Financial Times UK - 21 07 2020

2020·14.61 MB·English

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NEWS PROVIDER OF THE YEAR
TUESDAY 21 JULY 2020 UK £2.90 Channel Islands £3.20; Republic of Ireland €3.20
Africa on the brink Scottish dawn Into the cloud
Virus surge threatens to overwhelm Johnson wakes up to danger of split Banks accelerate digital shift with
poorest continent from UK tech alliances
— BIG READ, PAGE 21 — ROBERT SHRIMSLEY, PAGE 23 — INSIDE FINANCE, PAGE 9
Mean streets
Briefing
Federal police
i RBS staff to work from home until 2021
defy probe call The state-backed bank has told about 50,000 staff
that they will continue homeworking until at least
2021, dealing a blow to efforts to encourage people
back to offices to help boost the economy.
— PAGE 9
US federal agents disperse about 1,500
Black Lives Matter protesters near a i Time runs out to replace CE mark
court in Portland, Oregon, in the early Industry has warned ministers they are out of time
hours of yesterday. to introduce a quality assurance scheme to replace
Homeland Security officials said fede­- the EU’s product labelling system. The government
ral police — in unmarked cars and wear- has still not published its own plans.
— PAGE 2
ing camouflage — had no intention of
pulling back after Democratic lawmak- i EU recovery talks run into fourth night
ers called for inquiries into their deploy- Negotiations in Brussels on an
ment by the Trump ad­ministration. economic package stretched
Portland has been the centre of pro- into a fourth night as the bloc’s
tests since the killing of George Floyd by leaders eyed a compromise
Minneapolis police in May. Weeks of figure of €390bn in grants for
demonstrations over police brutality stricken countries.
— PAGE 4
and systemic racism intensified as fed-
eral officers used tear gas to disperse i Hong Kong extradition suspended
crowds and take some protesters into Foreign secretary Dominic Raab has announced the
custody without explanation. freezing of the treaty in the wake of China’s security
‘Secret police force’ page 8 law. But premier Boris Johnson said the UK would
Noah Berger/AP not “abandon our policy of engagement”.— PAGE 3
i Asda stake talks revived by Walmart
UK buys 90m potential vaccine
The world’s biggest retailer has rekindled moves to
sell a slice of the supermarket chain, after putting
the process on hold in April. It said it was talking to
“a small number of third-party investors”.
— PAGE 12
doses as breakthrough hopes rise i Chief nurse dropped in Cummings row
Ruth May has confirmed she was “dropped” from
the daily pandemic press briefings after expressing
concerns that prime ministerial aide Dominic
Cummings had undermined the lockdown.
— PAGE 2
i Amigo issues ‘uncertainty’ warning
3 French and German deals 3 Oxford drug promising 3 Hancock spurns ‘narrow nationalism’
The subprime lender grappling with customer
complaints, a regulatory probe and the coronavirus
crisis has flagged “material uncertainty” over its
Anna Gross and delivered during the next two years. in the first phase of its clinical trials. An money into the search for a vaccine than ability to continue operating.— PAGE 12
Clive Cookson — London At the same time, Britain also pledged eagerly awaited study, published yester- any other nation. He said: “We’re work-
Joe Miller — Frankfurt
to purchase 60m doses of a vaccine from day in The Lancet, showed it generated ing to ensure that whoever’s vaccine is
The UK has moved to bolster its corona- Valneva of France, which is less “robust immune responses” and was approved first, the whole world can have
Datawatch
virus defences by striking deals to advanced in terms of development and tolerated by all patients. Soumya Swa- access. We reject narrow nationalism.”
secure 90m doses of potential vaccines works in a different way to the BioN- minathan, WHO chief scientist, has The Oxford clinical trial, which
Dream on
from companies in Germany and Tech drug. It will be manufactured at described the drug as the most The WHO says involved 1,077 healthy adults aged 18 to A key aspect of
France, on the day AstraZeneca and Valneva’s Scottish plant in Livingston. advanced vaccine candidate. 23 vaccines are 55, induced two forms of human %of US children earning more than the American
Oxford university said another inocula- The financial terms of the two deals Boris Johnson, prime minister, wrote being assessed immune response — generating anti- their parents, by year of birth Dream is that
tion was showing promise. were not disclosed. in a tweet: “There are no guarantees, in clinical trials bodies and T-cells — for at least 56 days. 100 children will have
The deals underline the urgency of According to the World Health Organ- we’re not there yet & further trials will around the “The data is fantastic — as good as it Average rate of absolute 90 higher standards
income mobility of living than their
global efforts to acquire Covid-19 vac- ization, 23 coronavirus vaccines are be necessary — but this is an important world, with could have been at this stage,” said Kate 80
parents. But only
cines amid fears of a devastating second being evaluated in clinical trials around step in the right direction.” 100 others in Bingham, who chairs the government’s 70 half of children
wave in some countries while others the world. More than 100 others are in The UK’s purchase deals give it a stake earlier stages Vaccine Taskforce. But she added that
60 born in the 1980s
grapple with the virus’s first onslaught. earlier stages of development. in three leading Covid-19 vaccine tech- of development preliminary results did not guarantee
50 earn more than
The UK became the first country to The deals with BioNTech and Valneva nologies. But all depend on the outcome success in more extensive trials. 50% threshold their parents, as
40
secure supplies of a vaccine developed follow London’s agreement to buy 100m of clinical trials to demonstrate that Additional reporting by George Parker 1940 1950 1960 1970 1980 opposed to 90 per
by Germany’s BioNTech with the doses of the Oxford university vaccine they are safe and effective. Vaccine race page 11 Sources: Harvard University Opportunity cent of those
US pharma group Pfizer, signing being developed with AstraZeneca. Matt Hancock, health secretary, told Editorial Comment page 22 Insights; Knoema born in the 1940s
an agreement for 30m doses to be The Oxford drug has shown promise MPs that Britain was putting more Lex page 24
Alibaba’s Ant payments group finally
set for one of Asia’s biggest flotations
Ryan McMorrow — Beijing The company did not provide a time- Ant recently changed its name from
Henny Sender — Hong Kong line for its listing nor say how much Ant Financial to Ant Group to stress that
Mercedes Ruehl — Singapore
money it wanted to raise. One person it is a tech company, rather than a finan-
Ant Group, China’s dominant mobile close to the listing plans suggested the cial one.
payments company, which is owned by process was in its early stages. It was last However, it retains a hefty footprint in
Universities poised to cut Alibaba and was recently valued at valued at $150bn two years ago after China’s financial system, with more
$150bn, has announced its long-antici- raising about $14bn from investors than 600m users depositing funds into
short-term positions
pated initial public offering with a dual including Temasek, General Atlantic, its Yu’E Bao money market fund. Pro-
Universities, faced with a sharp drop in listing in Shanghai and Hong Kong. Warburg Pincus and Baillie Gifford. viding digital financial services such as
income as foreign student numbers fall In recent transactions in secondary wealth management, online lending
during the pandemic, are poised to cut Floating even a small portion of shares markets, small blocks of shares have and insurance drove more than 50 per
the jobs of thousands of academics on in Ant, which was founded by Chinese changed hands at levels implying a valu- cent of its revenue in the year to March.
short-term contracts. Unions have billionaire Jack Ma and has about 900m ation of more than $200bn, according to Its Alipay app has slowly turned into a
warned that the cuts will reduce the annual users, would be one of the big- several people familiar with the matter. “superapp”, or a hub for its ecosystem of
quality of teaching and significantly gest IPOs of an Asian company. PayPal, the US fintech company, is val- services, from restaurant reviews to
burden remaining staff members. They A senior Ant executive who did not ued at $204bn. online shopping.
