Ikea Attempts To Build Public Case Against Russian Corruption
MOSCOW — Weeks before the opening of its flagship store outside Moscow in 2000, Ikea was approached by employees of a urban utility firm . If the Swedish retailer wanted to have power for its grand opening, it had to pay a bribe .
Instead, Ikea rented diesel generators large enough to power a shopping mall . The engines roared to life in a loud rebuke to the corrupt executives who thought they had the retailer cornered, and soon the utility turned on the power .
As Ikea opened markets across Russia, and became one of the most outspoken Western corporate critics of Russian corruption , renting generators to thwart removing from power companies became standard practice. Ikea executives took great pride in their creative solution — renting generators “instead of putting ourselves into a squeeze,” as Christer Thordson, an Ikea board member and global director of legal affairs, put it in an interview.
But Russian graft may have proved more stubborn than Ikea.
The board of Ikea’s operating firm , which is based in the Netherlands, has concluded that the Russian executive hired to control the generators was taking kickbacks from the rental company to substantially inflate the price of the service. Ikea said that such a deception could cost it about $196 million over two years.
Ikea canceled the contract and sought redress in Russian local court. But in rulings over the last two weeks, Ikea has lost another 5 million euros in damages that the judges awarded the generator rental firm for breach of contract .
Ikea disclosed the details of its loss to The New York Times last month, saying that it hoped publicity might compel the Russian authorities to investigate.
“We have encountered something here that is outside the scope of what we normally encounter,” Mr. Thordson said, describing the universal retailer’s situation in Russia. “I have never experienced anything like this.”
The leader of the engine rental company and the former Ikea employee accused of accepting bribes denied any wrongdoing.
Russia is a maddeningly opaque but potentially profitable market of 140 million people, whose incomes are supported by trickle-down oil wealth . Many global businesses contend they must have a presence in Russia to remain competitive. On Thursday, Carrefour, the French hypermarket chain , opened its second store in Russia. Wal-Mart, the world’s largest retailer , has an advance command in Moscow but has yet to sponsor .
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Medvedev Laments Russia’s Democracy, Economy
MOSCOW – Russia’s democracy is unsteady , its economy is ailing and the country faces long-term problems with the health of its citizens , President Dmitry Medvedev said in an article published Friday.
His speech were among the bluntest estimations to date on national flaws from the Kremlin, which is typically defensive about similar accusations.
Medvedev carps an economy that feeds only off Russia’s energy resources, a lack of experienced politics and excessive state influence in everyday life — all in an article that some observers said was an attempt to distance him from his mentor, Prime Minister Vladimir Putin.
“An incapable economy, a semi-Soviet social sphere , a weak democracy, negative demographic vogues and an unstable Caucasus. These are very big troubles even for a state like Russia,” Medvedev wrote in the piece, which ran in several leading newspapers and on the Kremlin Web site.
Analysts admired the article comes as Medvedev appears to be trying to map out new strategies independent of Putin, who is still viewed as Russia’s top resolution maker.
“This could be interpreted as a sign of difference in policy plans between Putin and Medvedev,” said Masha Lipman of the Moscow Carnegie Center.
Putin issued no comment on the article Friday.
Rumors of divisions between Putin and Medvedev — dubbed a “ruling tandem” — have circulated for months. They have appeared to take various accesses to major notes such as policy toward Ukraine and restructuring the economy. Medvedev in the past has called for a more liberal way to politics in Russia and expressed curiosity in breaking up some of the large state-corporations consolidated during Putin’s tenure.
In the article , Medvedev attacked Russia’s “humiliating confidence on raw materials” and called for more investment in high-tech industries and enlarged energy efficiency.
Analysts also said the article exposed differences within ruling blocs on how to pull Russia out of the current economic crisis, which hit the country particularly hard, and on how to improve its crumbling infrastructure.
The Kremlin has struggled to deal with the fallout of the turning point , which has sent unemployment spiking , dried up foreign investment and battered Russian stock markets.
Backing to politics, Russia must struggle for an “open, pliant and internally total ” political system, Medvedev wrote.
Rights activists say Putin as president led Russia down the opposite path by destroying the election of regional leaders, by squeezing smaller parties out of existence and allowing an air of impunity to gather over charges on Kremlin critics.
On Friday, Putin said at a meeting with Russian experts at his residence outside Moscow that he and Medvedev would not compete in the next election but would discuss what way to take.
In his article , Medvedev condemned “centuries of exhausting corruption ” and widespread paternalistic attitudes in Russia that all difficulties should be the responsibility of the state.
