Kerry 'notes' Malaysian trafficking steps, urges more

US Secretary of State John Kerry met Malaysian Prime Minister Najib Razak on Wednesday and noted steps his government has taken to address human trafficking but urged it to improve law enforcement and victim protection, a US State Department official said. 

PHOTO: AFP

AUG 5, 20159:56 PM

[KUALA LUMPUR] US Secretary of State John Kerry met Malaysian Prime Minister Najib Razak on Wednesday and noted steps his government has taken to address human trafficking but urged it to improve law enforcement and victim protection, a US State Department official said.

Mr Kerry's talk with Mr Najib, on the sidelines of meetings of the Association of South East Asian Nations, came just days after the State Department he heads took Malaysia off its list of worst offenders in human trafficking, removing a potential barrier to a signature Asia-Pacific trade pact, despite opposition from human rights groups and nearly 180 US lawmakers.

The US official said Mr Kerry and Mr Najib also discussed progress on the Trans-Pacific Partnership (TPP) trade pact. "Both leaders reaffirmed the importance to regional prosperity of getting the trade agreement concluded," the official said.

Mr Kerry thanked Mr Najib for Malaysia's actions to address a recent migrant crisis and its willingness to accept large numbers of Rohingya Muslim refugees from Myanmar.

"They agreed on the importance of ensuring good treatment of the refugees, while also finding ways to address the root causes of migration and to bring human smugglers to justice," the official said.

On Tuesday, senior US lawmakers expressed concern about whether the State Department's annual global report on human trafficking may have been watered down due to political considerations and vowed to demand a full accounting at a Senate hearing this week.

Human rights groups called for an investigation into why strategically important countries such as Malaysia and Cuba were upgraded in the report, after a Reuters article chronicled how senior US diplomats repeatedly overruled State Department human rights experts.

The State Department denied that the country-by-country ratings in the latest report had been politicized.

Lawmakers will question Sarah Sewall, who oversees the anti-trafficking office as undersecretary of state for civilian security, democracy and human rights.

A Reuters examination, based on interviews with more than a dozen sources in Washington and foreign capitals, showed that the State Department office set up to independently grade global efforts to fight human trafficking was pressured into inflating assessments of 14 countries in this year's report.

Among the countries that received higher rankings than recommended by the Office to Monitor and Combat Trafficking in Persons were Malaysia, Cuba, China, India, Uzbekistan and Mexico, the sources said.

Mr Kerry said on Tuesday that "good progress" was made last week towards concluding the TPP, the key economic arm of US President Barack Obama's rebalance to Asia in the face of China's growing influence, even though negotiators failed to reach an accord in marathon talks in Hawaii.

REUTERS

    

Greece wants existing privatisation agency to handle announced tenders

AUG 5, 201510:02 PM

[ATHENS] Greece wants its existing privatisation agency to handle current tenders because setting up a new one will take time, a senior privatisation official said on Wednesday.

The issue - described as minor by Finance Minister Euclid Tsakalotos on Tuesday - has held up final agreement on privatisation in talks with lenders this week.

Greece clinched a last-minute deal with its lenders last month to negotiate a third bailout to keep it in the eurozone.

Under the deal, the country has pledged to wrap up a series of privatisations that were halted when the leftist government of Prime Minister Alexis Tsipras came to power in January.

"All pending tenders ... for the ports, the state natural gas firm DESDFA and the railway operator Trainose, will move ahead," the official said.

Greece is holding talks on fresh loans of up to 86 billion euros with the European Commission, the International Monetary Fund, the European Central Bank and the EU rescue fund, the European Stability Mechanism. It has said it expects to conclude a deal on time to pay off an ECB bond that matures on Aug 20.

Its existing privatisation agency had been meant to raise 50 billion euros by 2015 under the terms of Greece's first bailout agreement signed in 2010 but has cashed in only about 4 billion euros so far.

Greece must now transfer valuable state assets to a new, much bigger fund which aims to raise 50 billion euros. The cash will be used to recapitalise its banks, pay off debt and fund much-needed investments.

"There are several ideas on the table. It's a difficult exercise," the official said.

"If the structure (of the agency) changes and we try to set it up from scratch, it will take time and the whole programme will be pushed back." Greece's leftist government initially put on hold all privatisations launched by the previous conservative government.

But under pressure from the lenders, it unblocked the sale of a 51 percent stake in its biggest port, Piraeus, in May, asking three firms to submit bids by September.

The tender is now expected to be concluded by early November, the official said.

