News:

January 19, 2010

Inflation rate jumps to 2.9%

The Office for National Statistics said the Consumer Price Index (CPI) measure of inflation had risen to 2.9%, up from an annual rate of 1.9% in November.

That was the biggest jump in the annual rate from one month to the next since records began, and exceeded the City's expectations of an increase to 2.6%.

The Retail Price Index (RPI), which includes housing costs, rose to 2.4%, its highest level since November 2008.

This was a rise from 0.3% in November, and also constitutes the biggest monthly rise in the annual rate of RPI inflation since 1979.

Sterling surge

The news boosted the value of the pound, with markets betting on an early end to the Bank of England's policy of increasing the money supply under what is known as quantitative easing (QE) and possible future rises in interest rates.

The pound increased to a four-month high against the euro, adding 1.3 cents to 1.1477, making a euro worth 87 pence.

In a speech on Tuesday evening, Bank of England Governor Mervyn King warned that inflation was "likely to pick up markedly in the first half of this year".

He added that it was "likely to rise to over 3% for a while", and that it could go even higher if energy prices and indirect taxes were to increase further.

However, he said inflation "should return to target in the medium term".

Unusual factors

The annual increase in CPI mainly came about because of a number of unusual factors that had depressed prices a year earlier. These included a near-record fall in oil prices in December 2008, the VAT cut to 15% and retail discounting, the Office for National Statistics said.

Ten out of 12 sub-sectors recorded higher prices, with the biggest increases coming from transport and clothing and footwear.

Core CPI, which excludes food, energy, tobacco and alcohol, rose by 2.8% on the year, which is the fastest pace of growth since records began in January 1997.

The RPI and CPI measure the change in prices charged for goods and services bought by households in the UK. It is based on average spending patterns for UK households.

The CPI does not take into account certain items that are included in the RPI. The Retail Price Index includes council tax, mortgage interest payments, buildings insurance and house depreciation.

Testing patience

Turning his attention to the wider economic recovery, Mr King said "the patience of UK households is likely to be sorely tried over the next couple of years".

"There is little scope for growth in real take-home pay, which may remain weak even as output recovers."

In regards to the continuing global economic recovery, Mr King added that the G20 group of largest world economies should take the lead in formulating new rules for the financial system.

He said countries like the US and UK had to start exporting more, while nations such as China had to boost their domestic spending.

news.bbc.co.uk

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News:

january 14, 2010

Lithuania's new energy quandary

IGNALINA, Lithuania — At an hour before midnight, the last reactor went quiet.

On Dec. 31, the second and final unit of the Ignalina nuclear power plant — a hulking structure in Lithuania’s northeastern forests next to the Latvian border — was shut down, ending 26 years of service and opening a new era of uncertain energy supply for this small Baltic state.

The closure of Ignalina was part of the conditions Lithuania agreed to when it joined the European Union in 2004. The plant was originally built to supply the northwestern portion of the Soviet Union and it was the last surviving plant outside Russia with a RBMK model reactor, which stands for “reaktor bolshoy moshchnosti kanalniy” (high power channel-type reactor). This is similar to the graphite-modulated reactor that blew up at the Chernobyl facility in Ukraine in 1986.

There are differences. Technically, Ignalina’s reactors are not precisely like the one that blew up in Chernobyl. Plus, the accident there was caused by human error when technicians — incredibly — shut down all safety systems and then simulated an emergency situation. The Lithuanians’ safety systems, on the other hand, had undergone extensive (and expensive) upgrades in past years, and their record of minor incidents is one of the world’s lowest, government officials say.

But Brussels looked at Ignalina differently. Ignalina lacked key structures that would further decrease its risk, EU officials said. The EU had inherited a Chernobyl-type reactor, full stop. It had to be closed down.

“It’s not safe,” Kestutis Sadauskas, the EU’s head of commission in Vilnius, said flatly, adding that the facility needs a second “containment sarcophagus” which would provide a second firewall in case of an accident.

Nevertheless, the decommissioning created a mass of complications — and angst — for the Lithuanians, not the least being the question of where Lithuania will now obtain its electricity.

Ignalina produced between 70 and 80 percent of the country’s energy needs. Thanks to it, Lithuania — a nation of 3.5 million without any natural resources of its own, wedged between Poland, Belarus, Latvia and the Russian territory of Kaliningrad — had been energy independent. Now it must look to its neighbors for supplies. What is worrying to some Lithuanians is that Russia, the country’s former political master, will hold the majority of the strings to the country’s energy future for the short and perhaps medium-term.