also point out that the many young wish to be named said the group had Eric Jing, Ant’s executive chairman, Mr Ma maintains his controlling stake
and tech-savvy members of their ranks waited to announce its listing so as to said: “Becoming a public company will in Ant but last year Alibaba swapped its
proved essential in setting up online “secure the full support of Beijing”. enhance transparency to our stakehold- right to 37.5 per cent of Ant’s pre-tax
learning during lockdown. Ant has previously run into regula- ers, including customers, business part- profits for a 33 per cent equity stake
Analysis i PAGE 2 tory concerns over its outsized role in ners, employees, shareholders and after gaining approval from regulators.
the fin­ancial sector and its profitability. ­regulators.” Markets Insight page 14
World Markets
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JULY 21 2020 Section:FrontBack Time: 20/7/2020 - 20:01 User: simon.roberts Page Name: 1FRONT, Part,Page,Edition: LON, 1, 1
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2 ★ FINANCIAL TIMES Tuesday 21 July 2020
NATIONAL
Brexit Lockdown concerns
Call for clarity on product labelling Chief nurse
dropped from
briefings after
Company bosses say there The CE marks are essential for legally In 2019 the government said the CE Honda’s demand was backed by Make costs and uncertainties of a UKCA failing to back
placing products in EU markets, cover- mark would be recognised in the UK for UK, the manufacturers’ organisation, scheme, even if it replicated exactly the
is no time left to replace
ing vast numbers of industrial products, a limited period in the event of a “no- which said its members were growing EU standards.
CE mark with UK version from car brakes and airbags to indus- deal” Brexit, but that advice was increasingly anxious about the potential Andrew Varga, chief executive of Cummings
trial pressure valves and electromag- rescinded in January and has not been costs, bureaucracy and legal uncer- Seetru, a Bristol-based manufacturer of
netic engine safety tests. updated. tainty for placing goods on the market. industrial pressure-valves, said he was
Peter Foster
Honda, the Japanese car and marine Manufacturers are pushing for the “Companies already have enough on unable to see any benefits in creating a
Ministers have run out of time to intro- engine maker, called on ministers to grace period to be reinstated and details their plate trying to keep their heads UK scheme, given the global dominance Laura Hughes
duce a quality assurance scheme to “urgently update” plans for the scheme of the new scheme to be published. It is above water without wondering how of the EU and US regulatory regimes.
Ruth May, England’s chief nursing
replace the EU’s “CE” product labelling or risk interrupting supplies to its plant unclear if the UKCA mark, when it they are supposed to get their products “I fail to see the point of a UK mark: if
officer, has confirmed she was
system by the end of the Brexit transi- in Swindon. “Honda is calling on the comes into force, will be more stringent, certified,” said Stephen Phipson, chief it’s weaker, it will damage the UK’s repu-
“dropped” from a daily Downing Street
tion, industry has warned. government to urgently update its guid- less stringent or simply a carbon copy of executive. “Manufacturers need this tation; if it’s tougher, that’s pointless
press conference after expressing con-
With less than six months before the ance on CE markings,” the company the EU scheme. uncertainty removed as a matter of since CE is the global gold standard and
cerns that Dominic Cummings, the
transition ends, the government has still told the Financial Times. “The remain- UK negotiators are trying to agree a urgency. We call on the government to if it’s the same, but with a UK badge on
prime minister’s senior aide, had
not published details of how its own ing time in 2020 is simply too short to “mutual recognition agreement” with publish details of how the new UK prod- it, then it’s a nugatory effort,” he said.
undermined the coronavirus lock-
planned mark — the UK Conformity design, test and guarantee compliance Brussels that would see the sides recog- uct labelling system will operate.” The Department for Business, Energy
down.
Assessed — will operate, causing rising with whatever the new UK require- nise each other’s certifications, but it is Small and medium-sized enterprises and Industrial Strategy did not respond
frustration among manufacturers. ments will be before the end of the year.” not clear that the EU will agree. are expected to be hardest hit by the to a request for comment. Mr Cummings came under fire for driv-
ing 260 miles north from London to
Durham during the height of the pan-
demic and then taking a one-hour road
Higher education. Temporary contracts trip to check his eyesight.
In a preparatory briefing session
ahead of a televised broadcast on June 1,
Universities to cut thousands of fixed-term jobs
Ms May was asked to respond to reports
that Mr Cummings had breached the
government’s restrictions.
She told MPs yesterday that, after
indicating she was unhappy with Mr
Cummings’ actions, she was given no
Institutions prepare for big explanation as to why she was “stepped
down” from the press conference.
loss of income as pandemic
Speaking to the public accounts com-
hits foreign student numbers mittee, Ms May said: “It is indeed true I
was dropped from the briefing but that
happened to many of my colleagues as
Bethan Staton well.”
Universities are axing the jobs of thou- Questioned on whether she had been
sands of academics on short-term con- asked to comment on Mr Cummings’s
tracts as the sector prepares to make actions in the trial run of the briefing,
sweeping cuts after coronavirus. she said: “We talk about lots of these
Institutions across the country have
dropped hundreds of hourly posts and
left temporary contracts to expire, leav- Ruth May told
MPs she was not
ing academics facing unemployment
informed why she
and depleting the capacity of depart-
was ‘stepped
ments to run courses and support down’ from the
students. press conference
Universities are expecting a sharp
drop in income as the number of foreign preparations questions and of course I
students falls owing to the pandemic. was asked about lockdown and rules to
The Institute for Fiscal Studies esti- lockdown.”
mates the sector could lose anywhere Pushed on whether she believed Mr
between 7.5 per cent to half of its yearly Cummings had breached the rules, she
income over the next four years, and said: “In my opinion the rules were
warned institutions were unlikely to clear. They were there for everyone’s
“claw back” those losses without mak- safety and they applied to us all,” add-
ing redundancies. ing: “I don’t know why I was dropped
But academics and unions warn that from the briefing, you would have to ask
cuts to the temporary workforce will other people.”
reduce the quality of teaching and sig- Downing Street has denied Ms May
nificantly add to the workloads of other Bleak picture: indications that thousands of jobs could already expired, said fixed-term con- ‘The sector going to be coming to an institution that was dropped from the briefing after fail-
staff members. They also point out that the annual be lost, with “layer upon layer of people tracts were “part of the higher educa- is in utter turmoil because of industrial ing to support Boris Johnson’s chief
is propped
temporary workers, many of whom are Secret Postcard who they [the universities] are just let- tion landscape” and were used “legiti- action,” said Kevin Biderman, who adviser.
young and tech-savvy, proved essential fundraiser at the ting go like balloons into the sky”. mately and appropriately”. It added that up by this teaches at the college. The RCA said it Mr Johnson repeatedly defended Mr
in setting up online learning during Royal College of The UCU understands that 1,100 staff whose contracts were expiring was “being hit hard by the economic Cummings’ trip from London to Dur-
casualised
lockdown. Art in London fixed-term contracts are at risk at King’s would be supported in finding new jobs. consequences of Covid-19” and called ham and subsequent 52-mile day trip to
Vicky Blake, president of the Univer- has been College London, which confirmed it had But Peta Bulmer, who has worked at labour’ on the government “for a comprehen- Barnard Castle during the height of
sity and College Union, which repre- cancelled this a “general recruitment freeze” but said Liverpool for more than two decades sive support package that protects jobs, lockdown.
