chairman, had been indicted for his involvement in a multi-trillion-won slush-fund scandal. Then, too, the group closed down the office to show it was serious about reform. But by 2010 it was reborn as the Future Strategy Office.

Lee Kun-hee’s son and presumed heir to the Samsung empire, Lee Jae-yong (pictured), is the one now behind bars. This week he was indicted by a special prosecution team on charges of bribery and embezzlement. Prosecutors have…Continue reading

Scrappy don’t

TOO many new ships, too few old ones scrapped. Since the financial crisis, after which trade growth slowed, the Baltic Dry Index—a measure of bulk freight rates—has fallen by 93%. Prices for transporting containers have plunged by the same amount on some routes. In 2008 it cost $2,000 to send a 20-foot box from China to Brazil; now it costs $50. The industry is drowning in red ink. Hanjin Shipping of South Korea, the world’s seventh-largest line, went bust last August, and even Maersk Line, which has the lowest costs in the industry, lost $367m in 2016.

But there was some optimism this week at European Shipping Week in Brussels, an industry event. Bosses at bigger lines reckon the worst is over. Higher levels of scrapping will cut overcapacity, argues Rolf Habben Jansen, CEO of Hapag-Lloyd, a German line. The industry may break even this year, predicts Rahul Kapoor of Drewry, a consultancy.

But many shipowners are still too reluctant to send their hulks to the scrapheap. The problem can be clearly seen in the container-shipping business. Last year firms scrapped 194 ships, accounting for 3% of…Continue reading

RWANDA has a reputation for enterprise. Its government has largely stamped out small-scale corruption and trimmed regulations, making the country the second-best place in Africa to do business, according to the World Bank’s widely-followed ranking. But the dominant political party, the Rwandan Patriotic Front (RPF), does more than help business: it runs its very own conglomerate.

Crystal Ventures, the RPF’s holding company, has investments in everything from furniture to finance. It owns the country’s biggest milk processor, its finest coffee shops and some of its priciest real estate. Its contractors are building Kigali’s roads. There are several firms offering security services in Rwanda but the guards from ISCO, part of Crystal Ventures, are the only ones who tote guns. The company is reckoned to have some $500m of assets.

Its expansion is aided by the fact that its chief rival is Horizon, a similar group that is accountable to the ministry of defence, with interests in construction and logistics. Critics argue that Crystal Ventures and Horizon both get cushy government deals which mask the failures of their enterprises, several of…Continue reading

ONE question prompted by Kraft Heinz’s failed $160bn bid for Unilever is whether Britain still wants to be the world’s entrepot for buying and selling companies. For decades it has been more open to mergers and acquisitions than any other big economy. Britain accounts for 3% of global GDP and its firms make up just 5% of global market capitalisation, but the latter have been involved in a quarter of cross-border M&A activity since 1997, either as buyers or as targets, according to Dealogic, a data firm.

Now Blighty is getting cold feet. The government frowned on the Kraft bid, aware, probably, of the dwindling number of large British firms that are left. Another proposed deal, the $11bn takeover of the London Stock Exchange by Deutsche Börse, its German rival, is on the rocks, partly because of the British firm’s insistence that the headquarters be in London, not Frankfurt.

Brexiteers promise that Britain is on the verge of a new, golden age of global commerce. But many of its captains of industry fret that its past wide-open policy on takeovers means that it now has too few big firms to hold its own. To understand the country’s…Continue reading

IF INDIA is indeed the world’s fastest-growing big economy, as its government once again claimed this week, no one told its bankers and business leaders. In a nation of 1.3bn steadily growing at around 7% a year, the mood in corner offices ought to be jubilant. Instead, firms are busy cutting back investment as if mired in recession. Bank lending to industry, growth in which once reached 30% a year, is shrinking for the first time in over two decades (see chart). If this is world-beating growth, what might a slowdown look like?

India’s macroeconomy chugs along (though the quality of government statistics remains questionable), but its corporate sector is ailing. The sudden and chaotic “demonetisation” of 86% of bank notes in November hardly helped. But the origins of India’s troubles go much deeper. After India dodged the worst of the financial crisis a decade ago, a flurry of investment was made on over-optimistic…Continue reading

WHEN someone goes into cardiac arrest, survival depends on how quickly the heart can be restarted. Enter Amazon’s Echo, a voice-driven computer that answers to the name of Alexa, which can recite life-saving instructions about cardiopulmonary resuscitation, a skill taught to it by the American Heart Association. Alexa is accumulating other health-care skills, too, including acting as a companion for the elderly and answering questions about children’s illnesses. In the near future she will probably help doctors with grubby hands to take notes and to request scans, as well as remind patients to take their pills.

Alexa is one manifestation of a drive to disrupt an industry that has so far largely failed to deliver on the potential of digital information. Health care is over-regulated and expensive to innovate in, and has a history of failing to implement ambitious IT projects. But the momentum towards a digital future is gathering pace. Investment into digital health care has soared (see chart).