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Aureos puts the equity into investment
Private equity firm Aureos Advisers now manages $1.2bn of investments and has shown how to invest responsibly in emerging markets
The private equity firm Aureos Advisers is proof of how the business world is not only shifting east but also south. Run by the Sri-Lankan-born Sev Vettivetpillai, Aureos has amassed $1.2bn (£790m) of investment under management and last year raised $150m to invest in African companies selling in local markets.
“That’s a large sum of money in a market where raising capital is tough. Leverage was a game when cheap debt was around,” he says of the old private equity market. “Today a large chunk of growth is in emerging markets and we have proved you can invest responsibly in these markets and achieve attractive returns while paying attention to building sustainable businesses.”
Vettivetpillai admits Aureos has had an easy ride as there are not many competitors investing in small and medium-sized enterprises (SMEs) in Africa. “We have increased funds despite being in a financial crisis. I suppose there are not many players like us.”
Perhaps putting off the competition is the scale of operation needed to manage firms in the developing world. Aureos invests heavily in staff to manage its companies. It has 28 offices around the world and one investment professional for each of its 100 companies. “You have to be hands on,” he says. “It’s not just about capital. In many of these markets it’s very hard to find good-quality professionals. Most of our team have different skills: operational, finance, consulting. You need a mix. The model is you can’t have one office – you have to be on the ground. So we have an infrastructure that is quite expensive.”
In China, Aureos has seven professionals in one office. Two more will be joining shortly to look after just four firms with an investment value of $36m.
It is why management fees are 0.25% higher than the private equity industry standard of 2%. Nevertheless, a growing number of pension funds are investing with Aureos. Nearly 40% of its $400m sub-saharan African fund is from pension institutions, which were difficult to convince.
“It was a struggle initially. Today we have a track record we can show. It’s still a much tougher sell than the average player – you have to explain. So I’m hoping through this period of market dislocation, all those that were steady and building businesses and not playing the market will come through.”
Recent events in Dubai, though cannot be helpful. The inability of debt-laden Dubai to repay creditors raised the possibility that investors will take flight from emerging markets. Have investors been on the phone to you to get their money out?
“No. Not at all. You see I make a distinction between short-term and long-term investors. Long-term investors, I doubt, are in Dubai. If you fly in there, you can never figure it out, that’s what we felt. We made a point not to go to Dubai. The high prices didn’t make sense.” To Vettivetpillai, the blame for Dubai’s crash has to be shared between the state’s rulers and its lenders. “There are hedge funds who have taken debt positions. Now if you are lending $50bn to an institution which is owned by the state and you haven’t asked the question or put in your legal agreement that you have a sovereign guarantee clearly stated – instead you assumed – well, I’m not sure who’s at fault here: the lender or the borrower.” Companies that Aureos has invested in have held up, despite the global crisis, thanks to them having little debt. He has also focused his investments on firms exporting to local markets rather than Europe or the United States, where the consumer slowdown has been far more pronounced. “When markets crashed 60%, good management teams were making sure they were growing their company … making sure they had cash, not much debt. Most banks don’t lend to these SMEs. And that has saved a number of those businesses. So we had an upward lift in earning growth in 2008 when many people showed a drop.”
Aureos is registered in Mauritius, which raises the question: why can’t the company come onshore and pay tax like every other firm? This prompts Vettivetpillai to jump to his feet and describe how in a complicated global world with international investors investing in a number of jurisdictions, offshore locations ensure his firm is tax efficient. “We have paid cumulatively $480m in taxes. Taxes are being paid; I really don’t understand that tax argument.”
Aureos was spun out from the government-owned development investment fund Commonwealth Development Corporation’s (CDC) in 2001. CDC contributes 23% of its $1.2bn under management.
Vettivetpillai is shrewd enough not to comment too deeply on recent controversy over the near-£1m salary of CDC’s chief executives. “If that’s what he’s worth, that’s what he’s worth,” he says, before extolling CDC’s role in growing businesses in poor countries.
“CDC punches above its weight,” he said. “If CDC hadn’t taken a step to invest in these markets there would be quite a number of funds including ourselves that couldn’t do what they do today. Their biggest achievement has been providing funds to the local indigenous fund managers that are coming up. What they could better – all of us could do something better – they should focus more on the small and medium enterprises because that’s where the growth sectors are. They are the main engines of growth for economies.”
For developing countries seeking growth capital, there is a virtual vacuum between micro-finance and the SME-funding that Aureos provides. It requires local pension funds to encourage start-ups, he argues.
Educated in Britain, Vettivetpillai initally worked as an engineer before returning to Sri Lanka as an investment banker. His father worked at the World Bank and part of his childhiood was spent in Nigeria before he completed his education in Britain.