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Shipping Industry Fights For Survival
A brutal downturn in universal trade has left shippers with idle capacity, billions in losses, and even facing potential bankruptcy
The Andromeda towers almost 40 meters (131 feet) above Hamburg’s Burchard wharf , as countless feeder boats and container stacking vehicles conflict around it like arthropods around a bored elephant. Shipyard CMA CGN’s new flagship vessel ship , one of the world’s largest, brags a 100,000 horsepower engine, can carry 11,400 containers , is 363 meters long and was came from South Korea only a few months ago—at a price of $160 million (€111 million).
The Andromeda was built for an economic hum that never seemed to end, at a time when more and more containers , bigger ships and ever-growing port installations were needed.
With each passing minute, heave bridges hoist holders from the quay wall onto the deck of the 100,000-ton behemoth. When fully burdened , the craft has place for containers arranged up to 18 wide, 86 long and 19 tall. In the end, the Andromeda is loaded to about two-thirds capacity. “That’s not bad,” says Captain Ivan Bozanic. “At least nowadays .”
The next day, the CMA flagship departures Hamburg for China, the point of basis of its 68-day round-trip voyage . The Andromeda passes exclusively between East Asia and northern Europe, a speedway of global trade . It unchangeably shuttles TV sets, mobile phones, T-shirts, and everything else China’s factories are churning out, toward the West, and returns to the East loaded with finished parts, machines and empty containers.
Until not too long ago , navigation was both the greatest beneficiary and hammering pulse of globalization, moving property around the world at an ever- increasing pace. The industry has been growing rapidly from year to year, ever since China became the world’s plant . In 2008, roughly 500 million standard holders (TEU) were transported on the world’s oceans—twice as many as at the turn of the millennium.
Year after year, new and ever more large ships were built, ports were enlarged and new scheduled service introduced. The load capacity of the world’s combined container fleet increased from 4 million TEUs in 2000 to 12.5 million today.
Many became rich in the years of the hum , comprising ship owners , bankers and investors, especially in Hamburg. In the last term , the northern German port city became the world’s leading center for the financing and operation of new ships . Germans own 35 percent of the holder ships in operation worldwide, and close to 60 shipping banks and financiers are headquartered in Hamburg. Hamburg-based Hapag-Lloyd became one of the world’s chief shipping line operators .
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Why China’s Chip Industry Won’t Seize America’s
Chinese semiconductor companies have produced some design wins, but they are still struggling when it comes to any real silicon breakthroughs
In the 1980s, the U.S. was wasted with scare that Japan would become the prominent power in manufacturing and technology. Those fears never came to pass. Today the same scares are pointed China. The Middle Kingdom begins to be an even more daunting foe, with its enormous foreign reserves, fast-growing economy, oceans of scientists and engineers, and enormous subsidies to high-tech companies . How real is the China threat?
There is no doubt that China is making fast strides in both infrastructure and technology, but U.S. worry of being overtaken by China appears to be replaced . It takes more than money and might to reach innovation. This is what I learned when researching the inflated values of engineering graduation rates in China and by analyzing its pharmaceutical industry. And this is one of the key findings in a new book titled Chips and Change: How Crisis Reshapes the Semiconductor Industry (MIT Press). Written by Professors Clair Brown and Greg Linden of the University of California at Berkeley, the book proposes a wealth of information about semiconductor development cycles as well as a fresh and informed look at some of China’s key technological variants in those realms.
A few years ago, China seemed to be on track to rule the global semiconductor industry in the same method it currently dominates the electronics manufacturing sector. In 2004, China’s most advanced wafer manufacturer, SMIC (SMI), went public on the Hong Kong and New York market exchanges. The next year, two Chinese chip design companies , Actions (ACTS) and Vimicro (VIMC), had successful Nasdaq IPOs. Boosters of China’s chip industry said there were hundreds more transistor design firms waiting in the wings and many new Chinese chip manufacturers were also starting up.
Obstacle to Advance
Five years later, most Chinese chip firms remain unprofitable. Why? A number of interlocking reasons that propose spins as to why training lots of engineers and spending money to subsidize firms and build conveniences is not enough to create a successful industry.
Because of China’s poor good name for defending intellectual property , multinationals have limited technology remove to China. For instance , chip giant Intel (INTC) is now building a factory in northeastern China but has long delayed locating its most cutting-edge fabrication facilities in China, even though this increases the cost of logistics to supply China-based electronics plants , which are among the biggest consumers of Intel processors.
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The Card Game
Overspending on Debit Cards Is a Benefit for Banks
When Peter Means returned to graduate school after a career as a civic servant, he turned to a charged card to help him spend his money more carefully .
Banks and credit unions have long pitched charge cards as a convenient and prudent way to buy . But a increasing amount are now allowing consumers to exceed their balances — for a price .
Banks market it as overdraft protection , and the fees it evolves have become an important source of income for the banking industry at a time of big losses in other actions . This year alone, banks are expected to bring in $27 billion by covering overdrafts on checking reports , typically on debit card buys or checks that exceed a customer’s balance.
