WTO set to pick new leader

Updated 06 May 2013
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WTO set to pick new leader

GENEVA: The World Trade Organization is close to choosing its next leader in a final round pitting Brazil against Mexico, with the winner facing the tough task of restoring the clout of global commerce’s rule-setting body.
Brazil’s WTO ambassador Roberto Azevedo and his rival Herminio Blanco, Mexico’s former trade minister, are expected to learn as early as tomorrow whether they have won a contest that is seen as too close to call.
All concerned are keenly aware that the successor to two-term director general Pascal Lamy from France must act fast to revive the WTO’s moribund global trade talks.
Both men have pitched a similar vision for a negotiating process which they say needs overhauling.
“The multilateral trading system is weakened by a complete paralysis in the negotiations,” Azevedo said, explaining it was time to “unclog the system.”
Blanco, meanwhile, said it was time to reboot the 159-nation WTO.
“The main challenge is the ‘W’ in ‘WTO’,” he said, underlining that the logjam had pushed members into negotiating bilateral and regional deals.
“You have to transfer this energy back to Geneva,” where the WTO is based, to prove the point and reach of the organization, he said.
Supporters of a WTO-wide deal warn that other accords can create a “spaghetti bowl” of conflicting rules, thereby failing to serve global commerce.
Created in 1995, the WTO aims to spur growth by opening markets and removing trade barriers, including subsidies, excessive taxes and regulations.
The stated goal of its “Doha Round,” launched at a summit in Qatar in 2001, is to deploy trade to develop poorer economies.
But members repeatedly have clashed over the give and take needed to reach a deal, with deep splits notably between China, the European Union, India and the United States.
Some have blamed Lamy, a former EU trade chief, who raised hackles with an alleged name-and-shame drive to break the deadlock after he won a second term in 2009.

Amid fears that December’s WTO summit in Bali could fail, the new director general will have to act fast after taking over on September 1.
“The new DG obviously will come in at a rather precarious time for the WTO,” said Sergio Marchi, Canada’s former trade minister and ex-WTO ambassador.
Besides working the diplomatic circuit, Marchi told AFP, the new leader must repair ties with the business community — the hub of global commerce.
“The business community has taken the view, ‘Call me when you’re serious’... Obviously getting Doha together is a challenge, but if the institution is seen as irrelevant, it is irrelevant,” he said.
“You don’t have to have an agreement in your first six months, but there’s got to be movement and momentum,” he added.
Against that background, Blanco seems to have the advantage.
The 62-year-old economist was Mexico’s negotiator for the 1994 North American Free Trade Agreement and has solid private sector credentials, running an international trade consultancy and sitting on US, Asia and European company boards.
“My candidacy is a package of skills, experience, ambition and creativity,” he said.
But Azevedo’s insider status could be key.
The 55-year-old career diplomat was Brazil’s chief litigator in a raft of WTO disputes before becoming ambassador in 2008.
“In the WTO today, you don’t have any low-hanging fruit. You have to go up the tree, grab the fruit and bring it down. And if you don’t know the system, and don’t know the trees, you’re not going to get the fruit,” he said.
Marchi underlined the symbolism of a Latin American WTO leader.
“It’s the emerging economies that are now the economic locomotive globally, and both Brazil and Mexico have done tremendously well thanks to trade,” he said.
The WTO’s leader is not formally elected, but picked by consensus, with senior diplomats sounding out the member states to see who has most support.
The rules were set after an ugly 1999 race which led to New Zealand and Thailand splitting the job, before Lamy won in 2005.
The WTO’s two previous chiefs were Irish and Italian, and with France following Thailand, developing nations have been keen to claim the top post.
An unprecedented nine candidates ran this time around.
Those who fell at the first fence in mid-April were from Kenya, Ghana, Jordan and Costa Rica, while Indonesia, South Korea and New Zealand stumbled at the end of the month.
Both Azevedo and Blanco underline their broad support from rich, emerging and poor nations.
But a range of diplomats told AFP they were unhappy with a final choice between two Latin Americans, while Kenya and South Korea raised concerns at WTO meetings.
Kenya’s WTO ambassador Anthony Andanje told AFP, however, that it was a matter of making the disquiet known, rather than aiming to block the process.