A globe-trotter, the one hobby Vettivetpillai owns up to is “doing nothing”, which is a marked contrast to his working life.
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Aureos puts the equity into investment
Private equity firm Aureos Advisers now manages $1.2bn of investments and has shown how to invest responsibly in emerging markets
The private equity firm Aureos Advisers is proof of how the business world is not only shifting east but also south. Run by the Sri-Lankan-born Sev Vettivetpillai, Aureos has amassed $1.2bn (£790m) of investment under management and last year raised $150m to invest in African companies selling in local markets.
“That’s a large sum of money in a market where raising capital is tough. Leverage was a game when cheap debt was around,” he says of the old private equity market. “Today a large chunk of growth is in emerging markets and we have proved you can invest responsibly in these markets and achieve attractive returns while paying attention to building sustainable businesses.”
Vettivetpillai admits Aureos has had an easy ride as there are not many competitors investing in small and medium-sized enterprises (SMEs) in Africa. “We have increased funds despite being in a financial crisis. I suppose there are not many players like us.”
Perhaps putting off the competition is the scale of operation needed to manage firms in the developing world. Aureos invests heavily in staff to manage its companies. It has 28 offices around the world and one investment professional for each of its 100 companies. “You have to be hands on,” he says. “It’s not just about capital. In many of these markets it’s very hard to find good-quality professionals. Most of our team have different skills: operational, finance, consulting. You need a mix. The model is you can’t have one office – you have to be on the ground. So we have an infrastructure that is quite expensive.”
In China, Aureos has seven professionals in one office. Two more will be joining shortly to look after just four firms with an investment value of $36m.
It is why management fees are 0.25% higher than the private equity industry standard of 2%. Nevertheless, a growing number of pension funds are investing with Aureos. Nearly 40% of its $400m sub-saharan African fund is from pension institutions, which were difficult to convince.
“It was a struggle initially. Today we have a track record we can show. It’s still a much tougher sell than the average player – you have to explain. So I’m hoping through this period of market dislocation, all those that were steady and building businesses and not playing the market will come through.”
Recent events in Dubai, though cannot be helpful. The inability of debt-laden Dubai to repay creditors raised the possibility that investors will take flight from emerging markets. Have investors been on the phone to you to get their money out?
“No. Not at all. You see I make a distinction between short-term and long-term investors. Long-term investors, I doubt, are in Dubai. If you fly in there, you can never figure it out, that’s what we felt. We made a point not to go to Dubai. The high prices didn’t make sense.” To Vettivetpillai, the blame for Dubai’s crash has to be shared between the state’s rulers and its lenders. “There are hedge funds who have taken debt positions. Now if you are lending $50bn to an institution which is owned by the state and you haven’t asked the question or put in your legal agreement that you have a sovereign guarantee clearly stated – instead you assumed – well, I’m not sure who’s at fault here: the lender or the borrower.” Companies that Aureos has invested in have held up, despite the global crisis, thanks to them having little debt. He has also focused his investments on firms exporting to local markets rather than Europe or the United States, where the consumer slowdown has been far more pronounced. “When markets crashed 60%, good management teams were making sure they were growing their company … making sure they had cash, not much debt. Most banks don’t lend to these SMEs. And that has saved a number of those businesses. So we had an upward lift in earning growth in 2008 when many people showed a drop.”
Aureos is registered in Mauritius, which raises the question: why can’t the company come onshore and pay tax like every other firm? This prompts Vettivetpillai to jump to his feet and describe how in a complicated global world with international investors investing in a number of jurisdictions, offshore locations ensure his firm is tax efficient. “We have paid cumulatively $480m in taxes. Taxes are being paid; I really don’t understand that tax argument.”
Aureos was spun out from the government-owned development investment fund Commonwealth Development Corporation’s (CDC) in 2001. CDC contributes 23% of its $1.2bn under management.
Vettivetpillai is shrewd enough not to comment too deeply on recent controversy over the near-£1m salary of CDC’s chief executives. “If that’s what he’s worth, that’s what he’s worth,” he says, before extolling CDC’s role in growing businesses in poor countries.
“CDC punches above its weight,” he said. “If CDC hadn’t taken a step to invest in these markets there would be quite a number of funds including ourselves that couldn’t do what they do today. Their biggest achievement has been providing funds to the local indigenous fund managers that are coming up. What they could better – all of us could do something better – they should focus more on the small and medium enterprises because that’s where the growth sectors are. They are the main engines of growth for economies.”
For developing countries seeking growth capital, there is a virtual vacuum between micro-finance and the SME-funding that Aureos provides. It requires local pension funds to encourage start-ups, he argues.
