Monday, April 13, 2015

Statoil could cut over 10% of jobs: report

Statoil could cut over 10% of jobs: report

[OSLO] Statoil could shed 2,400 jobs in May, or nearly 11 per cent of the total workforce, as the Norwegian oil giant cuts costs following the plunge in global oil prices, an Oslo business daily reported on Monday.
Dagens Naerinsliv, citing a labour representative, said the cuts would hit engineering staff, particularly those drilling and maintaining wells, as well as administrative staff.
"We are working on reinforcing the productivity within the company and that could have consequences in terms of jobs but it is too early to speculate on their number," Statoil spokesman Jannik Lindbaek told AFP.
The cuts are part of a programme to generate US$1.7 billion in annual savings from 2016 that Statoil announced last year when oil prices were still above US$100 per barrel.
Oil prices have since fallen to under US$50 per barrel, pushing energy companies to accelerate cost-cutting measures and suspend or scale back investment.
In February, when it announced annual profits had been slashed in half due to tumbling oil prices and heavy write-downs, Statoil also announced a 10 per cent cut in its US$20 billion-investment budget for this year.
Statoil, which went into the red in the second half of the year, also warned in February that an 8 per cent cut in staff levels last year to 22,500 could be followed by further staff reductions.
AFP

The US$9 trillion short that's seen sending the dollar even higher

The US$9 trillion short that's seen sending the dollar even higher

[LONDON] Investors speculating the dollar rally is fizzling out may be overlooking trillions of reasons why it will keep on going.
There's pent-up demand for the US currency that will underpin years of appreciation because the world is "structurally short" the dollar, according to investor and former International Monetary Fund economist Stephen Jen.
Sovereign and corporate borrowers outside America owe a record US$9 trillion in the US currency, much of which will need repaying in coming years, data from the Bank for International Settlements show.
In addition, central banks that had reduced their holdings of the greenback are starting to reverse course, creating more demand. The dollar's share of global foreign reserves shrank to a record 60 per cent in 2011 from 73 per cent a decade earlier, though it's since climbed back to 63 per cent.
So, the short-term ebbs and flows caused by changes in Federal Reserve policy or economic data releases may be overwhelmed by these larger forces combining to fuel more appreciation, according to Jen, the London-based co-founder of SLJ Macro Partners and the former head of currency research at Morgan Stanley.
Short-covering will continue to power the dollar higher," said Mr Jen, who predicts a 9 per cent advance in the next three months to 96 cents per euro. "The dollar's strength is not just about cyclical factors such as growth. The recent consolidation will likely prove to be temporary."
Most strategists and investors agree on the reasons for the dollar's advance versus each of its major counterparts during the past year: the prospect of higher US interest rates while other nations are loosening policy.
Bloomberg's Dollar Spot Index, which tracks the US currency against 10 major peers including the euro and yen, has surged 20 per cent since the middle of 2014. The gains stalled recently, sending the index down more than 3 percent in the three weeks through April 3, as Fed officials tempered investors' expectations about the pace of rate increases.
Mr Jen isn't the only one who thinks short-dollar positions will cause the rally to extend.
Chris Turner, head of foreign-exchange strategy at ING Groep, sees the dollar surging through parity with the European currency by mid-year, from US$1.0586 per euro as of 12:11 p.m. in New York. He said gains will be spurred by bonds from Germany to Ireland yielding below zero.
"Central banks are re-accumulating their dollar reserves and low, or negative, bond yields in the euro zone will probably speed up that trend," said London-based Turner, whose bank topped Bloomberg's rankings for the most accurate currency forecasts in the past two quarters.
Not everyone thinks the dollar will keep on climbing.
David Bloom, global head of currency strategy at HSBC Holdings Plc, said in a report that the effects of policy divergence have run their course and that the greenback rally "will stall as the market demands: tell me something I don't know."
Billionaire Bill Gross of Janus Capital Group has meanwhile been betting on US Treasuries against German bunds on the basis that the spread between American and European interest rates will narrow. He called his bet "the trade of the year."
Adrian Lee, whose eponymous investment company oversees more than US$5 billion, does expect the dollar to keep strengthening and points to monetary policy as the biggest driver as the tightening bias of the Fed contrasts with a European Central Bank that's expanding the money supply.
"The dichotomy between Europe and the US is most interesting," said Mr Lee, chief investment officer at Adrian Lee & Partners, which has offices in London and Dublin. "If you ask where our strategy would be in a year's time, we can easily have a forecast of the euro well below US$1." He also sees another structural factor that's underpinning the dollar: the US's shrinking current-account deficit.
The decline in oil prices - even with the shale-gas revolution, the nation is still an importer - has helped the US reduce its trade shortfall to 2.3 per cent of gross domestic product, according to data compiled by Bloomberg. That's down from a record 5.9 per cent in 2006.
For Mr Jen, the rise in dollar-denominated debt across the globe is key. The US$9 trillion owed by borrowers outside the US has surged from US$6 trillion at the end of 2008 - when the Fed cut its benchmark interest rate to near zero, making it cheaper to issue in the currency.
Russian gas producer OAO Gazprom, Spanish phone company Telefonica SA and ArcelorMittal, the world's largest steelmaker, have each raised about US$12 billion in the US currency since then, data compiled by Bloomberg show. France and Sweden are among the biggest sovereign issuers, borrowing more than US$100 billion between the two.
Some of that will need to be repaid even if the remainder will be rolled over. And debt that will eventually be refinanced needs servicing in the meantime.
"After years of accumulating a huge amount of debt in dollars, borrowers will need to figure out how to repay" given the currency's recent gains, Mr Jen said. "People will either repay early or start hedging actively. There'll be huge demand for the dollar that is much more than what's consistent with growth or interest-rate differentials."
BLOOMBERG