sents university staff, said that by year because of it would renew fixed-term staff “soon but held a temporary contract after a Vicky Blake, preserves academic capacity and guar- The prime minister also prevented
cutting non-permanent staff on whose coronavirus. and where appropriate”. At the Univer- career break, said although staff could University and antees universities’ survival”. Chris Whitty, the chief medical officer,
work they depended for teaching and More than 90 sity of Sheffield, 116 fixed-term con- be rehired in September, the situation College Union In the past month, there have also and Patrick Vallance, the chief scientific
research after years of rapid expansion, per cent of staff tracts have already expired and, accord- was “far from business as usual”. She been wildcat strikes over the expiry of adviser, from answering any questions
university leaders were “pulling the rug at the college are ing to a statement, most remaining said: “Many of the staff losing jobs this contracts at Goldsmiths, University of about Mr Cummings when they
out from under their own institutions”. thought to be on fixed-term posts are being reviewed summer will not be rehired, and the London. The university confirmed that appeared alongside him at one of the
“The sector is propped up by this cas- temporary “based on anticipated student numbers recruitment freeze across HE means 343 contracts would end in October. daily briefings in May, saying it would be
ualised labour,” she said. contracts and and our financial challenges”. they are unlikely to get a job at a differ- UCU branches at 15 other universities wrong for them to be dragged into a
According to the Higher Education 200 jobs are at Other institutions have announced ent institution either.” and the union’s higher education political dispute.
Statistics Agency, 33 per cent of aca- risk teaching budget cuts of up to 50 per cent The threat of job losses has resulted in national committee have passed Prof Whitty said he had no desire to
— Leon Neil/Getty
demic staff in the UK were on fixed- and have warned temporary staff that disruption at a number of institutions. motions in support of a “corona con- get drawn into politics while Sir Patrick
term contracts in 2017-18. UCU analysis their contracts may not be renewed. At the Royal College of Art in London, tract” to protect non-contract staff. Vallance said he was a “neutral” civil
shows that of these, black and minority The University of Reading’s vice- where the UCU estimates more 90 per The Universities and Colleges servant.
ethnic staff were disproportionately chancellor last month said a worst-case cent of staff are on temporary contracts Employers Association, which repre- Just days later, Jonathan Van Tam,
affected, with 42 per cent on fixed-term scenario would mean losing the equiva- and 200 jobs are at risk, the union last sents universities, said while it was “too England’s deputy chief medical officer,
contracts, compared with 31 per cent of lent of 500 full-time jobs. week passed a vote of no confidence in soon” to predict the full financial impact did not hesitate when invited to com-
their white counterparts. Universities say it is not unusual for the vice-chancellor and threatened to of the pandemic, it was “deeply con- ment on the scandal.
Many of these non-permanent con- temporary contracts to expire and that go on strike. cerned”. Raj Jethwa, UCEA’s chief execu- “In my opinion the rules are clear and
tracts are about to expire, but hiring staff could be rehired in the next aca- “Students have to realise that if they tive, said: “It is not surprising that many they have always been clear,” he said.
freezes mean they are unlikely to be demic year if student numbers allowed. are coming to RCA and the vice-chan- HE institutions are having to discuss “In my opinion, they are for the benefit
renewed, as would normally be the The University of Liverpool, where 536 cellor doesn’t rescind the cuts and give possible job reductions with their of all and in my opinion they apply
case. According to Ms Blake, there are contracts are either due to or have us proper conditions of labour, they are employees and trade unions.” to all.”
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JULY 21 2020 Section:World Time: 20/7/2020 - 19:48 User: john.conlon Page Name: UKNEWS1, Part,Page,Edition: LON, 2, 1
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Tuesday 21 July 2020 ★ FINANCIAL TIMES 3
NATIONAL
Nuclear power
China’s biggest investments during the ‘golden era’ of Sino-British relations Where China invests in the UK
UK inbound M&A from China, largest 100 deals by value Foreign direct investment by sector, 2010-19
Total trade figure: $79.5bn
set to be next 10 Upper Bank Street $1.4bn Logicor Technology 8.2%
Real estate $13.7bn Finance Logistics Energy
19.6% 17.4% 7.7%
2011 12 13 14 15 16 17 18 19
battleground
Sunseeker $495m Gardner Aerospace $373m
Industrials
Real estate
Other
19.5%
27.7%
2011 12 13 14 15 16 17 18 19
with Chinese Global Switch $3bn Imagination Global Switch
Skyscanner $1.7bn Technologies $746m $2.2bn
Source: AEI Global Investment Tracker
Technology
UK inbound M&A
2011 12 13 14 15 16 17 18 19
% of total deal value, by acquirer
100
China &
Standard Bank $770m
HK
Tory hawks attempt to block state-owned Financials
75
EU
company’s involvement at Essex plant 2011 12 13 14 15 16 17 18 19
Rest of 50
Odeon and UCI Cinemas $1.2bn the world
Weetabix $1.9bn PizzaExpress $1.5bn
Jim Pickard, Daniel Thomas by an investor linked to the Chinese Other Southampton FC $273m 25
and Nathalie Thomas state to take control of the board of chip US
In the decade of “golden era” Sino-Brit- designer Imagination Technologies.
ish relations initiated by George Now the energy sector, which has seen 2011 12 13 14 15 16 17 18 19 0
201011 12 13 14 15 16 17 18 19 20
Osborne, Chinese companies snapped a frenzy of activity from Chinese com-
Source: Refinitiv YTD
up an estimated $80bn of UK assets, panies building holdings in wind and Source: Dealogic
ranging from London’s black cab maker solar farms, looks set to become the
to a wind farm in Norfolk and stakes in next battleground with the main focus in a short space of time. I think there is a ‘A fractious Chinese investment in the City of Lon-
football clubs, including Southampton. on the highly sensitive nuclear power The UK suspended its extradition treaty learning curve with China and we are a don. But she added: “The choices for the
relationship
The Conservative chancellor’s 2015 sector, and state-owned China General Hong with Hong Kong “immediately and long way behind Australia and the US,” Chinese government are very limited.
declaration that “no economy in the Nuclear, in particular. Kong indefinitely” yesterday as relations with said Bob Seely, MP for the Isle of Wight. with China The Chinese economy is not in a good
west is as open to Chinese investment as The company, which has already China deteriorated further after Beijing’s “There should not be high-risk vendors state and, obviously, China still wants to
will
the UK” was borne out in a buying spree spent nearly £3.8bn in the sector, is a imposition of a security law on the in critical national infrastructure and, present an image that it is open for for-
that also saw household names snapped junior partner on the Hinkley Point Extradition territory. yes, that applies to CGN.” probably eign investors.”
up, such as PizzaExpress, bought by pri- power station in Somerset being built by treaty with Dominic Raab, foreign secretary, also But if the government forced CGN out damage the Most members of the CRG say they
vate equity group Hony Capital in 2014. EDF, and is also involved with the said the arms embargo against China, of the nuclear industry it could leave the want a healthy bilateral relationship
territory
Many of the deals were uncontrover- French company’s proposed plant at which was imposed after the 1989 programme in limbo, given a lack of UK’s ability with China but there is a hardcore “who
sial and remain so despite the recent, Sizewell in Suffolk. suspended Tiananmen Square massacre, would be other companies keen to invest. are anti-China in all things”, according
to increase
sharp change in the political winds that But it is CGN’s third nuclear power extended to Hong Kong. Jim O’Neill, a Treasury minister in the to one of its members. The question
led this month to a ban, in effect, on project — a new station at Bradwell in The moves follow pressure from MPs Osborne era, said it would be “cavalier” bilateral they are asking is, what other infra-
Huawei, the Chinese telecoms group, Essex, where it is the majority partner — amid fears the new security law could to reject CGN without any alternative. structure should be deemed critical?