Lithuania will now produce at least 65 percent of is electricity at the Lietuvos Elektrine plant. That is the minimum, and the figure could rise. Russia will initially supply all the gas needed for the facility. Electricity will also be imported from neighboring countries, but this too may be Russian in origin.

The risks are obvious to anyone living in the former Soviet sphere: Moscow often uses its oil and gas supplies as a cudgel to punish or reward its former satellites. Lithuanian officials say that they foresee no difficulties in working with the Kremlin, but the danger of placing almost all of their eggs in one energy basket is still a consideration. The lessons of Ukraine, where Russia cut off supplies because of a pricing dispute, loom large.

So far, however, there is no need to worry. The country will suffer no shortfall in electricity production. Officials also say that they hope the market will help mitigate any liabilities: If Russia raises its gas prices, they can import more electricity, or import fuel oil — though that solution would be more expensive and less environmental friendly. In any case, they add, they did not really have a choice whether or not to close Ignalina.

“The official position and my own is that politically, we are already committed to closing the plant — so it should be done,” said Zygimantas Vaiciunas, head of the strategic planning division for the Lithuanian Energy Ministry.

Vaiciunas says that, as with any nuclear power plant, Ignalina had to be closed sooner or later. If they attempted to prolong the life of the facility by another few years, as many politicians were calling for, Lithuania risked missing out on a large part of the monies the EU was offering to aid the decommissioning — some $1.2 billion dollars so far.

The costs – both financial and social – will go even beyond this figure, however. The full closing of the plant should last until 2029 and carry a $3 billion price tag — including removing all the nuclear materials. The Vilnius government will have to shoulder some of this amount.

Lithuania at the same time is one of the countries worst hit by the world economic crisis. Its economy shrank by 18 percent in 2009 by some estimates. Ignalina’s disappearance will translate into lost business and jobs in the local economy, and a 30 percent hike in household electricity prices. The plant also produced electricity for export, which constituted by some measurements 1 percent of the country’s total gross domestic product.

But the benefits potentially outweigh the drawbacks, officials say. Aside from the removal of an environmental hazard, Ignalina’s closure will force Lithuania to modernize its energy grid. Integration with its Baltic and Scandinavian neighbors will receive a push, and electrical connections are being planned to Poland and Sweden. A new, state-of-the-art nuclear power plant is also in the works.

These projects, however, are years away from realization, or have been seriously delayed. In the near future, Lithuania’s gas consumption, and therefore dependence on Russia, will probably increase. But Sadauskas, the EU commission head, sees ultimately a society that may rival Sweden in its eco-friendliness and use of clean forms of energy.

“This is a golden opportunity to leapfrog into a post-modern society,” he said. “The Swedes use all renewables and nuclear energy. They couldn't care less about Russian gas.”

By David L. Stern - GlobalPost

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News:

January 19, 2010

SBY did not interfere with Century bailout

The former head of the Presidential Working Unit for Reform Program Management (UKP3R), Marsilam Simanjuntak, says his presence at last year’s meeting to bail out Bank Century was not under President Susilo Bambang Yudhoyono’s orders.

“The President did not send me nor order me to attend the meeting. I also never reported the matter to the President, either before or after the meeting,” he said during questioning with the House of Representatives’ inquiry committee on the Bank Century case in Jakarta on Monday.

Marsilam also stressed his presence in the meeting, dated Nov. 21, 2008, was due to an invitation from the then Financial System Stability Committee (KSSK) secretary, Raden Pardede, and in his capacity as an expert.

Furthermore, Marsilam also said there was nothing special about his presence as the UKP3R had always been set as the working partner for the KSSK, a grouping of the Finance Ministry and Bank Indonesia.

“So it really does not matter whether I attended the meeting as the head of UKP3R or the source. I attended the meeting as both [the UKP3R head and as an expert].”

Marsilam’s presence during the meeting was made known when one of the committee members, Bambang Soesatyo from the Golkar Party, claimed he had a transcript that might have contained a conversation between Finance Minister Sri Mulyani Indrawati and former Bank Century owner Robert Tantular.

It was then revealed that the voice in the transcript did not belong to Robert but to Marsilam.

Realizing the mistake on the identification of Robert in the transcript, legislators then tried to link Marsilam’s presence with the possibility of Yudhoyono’s interference over the decision to salvage Bank Century using a bailout of Rp 6.76 trillion (US$716 million), more than tenfold the original estimation.