In fact, banks now make more covering overdrafts than they do on penalty fees from credit cards.
But because consumers use debit cards far more often than credit cards, a waterfall of fees can be set off quickly, often for people who are least able to supply it. Some banks further increase their revenue by manipulating the order of a customer’s transactions in a way that causes more of them to incur overdraft fees.
“Banks will let you overspend on your charge card in a method that is much, much more expensive than almost any credit card,” said Eric Halperin, director of the Washington office of the Center for Responsible Lending.
Debit has essentially changed into a stealth form of credit, according to critics like him, and three quarters of the nation’s largest banks, except for a few like Citigroup and INGDirect, automatically cover charge and A.T.M. overdrafts.
Although regulators have warned of insults since at least 2001, they have done little to check the explosive increase of overdraft fees. But as a consumer outcry grows, the performance is under attack, and regulators plan to introduce new protections before year’s end. The proposals do not seek to ban overdraft fees altogether. Rather, regulators and lawmakers say they hope to curb abuses and make the fees more fair.
The Federal Reserve is considering requiring banks to get leave from users before enrolling them in overdraft programs, so that users like Mr. Means are not caught unaware at the cash list .
Representative Carolyn Maloney, Democrat of New York, would go even further by requiring warnings when a charge card buying will overdraw an account and by barring banks from working the most expensive purchases through accounts first.
Bankers say they are merely charging a fee for a convenience that protects users from embarrassment, like having a load card rejected on a dinner date.
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Coming Back, China Eases Suggestion To Ban Removes Of Some Vital Minerals
BEIJING — Chinese authority said on Thursday that they would not entirely prohibit removes of two minerals urgent to manufacturing crossbreed automobiles , cell phones, large wind turbines, missiles and computer monitors, although they would tightly regulate production.
China makes more than 99 percent of the world’s supply of terbium, above, and dysprosium, used in manufacturing .
China produces more than 99 percent of the world’s supply of dysprosium and terbium, two unusual minerals essential to recent breakthroughs in high-technology industries.
A bureaucratic reshuffling in Beijing this year prompted a review of Chinese policy, and rules were drafted that would ban the export of these minerals. That incited anger and perturbation from Western governments and multinational firms that depend on Chinese supplies.
Wang Caifang, representative director general of China’s Ministry of Industry and Information Technology, tried on Thursday to calm concerns that the draft rules would become the final policy, saying the regulatory review was still under way.
“China is very answerable . We will not take casual decisions. All our decisions will be consistent with scientific development ,” she said in a speech at the Minor Metals and Rare Earths 2009 conference in Beijing. “China will not close its doors.”
During an interview after her conversation , Ms. Wang said that China would continue to set an annual quota for the export of each mineral, adding, “I don’t think it will be zero.”
Dysprosium and terbium are two of the most useful , scarcest and most sought-after minerals among the 17 rare-earth constituents . China mines 93 percent of the world’s rare-earth minerals, which have a wide range of obscure but crucial industrial applications, like the manufacturing of ceramics and stainless steel.
A copy of the draft rules , viewed Thursday, said China would additional reduce its combined annual export quotas for all rare-earth constituents to 35,000 tons a year, from 53,000 tons last year and almost 66,000 tons as recently as 2005.
The sketch policy also clearly stated that removes of dysprosium and terbium were to be banned along with exports of three other rare-earth constituents : thulium, lutetium and yttrium. But Ms. Wang seemed to back away from that.
By cutting exports , as well as putting a general tax of 42 percent on exports of dysprosium, terbium and some of the other rare-earth constituents , Beijing officials have successfully required manufacturers industries of advanced magnets, motors and other technologies to move their plants to China, where the minerals are readily accessible .
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Five Worldwide Business Danger Zones
The five high-potential markets below may be matured for Western investment, but they also present potentially perilous working environments. With the help of AKE Group’s global risk monitoring service, UK Trade & Investment, and the Overseas Security Advisory Council, BNET held the particular risks foreign travelers may encounter in these global hot fault . Be sure to stay abreast of any new developments in these countries by checking the OSAC’s crime and safety reports. Oh, and don’t forget to take with you some common sense and these tips to maintain a low profile.
Russia
Due to needy law enforcement and the proliferation of weapons, Russia suffers from a wide range of crime. On the more extreme end, ongoing political disputes in the North Caucasus region (which includes parts of Azerbaijan and Georgia) sometimes erupt into large-scale attacks on public places, such as metro stations. In Moscow ultra-right-wing factions target foreign ethnic minorities in racially motivated attacks.
The most often risks are robberies, assaults, and “express kidnappings,” in which attackers force a victim to withdraw money from multiple ATMs. Watch your drink in bars and nightclubs, where criminals often attempt to drug unsuspecting individuals.
