Business

SINGAPORE — New hiring rules favouring Singaporeans kicked in Friday as part of measures aimed at addressing citizens' complaints about foreigners stealing jobs from them.

Singapore-based companies needing professional workers now have to advertise on an online "Jobs Bank" for at least 14 days before they can seek an employment pass for a foreigner.

The government-run website will match employment opportunities with profiles of locals seeking employment or a change of jobs. 

Singapore citizens and permanent residents looking for employment must create an account on the jobs bank that will allow them to apply for vacancies.

The portal offers vacancies in sectors such as accounting, banking, engineering, the sciences and sales. More than 16,000 positions are currently available, about half of them for professionals, managers and executives.

In a blog post on Thursday, the manpower ministry said it will scrutinise firms that have "a disproportionately low concentration of Singaporeans" at the professional level, as well as those that are accused of "nationality-based or other discriminatory" hiring practices. 

Firms with 25 or fewer staff, or those recruiting for jobs paying Sg$12,000 ($10,000) and above a month, will be exempted from the advertising rule.

The manpower ministry said it will provide support to companies with low numbers of Singaporean employees on "how to go about their training needs and grow a Singaporean core in their workforce". 

The American Chamber of Commerce (AmCham) in Singapore welcomed the new rules. 

"AmCham members anticipate that the new policy will help them reach a larger pool of qualified local applicants," James Andrade, the group's chairman, said in a statement.

Authorities have been phasing in measures to tighten worker inflows after facing criticism from Singaporeans, who accuse foreigners of competing with them for jobs, housing, schools, medical care and space in public transport.

Discontent spilled into general elections in 2011 when the ruling People's Action Party garnered its lowest-ever vote count after more than 50 years in power. 

The city-state's low birth rate had initially prompted the government to grant an average of 18,500 new citizenships every year between 2008 and 2012, helping the population surge by 30 per cent since 2004 to 5.4 million last year.

About 38 per cent of Singapore's total workforce of 3.44 million people are non-residents. There were 175,100 foreigners holding employment passes as of December 2013.

Another 770,000 hold work permits for lower-end jobs in construction, marine industries and other sectors shunned by Singaporeans. Some 215,000 foreign women work as domestic helpers.

NEW YORK — A majority of Wall Street's top bond firms see no move by the Federal Reserve (Fed) to raise interest rates before the second half of next year, and most see the US central bank sticking with a range rather than a specific target for the key fed funds rate, a Reuters survey showed on Friday.

The results are otherwise broadly unchanged from a survey taken in early June.

Twelve of 18 primary dealers, or the banks that deal directly with the Fed, said the US central bank's first rate increase would occur between July 2015 and June 2016. All but three of the 22 primary dealers participated in the survey.

The view that ultra-loose policy would continue for some time persisted after Friday's monthly employment report, which showed the US economy added more than 200,000 jobs for a sixth straight month in July — a string of gains not seen since 1997 — and after data earlier in the week showed the economy grew at a faster-than-expected 4 per cent annual rate in the second quarter.

Non-farm payrolls increased 209,000 last month, missing economists' median expectation of a gain of 233,000, after surging by 298,000 in June.

"It fits into [the Fed's] view of the world. There's progress in job growth, but slack is still ample. There was no growth in average hourly earnings," noted Jay Feldman, economist at Credit Suisse in New York.

Concern about wage inflation intensified on Thursday as data showed US labour costs recorded their biggest gain in more than 5-1/2 years in the second quarter. However, Friday's data showed average hourly earnings rose only one cent last month.

In the survey, 15 of 17 Wall Street firms expected the Fed would stop reinvesting the proceeds from maturing bonds it holds on its $4.4 trillion balance sheet after or around the same time as the first rate increase. That compares with 12 out of 17 who responded that way a month ago.

Fed seen setting range 

The most marked difference from June's survey was that most dealers now expect the Fed to target the funds rate at a range, rather than keeping a specific rate level as it customarily did before the latest financial crisis. A month ago just two of 16 dealers saw the Fed opting for a range.

Since December 2008, the Fed has targeted a range of zero to 0.25 per cent for its key funds rate.

In Friday's survey, nine dealers forecast the Fed would target a range of 0.25-0.50 per cent once it begins to raise interest rates. Two more see a range with 0.50 per cent as the upper band, with the lower ends at 0.30 per cent and 0.35 per cent. A sole dealer forecast the range to be between 0.175 per cent and 0.375 per cent.

Among the five dealers that see a specific target for the fed funds rate, three have it pegged at 0.50 per cent and two at 0.25 per cent once it begins to rise.

Among 15 primary dealers, the median forecast for the Fed's long-term neutral target rate, which is seen as a level that promotes growth without firing up inflation, was 3.5 per cent. This was below the current 3.75 per cent estimate from the Federal Open Market Committee, the central bank's policy-setting group.

KUALA LUMPUR — Any airline would struggle with the devastating impact of losing one jet full of passengers, especially if it had already been bleeding money for years.

But losing another just months later is pushing crisis-hit Malaysia Airlines to the brink of financial collapse, airline experts said, spotlighting whether it can steer its way out of extended turmoil as once-troubled carriers such as Korean Air and Garuda Indonesia did before.