trade’
winning business in the UK. that the Tory backbenchers want be used by Beijing to demand the Any move against CGN could worsen British Steel, for instance, was res-
But Dominic Raab, the foreign secre- blocked. The Chinese company wants to extradition of anyone who criticised the Sino-British relations while Beijing is cued by China’s Jingye this year, while
tary, yesterday promised tougher scru- use its own reactor technology and is communist regime. threatening dire consequences for the China Investment Corporation, the
tiny of any deals that could compromise hoping to receive design approval from Earlier yesterday Boris Johnson said Huawei decision and London’s stance on country’s main sovereign wealth fund,
national security as he confirmed politi- the regulator in the next 18 months. the government would not “completely the clampdown in Hong Kong. has stakes in significant utilities.
cal moves in response to China’s imposi- Iain Duncan Smith, a former Tory abandon our policy of engagement” “A fractious relationship with China Chinese investors have also built
tion of a security law on Hong Kong. leader, is a leading voice pushing for a with China. Urging the need to strike a will probably damage the UK’s ability to stakes in tech companies, including
As the pressure mounted to bar Hua- review of the group’s involvement. CGN “balance”, Mr Johnson insisted he was increase bilateral trade and investment Oxford Nanopore, which is developing
wei from the 5G network, led by Tory has been blacklisted by Washington not going to be “pushed into a position and hamper the ability to secure sup- testing kits for Covid-19.
hawks in the China Research Group, over allegations of theft of US technol- of becoming a knee-jerk Sinophobe on port from China on multilateral trade Mr Seely said there was a “grey area”
formed this year, other investments ogy for potential military use. The com- every issue, somebody who is initiatives,” said Chris Southworth, sec- over how to define inappropriate invest-
have come under scrutiny. Questions pany is set to be discussed at a meeting automatically anti-China”. retary-general of the International ments. “The government needs a con-
were raised in March after a Chinese today between Mike Pompeo, US secre- Mike Pompeo, US secretary of state, Chambers of Commerce. sidered and comprehensive posi-
company bought a big stake in data cen- tary of state, and the Tory hawks. will meet backbench MPs from the Tory Yu Jie, senior research fellow on China tion . . . it’s not easy at the moment con-
tre group Global Switch. In April the “A year ago no one was that interested and Labour parties today before at Chatham House, said one potential sidering there is a fair bit of knee-jerk-
government intervened to block a bid in Huawei, it has gone from hero to zero meeting Mr Johnson. Laura Hughes “retaliation” could be for Beijing to limit ery going on.”
JULY 21 2020 Section:World Time: 20/7/2020 - 19:49 User: john.conlon Page Name: UKNEWS2, Part,Page,Edition: LON, 3, 1
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4 ★ FINANCIAL TIMES Tuesday 21 July 2020
INTERNATIONAL
EU marathon
Beijing tension
Brussels
talks close in pressed over
leak inquiry
on recovery
into alleged
self-censoring
fund agreement
Michael Peel — Brussels
The EU faces pressure to reveal the
results of a leak inquiry it launched
Compromise in sight as €390bn in grants
over internal emails suggesting it toned
down a report on alleged Chinese disin-
set to be released if deal on tie-ins agreed
formation after pressure from Beijing.
European parliamentarians are con-
cerned the bloc’s diplomatic service has
Mehreen Khan and Sam Fleming reached. “These are incredibly tough focused more on how the documents
Brussels negotiations. They will now continue. became public than on the substantive
Marathon talks over Europe’s financial But an extraordinary situation requires question of how it dealt with China’s
response to the pandemic stretched into extraordinary efforts. So far we’re done complaints.
a fourth night, as EU leaders battled justice to that. And I hope we can also The affair has crystallised fears
over the details of the bloc’s multibil- cover the remaining distance, although among some legislators, member state
lion-euro recovery fund. it won’t be easy,” she said. diplomats and analysts that the EU is
The leaders were by yesterday hom- Leaders have been locked in talks reluctant to fund its anti-disinforma-
ing in on a figure of €390bn in grants for since Friday as they try to forge a com- tion efforts properly or to push back
stricken countries following a fraught mon EU response to the worst economic strongly against Beijing.
weekend of discussions in Brussels. This crisis since the bloc’s inception. Not only The perceived hesitancy contrasts
was below the figure proposed before are they attempting to seal a deal with the economic countermeasures
the summit began but higher than ear- authorising the European Commission being drafted over China’s alleged fail-
lier demands from an alliance of “fru- to borrow unprecedented sums to seed ure to reciprocate the market access the
gal” nations such as the Netherlands. the recovery fund, they are also EU allows Chinese companies.
Diplomats said the grants figure, for- attempting to settle the EU’s forthcom- “I am perplexed and unhappy they
mally proposed by European Council ing €1tn seven-year budget. have not said anything about the leak
president Charles Michel, represented a Emmanuel Macron, France’s presi- inquiry,” Markéta Gregorová, a Czech
breakthrough in the talks that have dent, said there was a “spirit of compro- MEP who sits on the European parlia-
been beset by divisions. Sebastian Kurz, mise” in the negotiations but warned ment’s foreign affairs committee, said.
Austria’s chancellor who was one of the that the agreement had not been settled “The focus on the leak rather than the
advocates for a smaller fund, said he was yet. “I remain extremely cautious,” he Chinese pressure is also strange.”
“very happy” with the result after a day told reporters, pointing out that impor- Ms Gregorová called for the diplo-
of “tough negotiations”. tant elements such as respect for cli- matic service to divulge the outcome of
But there were still complex discus- mate targets and the rule of law were yet the leak inquiry launched in May and
sions ahead yesterday evening, on top- to be discussed. also what measures it had taken to
ics including climate change targets, a He added that a failure to agree would improve its “resilience against self-cen-
governance mechanism for disburse- risk a revival of the arguments at sorship and undue interference”.
ment of funds, and how to link pay- “harder moments” and at a higher cost. The EU’s diplomatic wing — known as
ments to adherence to rule of law princi- The main sticking point over the Tough evening, including the new €390bn fig- ‘I hope we the rule of law as long as the move has the European External Action Service —
ples. weekend had been the level of non-re- negotiations: ure, alongside proposals for budget the support of a qualified majority of has recently completed the final report
can also
Governments were anticipating par- payable grants that the recovery fund German rebates for the frugal states and Ger- governments. on the leak, according to people familiar
ticularly difficult talks on whether to tie would be permitted to give hard- chancellor many. cover the One western diplomat said the frugal with the matter. An EU official said the
aid distribution to respect for the rule of pressed member states. Angela Merkel Dutch prime minister Mark Rutte countries would remain firm in the face inquiry had “identified clear evidence of
remaining
law in the face of resistance from Poland But yesterday morning leaders began arrives at the told journalists yesterday that he was of threats from the Hungarian leader. unauthorised disclosure of informa-
and Hungary. to make progress as the frugal position EU summit “ready to do a deal”. distance, “We will resist and let’s see if Orban tion”, but had “not established evidence
The euro yesterday hit a four-month shifted and €390bn emerged as a satis- in Brussels By mid-afternoon, leaders began to really wants to block a deal,” said the of a leak directly by EEAS staff to a jour-
although it
high against the US dollar as EU leaders factory compromise. yesterday grapple with the sensitive issue of how diplomat. nalist”. The EEAS insisted the inquiry
appeared to edge closer to a deal, Earlier in the weekend France, Ger- Francois Lenoir/AFP/Getty to connect the disbursement of funds won’t be Other issues to be resolved included a was not yet closed.