Educated in Britain, Vettivetpillai initally worked as an engineer before returning to Sri Lanka as an investment banker. His father worked at the World Bank and part of his childhiood was spent in Nigeria before he completed his education in Britain.
A globe-trotter, the one hobby Vettivetpillai owns up to is “doing nothing”, which is a marked contrast to his working life.
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Mariella Frostrup has lunch with Alastair Campbell
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Alastair Campbell discusses Twitter, Iraq and his Andrew Marr TV interview over lunch with Mariella Frostrup
As we’re perusing the bistro-style menu of the Camden Brasserie, I ask Alastair Campbell if he cares about food. His answer is not the most promising kick-off for an OFM interview.
“I’m not a big food person. I would be one of those people if you could take food pills and that’s where you got your energy for the day, that would be fine.”
His cooking skills are equally underwhelming. “I cooked a soufflé in 1980,” he offers.
Successfully?
“Really good. Tuna and potato – I gave up after that.”
Discouraging perhaps but not completely unexpected. Tony Blair’s one-time communications director, now novelist, Labour policy adviser, after-dinner speaker and general man-about-the-media has never come across as the sensory sort. Familiarity, not haute cuisine, is the main credential for Campbell’s restaurant choice, along with “the best chips in the world”.
Despite the Camden Brasserie’s relocation to an incongruous, glass-fronted block and internal makeover with charcoal grey walls, burgundy tongue-and-groove and an entire back wall papered to look like crammed bookshelves, the menu is virtually unchanged since it opened in 1983. When I arrive punctually at 12.30 my lunch date is already occupying his usual table in the right-hand corner, mobile phone and BlackBerry slung on the table like a discarded gun belt. “I’ve been coming here so long,” Campbell tells me, “that when I was on the Mirror, Mike Molloy, the editor, and I, used to design the front pages on the paper tablecloths.”
He asks about and then requests the special – tomato and vegetable soup, followed by calf’s liver – declaring that he likes to be told what to order. “I never looked at the menu, I don’t even know what’s on it.”
Such eschewing of responsibility could be regarded as a running theme. He recently said that far from setting the agenda at Downing Street, he was merely doing his duty. “I don’t think I had any power that was not Tony Blair’s power,” he says. And during lunch it becomes clear that his long-time partner Fiona Millar performs a similar role in personal matters. Having foresworn alcohol since 1986, he admits he has been experimenting with the odd glass since last year’s French holiday. “Always in controlled circumstances. As we call Fiona,” he jokes. “In her book about working women she devoted what seemed to be a whole chapter to how useless I am.”
Is there a hint of pride in that statement? I ask how he squares his risible contribution to domestic chores with the equality he espouses in his politics. “How do I rationalise it…? I’m the main breadwinner?” He raises his eyebrow hopefully but sees I’m not impressed. He answers for me, shaking his head ruefully: “No, that’s no good.”
Despite the war of attrition, recognisable to most of us in long-term partnerships, that rages in the Campbell/Millar household, from the radio settings (“First argument of the day – Fiona switches on the Today Programme, I switch it off”) to his domestic inadequacies, the couple have weathered three decades and raised three near-grown children, Calum, Rory and Grace. I ask how it feels to have stayed the course.
“She did an interview once where she said something like: ‘On balance, I’m pleased that we stayed together.’ I said, ‘what does that mean, “on balance”?’ But that’s the truth, isn’t it? On balance. I’m glad we stayed together, too. Though she sometimes makes it sound like she’s living with North Korea or something.”
Examples of Campbell’s loyalty and aversion to change, arguably illustrated by his restaurant choice as well as his relationship, are available in all areas of his life. Whether it’s with his ex-boss, whose defence he still springs to like a tiger, to the Labour party or to his beloved Burnley football team, Campbell strikes me as more of a loyal alsatian than the rottweiler of media mythology. The invincible public image is one he finds unrecognisable, an irony, I point out, when his area of expertise is communication.
“Look, you know this thing recently about Gordon and all that… I think you could go and interview every single person who’s worked for me and I’d be surprised if they’d say I was a bully. I think they’d say that I was actually quite pleasant to work for. I’m quite a good team builder and I always saw that as an important part of the job.”
Is he saying that in contrast to the PM? He immediately points out that Gordon Brown would be the first to admit he struggles with his handling of his media image. Those looking for a similar chink in Alastair Campbell’s armadillo-like exterior would have found some satisfaction during his recent appearance on Andrew Marr’s Sunday morning show. Campbell visibly froze and appeared on the verge of tears during post-Chilcot questions on Iraq.