The flag carrier needs an immediate intervention from the Malaysian government investment fund that controls its purse strings, and likely deep restructuring, to survive the twin tragedies of flights MH370 and MH17, analysts added.

Malaysia Airlines (MAS) was already struggling with years of declining bookings and mounting financial losses when MH370’s mysterious disappearance in March with 239 people aboard sent the carrier into free-fall.

The July 17 downing of flight MH17 over Ukraine, which killed all 298 people on board, deeply compounds those woes.

“The harrowing reality for Malaysia Airlines after MH17 is that if the government doesn’t have an immediate game plan, every day that passes will contribute to its self-destruction and eventual demise,” Shukor Yusof, an analyst with Malaysia-based aviation consultancy Endau Analytics, told AFP.

Shukor indicated that MAS was losing “$1-$2 million a day”, and has “the bandwidth to stay afloat for about six more months based on my estimates of its cash reserves”.

Image is everything 

While the MH17 disaster was beyond the airline’s control — pro-Russia separatists in Ukraine stand accused of shooting it down with a missile — bookings are expected to take a further significant hit, as they did in MH370’s wake.

“I’m not considering going to Malaysia in the next few years. Not unless Malaysia Airlines acts or does something in the future that will allow people to feel more relaxed about travelling there,” said Zhang Bing, a Chinese national in Beijing. 

Jonathan Galaviz, a partner at the US-based travel and tourism consultancy Global Market Advisors, said “perception is key in the airline industry”.

“Unfortunately for Malaysia Airlines, potential international customers are now going to link the brand to tragedy,” he added.

The airline already has announced refunds for ticket cancellations following MH17, which Galaviz noted would cost millions of dollars.

Speculation is rife that state investment vehicle Khazanah Nasional, which owns 69 per cent of the airline, will delist its shares and take it private, which could set the stage for painful cost cutting measures and other reforms. 

Analysts have long blamed poor management, government interference, a bloated workforce, and powerful, reform-resistant employee unions for preventing the airline from remaining competitive.

MAS lost a combined 4.1 billion ringgit ($1.3 billion) from 2011-13. It bled a further 443 million ringgit in the first quarter of this year, blaming MH370’s “dramatic impact” on bookings.

Khazanah declined to comment on future plans for the airline.

But writing in Britain’s Sunday Telegraph on Sunday, Hugh Dunleavy, Malaysia Airlines’ commercial director, stated that the carrier “will eventually overcome this tragedy and emerge stronger”.

The Malaysian government had begun to speed up its review of the airline’s future — started after the disappearance of MH370 — following the second tragedy, Dunleavy wrote.

“There are several options on the table but all involve creating an airline fit for purpose in what is a new era for us, and other airlines,” he indicated. “With the unwavering support we have received from the Malaysian government, we are confident of our recovery, whatever the shape of the airline in future.” 

Rising from the ashes 

Other airlines have risen from the ashes, lessons that could be instructive for MAS, experts said.

Indonesia’s state-owned Garuda Indonesia was plagued by a series of problems in the 1990s and early 2000s, including heavy debts and the murder of a prominent human rights campaigner mid-air in 2004. 

Safety problems also blighted its image, including a 1997 crash on Sumatra Island that killed all 234 aboard and remains Indonesia’s deadliest air disaster.

Former banker Emirsyah Satar was appointed in 2005 to turn around the airline, and he undertook a massive exercise to nurse it back to health. In 2010, it was named the world’s most improved airline by London-based consultancy Skytrax.

Korean Air was in trouble after a period during the 1980s and 1990s when several accidents left more than 700 people dead.

It embarked on a major reform push, bringing in retired Delta Air Lines Vice President David Greenberg in 2000, who subsequently revolutionised its safety and operational practices.

Korean Air is now widely respected worldwide.

Shukor said Malaysia’s government and Khazanah face a “mammoth task” but that the airline could learn much from carriers that have faced similar challenges. 

“Its name is now synonymous with disaster, mismanagement, lack of discipline and many negative elements,” he added.

With most of the passengers on MH370 Chinese, tourist arrivals from China — an increasingly important travel-industry market on which Malaysia has pinned much of its hopes for visitor growth — dropped in the aftermath.

According to observers, Malaysia could be associated with calamity in the eyes of travellers,  putting the tropical destination’s vital tourism sector at risk.

“Malaysia’s competency and governance are not under the spotlight to the same degree as in MH370,” Bridget Welsh, a Malaysia researcher at National Taiwan University, told AFP.

“This said, Malaysia Airlines and travel to Malaysia will be affected outside of Malaysia. The effects will not be as serious as MH370 but overall negative,” she said.

In some Asian societies such as China, deeply held superstitions cause people to shun anything associated with death, and Beijing resident Quan Yi summed up a commonly held Chinese view towards Malaysia.

“I’m definitely not considering travelling to Malaysia,” he said. “I had a few friends who went there for their honeymoon. People who wanted to go there are reconsidering because Malaysia is too dangerous to go now.”