strengthening by 0.3 per cent to $1.146, many, Spain and Italy had sought to with respect for rule of law after Hun- move to tie aid to respect for the EU’s The affair burst into public after
easy’
its highest level against the dollar since keep the grants ringfenced at no less garian premier Viktor Orban threat- goal of hitting climate neutrality by internal diplomatic service emails, first
early March. than €400bn — a figure that was itself ened to veto a compromise that tied dis- 2050. Poland has not formally signed up disclosed by the New York Times,
Angela Merkel,
Entering Brussels’ Europa building shy of the €500bn originally advocated tribution of money to respect to EU fun- to the goal and does not want aid to be revealed a dispute over the editing of an
German leader
yesterday morning, German chancellor by Berlin and Paris in May. damental principles. made conditional on the net-zero target. April EU report that accused China of a
Angela Merkel said the talks overnight Mr Michel was preparing to propose a The current deal says money can be Additional reporting from Michael Peel in “global disinformation campaign” dur-
had created “hope” that a deal could be fresh negotiating blueprint yesterday withheld from member states who flout Brussels and Guy Chazan in Berlin ing the coronavirus pandemic. After a
draft of the document leaked to the
news organisation Politico, China made
at least three formal diplomatic com-
Russia plaints to the EU and warned bilateral
relations would be hit should the bloc
Putin names ‘opposition’ figure as governor of restive region
publicly accuse it of spreading coronavi-
rus crisis propaganda.
A version of the report eventually
published made criticisms of China but
was shorn of any reference to the alleged
Max Seddon — Moscow Kremlin-appointed governor in an elec- Khabarovsk, a normally sleepy city of gal his popularity was outstripping Mr for the LDPR’s ageing ultranationalist “global disinformation campaign”.
toral upset in 2018. Demonstrators 600,000 on the Chinese border Putin’s. Khabarovsk gave the LDPR a leader, Vladimir Zhirinovsky. He told In the internal diplomatic service
Vladimir Putin has chosen a politician
chanted slogans calling for Mr Putin’s 8,000km east of Moscow, became the majority in the regional parliament last Mr Putin in a video call yesterday he was emails, Monika Richter, a disinforma-
from Russia’s tightly controlled “sys-
resignation. In a sign of the Kremlin’s jit- unlikely focal point for that anger this year and returned a low turnout for Mr “ready to fly to Khabarovsk immedi- tion analyst, raised concerns that
temic opposition” to run a far eastern
ters over the unexpected protests, offi- month after security services arrested Putin’s constitutional amendments. ately” and asked for additional support changes to the report showed the EU’s
region rocked by a week and a half of
cials let the crowds disperse peacefully Mr Furgal on charges of ordering two Yuri Trutnev, Mr Putin’s special for the region during the pandemic. “apparent willingness to self-censor in
protests following the arrest of its pop-
but claimed people were paid to attend. contract killings and a third attempted envoy for the far east, said last week that Mr Putin’s decision to appoint an response to Beijing’s threats”.
ular governor.
State TV suggested locals were egged on killing in the mid-2000s. “law enforcement would never have LDPR member was “compensation” for The diplomatic service responded by
The appointment of Mikhail Degtyarev, by paid provocateurs working for the US Murky score-settling between busi- arrested a sitting governor unless they Mr Zhirinovsky, a longstanding mem- launching an inquiry into how the
a 39-year-old lawmaker from the government. nessmen was rife in the metals and tim- had 100 per cent ironclad justification” ber of the “systemic opposition” the emails came to be disclosed.
nationalist Liberal Democratic Party of Though Mr Putin won overwhelming ber trade where Mr Furgal, who denies but admitted the Kremlin had “under- Kremlin uses to provide a valve for dis- Ms Richter left the EU diplomatic
Russia, as governor of Khabarovsk came support in a vote on constitutional the charges against him, made his estimated the extent to which people in sent and nationalist sentiment, political service last week of her own accord to
after tens of thousands of people took to amendments earlier this month that money in Khabarovsk before going into Khabarovsk were sick” of the previous scientist Ekaterina Schulmann said. take a job in the private sector. She told
the streets at the weekend for the sec- could potentially extend his rule until politics. But it was the heavy-handed Putin-appointed governor. “We put one guy from your party in jail, the FT she was not the source of the leak
ond Saturday running. 2036, the protests indicate that anger move against him that struck a chord in Mr Degtyarev, a native of Samara in so let’s make another one the governor. and was disillusioned by the EU’s insti-
Protesters braved 30-degree heat and with falling living standards and the the region, which has long chafed the Volga region who ran for mayor of “LDPR is quite a powerful political tutional response to Chinese pressure.
a bomb warning to demand that the Kremlin’s patchy coronavirus response against what locals see as imperious Moscow in 2013, has no previous con- force in Khabarovsk, not because it’s The diplomatic service has always
security services release Sergei Furgal, have sent Mr Putin’s approval ratings to micromanagement of their affairs. nection to Khabarovsk or the far east LDPR, but because it represents what maintained it did not bow to Chinese
the LDPR politician who defeated a their lowest level on record. Kremlin officials had warned Mr Fur- and is best known as a youthful proxy legal opposition is possible.” pressure to soften the report.
Dispute resolution
Mexico’s WTO candidate vows to ease US-China trade tension
FRIDAY31MARCH2017 WORLDBUSINESSNEWSPAPER UK£2.70ChannelIslands£3.00;RepublicofIreland€3.00
TrumpvstheValley AFiveStarplan? DearDon...
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steps down in September. has been much more specific on trade being considered a developing nation
The field is led by two female African negotiations,” he said. within the WTO despite also being a glo-
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Mohamed, a former trade minister who the OECD in a move seen as designed to added. But nations had to advance in
With newspaper delivery, you start the day prepared.* With FT.com, has chaired the WTO’s general council, bolster Mr Seade’s chances. negotiations on fisheries, electronic
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and tablet access, you’re up to speed wherever you are. Nigerian finance minister and senior shoes will first have to fix the appellate dence” before tackling tough issues of
World Bank official. Mr Seade insists he body — the WTO’s dispute resolution industrial subsidies.
is not disadvantaged by a widespread mechanism — that has been at a stand- ‘[The US grudge with the He dismissed suggestions the US
desire to make the multilateral body’s still since December. The US has exer- could pull out of the WTO altogether but
WTO] will be there
leadership more diverse. cised a veto and blocked the appoint- stressed that “they have a grudge with
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“Maybe there’s a fascination for some- ment of new judges to the body, which whoever wins the election’ the WTO — we have to understand that
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*Terms and conditions can be found at www.ft.com/subscribenow or is of a certain gender,” Mr Seade told disputes between members. Jesús Seade can . . . it will be there whoever wins the
the Financial Times from Geneva, Mr Seade locked horns with Mr Light- next election”.