“I don’t think I was that upset. I almost wasn’t listening. I was just thinking: ‘This guy asking these questions doesn’t give a shit about the answers.’ It was just a moment of exasperation and I thought, ‘bollocks to it’. And I was thinking about saying certain things that I would have regretted. So I just said to myself, ’shut up, don’t lash out, don’t get angry.’ There came a point where I was conscious of Andrew speaking but I was sort of in my own zone. I remember this really important thought flitted into my head. I thought: ‘Oh God, I wonder if my mum’s watching?’ Because she’d be upset.”
We’ve been so engrossed we’ve dispensed with two courses. He motored though his soup and now the calf’s liver is gone too. Over coffee, (he’s a cappuccino, I’m a macchiato) we move on to the upcoming general election where he feels that social networking sites will be a major asset.
It partly explains his enthusiastic embrace, of all things Twitter, blog and Facebook. As we’ve been talking his right hand has been creeping ever closer to his mobile, abandoned near the sugar bowl during the rest of the meal. Suddenly, Gollum-like, he can resist temptation no longer. He snatches it up: “Can I tweet about you? Can I say ‘having lunch with Mariella Frostrup’?”
He doesn’t wait for an answer but starts typing away into his phone.
“Oh my God yes. Frostrup…. I’ll put ‘Lots of envious glances from male-only table opposite’.”
“That’s pathetic,” I retort, “that’s trying to enforce an idea on people.”
“But ‘Having lunch with Mariella Frostrup’ is just old-fashioned name dropping.” He sounds disappointed.
“And yours is what? Name-dropping with smugness?”
“Yes.”
I’d fully intended to avoid politics but in the end I can’t resist. During a brief spat about Iraq, the waitress begins clearing our cups. “Could you clear this woman away too please?” he requests, only partly in jest.
To be quite honest I’m thoroughly enjoying myself. Campbell is engaging, funny and informed. I’m almost tempted to take up his invitation to Ladies’ Day at Burnley Football Club the next day. “The Burnley communications director phoned me yesterday – I’ve done the past two Ladies’ Days – and said, ‘I’m really sorry but they want you again.’” I don’t like to point out that with such short notice he’s most likely a stand-in!
Like I said earlier, a little affection goes a long way with Alastair Campbell. If I were prime minister I’d like to have him padding alongside me too, barking at people who got on my nerves. I’d put him on a leash though, just to be safe.
Alastair Campbell’s novel, Maya, is out now, published by Hutchinson
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Auditors face inquiry call after Lehman revelations
about 4 months ago - No comments
MPs and financial experts demand regulators reform industry in effort to eliminate risky practices, writes Phillip Inman
Pressure was mounting this weekend for a root-and-branch review of the role played by auditors in the credit crunch, following the revelation that Lehman Brothers was able to hide $50bn (£32bn) of debts from regulators despite checks by accountancy firm Ernst & Young.
MPs and financial experts called on regulators to clean up the audit industry as part of a clampdown on reckless and risky practices in the financial sector.
Liberal Democrat treasury spokesman Lord Oakeshott urged the government to commission a fundamental review, while Tory MP Michael Fallon, who is deputy chairman of the influential treasury select committee, said: “Too much is being concealed. We need a fresh approach that gives a more realistic picture of bank finances and not one that disguises risky practices.”
Oakeshott said the treasury select committee’s investigation of Northern Rock’s collapse had already revealed that accountants should be banned from accepting additional consultancy work for the firms they audit; but, he added, “that is just a starting point to cleaning up the whole profession”.
Prem Sikka, a professor of accounting at Essex University and a leading critic of the accounting profession, warned that without deep-rooted reform the crisis could repeat itself. “The report into the collapse of Lehmans is indicative of a deeper malaise,” he said. “We rely on the discretion of eminent firms of auditors and lawyers that are paid millions of pounds for their efforts, but that discretion is too often abused.”
A damning 2,200-page report commissioned by the US bankruptcy courts into the collapse of Lehman said that Ernst & Young’s failure to act over off-balance sheet accounting practices which allowed the bank to hide $50bn of debts, and failing to investigate the concerns of a whistleblower, amounted to “professional negligence”.
Ernst & Young, which earned fees of $31m from auditing Lehman Brothers in 2007, has insisted that a thorough internal review showed it did nothing wrong.
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Iraq security firm joins bidding for Wall Street’s favourite detective agency
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Control Risks poised to table £600m bid for US corporate investigations company Kroll
Control Risks, which provides security for foreign companies in Iraq and the British government, is poised to join the bidding war for Wall Street’s favourite detective agency, Kroll.
The security firm, headed by Richard Fenning, is linking with US private equity firm General Atlantic to table a £600m bid. Additional firepower for the bid could come from British private equity group 3i, which has a 17% stake in Control Risks.