Some in the tourism sector, however, say any impact may be short-lived as Malaysia’s pristine rainforests and beaches, vibrant multi-culturalism and food scene and an overall safe and visitor-friendly environment continue to draw discerning travellers.

Malaysia drew 25 million visitors in 2013 and 65 billion ringgit ($20 billion) in tourism receipts, according to official data.

Hopes were high for 2014, which the government declared “Visit Malaysia Year” with plans to ramp up international promotional efforts centring on its years-long “Malaysia: Truly Asia” campaign familiar across the region.

Goals of 28 million visitors and 76 billion ringgit in receipts were set.

Most visitors are day-trippers from neighbouring Singapore but Malaysia is targeting bigger-spending arrivals from the Middle East, Europe and particularly China.

MH370 anger 

hits China arrivals 

Chinese arrivals have soared, hitting nearly 2 million last year — seven per cent of the total.

But Chinese anger over MH370 caused arrivals to drop 20 per cent in April, according to the latest Malaysian figures.

The China Business News reported this month that concern over travelling on Malaysia Airlines, a major feeder of visitors to the country, has crimped arrivals by more than 40 per cent since MH370, citing figures collected from Chinese travel agencies.

“The crash of the Malaysia Airlines flight [MH17]... has deepened consumers’ concerns over the carrier,” the report cited an official with China Environment International Travel Service as saying.

The official added that MH17 had led to a “large number” of new Malaysia travel cancellations “because a lot of tourists no longer trust Malaysia Airlines’ safety”.

Malaysia’s tourism ministry said it is “monitoring the market situation closely”.

“International tourists are definitely going to be thinking twice, thrice about flying on Malaysia Airlines,” said Jonathan Galaviz, a partner with the US-based travel and tourism consultancy Global Market Advisors. 

Malaysia’s image has not been helped by a wave of kidnappings and other deadly violence on the coast of Malaysian Borneo, normally popular for scuba-diving and nature enthusiasts. Bandits from the nearby Philippines are blamed. 

While the country’s flag carrier has taken a beating, Tan Kok Liang, vice president of the Malaysian Association of Tour and Travel Agents, said agencies are hoping tourists will continue to visit the country on different airlines.

“Our outlook is that the average tourist will still want to come to Malaysia. The latest incident has got nothing to do with the safety of Malaysia and there is no reason why people will stay away,” he added.  

That seems to bear out with many foreign travellers arriving at Kuala Lumpur International Airport after the latest incident, who mostly said they were unperturbed.

“Sadly there is a lot of scepticism about coming to Malaysia... This is my first time. I came because I am attracted to its multi-cultural society,” Alfred McDonnell, a 60-year-old American teacher, told AFP. 

LONDON — An asset management firm has been told to repay customers after using their money to settle its market data bill, Britain’s Financial Conduct Authority (FCA) said in a crackdown on commission charges.

The watchdog’s chief executive acknowledged that it is losing patience with firms that fail to comply with stricter rules imposed to help safeguard the UK’s position as a leading centre for asset management — a sector crucial to government efforts to encourage more people to save for their old age.

British asset managers pay brokers about 3 billion pounds ($5.1 billion) a year in dealing commission, which is passed on to customers, but FCA investigations found that many firms have been using this as cover to get customers to pay for market data and research of questionable value.

Only trading fees and useful research can be passed on to customers as dealing commission, but the watchdog’s Chief Executive Officer Martin Wheatley said the review of 17 investment managers and 13 brokers found that only two investment managers were fully in line with the new rules.

“We are in active discussion with one firm on redress for clients after we found it used dealing commission to pay for market data services in full, despite clear statements that this was not consistent with our rules,” Wheatley said.

Given poor compliance with the regulations, Wheatley added that the FCA is now backing a European Union (EU) law to separate research and trading fees to encourage greater competition and transparency.

Britain must comply with EU law in any case, but in the past the watchdog had been willing to “work with the grain of an industry-led solution”.

“The UK is a global centre for asset management — to keep this position it is crucial that investors are confident that they get a fair deal,” Wheatley stressed.

The Investment Management Association sought in February to head off a tougher regime by issuing its asset management members with guidance on dealing commission.

It said this month that it is considering the FCA review and remains committed to supporting a regime that operates in the best interests of investors.

Also this month, the FCA launched a wide-ranging review of competition in wholesale financial markets, which will also take in investment firms. 

Separately, the Bank of England (BoE) said British banks had a “dreadful record” on mis-selling complex interest rate hedging products to small businesses and warned that it would keep a close eye on them.

Before the financial crisis, many businesses bought the products to protect against interest rate rises, but ended up facing crippling costs after the BoE cut rates to a record-low 0.5 per cent in March 2009.

Last year, the FCA ordered Barclays, Royal Bank of Scotland , HSBC and Lloyds Banking Group to investigate nearly 30,000 cases of potential mis-selling.

To date, the banks have paid out just a third of the 3.75 billion pounds ($6.38 billion) they set aside to pay compensation.

BoE Governor Mark Carney, speaking to a panel of lawmakers about financial stability, said there had been clear malpractice and that firms’ problems should not be viewed as an inevitable side-effect of low interest rates.