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Tuesday 21 July 2020 ★ FINANCIAL TIMES 5
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6 ★ FINANCIAL TIMES Tuesday 21 July 2020
INTERNATIONAL
Austerity Anti-corruption protests
Iraq warns of crisis woes stoking insecurity Zimbabwe
detains
journalist
Finance minister calls for spending and a monthly wage bill of Crude prices have more than halved The 73-year-old minister is part of a below the poverty line, according to a
radical reform to avert $5bn for its vast public payroll. This compared with last year, dealing a dev- transitional cabinet appointed to steer new joint assessment by the govern- who made
includes payments for what he esti- astating blow to the finances of Opec’s Iraq towards fresh elections after mass ment, UN, World Bank and Oxford uni-
‘disaster’ after crude crash mated are 300,000 “ghost” or fictional second-biggest producer. The country’s anti-establishment protests toppled the versity.
graft claims
employees. oil export revenues fell from $6.1bn in previous administration. After three Plunging oil prices leave the govern-
While austerity is a “hard message” to January to lows of $1.4bn in April, decades of war and turbulence, Mr ment little room to manoeuvre. Accord-
Chloe Cornish — Beirut
sell to politicians, Mr Allawi detects a according to the Oxford Institute for Allawi is not alone in fearing economic ing to the World Bank, if oil prices
Iraq’s finance minister has warned of growing political awareness that “if you Energy Studies. freefall could destabilise Iraq again. remain under $30, Iraq will go from hav-
“severe security consequences” if its over-milk [a cow] it might die”. He While global oil price crashes hurt “Unemployment is going through the ing a fiscal surplus to a deficit equivalent Joseph Cotterill — Johannesburg
economy is not “restructured radically”, added: “All you can do is to point out the Iraq’s economy before, Mr Allawi says roof,” said a western diplomat in Bagh- to more than a quarter of its gross
Zimbabwe’s security forces have
as the coronavirus crisis wreaks havoc disaster before us if we continue along Baghdad can no longer count on prices dad, adding this could have an “impact domestic product.
detained a prominent journalist who
on business and an oil price crash hits this path.” to bounce back, arguing this may spur on radicalisation” as extremist groups The government can tap $68bn of
exposed the alleged illegal awarding of
state revenues. Mr Allawi added: “[My] firm opinion reforms. “There’s a growing recognition prey on jobless Iraqis. foreign reserves to cover bills in dollars,
contracts in pandemic-related govern-
“Issues, which were buried because of is that the economy, if it’s not restruc- that we’re moving into an environment Underscoring Iraq’s economic fragil- such as imports and debt servicing,
ment procurement.
large and growing oil revenues, are now tured radically in a very consistent and of relatively low oil prices . . . It is really ity, the country’s poverty rate is set to and is expected to borrow $18bn domes-
crystallising,” said Ali Allawi, the coun- well-implemented medium-term pro- imposed on us that we find an alterna- rise to 31.7 per cent this year, from 20 tically and abroad to cover gov- Hopewell Chin’ono, whose revelations
try’s new Harvard and MIT-educated gramme, can lead to really severe secu- tive to restructure our public finances, per cent in 2018, as the coronavirus ernment wages for the next few months, led to the arrest and sacking of President
finance minister, referring to bloated rity consequences.” to account for this new normal.” emergency pushes 4.5m more Iraqis analysts said. Emmerson Mnangagwa’s health minis-
ter, was arrested by security agents who
raided his home in the capital, Harare,
yesterday.
“I have locked myself inside. They are
Lift off
outside . . . alert to the world for me,”
Mr Chin’ono told the Financial Times.
UAE sends He posted a video on Facebook of agents
arriving to take him away.
The arrest comes as the government
probe to Mars
of the southern African nation moves
against anti-corruption protesters. Mr
Chin’ono had backed demonstrations
against rising graft and economic mis-
rule under Mr Mnangagwa, who came to
A rocket carrying the Hope probe power in the 2017 coup that overthrew
blasts off from the Tanegashima Robert Mugabe as president.
Space Center in Japan yesterday as The detention underlines the rising
the United Arab Emirates launched tensions in Zimbabwe ahead of planned
its first mission to Mars. protests on July 31, which have been
The probe will make a seven- called by opposition activists amid infla-
month journey to the red planet, tion of more than 700 per cent and a
where it will orbit and send back data plunging Zimbabwe dollar. Jacob
about the atmosphere. Ngarivhume, a protest organiser, was
The mission is designed to help the also arrested yesterday.
UAE develop its scientific and Zimbabwe’s police said the pair had
technology capabilities and move been arrested in connection with allega-
away from a reliance on oil. tions of “incitement to participate in
There are eight active missions public violence” and were in custody
exploring Mars. Some orbit the pending appearance in court.
planet and some have landed on its Mr Mnangagwa has said that he sup-
surface. China and the US each plan ports greater freedom of expression
missions this year. Reuters after the censorship of the Mugabe
years, yet his government has taken a
Mitsubishi Heavy Industries tougher line as the economy and cur-
rency have stalled and a succession of
corruption scandals have come to light.
Budget deficits While dozens of opposition politi-
cians, activists and lawyers have been
Virus spending leaves developing nations in debt hole
arrested or have disappeared in recent
months, the targeting of journalists is
relatively rare.
Beatrice Mtetwa, a lawyer represent-
ing Mr Chin’ono, said that about eight
Jonathan Wheatley — London had hit a record 51 per cent of GDP and Zambia and Ghana are most vulnerable, able to finance their rising debts in the around the extraordinary surge in fiscal state security agents surrounded his
many countries previously in surplus according to his analysis, while large bond markets thanks to a surge of deterioration. We have never seen any- house and smashed glass to enter with-
Some of the largest developing econo-
had moved into deficit in recent years. economies such as South Africa, India, liquidity in global financial markets and thing on this scale before.” out an arrest warrant. “He has been
mies will face a fiscal crisis in coming
Gabriel Sterne, chief economist at Nigeria and Brazil also face elevated lev- local investors’ deep pockets. The IMF and World Bank have pro- abducted,” she added.
years unless they can roll back huge
Oxford Economics, a research firm, els of risk, and Turkey, Indonesia and The trillions of dollars of stimulus vided emergency funding for the poor- Last month, Mr Chin’ono embar-
increases in public spending enacted in
said: “If your response [to the pan- Mexico are not far behind. Brazil and injected into financial markets by cen- est countries, and G20 states agreed ear- rassed Mr Mnangagwa’s ruling Zanu-PF
response to Covid-19, analysts say.
demic] is more fiscal spending, then you South Africa will each this year rack up tral banks in advanced economies has in lier this year to give them a moratorium when he cited leaked documents that
The economic downturn caused by the have to fund it somewhere. So you start budget deficits in excess of 15 per cent of part flowed through into emerging on debt repayment. But critics say the indicated Obediah Moyo, the health
pandemic, combined with rising health- to stretch arguments about countries’ GDP, according to Oxford Economics. economies, helping to reverse the mas- focus on the debts of poor nations has minister, improperly gave supply con-
care spending to tackle the spread of the capacity to fund themselves.” So far, many governments have been sive outflows triggered by the early diverted attention from the fiscal needs tracts related to Covid-19 to companies
virus, have caused budget deficits to In the early stages of the pandemic, stages of the crisis. of middle-income countries. that appeared not to be transparently
soar in many countries. They will face the IMF warned emerging and develop- While $33.5bn left emerging bond Mr Wolfe said: “In a lot of cases, appointed.
Emerging economies spend
the choice of risking unrest by cutting ing countries would need fiscal support markets in March, nearly $50bn has restructuring will not be enough and Mr Moyo, who denies wrongdoing,
spending or negotiating with investors of at least $2.5tn to see them through the big to combat pandemic since flowed back in, according to the countries will need the support of offi- was arrested and fired by Mr Mnan-
to restructure their debts. crisis — in particular, for healthcare Size of economic support measures Institute of International Finance. Gov- cial lending. The size of the problem will gagwa. But Zanu-PF threatened Mr
On average, emerging and developing spending and social protection. in 2020 (% of GDP) ernments in developing economies have be in the trillions [of dollars] while the Chin’ono after he also accused Collins
economies have announced support That figure is now widely regarded as raised almost $90bn in international size of the response has been in the bil- Mnangagwa, the president’s son, of
0 2 4 6 8 10
packages worth 5.4 per cent of gross an underestimate: the fund’s latest fore- bond markets since the start of April. lions, and there doesn’t seem to be much involvement in the alleged fraud, a
domestic product, according to World cast is that the global economy will suf- South Asia Although the capital flows have of a plan [to do more].” claim he has denied.