World Bank cuts East Asia growth forecast, warns of risks to outlook

World Bank cuts East Asia growth forecast, warns of risks to outlook


(Reuters) - The World Bank cut its 2015 growth forecasts for developing East Asia andChina, and warned of "significant" risks from global uncertainties including the potential impact from a strengthening dollar and higher U.S. interest rates.
The Washington-based lender expects the developing East Asia and Pacific (EAP) region, which includes China, to grow 6.7 percent in each of 2015 and 2016, down from 6.9 percent growth in 2014.
That's down from its previous forecast in October of 6.9 percent growth this year and 6.8 percent in 2016.
China's growth is likely to slow due to policies aimed at putting its economy on a more sustainable footing and tackling financial vulnerabilities, the World Bank said in its latest East Asia and Pacific Economic Update report on Monday.
The World Bank said China's economy is likely to slow to 7.1 percent in 2015 and 7.0 percent in 2016, from 7.4 percent in 2014. The previous forecast was for growth of 7.2 percent in 2015 and 7.1 percent in 2016.
While the impact of low oil prices will vary from country to country, the World Bank said the prospect of a sustained period of low oil costs will help underpin growth in the region, as will an expected improvement in high-income economies.
However, due to uncertainties in the global economy, there are "significant risks" to the regional outlook, it added.
"Higher U.S. interest rates and an appreciating U.S. dollar, associated with monetary policy divergence across the advanced economies may raise borrowing costs, generate financial volatility, and reduce capital inflows more sharply than anticipated," the World Bank said.
Any downturn in Japan and the euro area would dent the region's exports, it said. Another risk is a significant slowdown in China, although that is unlikely since the world's second-biggest economy enjoys policy buffers including large foreign reserves, and ample fiscal room to deploy stimulus or bail out debtors, the report added.
China's central bank has cut interest rates twice since November in a bid to spur aneconomy growing at its slowest pace in decades.
Growth in developing East Asia and Pacific excluding China is expected to accelerate to 5.1 percent in 2015 and 5.4 percent in 2016, from 4.6 percent in 2014, the World Bank said.
Malaysia, the region's largest oil-exporter, is likely to see growth slow in 2015, as low oil prices hit capital spending in the energy sector and private consumption cools due to the implementation of the goods and services tax in April, it said.
(Editing by Shri Navaratnam)

Is education the secret of Singapore’s success? - By Stavros N. Yiannouka Apr 10 2015

Is education the secret of Singapore’s success?