“This just goes right back into the mis-selling issue and it’s not a monetary policy issue,” he said.

Andrew Bailey, the BoE deputy governor responsible for bank regulation, said the “dreadful record of British banks and selling hedging products to customers” meant he would be looking closely to see if they bent new rules meant to stop this.

“We will have to be very vigilant about this,” he remarked.

British banks have also set aside more than 20 billion pounds to compensate individual borrowers who were mis-sold so-called payment protection insurance policies to help them service loans if they fell ill or lost their job.

Some lawmakers were not happy with the BoE’s assurances that it was keeping an eye on allegations of malpractice in high-frequency trading of shares in London.

New York’s attorney general has filed a securities fraud lawsuit against Barclays, accusing the bank of giving an unfair edge to US high-frequency traders.

Carney and Bailey said the FCA was looking at high-frequency trading in London, something that was not a BoE responsibility.

Some lawmakers said that kind of approach was responsible for the central bank’s delay in spotting the risk of malpractice in currency markets, something it is now investigating.

Referring to a previous committee hearing where this topic had come up, Labour Party lawmaker George Mudie said Carney had appeared disingenuous. 

“Your face... was just so sly, I would have never played cards with you,” Mudie said.

Carney and Bailey said the current set-up — where the FCA is responsible for rooting out malpractice and the BoE is in charge of financial stability — had been agreed by lawmakers.

Last month, Mudie’s party colleague Pat McFadden had described the BoE under Carney as an “unreliable boyfriend” because of the mixed signals he had given on interest rates.  

LONDON/PARIS — Britain's BSkyB  has agreed to pay $9 billion to buy the Rupert Murdoch's pay-TV companies in Germany and Italy, taking its hunt for growth into Europe by creating a media powerhouse with 20 million customers.

Under the deal, BSkyB will pay Murdoch's 21st Century Fox  for the pay-TV companies using cash, debt, its stake in a TV channel and a placing of shares that represents around 10 per cent of its issued share capital. Murdoch is also the largest shareholder of BSkyB.

The deal, which will make BSkyB the leading pay-TV provider in Europe, adds to a flurry of consolidation in the global media sector as traditional entertainment companies seek to bulk up to compete against more nimble Internet rivals.

Fox is expected to use the proceeds to fuel its pursuit of Time Warner, which recently rejected a bid by Fox of  $80 billion.

BSkyB had flagged a possible deal for Sky Deutschland and Sky Italia in May. The price announced on Friday was slightly lower than expected by some analysts and the cost and revenue benefits higher.

But BSkyB's shares fell 5 per cent, pulled lower by the plan to issue stock and suspend a share buy-back.

"It is a bit of a step in the unknown for Sky," said Conor O'Shea, an analyst at Kepler Capital Markets. "For the first time, it will go from UK-focused to European and be asked to prove that it can add value from being larger."

O'Shea has a "buy" rating on BSkyB shares.

Facing the toughest market conditions in its 25-year history, BSkyB has decided its future growth lies in creating a European pay-TV leader that will operate in Britain, Ireland, Germany, Austria and Italy.

BSkyB dominates British pay-TV, offering its premium sports, movies and US drama programming to more than 10 million homes. Of 97 million households in the five countries it wants to target, 66 million are yet to take pay-TV.

"Sky is clearly taking the strategic view that pay TV, already ingrained in the US culture, will become prevalent in Europe," said Richard Hunter, head of equities at Hargreaves Lansdown.

European tie-up

Fox owns 100 per cent of Sky Italia, 57 per cent of Sky Deutschland and 39 per cent of BSkyB. BSkyB will pay £2.45 billion ($4.2 billion) for Sky Italia and £2.9 billion for Fox's 57 per cent stake in Sky Deutschland.

Under German takeover law, BSkyB also has to make an offer for the minority investors in Sky Deutschland, but with only a small premium on the table, analysts doubt that many will sell. The overall price for the deal would rise to around £7 billion if German investors did sell out.

For Sky Italia, the price will be made up of cash and BSkyB's 21 per cent stake in the National Geographic Channel, valued at around £382 million.

Fox said it would subscribe to the share issue to keep its stake in BSkyB stable, meaning it will take net proceeds from the deal of around $7.2 billion. The placing raised £1.4 billion, according to traders.

In the eyes of many media executives and investors, programming and content are now seen as more valuable than the infrastructure that carries it to people's homes.

That change has been driven in part by firms such as Netflix  and Google's Youtube, which have taken away viewers from traditional pay-TV services delivered by satellite operators or cable companies.

The shift has led some like Murdoch's Fox to concentrate more on content, but for those like BSkyB that remain in both content and distribution, they need to invest heavily in technology and fresh programming to see off the challenge.

Drive down costs

BSkyB's deal is a bet that it can squeeze out costs on everything from set-top boxes to broadcasting rights. It aims to reap £200 million of annual cost savings by the end of the second financial year, with revenue synergies coming after that.

It will compete with John Malone's Liberty Global, which is available in 12 European markets.

Analysts said the deal could make BSkyB an attractive takeover target in the future for a group such as Vodafone  which has been buying fixed-line assets in Europe to bolster its mobile offering.