Gulf companies challenged by debt and rising interest rates

Updated 22 min 26 sec ago
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Gulf companies challenged by debt and rising interest rates

  • Debt restructurings on the rise, but below crisis levels
  • Central Bank of the UAE has raised interest rates four times since last March

There has been an uptick in recent months in heavily-borrowed companies in the Gulf seeking to restructure their debts with lenders. Although the pressure on companies is not comparable to levels witnessed in the region following the 2008 global financial crisis, rising interest rates will eventually begin to have a greater impact, say experts.
Speaking exclusively to Arab news, Matthew Wilde, a partner at consultancy PwC in Dubai, said: “We do expect that interest rate increases will gradually start to impact companies over the next 12 months, but to date the impact of hedging and the runoff of older fixed rate deals has meant the impact is fairly muted so far.”
The Central Bank of the UAE has raised interest rates four times since the start of last year, in line with action taken by the US Federal Reserve. The Fed has signalled that it will raise interest rates at least twice more before the end of the year.
Wilde added that there had been a little more pressure on company balance sheets of late, although “this shouldn’t be overplayed”.
Nevertheless, just last week, Stanford Marine Group — majority owned by a fund managed by private equity firm Abraaj Group — was reported by the New York Times to be in talks with banks to restructure a $325 million Islamic loan. The newspaper cited a Reuters report that relied on “banking sources”.
The Dubai-based oil and gas services firm, which has struggled as a result of the downturn in the hydrocarbons market since 2014, has reportedly asked banks to consider extending the maturity of its debt and restructuring repayments, after it breached certain loan covenants.
A fund managed by Abraaj owns 51 percent of Stanford Marine, with the remaining stake held by Abu Dhabi-based investment firm Waha Capital. Abraaj declined to comment.
Dubai-based theme parks operator DXB Entertainments struck a deal last month with creditors to restructure 4.2 billion dirhams ($1.1 billion) of borrowings, with visitor numbers to attractions such as Legoland Dubai and Bollywood Parks Dubai struggling to meet visitor targets.
Earlier this month, Reuters reported that Sharjah-based Gulf General Investment Company was in talks with banks to restructure loan and credit facilities after defaulting on a payment linked to 2.1 billion dirhams of debt at the end of last year.
Dubai International Capital, according to a Bloomberg report from December, has restructured its debt for the second time, reaching an agreement with banks to roll over a loan of about $1 billion. At the height of the emirate’s boom years, DIC amassed assets worth about $13 billion, including the owner of London’s Madame Tussauds waxworks museum, as well as stakes in Sony and Daimler. The firm was later forced to sell most of these assets and reschedule $2.5 billion of debt after the global financial crisis.
Wilde told Arab News: “We have seen an increasing number of listed companies restructuring or planning to restructure their capital recently — including using tools such as capital reductions and raising capital by using quasi equity instruments such as perpetual bonds.”
This has happened across the region and PwC expected this to accelerate a little as companies “respond to legislative pressures and become more familiar with the options available to fix their problems,” said Wilde.
He added that the trend was being driven by oil prices remaining below historical highs, soft economic conditions, and continued caution in the UAE’s banking sector.
On the debt restructuring side, Wilde said there had been a “reasonably steady flow of cases of debts being restructured”.
However, the volume of firms seeking to renegotiate debt remains small compared to the level of restructurings witnessed in the aftermath of Dubai’s debt crisis.
Several big name firms in the emirate were caught out by the onset of the global financial crisis, which saw the emirate’s booming economy and real estate market go into reverse.
State-owned conglomerate Dubai World, whose companies included real-estate firm Nakheel and ports operator DP World, stunned global markets in November 2009 when it asked creditors for a six-month standstill on its obligations. Dubai World restructured around $25 billion of debt in 2011, followed by a $15 billion restructuring deal in 2015.
“We would not expect it to become (comparable to 2008-9) so barring some form of sharp external impetus such as global political instability or a protectionist trade war,” said Wilde.
Nor did he see the introduction of VAT as particularly driving this trend, but rather as just one more factor impacting some already strained sectors (e.g. some sub sectors of retail) “which were already pressured by other macro factors.”