By Stavros N. Yiannouka

Lee Kuan Yew’s achievements have been the subject of much global discussion since his recent death. But one aspect of his success has been little mentioned: the investments that he, and his successors, made in education. His strategy, he would often remark, was “to develop Singapore’s only available natural resource, its people.”
Today, Singapore routinely ranks among the top performers in educational attainment, as measured by the OECD’s Program for International Student Assessment (PISA). Moreover, though a city-state of just five million people, Singapore boasts two universities among the top 75 in the latest Times Higher Education World University Rankings, the same number as China, Japan, and Germany.
How did that happen? What did Lee Kuan Yew and Singapore do right?
For starters, it should be emphasized that Singapore’s education system was not designed de novo by Lee Kuan Yew and his colleagues. Rather, it was built on the very solid foundations inherited from Singapore’s British colonial past. In contrast to many of his contemporaries among post-colonial leaders, Lee Kuan Yew was not afraid to embrace whatever elements from that past that would prove useful to the nation-building enterprise.
Nowhere is this approach more evident than in education. Many of the country’s premier educational institutions – for example, the National University of Singapore (founded in1905), Raffles Institution (founded in 1823), and the Anglo-Chinese School (founded in 1886) – significantly predate independence in 1963. Moreover, the curriculum for secondary education is modeled on the British O level and A level qualifications (with some adaptation to account for the generally higher average attainment levels of students in Singapore). And, though infrastructure is by no means neglected, the primary focus of educational investment is students and teachers.
A national system of generous scholarships enables the best students to avail themselves of an education at some of the world’s premier universities, even as Singapore develops its own world-class institutions. Moreover, with starting salaries above the national median, the teaching profession attracts, develops, and retains some of the best graduates.
Moreover, Singapore’s education system is unabashedly meritocratic (some might say elitist) in its focus on identifying and developing the very best talent and, equally important, directing it toward public service. Government scholarship recipients are obliged to serve in the public sector for a minimum of two years for every one year of study.
The same meritocratic approach governs the development and promotion of teachers. Top-performing teachers are given leadership responsibilities without excessive regard to tenure, and there is a revolving door between the education ministry, classrooms, and school administration. Educators are frequently seconded to carry out policy work. Many subsequently choose to return to the classroom.
The elitist tendency in Singapore’s education system is tempered by the fact that quality education is available for all levels of academic aptitude. Singapore is rightly proud of its elite secondary and tertiary academic institutions, but one could argue that the hidden gems of the system are the hundreds of neighborhood schools, institutes for technical education, and polytechnics that provide high-quality education for all.
Singapore’s education system is relentlessly forward-looking. From adopting bilingualism with English (in addition to the mother tongue of Mandarin, Malay, or Tamil), to its focus on science, technology, engineering, and mathematics (STEM), Singapore anticipated many of the key education strategies being adopted by today’s policymakers.
The choice of English was driven by history and a multiethnic society’s need for a common language. But it was also a prescient recognition of English’s rapid emergence as the lingua franca of global commerce and science, and that once entrenched it was likely to remain so for decades, if not centuries, to come. In this regard, too, Lee Kuan Yew distinguished himself from other post-colonial leaders of his generation. Rather than pandering to narrow nationalist sentiment and opting for the majority language and culture, he and his colleagues chose to adopt a global language for a global city.
Finally, Singapore’s education system evolves with the times and in light of new evidence. In the 1990s, Singapore’s policymakers, concerned that their approach to education might be somewhat regimented and overly focused on STEM, began to provide avenues for excellence in the humanities, arts, and sport. That rebalancing is still ongoing, with a new emphasis on identifying ways to foster creativity and entrepreneurship.
For Singapore’s founding father, education went beyond formal schooling. As he put it in a speech in 1977: “My definition of an educated man is a man who never stops learning and wants to learn.”
Indeed, Singapore’s world-class education system will be one of Lee Kuan Yew’s most enduring legacies. It was fitting that his state funeral took place at the National University of Singapore.
This article is published in collaboration with Project Syndicate. Publication does not imply endorsement of views by the World Economic Forum.
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Author: Stavros N. Yiannouka, former Executive Vice-Dean of the Lee Kuan Yew School of Public Policy at the National University of Singapore, is Chief Executive Officer of the World Innovation Summit for Education (WISE), an initiative of the Qatar Foundation.
Image: Former Singapore Prime Minister Lee Kuan Yew, who died early on March 23, 2015, aged 91. REUTERS/Tim Chong

