Business

FRANKFURT/MOSCOW — Germany's Siemens tried to distance itself from a Crimean sanctions scandal on Friday, halting deliveries of power equipment to Russian state-controlled customers and reviewing supply deals.

The industrial group said it now had credible evidence that all four gas turbines it delivered a year ago for a project in southern Russia had been illegally moved to Crimea, confirming a series of Reuters reports over the past weeks.

The move is embarrassing for Russia which stands accused of disregarding EU sanctions and of flouting its original agreement with Siemens and it also risks making European companies more cautious about doing business there. The Kremlin declined to comment, saying it was a matter for the companies involved.

Siemens said it had not yet found proof that it had violated sanctions itself, reiterating that the turbines had been locally modified and unlawfully moved to Crimea against its will and in breach of contractual agreements.

Crimea is subject to EU sanctions on energy equipment since Russia annexed the Black Sea peninsula in 2014. Russian President Vladimir Putin has promised to provide the region with a stable energy supply.

"This development constitutes a blatant breach of Siemens' delivery contracts, trust and EU regulations," Siemens said. 

Siemens said it would "take immediate and decisive action" if it discovered further indications that export control regulations had been violated.

Siemens shareholders appeared supportive of its response.

Fund manager Max Anderl of UBS Asset Management, one of the top 20 investors in Siemens, said: "You could ask for the products back but if the customer does not cooperate there is little that can be done. The quick reaction time and the decision taken today show strong governance."

Siemens said it would now divest its minority stake in joint venture Interautomatika (IA), which sources have told Reuters was involved in the installation and commissioning of the turbines in Crimea, and suspend its two representatives on IA's supervisory board. Siemens has a 45.7 per cent stake in the business.

Siemens said it had also reviewed its licensing agreements with Russian companies associated with the matter, and was reviewing potential cooperation between its subsidiaries and other entities around the world regarding deliveries to Russia.

Matthias Schepp, head of the German-Russian chamber of commerce, said: "German companies ought to be able to depend on contracts being upheld."

He added: "The German-Russian chamber of commerce is not aware of any violations on the part of German companies."
Long history 

Munich-based multinational Siemens has been active for 170 years in Russia, where its primary activities are supplying energy equipment and rail technology. 

Its business there has slowed in recent years as the Russian economy struggled with the falling oil price and the impact of sanctions. Siemens made sales of 1.2 billion euros ($1.4 billion) in Russia last year, about 2 per cent of its total.

German business weekly Wirtschaftswoche reported this week that President Vladimir Putin last September promised Sigmar Gabriel, then economy minister and now foreign minister, that the turbines would not end up in Crimea.
Dmitry Peskov, Putin's spokesman, declined to comment when asked by Reuters on Friday whether that was true.

It was not clear whether Russia might retaliate against Siemens by ending cooperation in other areas. Russia uses Siemens trains on its high speed Sapsan rail network. However, those trains cost Moscow over 1 billion euros to buy and cover with a 30-year Siemens service contract.

Siemens also has a joint venture in Russia which manufactures passenger trains. 

Siemens said it would put in place additional controls to ensure that energy equipment in future will only be dispatched once Siemens has confirmed it can be installed at the agreed destination.

Any new business in gas turbine equipment will be executed only by its majority-owned Siemens Gas Turbines Technologies joint venture with Russia's Power Machines, and its wholly owned subsidiary, OOO Siemens, it said.

Siemens spokesman Wolfram Trost said the Crimean affair had not sparked a wider review of compliance at Siemens, which battled a worldwide bribery scandal a decade ago, resulting in a then-record $1.6 billion fine from the US Justice Department.
Siemens renewed its offer to buy back the turbines and cancel the original contract with state-owned Technopromexport (TPE), against whom it is taking legal action intended to stop further deliveries to Crimea and to return the turbines to their original destination of Taman in southern Russia.

Evgeny Rodin, partner at Moscow law firm Vegas Lex, said he doubted the turbines would be returned. "One can assume that while the legal case is ongoing the turbines will be installed," he said.

Russia will press ahead with plans to build two new power stations in Crimea, said Andrei Cherezov, a Russian deputy energy ministry, the RIA news agency reported.

Technopromexport, which is now building the new Crimean power plants, did not respond to a request for comment on Friday.

BEIRUT — An Algerian biomedical engineer is on a mission to make it easier for women to find work in Saudi Arabia by creating the first job-searching website for females in the deeply conservative kingdom. 

Australian-born Naziha Deriche, 23, who was raised in Saudi Arabia, realised after completing her postgraduate studies in Sydney last year that it was hard for her and her friends to find jobs in Saudi Arabia.