Vodafone Chief Executive Vittorio Colao told reporters the deal could make BSkyB more appealing in terms of the content sharing agreements the two companies already have.

"It demonstrates that in a world which is increasingly digital it is important to have scale and cross-country presence, which is exactly what Vodafone has," he said.

The increased scale, and the fact the group has not hiked its leverage too high, should also bolster BSkyB when it goes up against telecom group BT in the next auction for English Premier League rights — its most important offering for many of its subscribers.

Risks involved

The deal is not without risks, however, and it could take a while for the creation of a "Sky Europe" to pay off.

Sky Italia, Italy's biggest pay-TV operator, has lost 220,000 customers since its peak in 2011 as the country's prolonged economic downturn led more people to ditch their monthly TV packages.

Sky Deutschland is growing strongly in terms of customer additions and revenue, helped by the appeal of its domestic and European soccer matches, but the percentage of those willing to pay for TV in Germany remains low — below 20 per cent.

The company's credit rating is likely to be downgraded. Its ratio of debt to core earnings will also move to just below 3 from the current level of 1. As a result, the group said it would not resume share buybacks or do any further acquisitions until its leverage target was achieved.

Chief Executive Jeremy Darroch said he did not envisage any regulatory problems with the deal. 

AMMAN — The Housing Bank announced Saturday in a press statement that net profit went up 16.4 per cent during the first half (H1) of this year.

According to the statement, net profit after provisions and after tax amounted to JD61.1 million compared to JD52.5 million achieved during the H1 of last year. 

“Total assets at the end of last month rose by 5 per cent to JD7.6 billion and customer deposit balances increase by 3.6 per cent to JD 5.3 billion,” Chairman Michel Marto indicated in the statement. 

“The net balance of credit facilities portfolio amounted to JD2.8 billion, 5.2 per cent higher than the amount at the end of 2013,” he pointed out.

He said that the bank achieved positive results in various performance indicators, noting that capital adequacy ratio stood at 17.6 per cent, a rate that is higher than the 12 per cent minimum required by the Central Bank of Jordan. 

The chairman pointed to a 53 per cent ratio of net facilities to customer deposits to highlight the bank’s high liquidity.

“Figures confirm the strength of the bank's financial position, and its ability to continue to achieve greater achievements and growth rates in various activities,” the statement said, noting that the results are preliminary and subject to the approval of the Central Bank of Jordan."

SEOUL — South Korea offered billions of dollars in stimulus spending on Thursday to shore up domestic demand after Asia’s fourth-largest economy grew at its weakest in more than a year in the second quarter.

The finance ministry’s plans included additional spending of 11.7 trillion won ($11.4 billion) from the fiscal and quasi-fiscal accounts, 26 trillion won of loans or other financial support and easing in mortgage borrowing restrictions.

The central bank separately unveiled a plan to create a 3 trillion won lending facility, based on which banks can lend up to 12 trillion won with low interest rates to support corporate investment in production facilities within the country.

President Park Geun-hye has called for all-out efforts to boost the economy and Finance Minister Choi Kyung-hwan promised to take massive action, which investors believe will pressure the central bank to cut interest rates as soon as next month.

“The government’s will to improve the economy is quite strong and there is a social understanding right now that the economy has to be supported. I feel that the measures will work,” said Kim Jong-su, economist at Taurus Investment & Securities.

“In the past, the government would focus its strength on one policy or another, but right now it is pulling in everything from all possible points,” he added.

The won fell 0.4 per cent on the day to 1,027.8 per dollar by 0153 GMT as traders slightly increased expectations for an interest rate cut, but bond futures eased as investors opted to take profits after recent rallies.

South Korea, which relies heavily on exports, has been dragged down by a slower-than-expected recovery in global demand, while domestic consumption has been fragile, partly as a result of the ferry sinking that hurt tourism and services.

South Korea’s economy grew 0.6 per cent in the April-June period over the prior quarter, data showed earlier on Thursday, the weakest since the first quarter of 2013 and slightly below  market expectations for 0.7 per cent growth.

Rate cut looms

The Bank of Korea data showed private consumption fell a seasonally adjusted 0.3 per cent in the second quarter after edging up 0.2 per cent in the January-March period. Capital investment rose 1.3 per cent after a 1.9 per cent decline.

 It was the worst fall in private consumption since the third quarter of 2011 and only the second quarterly loss since then.

The Sewol ferry sank on April 16, killing more than 300 people in the country’s worst maritime accident in two decades. That led to massive cancellations of tour contracts across the country, badly affecting all businesses serving tourists.

“In the domestic tourism industry, how the public sector entities are doing is very important,” said Nickey Joo, who runs Air Tours Co. “All public-sector travelling was cancelled immediately after the accident and that quickly stopped activity in the private sector as well.”

Private consumption generates about half of South Korea’s gross domestic product (GDP) but the economy still relies heavily on exporters as their performance has a strong influence on jobs and investment within the country.

The won has also emerged as an important factor for the Bank of Korea’s policy as a firmer won cuts profits at exporters and lowers inflation. The won was up 12.9 per cent against the dollar by the end of June from a year earlier.