Investors will also be asked to bid for railway operator Trainose and Greece's second biggest port, Thessaloniki Port , by end-2015 and by early 2016 respectively, the official added.

A 1.2 billion-euro deal for the lease of 14 regional airports to Germany's Fraport was also expected to be wrapped up in the fall.

"We are in discussions with the Germans to conclude it. We hope for this to happen in autumn, no later than November," the offical said.

REUTERS

    

US services sector growth ticks up in July: Markit 

AUG 5, 201510:30 PM

[NEW YORK] US services sector growth improved modestly in July from June, owing to a slight gain in employment and in new business, an industry report showed on Wednesday.

Financial firm Markit said its final reading of its Purchasing Managers Index for the service sector edged up to 55.7 in July, a slight improvement from the preliminary reading of 55.2 and up from June's 54.8 reading.

A reading over 50 signals expansion in economic activity.

Markit said its reading of new business rose to 57.4 in July from 56.3 in June. The employment index also improved from June.

The firm's composite index, a weighted average of the manufacturing and services indexes, was 55.7, a slight increase from its preliminary reading of 55.2.

"The Markit PMI data indicate that the US economy enjoyed a good start to the third quarter. Faster growth in services accompanied a similar upturn in manufacturing," said Chris Williamson, Markit chief economist, in a statement.

He did note, however, that declining company optimism meant that "firms are expecting growth to slip further in coming months."

REUTERS

      

US trade deficit widens in June on higher imports  

AUG 5, 20158:43 PM

[WASHINGTON] The US trade deficit widened more than expected in June as an acceleration in domestic demand in the second quarter and a strong dollar sucked in imports of food and automobiles.

The Commerce Department said on Wednesday the trade gap increased 7.1 per cent to US$43.8 billion, which also reflected a second straight monthly drop in exports.

May's trade gap was revised to US$40.9 billion from the previously reported US$41.9 billion.

Economists had forecast the trade deficit rising to US$42.8 billion. When adjusted for inflation, the deficit increased to US$59.3 billion in June from US$57.6 billion in the prior month.

The trade data likely will have a marginal impact on the second quarter gross domestic product estimate released last week, as the deficit on the goods balance came in a bit higher than the advance figure incorporated in the GDP report.

In that report, the government estimated the economy expanded at a 2.3 per cent annual pace, with trade adding 0.13 percentage point to GDP.

But following stronger-than-forecast construction and factory inventory data, economists expected GDP would be revised to as high as a 3.0 per cent annual rate when the government publishes its second GDP estimate later this month.

Domestic demand grew solidly in the second quarter. The dollar, which has gained 15 per cent against the currencies of the United States' main trading partners since June 2014, is also making imports cheaper.

In June, imports increased 1.2 per cent to US$232.4 billion. Despite firming domestic demand, some of the imports likely ended up in inventories, which remained at very high levels in the second quarter.

Imports of food and automobiles were the highest on record in June. Dollar strength and sluggish global demand crimped exports, which slipped 0.1 per cent to US$188.6 billion in June.

Exports to the European Union fell 2.3 per cent, while imports surged 4.0 per cent to a record high. That left the trade deficit with the EU at an all-time high.

Exports to Canada, one of the main US trading partners, slipped 0.1 per cent in June. Though exports to Mexico rose solidly, they were outpaced by a jump in imports. That put the trade deficit with Mexico at the highest level since May 2012.

Exports to China increased 10.6 per cent, while imports from that country rose 4.9 per cent. That left the politically sensitive US-China trade deficit at US$31.5 billion, up 3.3 per cent from May.

REUTERS

      

US private sector adds 185,000 jobs in July: ADP

AUG 5, 20158:34 PM

[NEW YORK] US private employers hired 185,000 workers in July, which was the smallest increase since April and reduced expectations of a strong jobs reading in the government's payrolls report due Friday, according to a payrolls processor on Wednesday.

Economists surveyed by Reuters had forecast the ADP National Employment Report would show a gain of 215,000 private jobs in July.

June private payroll gains in June were revised down to 229,000 from an originally reported 237,000 increase, which was the biggest rise since December.

The report is jointly developed with Moody's Analytics.

The ADP figures come ahead of the US Labour Department's more comprehensive non-farm payrolls report on Friday, which includes both public and private-sector employment.

Economists polled by Reuters are looking for total US employment to have grown by 223,000 jobs in July, matching June's figure. The unemployment rate was forecast to hold for a second month at 5.3 per cent, the lowest since April 2008.