Banks show restraint for new CEO compensation

Banks show restraint for new CEO compensation

BayStreetBanks1
Canada’s new bank CEOs are making less money than their predecessors as banks cut salaries and reduce CEO pensions in the face of shareholder pressure to curb super-sized executive pay.A report on bank CEO pay by Toronto compensation consulting firm McDowall Associates shows base salaries for the new CEOs of Bank of Nova Scotia, Canadian Imperial Bank of Commerce and Toronto-Dominion Bank are all down 33 per cent compared with the outgoing CEOs’ salaries, while the base salary for the new CEO of Royal Bank of Canada is down 13 per cent compared with his predecessor.
Targeted total direct compensation – which includes grants of share units and stock options – is down between 11 per cent and 25 per cent for all four CEOs, the report shows. For example, the analysis shows Scotiabank CEO Brian Porter earned $8-million in total direct targeted compensation (excluding pension costs) in 2014, which is 25 per cent less than the $10.7-million that predecessor Rick Waugh earned in total targeted compensation in 2013.
Bernie Martenson, senior consultant with compensation firm McDowall Associates and previously vice-president of compensation at Bank of Montreal, said it is too soon to conclude that the banks have permanently lowered CEO pay because it is common for CEOs to get raises as they spend more time in the job.
But she said a number of current pay practices, including reducing the proportion of pay awarded in stock options, suggest overall pay is likely to be lower for the new CEOs over the long-term.
“You would naturally think there would be a difference between someone of long tenure and someone who is new in the role,” Ms. Martenson said.
“But I think the reduction of stock options in the last few years is starting to have an impact in terms of wealth accumulation. If you were to look out eight or 10 years for these new CEOs and compare the value of their total equity to that of their predecessors, I think it would be lower.”
Bank CEOs are still well compensated of course, but restraint is increasingly evident. Ms. Martenson points to the CEO pension plans at all four banks. Toronto-Dominion Bank CEO Ed Clark, for example, has the largest pension of departing CEOs at $2.5-million a year, while his replacement, Bharat Masrani, will have a maximum possible pension of $1.35-million a year when he retires.
At Scotiabank, Mr. Waugh’s pension plan was capped at a maximum of $2-million a year at age 63, while Mr. Porter is eligible for a maximum pension of $1.5-million available at 65. Royal Bank’s Gord Nixon had a $2-million maximum pension at 60, while his successor David McKay will have a maximum pension of $700,000 at 55, increasing to a final maximum of $1.25-million at 60.
Retired CIBC chief executive Gerry McCaughey had no cap on the size of his pension, but his pensionable earnings that formed the base for his pension calculation were capped at $2.3-million. His successor, Victor Dodig, has his annual pension capped at $1-million.
A number of shareholder groups – including the Canadian Coalition for Good Governance – have urged companies to reform pension plans because they create expensive funding obligations that last for decades.
Michelle de Cordova, director of corporate engagement and public policy at mutual fund group NEI Ethical Funds, said bank CEOs continue to have very generous pensions “that most people can only dream of,” but she sees a sense of moderation in the trends.
Ms. de Cordova, whose fund has lobbied the banks to curb their executive pay and link CEO pay increases to those of average Canadians, hopes the pay reductions in 2014 are not a temporary trend.
“It does suggest that there is some sense that the levels that pay and benefits had reached were perhaps too high, and boards have decided they need to do something about that,” she said. “I’d say they are still very generous arrangements, but it does seem that there is a sense that there needs to be some moderation, which is welcome.”
The report says all five of Canada’s largest banks have cut the proportion of stock options they grant their CEOs in recent years.
Banks previously decided how much equity they wanted to grant CEOs each year, and split the amount evenly between grants of stock options and grants of share units. In 2014, however, stock options accounted for 20 per cent of total new equity grants at the median for the five banks, while share units accounted for 80 per cent of new equity grants.
Ms. Martenson said banks faced pressure from regulators to reduce stock options following the financial crisis in 2008 because they were deemed to encourage executives to take risks by quickly pushing up the company’s share price to reap a windfall from quickly exercising options. Share units, which track the value of the company’s shares and pay out in cash, are considered less risky because they must be held for the long-term or even until retirement, creating incentives to build long-term growth.

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