"Most of the jobs advertised are... for males in Saudi Arabia. And the working environment is mainly very male dominated here so I felt that there was a problem, sort of a gap," Deriche told the Thomson Reuters Foundation by phone.

So she set up a free website in March this year called "Alajnabia” or foreigner in Arabic, with the aim of increasing the amount of women in the workforce by connecting job seekers with recruiters.

"It's an ironic word. The reason we used that word 'foreign' is the fact that the idea of women working here in Saudi Arabia is so foreign," said Deriche, speaking from Dubai where she is working because she couldn't find a job in her field in Saudi Arabia.

Saudi Arabia is known as one of the world's most gender-segregated nation, where women live under the supervision of a male guardian, cannot drive, and in public should wear head-to-toe black garments. 

But the kingdom is trying to diversify its economy and reduce its reliance on oil with its Vision 2030 economic reform plan setting a target to lift women's participation in the workforce to 30 per cent by 2030 from 22 per cent. 

Women can now work in certain retail and hospitality jobs and this year the Saudi Stock Exchange appointed its first female chair, Sarah Al Suhaimi.

Deriche said she and her friends saw the main issue with female unemployment as not just the few available jobs but also poor advertising. 

Deriche, who is working with 40 recruitment agencies, said the website has had 1,000 resumes uploaded since it was set up and keeps growing.

On the site job seekers can look for work and also employers can advertise jobs and look at the women's resumes.

Jobs are also advertised on website's social media platforms.

"We're creating a healthy environment for competition where people are hired based on their skills, their qualifications, their abilities — rather than connections, or through word of mouth, or through knowing someone," said Deriche. 

"I know people may think it's just a job board, but it was more of a social initiative. I wanted it to be something to simulate women empowerment."

ATHENS — Greek hotel and restaurant employees walked off the job on Thursday to protest against labour reforms prescribed by the country's official creditors in exchange for bailout funds that help Greece stay afloat. 

The Mediterranean country, which has signed up to three bailouts with the European Union and the International Monetary Fund since 2010, relies on tourism to emerge from a huge debt crisis. Summer is its peak tourist season. 

With about 25 million people visiting the country annually, the sector accounts for about 18 per cent of Greece's economic output and employs a fifth of its workforce.

"Tourism grows on workers' backs," read a poster in Athens.

Hundreds of workers rallied in central Athens as part of the 24-hour strike against legislated reforms allowing flexible forms of work and a lower minimum wage for young employees and weakening sectoral wage agreements.

The left-led government was first elected in 2015 on a mandate to increase wages and protect labour rights. 

Anti-austerity strikes are frequent in Greece but turnout in protests has been low in recent years due to despair and fatigue after seven years of austerity that have slashed incomes and sent tens of thousands out of work. 

The jobless rate, at 21.7 per cent in April, remains the eurozone's highest.

LONDON — Britain’s public broadcaster BBC came under fire on Wednesday for its gender pay imbalance after it was forced to reveal how much it pays its top-earning talent.

For the first time in its 94-year existence, the BBC was this year forced to release a list of its employees paid more than £150,000 ($195,000, 170,000 euros) between 2016/2017, after a change in its charter last year.

More than 200 names feature on the list — which includes executives, actors, presenters, writers and technicians — but only one third are women.

Former Top Gear host Chris Evans was revealed to be the highest-paid person, earning over £2.2 million, while presenter Claudia Winkleman was named as the top female earner, pocketing more than £450,000.

Winkleman hosts “Strictly Come Dancing”, Britain’s version of “Dancing With The Stars”.

In a statement, the BBC’s Director General Lord Hall defended the organisation as “more diverse than the broadcasting industry and the civil service” but admitted that “there is more to do”.

“We’ve set a clear target for 2020: we want all our lead and presenting roles to be equally divided between men and women,” he added.

Culture Secretary Karen Bradley told parliament last year that releasing the list would ensure the organisation “produces value for money” for licence fee payers and that more transparency could lead to savings.

Britain’s licence fee, which pays for the BBC, stands at £147 per year.

But Hall defended the organisation’s high salaries, telling BBC radio earlier in the day that it operates in a “very competitive market”.

He argued that the BBC had reduced talent salaries by 25 per cent in the past four years and said publishing the list was a “bad idea” because it could tempt other companies to poach talent.

Questioned on Twitter over his pay, former footballer turned presenter Gary Lineker revealed that he had turned down higher salary offers from a privately owned broadcaster “because I love and value my job and BBC Sport”.

Lineker was the BBC’s second-highest earner last year, pocketing £1.7 million.