During previous inquiries, Mul-yani and former Bank Indonesia governor Boediono, the current Vice President, had also said that Marsilam was invited in his capacity as an expert, particularly on the legal aspects.

On Monday morning, the committee also grilled the former taxation office chief and interim Bank Indonesia governor, Darmin Nasution.

Darmin was questioned because he attended the KSSK meeting in his role as one of the commissioners at the Deposit Insurance Corporation (LPS), an institution whose funds were then used to inject fiscal aid into Bank Century.

The inquiry on Darmin was mostly about his opinion as to whether he deemed that Bank Century possessed a systematic threat to the country’s banking system or not.

Darmin Nasution told the committee that the debate over the potential systematic threat of Bank Century was relevant during that time, which was right in the middle of the global financial crisis.

Darmin then said the decision to save Bank Century was made as a preventive measure to save the country’s economy amid the global financial crisis.

“From a micro point of view, Bank Century was not a systematically threatening bank,” he said.

“However, Boediono reasoned we must put safety first amid the global crisis.”

Hans David Tampobolon , The Jakarta Post , Jakarta

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News:

December 4, 2009

Why Fake Snow Is Filling Beijing's Bird's Nest

In August, soccer giants Inter Milan and Lazio met here for the Italian Super Cup final. In October, a luxurious retelling of Puccini's opera "Turandot" came through for a week-long residence; in November, Formula One stars Michael Schumacher and Jensen Button zoomed around in a rally car race; and next month, thousands of tourists are expected to flood in when the doors are thrown open on a new wintersports wonderland.

No, this is not some Italian alpine retreat — this is Beijing's iconic Bird's Nest Olympic stadium. Eighteen months after the most ostentatious Olympics of all time, the organizers of the Beijing Games are finally facing a reckoning as they try to figure out how to keep their prized centerpiece stadium in the black. It is a quandary that has been faced by almost every other Olympic host city: how to ensure your gleaming new stadium doesn't become a municipal albatross after the two-week Olympic fiesta leaves town. But in Beijing, which does not boast a regular calendar of large-scale sporting events at the best of times, the problem is even more acute.

This time last year, none of this was a problem — the venue simply filled itself. Upwards of 50,000 tourists swelled in every day, shelling out over $7 (RMB 50) apiece just to get into the novel structure — and much, much more to pose for pictures alongside the official Olympic mascots or to stand at the medal podium itself. For the first few months after the Games, the daily operations cost of some $30,000 (RMB 200,000) was easily matched with ticket revenue.

But as Beijing Olympic fever faded, so has interest in its crown jewel. The early plan for the stadium was that it would become the home base for Guoan, Beijing's local soccer team and the current Chinese league champions. But even that team, arguably most popular in the country, seldom attracts more than 10,000 spectators a game, and the team backed out of an agreement to move their meagre fanbase into the 90,000 seater stadium before the Olympics even started. China's struggling national soccer team fares little better in the spectator stakes. (See pictures of the Beijing Olympics.)

The empty seats have left CITIC Investment Holdings, the private management company that ran the Birds Nest, scrambling for other activities to draw the crowds and pay the bills. The result has been a hodgepodge of bizarre offerings. Alongside the rally cars and operas, the Birds Nest has also hosted a mass Tai Chi exercise event and a pop concert by kungfu legend Jackie Chan.

"Happy Snow and Ice Season," kicking off Dec. 19, is the latest get-rich-quick scheme. The program will see the stadium transformed into a frosted extravaganza, complete with a ski-slope, ice rink and 3.7 square miles of artificial snow that is heralded to be one-and-a-half feet deep. There's a lot riding on all that fake fluff; the winter sports park is also the first initiative at the Bird's Nest since the venue came under new management in August. The challenge of maintaining the stadium as a viable and profitable initiative evidently proved too much for CITIC, which quietly offloaded its management rights back to the government just 12 months into a 30-year contract.

Observers speculate that it will be easier for the Beijing government to arrange its own permits to organize the kind of ambitious programs that could keep the stadium out of the red. CITIC is rumored to have abandoned at least one project after state interference in the process. "The government believed it would make a greater profit by running the venue itself," the former deputy general manager of the stadium was quoted as saying after the handover, after he had left his own position. As he told the state-run China Daily, "There was no freedom for me, so I had to quit." The stadium's new managers now hope that the nation's prized Bird's Nest won't be fated to be an empty one.

By Chengcheng Jiang / Beijing, Time.com