REUTERS

    

IMF says more work needed on yuan reserve-currency decision

AUG 5, 201510:45 PM

[WASHINGTON] The International Monetary Fund said the yuan trails its global counterparts in major benchmarks and that "significant work" in analyzing data is needed before deciding whether to grant the Chinese currency reserve status.

IMF staff members also opened the door to a possible delay in any approval with a proposal to postpone by nine months, until September 2016, the implementation of a change in the basket of currencies that make up the lender's Special Drawing Rights, according to an update on the five-yearly review released Tuesday in Washington. The IMF said postponing the change would make the transition to a new basket smoother.

The report suggests that while approval by the IMF board isn't yet assured, it's within reach, and the decision will come down to more than just the staff's assessment. China has been pushing for the yuan to join the dollar, euro, yen and pound in the SDR basket; while France has called for including the yuan, the US has urged China to keep moving toward a flexible exchange rate and making financial reforms to qualify.

"The ultimate assessment by the board will involve a significant element of judgment," the IMF report said.

The postponement sets the stage for the IMF to add the yuan to the SDR just before Chinese President Xi Jinping hosts a meeting of Group of 20 leaders next year, said David Loevinger, managing director of emerging-markets sovereign research at asset manager TCW Group Inc in Los Angeles.

"The end game is obvious," said Loevinger, former senior coordinator for China affairs at the US Treasury Department. "If the Chinese make this a priority, it's pretty certain President Xi will have his deliverable at the G-20."

The delay may buy China some time to implement reforms including opening up the capital market, which have been complicated by the government's efforts to stem a near-US$4 trillion stock rout. The barrage of measures include cutting interest rates to a record low and banning shares sales by major investors.

"Lots of preparation needs to be done, especially in the front of managing risks," Tao Dong, chief regional economist for Asia excluding Japan at Credit Suisse Group AG in Hong Kong. "If it's not ready to open the capital account, it'd be better not to force it. Capital controls saved China in 1997, in 2008 and now."

The report doesn't refer to the recent interventions to stem the equities slump. IMF Managing Director Christine Lagarde said last week the interventions shouldn't derail the SDR review.

The IMF's executive board, which represents the fund's 188 member nations, still plans to formally discuss the review toward the end of the year, Siddharth Tiwari, head of the IMF's Strategy, Policy and Review Department, said in a statement. The proposed extension in implementation will be decided later this month and won't "in any way prejudge the timing of conclusion or outcome of the review," he said.

It's highly likely the yuan will be included in the SDR basket, Wang Tao, chief China economist at UBS Group AG in Hong Kong, wrote in a note after the IMF report was released. She pointed to the amount of technical preparation being done as a sign the Chinese are likely to succeed in their bid.

Asia, Europe The fund said international use of the yuan, officially called the renminbi and abbreviated RMB, has increased over the last five years, albeit from a low base. "Across a range of indicators, the RMB is now exhibiting a significant degree of international use, especially in Asia and increasingly in Europe," the report said.

At the same time, the yuan trails other currencies in metrics the fund tracks in determining the SDR basket, according to the report.

To qualify for the basket, currencies must be "widely used" to make payments in global transactions, and "widely traded" in major exchange markets. Key indicators include the share a currency makes up of official reserves, international banking liabilities and global debt securities, as well as the volume of use in foreign-exchange markets.

Last year, the yuan ranked seventh among currencies as a share of official reserves, behind the four SDR members as well as the Australian and Canadian dollars, according to the IMF. The yuan constituted 1.1 per cent of official reserves, compared with 63.7 per cent for the US dollar.

Top Five The yuan also ranks outside the top five in terms of debt securities and currency trading, according to the report.

Winning the IMF's blessing, following a rejection in the last review in 2010, would give the yuan prestige as a reserve currency that makes it more attractive for central banks to hold and potentially reduces the dollar's dominance worldwide. From a technical standpoint, owning SDRs counts toward a country's official reserves; the U.S. holds US$50 billion worth, out of about US$280 billion allocated to IMF members worldwide.

The report said IMF staffers could include additional indicators to evaluate the yuan, such as cross-border payments and letters of credit of trade finance. The yuan ranks third behind the dollar and euro in terms of trade finance, according to the report.

Another wrinkle is that the IMF will assess whether yuan payments between the Chinese mainland and Hong Kong, Macau and Taiwan should be treated as international transactions, according to the report.

Taiwan, which China regards as a renegade province, has its own currency and central bank and has been ruled separately since a civil war that ended more than six decades ago. The IMF refers to the island as "Taiwan Province of China."

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