Among the other well-known names on the list are ex-tennis professional John McEnroe (more than £150,000) and Doctor Who actor Peter Capaldi (over £200,000).

Presenter Graham Norton also appeared on the list for his radio hosting duty for which he pocketed £850,000, but his overall income is believed to be much higher.

The sum did not include his salary for his famous chat show because it is produced by an independent company.

TEPIC, Mexico — Sweden, the Netherlands and Germany are among the best placed wealthy countries to cope with shocks like large-scale migration due to their strong safety nets, education programmes and economic opportunities, said a global report by KPMG.

Switzerland took first place overall in KPMG’s “Change Readiness Index”, which measures the ability of 136 countries to respond to shocks and long-term trends, such as natural disasters, economic crises and climate change.

Britain, in the early stages of Brexit negotiations to leave the European Union, moved into the top 10. The United States moved up eight places to 12, while Syria and Somalia ranked bottom of the list.

“The countries that tend to be doing better are the ones who have a more inclusive approach to growth,” said Trevor Davies, global head of KPMG’s International Development Assistance Services.

“There’s increasing expectations by citizens who are increasingly better educated, better informed, more engaged, they want to see greater equity,” he told the Thomson Reuters Foundation. 

The biennial index by the accounting and advisory firm analyses the capacities of business, government and civil society, with findings highlighting areas that need improvement — potentially helping policy makers, companies and aid donors, said Davies.

When it comes to migration, national income alone is not a clear indicator of a country’s capacity to accommodate new arrivals, with Spain and Greece struggling to cope, according to the report. 

It said Jordan and Lebanon lacked sufficient capacity to absorb refugees, which also proved a major strain for Chad.

Among African countries, Rwanda was “punching very much above its weight,” with a focus on strengthening its economy and governance helping push it to number 43, above Greece.

Chad, Sudan and South Sudan ranked among the five countries least able to cope with shocks.

Oil-rich Nigeria’s position at 120 demonstrated “wealth in itself is not enough” to prepare countries for change, said Davies, noting it has failed to cut poverty or create enough jobs for its growing population.

High levels of inequality limit the capacity of Latin American countries to respond to shocks, Davies said. While high-income Chile and Uruguay both ranked among the top 30, Mexico stood at 71 and Brazil at 79, with Venezuela languishing at 119 and Haiti at 123.

“Income inequality is one of the key factors that’s holding back a number countries. The countries towards the top of the index that have greater income equality are certainly more prepared for change as they have a greater degree of flexibility in the economy,” said Davies.

In Asia, Singapore slipped from the global top spot to number four, while Japan stood at 21 and China at 36.

Afghanistan ranked lowest among Asian countries for its ability to respond to shocks at 127.

While Asia’s enterprise sector was strong, countries needed to ensure the benefits of growth were better spread across society, said Davies. The region faces complicated demographic challenges with Japan’s population ageing and India’s yet to peak.

RAMALLAH, West Bank — Careem, a Middle Eastern rival to Uber, has become the first ride-hailing firm to operate in the Israeli-occupied West Bank.

Dubai-based Careem, whose name is a play on the Arabic word for generous or noble, launched in Ramallah in June, aiming to bring digital simplicity to the Palestinian territory.
There is certainly a market for easier ride-hailing among the nearly 3 million Palestinians living in the West Bank, but the fact the mobile network is still 2G, that electronic payments are not the norm and that Israeli checkpoints are common, make using the service somewhat cumbersome.

Yet, Careem is optimistic about the potential.

“We are planning to invest hundreds of thousands of dollars within the coming year in the [Palestinian] sector,” Kareem Zinaty, operations manager for the Levant region said. “After the investment, it is also an opportunity to create jobs.”

Careem, which was launched in 2012 and now operates in 12 countries and more than 80 cities across the Middle East, Africa, and South Asia, has said it aims to provide work for one million people across the region by 2018.

Careem’s  captains

While a version of Uber and Israeli app Gett already operate in Israel, they do not venture into Palestinian territory. Drivers are excited to work with Careem, which they hope will help boost their incomes, especially with unemployment in the West Bank running at nearly 20 per cent.
“It’s a very wonderful opportunity,” said one of the more than 100 new drivers, known as “captains” by Careem. “Most of the people who use it are young and happy with the price.”

Palestinians have limited self rule in parts of the West Bank, which they want for a future state alongside East Jerusalem and the Gaza Strip. Israel captured those areas in the 1967 Middle East war. It withdrew from Gaza in 2005, but still occupies the West Bank and East Jerusalem.