Control Risks was founded in 1975 by former army officer Timothy Royle to provide advice to insurer Hogg Robinson after a spate of kidnappings of company executives in the US and Europe by political extremists. It became independent in 1982 and offers advice on the political, economic and logistical risks of doing business abroad as well as providing crisis-management services. A large contract with the British government for work in Iraq accounted for 30% of its sales in 2008.
The firm has more than 1,000 employees in 15 countries and performs vetting, provides bodyguards and carries out anti-stalking measures for high-profile individuals. The majority of its clients are large corporations that need political and security risk assessments.
Control Risks rose to prominence in 1997 when it produced video evidence of senior Co-operative Wholesale Society executives passing information about the group to British entrepreneur Andrew Regan ahead of his planned bid for the business. But it has also grown on the back of the increase in global mergers and acquisitions activity and rising use of technology in the workplace.
“Investigating technology-based fraud and providing political and economic analysis for entrants to a particular market remains its stock in trade,” said one security analyst.
Kroll is best known for helping to uncover the hidden assets of Saddam Hussein, and for proving that the death of “God’s banker”, Roberto Calvi, found hanging from London’s Blackfriars bridge in 1982, was not suicide.
In the early 1980s, Kroll started investigating corporate raiders such as Sir James Goldsmith and Victor Posner on behalf of the companies they were attacking. During the 1990s, it also gained attention for its success in searching for assets hidden by dictators Jean-Claude Duvalier of Haiti and Ferdinand and Imelda Marcos of the Philippines.
Following the 11 September attacks in 2001 and a rash of corporate scandals during the early part of the decade – which reinforced the message that companies and investors needed to carry out proper due diligence – Kroll and other corporate security groups were in increasing demand.
However, Kroll has seen many twists and turns in its history as it pursued expansion and diversification into other areas such as computer security, forensic accounting, data recovery, employee screening and restructuring.
Kroll has offices in 33 countries and employs more than 3,800 people. By 1987, it had established a reputation as Wall Street’s pre-eminent private eye during hostile takeovers, after being hired to look into the new breed of financiers and their novel means of raising money. Kroll was hired by the Sears Tower in Chicago to review security after 9/11 and took the job of restructuring Enron, the energy firm brought down by fraud in 2001.
City sources say Control Risks and General Atlantic face fierce competition for Kroll from three American private equity bidders – Carlyle, Apax and BC Partners – with the latter teaming up with restructuring expert David Buchler. Control Risks declined to comment.
Kroll has been put up for auction by parent company Marsh & McLennan, the global insurance broker and consultancy company which acquired the firm from founder Jules Kroll in 2004 for nearly $2bn.
Carlyle is viewed as a leading contender for the business as it has historically had a strong focus on the defence and security sectors. Former prime minister John Major was once a member of its board. But General Atlantic has deep pockets – the firm has approximately $15bn (£9.8bn) of capital under management and is among the 50 largest private equity firms globally.
Analysts say that the increasing complexity of the financial markets, globalisation and the internet have presented new security challenges for companies, meaning increased opportunities for firms such as Kroll and Control Risks.
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Fortis becomes ‘ageas’, to signify shift from banking, but was it worth it?
about 4 months ago - No comments
Corporate rebrandings are almost always pointless, pompous or both. So it’s a relief that bailed-out Benelux insurer Fortis has provided a crib-sheet to explain why as of April, it will be called “ageas” .
Apparently, the a and g at the beginning “celebrate our roots” – the firm began as AG Leven; the e and a in the middle refer to its two key markets, Europe and Asia; and the “as” at the end stands for “assurance”. The absence of capital letters “heightens the sense of unity within our group” and shows that “we don’t want to force our opinions on anyone”. How very modest. To give Fortis its due, the pared-down, pure insurance firm that emerged from the £10bn cross-border taxpayer carve-up is a very different business from the banking conglomerate it had become. BNP Paribas got the group’s Belgian banking interests, while a chunk of the ill-fated ABN Amro that Fred Goodwin didn’t get his hands on was taken over by the Dutch state. What’s left looks more like a boring old insurer, give or take some toxic legacy assets from the credit crunch era, which its boss Bart De Smet has been able to return to profit. But wouldn’t it have been refreshing if he’d applied the same back-to-basics approach to Fortis’s name, instead of succumbing to the brand consultants? It could have been Fortis’s most sensible decision in ageas.
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Fortis becomes ‘ageas’, to signify shift from banking, but was it worth it?
about 4 months ago - No comments
Corporate rebrandings are almost always pointless, pompous or both. So it’s a relief that bailed-out Benelux insurer Fortis has provided a crib-sheet to explain why as of April, it will be called “ageas” .