Bank figures last month. In some coun- fer a cumulative output loss of $12.5tn in Middle East and helped ease countries’ immediate situa- Some analysts have warned the scale The government recently repealed a
tries — including India, Malaysia, 2020 and 2021, and the majority of the north Africa tion, they have also reduced the pres- of the hit to middle-income countries restrictive Mugabe-era media law, but
Poland, Qatar, South Africa and Thai- hit will occur in developing countries. Latin America and sure to find longer-term solutions, while has not yet been widely appreciated. activists have said that it means little
land — pandemic-related public spend- As a result of the strains on public the Caribbean exacerbating future budget problems. Richard Kozul-Wright, director of glo- next to the crackdown on dissent in
East Asia
ing has topped 10 per cent of GDP. finances, as many as 37 per cent of the Phoenix Kalen, an emerging markets balisation and development strategies practice.
and Pacific
Tourism-dependent economies and bonds in the benchmark JPMorgan strategist at Société Générale in London, at Unctad, the UN’s trade and develop- After the law’s repeal last month,
Europe and
big commodity producers were particu- index of emerging market sovereign central Asia said: “We are kicking the can down the ment agency, said: “For developing Tibor Nagy, the US assistant secretary of
larly vulnerable, the World Bank said, external debt could be at risk of default Sub-Saharan road in refinancing the debt problem, countries, the worst is yet to come.” state for African affairs, said that
Africa
warning that across emerging and in the next year or so, said Adam Wolfe which is ballooning dramatically . . . It See FT Big Read/Editorial Comment/ “actions speak louder than words” for
Source: World Bank
developing economies government debt of Absolute Strategy Research. Egypt, is very tough trying to wrap your head Opinion/Lex Mr Mnangagwa’s government.
Rural return Basic resources
India’s reverse migration drains largest cities of labourers Australian mining and energy
sales to China rise despite row
Benjamin Parkin and Jyotsna Singh policymakers and businesses are reck- “This is the first time in the history of areas where migrants have returned,
New Delhi oning with the economic — and humani- migration [in independent India] that could shield India’s economy from the
Sachin Kumar went hungry for four tarian — consequences of this epic returning migrants are going back to worst effects of the pandemic.
days after India entered into an abrupt reverse migration. It has left millions rural areas with empty hands,” he said. The government has ramped up its 15- Jamie Smyth — Sydney China would probably continue to buy
nationwide coronavirus lockdown in without work, drained metropolises of “Whenever they used to go home, they year-old National Rural Employment Australia has been shielded from an Australian resources owing to the high
March. The 30-year-old had lost his job labourers and cut off flows of internal used to take money and gifts for family, Guarantee Act, which provides a mini- even worse Covid-19 downturn by a quality of products and its reliability.
earning around Rs9,000 ($120) a remittances that are lifelines to rural neighbours and distant relatives. This mum 100 days of work per year to infor- record demand for resources from Data due to be released this week by
month at an electric bulb factory in the communities. time they were begging for train tickets mal labourers. This has created a record China, despite the souring of diplo- Australia’s industry department will
capital, New Delhi. India’s gross domestic product is and bottles of water.” number of jobs under the scheme and matic relations between the two. show mining and energy exports hit a
expected to contract by 3 per cent this Many factories report shortages of helped rural employment to rebound record of almost A$300bn ($210bn) in
By April, out of money and food, Mr year, according to financial information faster than in cities. Keith Pitt, Australia’s minister for res­- the 12 months to end-June.
Kumar borrowed Rs3,000 to hitch a firm Moody’s, while the International A good monsoon season is also ources, said the mining and energy sec- Exports of iron ore alone will top
truck ride back to his home village some Labour Organization estimated that Migrant workers expected to help produce bumper tors were underpinning the domestic A$100bn, as Australian producers BHP,
return by truck to
500 miles east in the state of Uttar 400m informal workers were at risk of crops. Improving rural demand has con- economy, which has been hit by a sec- Rio Tinto and Fortescue cash in on surg-
their home state
Pradesh after nine years in Delhi. He falling deeper into poverty during the tributed to an uptick in sales for every- ond wave that has forced many busi- ing Chinese demand for steelmaking
of Uttar Pradesh
had been the sole breadwinner, remit- lockdown. after being laid thing from tractors to biscuits. nesses in Melbourne to shut again. ingredients and disruption to supply
ting money back to his family of six. While cities have been the worst hit, off in Mumbai Kamlesh Kumar, 49, who returned to “Resources have been a shining light from Brazil caused by Covid-19.
He is one of millions of destitute coronavirus is spreading in rural com- eastern Uttar Pradesh after losing his of Australia’s economic story. The sector Australia’s economy has been
labourers who have left India’s cities for munities partly due to returning workers as they try to resume activity, a job as a carpenter in the western city of has managed to keep pretty much all its dragged into its first recession in almost
their rural homes in recent migrants. The country of 1.3bn has the task complicated as the raging virus Pune, secured work building roads people employed and engaged; that’s 30 years by the pandemic and hopes of a
months. “Lockdown snatched our world’s third highest caseload at over forces some of the largest metropolises through the government’s rural jobs over 240,000 direct jobs,” said Mr Pitt. V-shaped recovery are fading after fur-
bread from us,” he said. “I had no choice 1.1m confirmed infections. back into lockdown. scheme, as well as sowing rice on farms. “If you look at iron ore specifically, 62 ther social-distancing curbs in Victoria.
but to leave.” The World Bank says that a large pro- Venu Srinivasan, chairman of leading Scarred by his experience of running per cent of China’s iron ore imports On Thursday, Canberra is expected to
Shaken by the ordeal, Mr Kumar portion of India’s 40m internal migrants motorcycle maker TVS, said factories out of food and money in the city, he is came from Australia in 2019-20.” forecast a budget deficit of A$191.5bn or
hopes he does not have to return to the were badly impacted by the draconian and their suppliers faced shortages of determined to stay put but worries des- After Beijing imposed trade sanctions about 10 per cent of gross domestic
city. He has been reunited with his wife shutdown. In the absence of concrete workers such as welders and spray peration will pull him back. on some Australian farm products, Mr product, the worst since the second
and young daughters, and found work data on movement, Irudaya Rajan, a painters. Mr Srinivasan said the auto- “It would be wonderful if I can stay Pitt acknowledged that there were fears world war, according to Bloomberg.
labouring on farms. “I am so relieved to professor at India’s Centre for Develop- mobile industry around cities such as home and wouldn't have to work in the China would target the resources sector, Mr Pitt ruled out imposing new min-
be back,” he said. “It is much better than ment Studies, estimates that as many as Delhi was likely to be even harder hit by city. But the farm work is not reliable. too. To help mitigate the fallout from ing taxes on resources companies to
starving in the city. But I hope the gov- 30 per cent of migrant labourers in the shortages of migrants. We are poor, we don't choose. We just sanctions, Canberra is expanding its help cover the cost of Covid-19, which
ernment is able to give us more work.” Indian cities have left and expects out- Yet authorities hope some unex- live life as it comes.” trading partners to provide new mar- was recently proposed by IGF, a body of
As India reopens from its lockdown, flows to continue through 2020. pected bright spots, particularly in rural Additional reporting by Andrea Rodrigues kets for its resources. But Mr Pitt said more than 75 governments.