South Korea’s SK Hynix Inc., the world’s second-largest memory chip maker, reported on Thursday a 2.7 per cent drop in its second-quarter operating profit over a year before as the firmer won ate into profits earned on overseas sales.

Unusually low inflation also underscores the currency effects and depressed consumer demand. Annual inflation averaged 1.4 per cent for the first six months, below the lower end of the central bank’s target band of 2.5 - 3.5 per cent.

Low inflation and the government’s call for policy coordination will likely lead to the Bank of Korea’s interest rate cut as soon as at its August 14 meeting. It would mark the first rate cut since May last year, when the central bank also lowered interest rates to support the government’s stimulus efforts.

From a year earlier, South Korea’s GDP rose 3.6 per cent for the June quarter, matching a median 3.6 per cent gain forecast in the Reuters survey but slowing from a 3.9 per cent rise in the first quarter.

The Bank of Korea downgraded its economic growth forecast for the whole of this year to 3.8 per cent from the previous 4 per cent, with many analysts seeing the projection as still too optimistic. The economy expanded 3 per cent in 2013.

WASHINGTON — The International Monetary Fund (IMF) lowered its 2014 global economic growth forecast Thursday, warning of “negative surprises” from the United States and China and geopolitical risks in Ukraine and the Middle East.

The IMF projected global growth of 3.4 per cent for this year, down from its April estimate of 3.7 per cent.

In 2013, the world economy grew 3.2 per cent. 

The downgraded 2014 growth outlook reflects “both the legacy of the weak first quarter, particularly in the United States, and a less optimistic outlook for several emerging markets”, the IMF said, in an update of its semiannual World Economic Outlook.

The US economy, which accounts for nearly a quarter of the world’s gross domestic product (GDP), shrunk by 2.9 per cent in the first quarter, in part because of severe winter weather.

“An unusually harsh winter conspired with other factors, including an inventory correction, a still-struggling housing market, and slower external demand” to lead the economy to contract by 2.9 per cent in the first quarter, the 188-nation global lender said.

On Wednesday, the IMF lowered its 2014 US growth forecast to a “disappointing” 1.7 per cent, from 2 per cent in mid-June and 2.8 per cent in April.

“It’s really a story of something which has just happened and that is behind us,” said Olivier Blanchard, the IMF’s chief economist.

The IMF is projecting growth will pick up in the US the rest of the year, but not enough to offset the first-quarter drag. 

The IMF predicted the improvement would be driven by strong consumption growth, a declining fiscal drag, a pickup in residential investment, and easy financial conditions.

“Risks around this outlook include slowing growth in emerging markets, oil price spikes related to events in Ukraine and Iraq, and earlier-than-expected interest rate rises,” the IMF indicated.

“This makes it critical for the authorities to take immediate steps to raise productivity, encourage innovation, augment human and physical capital, and increase labour force participation,” it stressed.

High poverty 

While welcoming a drop in unemployment rate, with the jobless rate falling to 6.1 per cent in June from 7.5 per cent a year earlier, the IMF expressed concern about the high level of poverty in the US.

It said that recent growth since the severe 2008-2009 crisis has left millions of Americans behind, with the latest US government data pointing to almost 50 million Americans living in poverty and the poverty rate stuck above 15 per cent. 

To combat rising poverty, the IMF recommended an expansion of the Earned Income Tax Credit and an increase in the federal minimum wage of $7.25 per hour.

The IMF called for a “long overdue” reform of the tax system to boost potential growth, including a reduction in the federal corporate tax rate, which at 35 per cent is the highest among the other 33 industrialised countries in the Organisation for Economic Cooperation and Development.

“Given the substantial slack in the economy, there is a strong case to provide continued policy support to the recovery” that is aimed at reducing poverty and encouraging longer-term growth, it said.

The IMF said that President Barack Obama’s fiscal year 2015 budget offers “various valuable steps that would move towards such a policy mix”.

Those proposed steps include healthcare savings, immigration reform, and measures that limit tax deductions and exclusions for higher earners, the Washington-based institution said.

The Federal Reserve’s (Fed) planned exit from its extraordinarily accommodative monetary policy must be carefully managed to avoid damaging spillover effects on the US and global economies, the fund reiterated.

The IMF suggested the impending rise in the Fed’s key federal funds rate, which has been stuck near zero since 2008 and is expected in mid-2015 by central bank officials, could be pushed back.

With expectations that inflationary pressures will remain muted and full employment only slowly achieved, the Fed has “some scope for policy rates to stay at zero for longer while still keeping inflation under 2 per cent”.

To increase transparency, the IMF recommended that Fed Chair Janet Yellen hold a press conference after each meeting of the policy-setting Federal Open Market Committee.

The IMF expected the expansion in China, the world’s second-largest economy, to be less than previously thought, lowering its forecast to 7.4 per cent from 7.6 per cent.

“In China, domestic demand moderated more than expected,” it said.

In the eurozone, still struggling to recover from recession, the growth estimate was unchanged at 1.1 per cent and the IMF reiterated concern about weak inflation in the 18-nation European bloc.