Apparently, the a and g at the beginning “celebrate our roots” – the firm began as AG Leven; the e and a in the middle refer to its two key markets, Europe and Asia; and the “as” at the end stands for “assurance”. The absence of capital letters “heightens the sense of unity within our group” and shows that “we don’t want to force our opinions on anyone”. How very modest. To give Fortis its due, the pared-down, pure insurance firm that emerged from the £10bn cross-border taxpayer carve-up is a very different business from the banking conglomerate it had become. BNP Paribas got the group’s Belgian banking interests, while a chunk of the ill-fated ABN Amro that Fred Goodwin didn’t get his hands on was taken over by the Dutch state. What’s left looks more like a boring old insurer, give or take some toxic legacy assets from the credit crunch era, which its boss Bart De Smet has been able to return to profit. But wouldn’t it have been refreshing if he’d applied the same back-to-basics approach to Fortis’s name, instead of succumbing to the brand consultants? It could have been Fortis’s most sensible decision in ageas.
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Pressure on Tories to name mystery MP who sabotaged anti-poverty bill
about 4 months ago - No comments
Campaigners demand David Cameron names member who killed bill protecting developing world from vulture fund bankers
Pressure is growing on David Cameron to identify the mystery Tory MP who deliberately scuppered a landmark anti-poverty bill that could have stopped “vulture” bankers profiteering from the developing world’s debt burdens.
Debt campaigners have reacted in fury and disbelief to the killing of the bill and Labour MP Sally Keeble, one of the bill’s backers, has accused the Conservatives of “duplicity” by pretending to back the legislation and then sabotaging it at the last minute.
Campaigners are now calling on the leader of the opposition to clarify his view of the bill and asking whether the MP concerned will be identified. The international development secretary, Douglas Alexander, has sent a letter to Cameron demanding an explanation.
The frustration has been compounded by the secrecy surrounding the events in the House of Commons last night. During the reading, three Tory MPs were seen to huddle together on the benches before one shouted the word “object!”, which under parliamentary procedure effectively stopped the bill passing.
Three Conservatives were in the chamber – Christopher Chope, Andrew Robathan and Simon Burns – but none have admitted intervening. The Tory treasury spokesman David Gauke, who was on the committee which debated the bill, insisted the Conservatives had wanted to see the bill go through and that the MPs, two of whom are Tory whips, did not have the support of the frontbench. He said he did not know which one had made the objection. “We have our suspicions,” he said. “It is a pity. Our view was let’s go with the bill but that was not to be. Everyone recognises that this was a rushed process.”
But Keeble said that there had been plenty of time to debate the bill, both for two hours in the chamber and at committee stage. “All concerns that had been raised had been dealt with and the bill had been watered down already as a compromise to the Conservatives,” she said.
“It’s blatantly obvious that this was duplicitous behaviour by the Conservatives whose commitment to international development is deeply suspect. The three men went into a huddle and then no one can see who actually objects. It’s disgraceful behaviour.”
Nick Dearden, director of Jubilee Debt Campaign, said: “It is an outrage that one MP has taken it upon himself to effectively kill a bill which has the support of the vast majority of the House. His move will mean many of the poorest countries in the world will continue suffering at the hands of reckless and unethical investors.
“This action has destroyed the hopes of many people across the developing world that we might put an end to the appalling practice of vulture funds.”
Vulture funds buy up the debts of poor countries, often at a fraction of their face value, and pursue them through the international courts, in many instances despite agreements by other creditors to give the country debt relief.
Campaigners wanted the legislation to apply retrospectively, because it could help countries such as Liberia, which lost a £13m case in London against two vulture funds late last year. Liberian president Ellen Johnson Sirleaf has urged parliament to pass the new law. The scuppering came a day after former Tanzanian President Benjamin William Mkapa backed the bill, saying: “I hope the international community joins hands to put an end to these deplorable activities of the vulture funds.” The bill also has the support of Archbishop Desmond Tutu.
Andrew Gwynne MP, who proposed the bill, said: “It is staggering the Conservatives are still unwilling to support even the most basic legislation to help reduce third world debt.”
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The wisdom of recycling trade surpluses | George Irvin
about 4 months ago - No comments
Look to Keynes for a way to rebalance the world economy – force surplus countries to spend money in deficit countries
How is the global economy to be rebalanced? Is there a distinction worth making between Chinese and German mercantilism? One can argue that China’s astonishing growth has sucked in other countries’ imports while lifting millions out of poverty. But growth continues to be export-led, and the Central Bank of China has accumulated the world’s largest stash of dollar-denominated assets. Germany runs an even larger current account surplus, but much of it is recycled into buying companies in the US and elsewhere.