Common Scams
The “turkey drop ”: A scammer pretends not to pay any attention as he drops a roll of money in front of a pedestrian. Then one or more accomplices (sometimes dressed as police officers) approach, accusing the victim of trying to steal the money. They try to check the victim’s passport and then demand a fine.
Staged vehicle accidents: Criminals pass foreign drivers on the Moscow Automobile Ring Road (MKAD) or larger city roads and gesture to get them to stop. A number of persons get out and indict the victim of hitting their car. To make the situation more believable, the suspects will brush some steel wool along the side of the car. They then demand an exorbitant amount as compensation.
India
A year after the Mumbai attacks , the terrorism threat remains high, especially in public places in large cities. In November 2008, senior executives from the Tata group, Ispat Industries, and Anglo-Dutch giant Unilever were among those caught up in the assault on the Taj Mahal hotel in Mumbai.
Brazil
Many areas, mainly the tri-border region with Argentina and Paraguay, remain centres of arranged crime and smuggling. In cities such as São Paulo, the main point is mobile street gangs. Attackers often use weapons and a disproportionate amount of violence to accomplish petty crime.
Mexico
The most immediate security issue in Mexico stems from the country’s role as a major corridor for drugs. As a result, ordered crime and smuggling gangs act with virtual impunity in many regions.
In Mexico City, the most common crimes include armed robberies, express kidnappings, car thefts, carjacking, and credit card fraud. Criminals select victims based on an appearance of vulnerability, prosperity, or inattentiveness, so dress plainly and don’t flash your cash. Use ATMs inside banks or in other businesses, and withdraw money during daylight hours.
South Africa
South Africa’s rates of murder, rape, and car theft rank among the highest in the world. Be cautious after dark, because there is no much light on the streets . Park in well-lit areas, and don’t stop to assist apparently distressed motorists.
If you’re visiting Johannesburg, be particularly careful in and around the airport and while driving away. There have been a number of incidents involving foreigners followed from O.R. Tambo International Airport to their destinations by car and then robbed at gunpoint.
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Recent Informational Update About Car Industry Business Giant
These look like successful period for carmakers in the Motherland of Chinese . Since January, when Beijing introduced measures to shore up the auto industry, sales in the mainland have jumped 23%, and for the year the increase could hit 26%, Hong Kong-based brokerage CLSA reckons. That would mean 2009 sales of 11.8 million vehicles , making China the world’s top auto market. “I think China has adopted for good,” says CLSA analyst Scott Laprise.
The problem , at least for car producers , is that those surging sales don’t produce the kind of uses most companies wish to have . China’s stimulus package contained tax breaks on cars with small engines and subsidies for mini-trucks. Through July, sales of vehicles eligible for state support soared 49%, but many of these cars earn manufacturers as little as $100 each, according to researcher J.D. Power & Associates (MHP). Sales of bigger, more profitable vehicles were unchanged, so earnings for automakers are up less than 5%, J.D. Power says. “The tax cuts absolutely affected my choice,” says Cui Tao, a 25-year-old resident of Tianjin who just bought a Geely Vision sedan for his fiancée. “I would have had to pay thousands more for a bigger car,” he says.
TOYOTA’S DECREASE
The change has been hardest on the partnership of global automakers . They tend to focus on larger, more expensive cars, while Chinese manufacturers focus on smaller, cheaper models, putting them in a better position to gain from Beijing’s stimulus measures. Shenzhen-based BYD Auto, for instance, has seen its sales soar 183%, to 208,000, in large part thanks to a hot-selling hatchback.
Collate BYD to Toyota Motor (TM). The Japanese giant’s China sales are rised just 5% this year, in spite of the introduction of two new SUVs. That’s a big change from last year, when Toyota’s mainland sales jumped by 18.5%, to 570,000 vehicles. While the company doesn’t disclose its China profits , Yuzo Ushiyama, who left in June as Toyota’s China chief, hints that the preference for smaller vehicles has hurt. “Relatively inexpensive cars are selling quite well, but in China that segment is not [where Toyota competes],” he said in a May interview. “We have to address the short-term decline in profitability.”
Even worldwide carmakers with surging sales are having trouble getting any substantial profits . General Motors has sold 43% more cars in China this year than in 2008. But three-fifths of its mainland sales come from its Wuling unit, which mostly makes tiny commercial vans that cost as little as $4,300. GM doesn’t reveal its China profits, but in the first quarter its Asian operation, of which China is by far the largest part, was in the red.
Sure , growing sales help offset shrinking margins. But the potential reaching from the world’s new No. 1 market are far smaller than those in the pre-crisis U.S., where Toyota made about half its global uses before the slump. Says Ashvin Chotai, managing director of consultant Intelligence Automotive Asia: “It will be very hard for automakers to turn China into a cash cow like the Japanese did with North America.”
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