“In major advanced economies, there is a risk of stagnation in the medium term,” the IMF warned.

Geopolitical risks on rise 

The brief update showed the IMF increasingly concerned by escalating geopolitical tensions.

“Geopolitical risks have risen relative to April: Risks of an oil price spike are higher due to recent developments in the Middle East while those related to Ukraine are still present,” the report said.

Russia, the target of recent US and European Union (EU) economic sanctions for its alleged support of separatist fighting in Ukraine, was likely to see its economy brought to the brink of recession this year.

IMF slashed its Russian growth forecast by 1.1 percentage point, to 0.2 per cent, saying “activity in Russia decelerated sharply as geopolitical tensions further weakened demand”.

Emerging-market economies would slow a bit more than previously estimated, to a 4.6 per cent growth pace, but they were not expected to suffer significantly from the eventual US exit from extremely loose monetary policy.

“Emerging market economies — particularly those with domestic weaknesses and external vulnerabilities — may face a sudden worsening of financial conditions and a reversal in capital flows in the event of a shift in financial market sentiment,” the IMF said.

Such a scenario occurred in 2013 when investors abruptly withdrew capital from emerging-market economies anticipating the Fed would raise its key US interest rate, stuck near zero since late 2008. That did not happen, but the Fed is looking to hike the federal funds rate in mid-2015. 

“I don’t think we’ll see major financial chaos in the future... but there are going to be bumps,” Blanchard indicated.

Despite the worse-than-expected global growth outlook for 2014, the IMF left its 2015 forecast unchanged at an annual rate of 4 per cent, the fastest pace since 2011.

JAKARTA — Indonesia’s new President, Joko “Jokowi” Widodo, promised to make life simpler for investors by beefing up the country’s threadbare infrastructure, untangling near-impenetrable regulations and sacking his ministers if they aren’t up to the job.

“We need to get our economy growing. To do that we must have more investment and also deliver in terms of infrastructure,” Jokowi told Reuters in an interview on Saturday, given on the condition that it not be published until after he was officially named winner.

A lack of roads, ports, electricity and other basic services, along with corrupt bureaucracies, is beginning to disenchant foreign investors, essential for the resource-based economy to grow.

“[Investors] say getting business permits is very complicated. Some investors say they need two years. Imagine. So if we can give solutions for getting business permits, I’m sure that we can improve the infrastructure faster,” he said.

Jokowi is the first businessman to become president of Indonesia, which took all six of its previous leaders from a political elite. 

His simple, direct approach and success in cutting through red tape appealed to ordinary voters. And investors have been pushing up share prices on expectations he would become leader of the world’s third-largest democracy and home to its biggest Muslim population.

Jokowi’s humble “I’m just like the rest of you” style has made him the country’s most popular politician and it is an image he is careful not to lose, repeatedly referring to his time as mayor of Solo, a small city, and later as the capital’s governor.

He has rented a small, plainly furnished house in central Jakarta while he waits to move, in October, into the sprawling presidential palace in central Jakarta, which began life in the 18th century as home to a wealthy Dutch businessman in the colonial era. Outside were three security guards in plain clothes.

Jokowi, in bare feet and dressed in white shirt and dark trousers, made clear he understood his presidential honeymoon could be brief.

There is little in the state coffers to address pressing problems from declining economic growth to rising poverty. But he has shown in Jakarta talent for finding money in the budget and has come down hard on officials who do not perform.

That, he noted, is a policy he will take to the presidential office.

“If [ministers don’t succeed] there are more than a thousand other good people in Indonesia to replace them. I can cut and then replace them. It’s very simple for me,” he said.

“They have to be clean, they have to be competent, they have to have good leadership [skills] and a commitment to serve the people,” the president stressed.

He has faced accusations, which he denies, that he will be under the thumb of the chief of the party that supports him, former president Megawati Sukarnoputri.

Jokowi repeatedly said during his presidential campaign he would not trade Cabinet jobs for political support.

But in the interview, he acknowledged for the first time that around 20 per cent of his Cabinet will likely be political appointments from parties that backed him.

The threat of being fired is an unusual risk for ministers. For years, the biggest threat most Cabinet members have faced is a reshuffle into a less significant role.

One finance minister was forced to resign three years ago because, in the view of many analysts, she was a little too effective in tackling the rampant graft that has so long weighed down Southeast Asia’s biggest economy.

Short on specifics

But Jokowi was short on specifics. “Too much detail,” said his aide when the president-elect was asked exactly how he would handle such issues like a ban imposed this year on exports of unprocessed minerals. 

The law is meant to boost national revenues, but has worried investors by its confused implementation and suggestion of rising nationalism.

First, said Jokowi, he will immediately set a transition team to discuss how to allocate top government positions and which issues to set as priorities.

He pointed to the massive fuel subsidies, which now cost about a fifth of the annual state budget but which economists say do more to help the wealthy than the 40 per cent of the population which live in or close to abject poverty.

“We should move the subsidies to the farmers for their fertiliser or infrastructure for their irrigation. To the fishermen, we can give... engines for their boats... if we move the subsidies from fuel to productive activities, we will have more productivity,” he indicated.