Under interim peace accords, Israel still controls 60 per cent of the West Bank, where most of its settlements are located. Careem’s drivers have Palestinian licence plates, meaning they usually cannot enter Israeli-controlled areas.

In 2015, Israel and the Palestinian Authority agreed to expand 3G mobile access to the West Bank by 2016, but have yet to implement the agreement. In the meantime, the Ramallah municipality has set up public WiFi in parts of the city centre, allowing Apps like Careem to be used more easily.

Despite 2G’s slower service, Zinaty said their model was an opportunity for telecommunication companies to look into expanding services and technologies to better serve Palestinian start ups and businesses.

ANKARA — Turkey’s economic growth this year will fall slightly short of the government’s forecast, a Reuters poll found, suggesting not all investor concerns following an April referendum giving President Recep Tayyip Erdogan sweeping new powers have eased.

While growth forecasts are better than they were three months ago — alongside a rising stock market and a more stable lira — projected growth rates are still well below half the expected inflation rate, suggesting not all is well.

On April 16, Turks voted by a thin margin to back constitutional changes to create an executive presidential system, in which Erdogan could remain in power until at least 2029.

The government has said the changes would boost growth as they will make it easier to push through reforms to labour and tax laws, but investors have voiced concern about Erdogan’s further consolidation of power and his grip on monetary policy.

“I think the drivers of growth - including rapid credit growth, loose fiscal policy and a rebound in the tourism sector — are unlikely to last too long,” said William Jackson of London-based consultancy Capital Economics.

“I suspect that GDP growth will probably peak in Q3, then slow sharply,” Jackson added. 

Growth in 2017 is estimated at 3.9 per cent, according to the poll of 41 economists, slightly below the government’s official forecast of 4.4 per cent, but well above the previous Reuters poll in April which predicted 2.6 per cent.

For 2018, growth is seen at 3.3 per cent, the poll showed.

Widespread purges since last July’s coup attempt, in which some 150,000 people have been sacked or suspended from jobs in the civil service and private sector and more than 50,000 have been detained, have also alarmed rights groups and Turkey’s Western allies.

In the aftermath of the abortive putsch, the lira hit a series of record lows, and the economy saw a 1.3 per cent contraction, with concerns about the political situation also pushing up consumer prices. Both the lira and inflation have since shown signs of recovery.

After hitting a eight-and-a-half-year high just below 12 per cent in April, Turkish inflation cooled in May and June, on a drop in food prices to a little under 11 per cent increase in annual consumer prices.

The poll predicted inflation would remain high at 10 per cent by end-year, not far below the current level. The lira has firmed somewhat from a record low of 3.94 against the US dollar in January.

LONDON — Sterling slipped back below $1.31 on Monday, with signs of division as the Conservative government wades into Brexit talks weighing on the currency after it soared to its highest levels in 10 months.

Four days of Brexit negotiations began in Brussels on Monday with the UK papers full of warnings from academics, commentators and former senior civil servants of the chaos that the process may generate for British government and business. 

The pound jumped almost 2 cents on Friday to hit $1.3113 , its strongest since last September, after US inflation and retail sales data came in weaker than expected, putting into doubt the prospect of a further rate hike from the Federal Reserve this year.

But sterling started the week by edging down from those highs, trading down 0.3 per cent on the day at $1.3058 and 87.84 pence per euro respectively.

“It does look like there is a bit of independent sterling weakness and politics is the obvious source,” said Gavin Friend, an analyst with National Australia Bank in London. 

“I can’t get enthusiastic about the pound at these levels. After a weekend when the Tory party has appeared to be tearing itself apart over Brexit, those people who have sterling to sell will be doing so anywhere around 1.30.”

Finance Minister Philip Hammond, who has championed a softer form of Brexit, bore the brunt of a series of critical newspaper stories over the weekend about what was said at private government meetings. He said he was being attacked because of his views on Brexit.

Brexit Secretary David Davis, in the Belgian capital for talks with the European Union’s chief negotiator Michel Barnier a month after a first meeting, said on Monday that having “made a good start” during their last encounter, “this week we’ll be getting into the real substance”.

With less than two years to settle divorce terms before Britain leaves, deal or no deal, on March 30, 2019, the 27 other EU national leaders want British Prime Minister Theresa May to rally her divided nation swiftly behind a clear, detailed plan that can minimise economic and social disruption across Europe. 

Investors will be watching the talks closely, with any signs that Britain will lose preferential access to Europe’s single market likely to weigh on the currency. 

“It seems that the British government wants to [take] major steps towards the EU in the upcoming round of negotiations... It has for example admitted by now that it would meet its financial obligations towards the EU — an auspicious beginning,” wrote Commerzbank analysts in a note to clients.