Is exchange rate adjustment the answer? While the US Congress seems to believe so, a large revaluation would in practice serve nobody’s interests. Chinese export-driven growth rate would slow, and Americans would find themselves poorer in real terms having to buy dearer goods at Wal-Mart.
In the EU, things are slightly different because the euro has appreciated strongly against the dollar. But appreciation has had only had a marginal effect on Germany’s surplus; Germans have accepted slower wage growth as a price worth paying for the prize of being the world’s leading exporter. By any measure, exchange rate adjustment – even allowing for lags – seems to have done little to rebalance the world economy.
The financial crisis has complicated matters, with fiscal deficits growing alarmingly. The German response to resulting downward pressure on the euro has been to insist that all countries should balance the books like Germany. But as Martin Wolf correctly observes: “Germany is in a trap of its own devising. It wants its neighbours to be as like itself as possible. They cannot be, because its deficient domestic demand cannot be universalised”.
In macroeconomics, the basic savings identity says that the sum of the private sector surplus (of savings over spending) and of government’s fiscal deficit must equal the current account (or external) balance. Thus, if a country is in approximate external balance, but an external shock like the credit crisis leads to a sudden increase in the private sector surplus, this must be mirrored by a similar increase in the fiscal deficit. In plain English, as the private sector pays off its debts by spending less, this is reflected by an increase in public sector spending.
There are only two ways out: the first is getting the private sector to start spending again and the second is for net exports to expand rapidly. The problem with the first solution is that, by definition, private consumption falls in a credit crunch; in consequence, business confidence falls dragging down private investment.
The problem with the second solution is slightly more complex and involves what philosophers call the “fallacy of composition“. While one country may be able to boost its exports, all countries taken together cannot. Because my exports are your imports, everyone trying to boost their exports simultaneously by means of, say, currency devaluation leads to a 1930s style “beggar my neighbour” result. This is broadly the logical flaw of those who argue that Britain was fortunate in not joining the euro and retaining its own currency.
What of the weaker members of a currency union, eg Greece and the “Club Med” countries? The German solution, currently dressed up as a debate about the merits of a European Monetary Fund (EMF), is for all countries to adhere to strict fiscal discipline and slash the public deficit. The EMF in its present guise is simply another version of the EU stability and growth pact. This “solution” only works through cutting the real wage and driving down national income to such a degree that the private sector surplus falls and imports contract drastically – ie though expenditure cutting rather than expenditure switching. The rub is of course that were a number of eurozone countries forced to adjust in this way, Germany’s current account surplus would contract.
Is there another answer? John Maynard Keynes proposed a perfectly sensible solution at Bretton Woods in 1944, namely, forcing surplus countries to spend their extra money in deficit countries, thus both their private spending and export capacity. The “Keynes solution” as is has been dubbed by the US economist Paul Davidson, was unfortunately vetoed by the Americans. In fairness, one must add that America rechannelled part of its surplus at the time into the Marshall Plan, thus enabling Europe to grow and to overcome its deficit.
Under such a scheme applied to the eurozone, the EMF would use the German euro surplus to create new sources of income and jobs in the Club Med countries, thus raising their ability to buy future German exports. In the absence of an EMF, a new eurozone economic structure which provided it with a Federal Treasury could capture such surpluses and direct them towards an ‘extended’ solidarity fund.
Too idealistic? Not at all. Just as Keynes and Marshall recognised that the failure to reflate Europe after the war might be catastrophic for the west as a whole, so Germany should draw the same lesson today – just as China now seems to be recognising that the new mercantilism leads nowhere. Recycling trade surpluses is a win-win game. Alternatively, insisting on budgetary balance will almost certainly lead to prolonged recession with high social costs.
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Climate change adverts draw mild rebuke from advertising watchdog
about 4 months ago - No comments
Leaked adjudication largely clears government over campaign that some thought ’scary, inaccurate and too political’
Read the full text of the ASA adjudication
The advertising watchdog has mildly rebuked the government over the phrasing of a claim in two advertisements on the danger of climate change, while dismissing the rest of the complaints against the controversial television and newspaper campaign.
The campaign, run by the Department of Environment and Climate Change last winter, brought in 939 complaints. Various groups said the adverts were political, too scary, and factually misleading.
The vast majority of these complaints have now been dismissed by the authority.
The Advertising Standards Authority’s only criticism was that a claim that “flooding, heat waves and storms will become more frequent and intense” should have be phrased more tentatively.
The environment secretary, Ed Miliband, said the authority had “comprehensively vindicated” the accuracy of the department’s TV advert and had rebuffed those who attempted to use the advertising standards process to question the reality of man-made climate change.
“Science tells us it is more than 90% likely there will be more extreme weather events if we don’t act.