“I think a first important thing is also to make regulations clearer. Because some of the regulations are not clear,” he concluded. “In my experience as mayor and governor it’s not difficult. It’s just a different scale. It’s only about management.”

KABUL — Afghans' aversion to the number 39 due to its mysterious connotations of prostitution forced the government on Tuesday to appeal for people to stop refusing vehicle licence plates containing the much-feared figure.

The "curse of 39" has struck repeatedly in recent years, returning as registration number combinations cycle over, with car dealers complaining they get stuck with vehicles that they are unable to sell due to a bizarre urban legend.

According to many Afghans, "39" got its bad reputation through a well-known pimp who was often identified by the number on his car plates as he drove around Herat, the western city that lies close to the border with Iran.

The man's seedy image and illicit business meant that the number became associated with immorality. Apocryphal or not, the tale spread to other Afghan cities — and the curse was born.

Now anyone seen sporting a "39" licence plate is in danger of being linked to the underground sex industry that is taboo in the devoutly Muslim nation.

The vehicle licensing system is now putting 39 at the front of plate numbers, causing a backlog of sales as potential buyers refuse to make a purchase that could bring ridicule.

"We cannot remove 39 — this is illogical to remove a number from the whole system," interior ministry spokesman Sediq Sediqqi told the Tolo news channel. "The people should accept the number plates that contain 39 so that the process of registering cars resumes again.”

"We cannot change the system, we have to change the people's mentality toward that number," he said.

The Kabul traffic department, which issues licence plates in the capital, said it had 800 plates that no one would take.

"This has harmed our revenue," General Assadullah, head of the Kabul traffic department, told AFP. "Revenue has gone down by a half this year. The process of distributing new number plates has been very slow because the registration is now beginning with 39 and people don't want to take them."

Buyers are alleged to pay bribes to avoid the number in new vehicles, while owners who do have 39 in their plates often doctor their plates illegally using white paint to change the digits.

"The people who fan this idea are those who are corrupt and those who intentionally want to misuse it for their own benefit," said Sediq, implying that the rumour-mongers are those who benefit from accepting bribes.

Separately, a $375 million hole in the Afghan budget is threatening public projects and civil servants' salaries, officials say, putting the aid-dependent economy under stress just as Afghanistan awaits a new leader and foreign troops prepare to go home.

US, UN and Afghan finance ministry officials have discussed ways to resolve what they say has become a critical situation for the budget, with civil projects most at risk as international assistance starts to taper off.

"If the political situation of the country does not become normal and businesses do not start again soon this problem will become even more worrying," Alhaj Muhammad Aqa, director general of the treasury at the finance ministry, told Reuters. 

"We will not only face problems in paying salaries of employees but we will have difficulties in other issues too," he said.

Funding for security will not be affected, as costs are met by foreign governments which recognise that any chance of stability in Afghanistan rests on quelling the Taliban insurgency.

The international community poured billions of dollars of aid into Afghanistan during Hamid Karzai's rule, but the country's next leader could struggle to receive the same levels of support.

Ex-World Bank official Ashraf Ghani, presidential election frontrunner, has called for radical economic reforms, while former foreign minister Abdullah Abdullah campaigned on job creation and fighting corruption.

"We have to put pressure on the international community to help us cope with this problem," Aqa said. 

Officials put the growing hole in the $7.6 billion budget down to a sharp decline in domestic revenue, forcing some development projects to be put on hold. So far this year, the shortfall stands at $375 million due to falling customs, the finance ministry says.

About a third of the overall budget is earmarked for development projects, ranging from building schools and hospitals to roads.

Jobs under threat

Employees of a project producing electronic identification cards, a task jointly managed by the interior and communications ministries, said they have been told their jobs might go.

"The head of the treasury department of the finance ministry came with his team to our office and told us that there is a shortfall of around $500 million, and they have to cut from every development project," Homayun Mohtat, head of the electronic ID card department, said.

Some employees said they had not been paid for months.

International assistance covers $5 billion of this year's budget, with the remainder filled by domestic revenue raising, mainly in the form of customs duties.

But customs revenue and imports are down since the start of the year, the finance ministry says. Taxes and exports contribute little to the state finances.

The UN envoy to Afghanistan Jan Kubis said recently that Afghan revenue was much less than expected and the budget was a major problem. He said international donors and the finance ministry were meeting to agree a way to cover the hole.

The UN office in Afghanistan and the US embassy in Kabul declined further comment.

In January, US lawmakers halved development aid to $1.2 billion for the 2014 fiscal year and with most foreign troops due to leave by the year's end, the new Afghan administration is being left, more than ever, to stand on its own feet.

After a dozen years of massive international aid efforts, Afghanistan is still one of the world's poorest countries. The US decision to cut aid is also expected to shape the contributions of other donor nations.

Foreign powers have poured billions of dollars of aid into Afghanistan since the fall of the Taliban in 2001, but the country's next leader is unlikely to receive the same levels of financial support.

The prospect of dwindling inflows of foreign aid could stoke uncertainty as the United States and other NATO countries move to end their long war in Afghanistan, and as Washington seeks an agreement that would permit some US forces to stay there beyond 2014.