“The situation remains difficult for the pound; however, as the recent reports of domestic political quarrels in the UK show... In the short term, it may not be a breakdown of the Brexit negotiations, but a breakdown of the British government which is the biggest risk for sterling.” 

Some analysts, though, said sterling’s main drivers at the moment were less about politics and more about the economy and the outlook for monetary policy. Recent warnings from Bank of England policymakers that interest rates could be set to rise have provided support to the currency. 

Investors will be watching British inflation data due on Tuesday closely. 

“It seems that monetary policy is having more weight than the Brexit talks; if Tuesday’s inflation figures from the UK surprise to the upside, expect sterling to continue rallying,” wrote FXTM strategist Hussein Sayed. 

BEIJING — China posted better-than-expected growth in the second quarter, official data showed on Monday, but authorities warned that the world’s second largest economy faces external and internal risks.

The economy expanded by 6.9 per cent, the same as the first three months of the year, according to the statistics bureau, and better than the 6.8 per cent growth forecast by analysts polled by AFP.

“The national economy has maintained the momentum of steady and sound development in the first half of 2017, laying a solid foundation for achieving the annual target and better performance,” national statistics bureau spokesman Xing Zhihong said.

“However, we must be aware that there are still many unstable and uncertain factors abroad and long-term structural contradictions remain prominent at home,” Xing told reporters.

Debt-fuelled investment in infrastructure and real estate has underpinned China’s growth for years, but warnings of a potential financial crisis have spurred Beijing to clamp down.

In the latest alert, Fitch Ratings on Friday said China’s growing debt could trigger “economic and financial shocks” even as it maintained its A-plus rating for the country. 

That follows Moody’s decision in May to downgrade China for the first time in almost three decades on concerns over its ballooning credit and slowing growth. 

President Xi Jinping called for tougher regulations to crack down on financial risks during a National Financial Work Conference, which sets the tone for reforms, according to the official Xinhua news agency.

The government will continue to deleverage the economy through prudent monetary policy and by reducing leverage in state-owned enterprises, Xi said.

The conference showed that authorities will intensify financial regulation “unprecedentedly, through a much more centralised and empowered organisational set-up,” ANZ’s chief China economist Raymond Yeung said in a note.

“Debt reduction will become an important consideration in monetary policy,” Yeung said.

Despite the economic deleveraging, however, “we do not think this event will trigger an immediate monetary tightening.”

Analysts expect that tighter restrictions on property purchases and bank lending will continue to weigh on the economy in the months ahead. 

But a sharp slowdown in the second half is unlikely as policymakers prepare for an important Communist Party congress later this year that will likely make Xi the most powerful leader in a generation. 

“It is therefore highly probable that authorities will use the resources and policy tools at their disposal to ensure a positive economic outcome,” Citibank said in a note.

The government has trimmed its 2017 GDP growth target to around 6.5 per cent, after it expanded by 6.7 per cent in 2016 -- its slowest rate in more than a quarter of a century.

Despite growing concerns about China’s financial risks, Premier Li Keqiang said last month that the country could reach this year’s economic growth targets.

Last quarter’s growth momentum had continued into the current one, he said, noting that traditional economic indicators such as power generation and consumption, and new business orders had increased “significantly”.

CAIRO — The International Monetary Fund (IMF) has approved a second tranche of a $12 billion loan to Egypt, praising the country's tough economic reforms that have fuelled inflation.

In a statement on Thursday, IMF Managing Director Christine Lagarde said the approval of the roughly $1.25 billion tranche showed "the IMF's strong support for Egypt in these efforts”.

The IMF and Egypt had agreed the loan last November, as the North African country devalued the pound and after it introduced a value-added tax in a bid to boost government finances and its foreign reserves.

Egypt has also slashed fuel subsidies, most recently last month.

"We believe that these efforts will yield results," Lagarde said in the statement.

But concerns remained about inflation, which hit 32.9 per cent in April before declining slightly in May.

"The authorities' immediate priority is to reduce inflation, which poses a risk to macroeconomic stability and hurts the poor. The Central Bank of Egypt has taken significant steps to reduce inflation by raising policy interest rates and absorbing excess liquidity," said David Lipton, the IMF's acting chair, in a statement.

The government in June announced an increase in fuel prices of up to 55 per cent, the second since November when it also floated the currency.

Analysts believe the fuel price rises will further increase inflation.

The pound has also continued to trade at a rate that is lower than was expected before the flotation.

The pound trades at about 18 to the dollar, compared with 8.9 before November.