“In any future campaign, as requested by the ASA, we will make clear the nature of this prediction.”
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Public sector job cuts hit women first
about 4 months ago - No comments
With four in 10 working women in public sector jobs, redundancies will make a work-life balance even harder to attain
The key election debate will be about the speed, scale and scope of spending cuts. This is a bit strange. It is the recovery of growth that will make the biggest contribution to reducing the deficit by getting tax revenues flowing again. Polls report just as much support for tax rises as spending cuts. But the test of economic virility has become the size of your spending cuts.
And virility is the right word here as spending cuts will hit women harder than men. So far men have been bigger losers in the recession job-loss stakes. This is not because women’s jobs are inherently more secure – indeed the chances of losing your job are about the same for men and women in hard-hit sectors such as retail, manufacturing or finance. But because those sectors that have suffered the most redundancies employ more men than women, the net result has been more male job losses.
But the public sector is different. Big spending cuts and job losses here will hit women, as they are twice as likely as men to work in the public sector. Indeed four in 10 women work in public-sector occupations. This has been particularly important in areas hit hard by private-sector unemployment such as the North East, Yorkshire and Humber and the West Midlands. In these regions male unemployment is more than 10%, and many families will now depend on a public-sector woman’s wage. If public-sector jobs are axed, many families could find themselves without anyone in work.
Women often work in the public sector because it offers relatively secure work, flexible working patterns and a chance to build up a decent income in retirement. The gender pay gap is smaller and the public sector offers more opportunities to combine a proper career with caring responsibilities. Spending cuts would inevitably threaten this – and thus set back the cause of gender equality.
Women’s pensions would be hit particularly hard. Those public-sector pensions of tabloid fury go largely to women. Two thirds of current public-sector pensions are being built up by women.
Cuts would also make the public sector a less woman-friendly place to work. While it is right to look to increase public-sector efficiency, unplanned job cuts will mean fewer workers doing the same amount of work, leading to stress and pressure to work even longer hours.
Politicians will battle hard for women’s votes during the election. Child tax credits already look set to be a battleground and both parties are keen to show their flexible working credentials. But it will be a policy that perhaps few would immediately associate with gender that will make the biggest difference to working women. The size and shape of the parties’ cuts packages does matter.
• An different article by was mistakenly published yesterday under the author’s name and subsequently removed. Comments on the original piece have been lost – apologies to those concerned
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Teacher racism is rare | John Dunford
about 4 months ago - No comments
Disciplinary procedures are already in place to deal with staff with discriminatory views – there’s no need for a BNP ban
It goes without saying that schools should be places that promote tolerance and understanding, and that there is no room for racist views in such organisations. However, the decision of the government not to ban teachers who are members of the British National party (BNP) or other groups that may promote racism is a welcome glimmer of common sense in an otherwise increasingly frustrating political landscape.
School are havens of fairness and inclusivity and only a handful of cases have come to light of teachers with BNP membership or extremist views. It goes without saying that young people should not be subject to racist views in the classroom, but a blanket ban surely falls into the category of sledgehammer to crack a nut.
The vast majority of teachers and staff have no hidden agenda, put the interests of their students first, and concentrate on teaching and providing a role model for widely accepted standards of behaviour.
Schools already do an excellent job of making sure that those who hold discriminatory views are not welcome. Each school has a set of values and a strong ethos. In many cases these are explicitly set out in a policy or document which includes reference to all staff having a commitment to treat all members of the school community with tolerance and respect and to promote community cohesion more widely. As part of recruitment processes, a school will use this policy to check that prospective employees agree with its ethos and to screen out those who are not able to support it.
Likewise, the general injunction that schools and teachers should not promote particular positions – political, religious, or discriminatory – continues to work well, as do the powers schools have to enforce it.
Disciplinary procedures are in place to deal with teachers or other staff who are overtly or covertly racist, and schools can dismiss staff for this when appropriate. In the case of teachers, dismissal is followed by referral to the General Teaching Council and can lead to the person being barred from teaching. There is no reason to change processes that work well and can be used to deal with the rare cases where trust is betrayed.
Of course it is right that teachers and others should be forbidden in schools to promote any contentious position. However, open discussion of difficult topics must be possible.
The aim should be genuinely to challenge young people to think for themselves and to form their own opinions, rather than to promote a particular ideology. Students should not be made to feel that their identity is under threat or that they are being attacked or belittled. With those provisos teachers should feel that they can tackle difficult issues without being accused of misbehaviour.
As in all areas of society, there is some racism in schools but very rarely on the part of school employees, who in almost every case take pains to project and live by values based on respect, tolerance and the intrinsic value of every human being.
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