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8 ★ FINANCIAL TIMES Tuesday 21 July 2020
INTERNATIONAL
Democrats demand probe into
US shooting
Gunman kills son of judge
‘secret police force’ in Oregon overseeing Epstein lawsuit
James Politi — Washington was opened. Daniel Anderl, Ms Salas’s
Trump administration faces rights backlash after federal agents round up protesters 20-year-old son, was fatally struck.
A gunman shot and killed the son of a
Husband Mark Anderl, a criminal
federal judge overseeing a lawsuit
defence lawyer, was taken to hospital
linked to disgraced financier Jeffrey
James Politi — Washington near their home in North Brunswick,
Epstein.
New Jersey.
Senior Democratic lawmakers have The FBI is investigating the shooting at Bob Menendez, the Democratic sena-
called for inquiries into the Trump ad­- the New Jersey home of Judge Esther tor from New Jersey, said he knew Ms
ministration’s use of federal law en­- Salas, which also resulted in injuries to Salas and her husband well and had
forcement officers to quell protests in her husband. been “proud” to recommend her to
Oregon, saying it did not have “unfet- Ms Salas, who was not hurt, had last Barack Obama, then president, for the
tered authority” to crack down on week been assigned to oversee a lawsuit judicial post, which she took up nine
peaceful demonstrations. filed by investors against Deutsche years ago. While on the federal bench,
The request from Jerry Nadler, chair- Bank. They alleged the bank had made Ms Salas presided over a fraud trial that
man of the House judiciary committee, false and misleading statements with resulted in the convictions of Teresa
and Carolyn Maloney, who chairs the regards to its anti-money-laundering Giudice, a reality television star and a
House oversight committee, came after practices and had improperly moni- member of the cast of Real Housewives of
local officials in Oregon accused the tored high-risk customers, including the New Jersey, and husband Joe Giudice.
administration of using unlawful and late Epstein, a convicted sex offender. This month, Deutsche Bank agreed to
“abhorrent” tactics in Portland, the Authorities have not linked the shoot- pay a $150m fine for compliance failures
state’s largest city. ing to the Deutsche Bank case. The FBI in its dealings with Epstein, as well as
“This is a matter of utmost ur­gen­- did not offer any motive for the attack Danske Bank Estonia and FBME Bank.
cy. Citizens are concerned that the ad­- but said it was looking for “one subject”. Linda Lacewell, the New York super-
ministration has deployed a secret “Judge Salas and her family are in our intendent of financial services, said:
police force, not to investigate crimes, thoughts at this time as they cope with “Despite knowing Mr Epstein’s terrible
but to intimidate individuals it views as this senseless act,” Phil Murphy, gover- criminal history, the bank inexcusably
political adversaries, and that the use of nor of New Jersey, wrote on Twitter. failed to detect or prevent millions of
these tactics will proliferate throughout According to CNN, the gunman was dollars of suspicious transactions.”
the country,” stated Mr Nadler and Ms disguised as a FedEx delivery driver, A few days later, plaintiffs filed the
Maloney. and opened fire as the door of the home lawsuit being overseen by Ms Salas.
The Democrats want internal watch-
dogs at the justice and homeland secu-
rity departments to investigate the
deployments. Presidential vote
On Sunday, Ted Wheeler, the mayor
Poland’s foreign minister to
of Portland, said the administration’s
tactics were “completely unconstitu-
tional”. The state of Oregon sued the Mum’s the word: of the BLM protests that swept across ‘While into the van,” he told OPB. “And I had step down as reshuffle looms
federal government on Friday for vio- mothers link the US since the killing of George Floyd my beanie pulled over my face so I
Portland
lating the protesters’ civil rights. arms in Portland in May as captured by violent rioters, couldn’t see and they held my hands
“People are being literally scooped off during a protest even though most have been peaceful. is the over my head.”
the street into unmarked vans; rental against racial “We are trying to help Portland, not According to the report, Mr Pettibone
president’s
cars, apparently. They are being denied discrimination hurt it. Their leadership has, for realised he had been taken to a federal James Shotter — Warsaw was likely to continue. “After the victory
probable cause, and they are denied due on Saturday. months, lost control of the anarchists current courthouse only after he was released a of Andrzej Duda, a period of several
Poland’s foreign minister, Jacek Cza-
process,” Mr Wheeler told broadcaster Below, Jerry and agitators. They are missing in few hours later. years of political stability is opening up,
target, any putowicz, says he expects to step down
CNN on Sunday. Nadler action. We must protect Federal prop- Kate Brown, Oregon’s governor, des­- which will help the further strengthen-
later this summer, as the ruling Law
Democratic lawmakers have repeat- Caitlin Ochs/Reuters erty, AND OUR PEOPLE. These were city could be cribed the administration’s actions as ing of Poland’s position in the interna-
and Justice party prepares for a reshuf-
edly accused administration officials of not merely protesters, these are the real “absolutely unacceptable” and “purely tional arena,” he said.
next. We fle after success in last week’s presiden-
abusing power, including during earlier deal!” Mr Trump wrote. a photo-opportunity” for the White The election campaign was marked
tial election.
Black Lives Matter protests. Mr Wheeler, however, said the federal live in a House. “He is trying to distract . . . They by a series of attacks on Germany by
“Last month, the administration tear- law enforcement officers, which inc­- only want to escalate. They want to The presidential vote was won by senior politicians from the ruling camp,
democracy,
gassed peaceful protesters in Washing- luded agents from US Customs and Bor- dominate the streets,” she told MSNBC Andrzej Duda, backed by the conserva- with Mr Duda accusing German-owned
ton, DC. Now videos show them kidnap- der Protection, were making matters not a television. tive-nationalist Law and Justice, giving media of trying to influence the result.
ping protesters in unmarked cars in worse. “What they are doing is sharply Mr Trump faced similar criticism in the party a spell of three years without Poland summoned the German chargé
banana
Portland, all with the goal of inflaming escalating the situation, their presence June after federal law enforcement national elections in which to press on d’affaires over the matter. It has also yet
tensions for their own gain,” Nancy here is leading to more violence, and republic’ officers cleared the area of protesters with an agenda that has frequently left to confirm the country’s incoming
Pelosi, the Democratic House Speaker, more vandalism,” he said. “They are not around Lafayette Square near the White Warsaw at loggerheads with Brussels. ambassador, to the frustration of Berlin.
and Earl Blumenauer, the congressional wanted here . . . in fact we have asked House in Washington to allow the US Mr Czaputowicz, one of the govern- Mr Czaputowicz played down the fric-
representative from the city in Oregon, them to leave.” president to make remarks in front of ment’s more moderate figures, told the tion, saying that Germany still wanted
said late on Saturday. Criticism of the administra- the local church, triggering a sharp newspaper Rzeczpospolita that he had to work closely with Warsaw. “They
“While Portland is the presi- tion’s use of force in Oregon rebuke from Muriel Bowser, the mayor agreed earlier this year to stay on until have come to terms with the fact that
dent’s current target, any city mounted last week after Ore- of the US capital. the election, but that the reshuffle, the current ruling camp will stay in
could be next. We live in a gon Public Broadcasting According to a Pew Research Center expected by the autumn, would be a power in Poland for longer,” he said.
democracy, not a banana repub- reported that Mark Petti- study released last month, 67 per cent of “good moment for a change at the top of Jaroslaw Kaczynski, the founder of
lic,” they said. bone, a 29-year-old pro- Americans support the BLM move- our diplomacy”. Law and Justice, made clear that the
In a tweet on Sunday, Mr tester, was seized on the ment. However, Republicans are more Asked if this could lead to a change in party planned to return to the vexed
Trump defended his adminis- streets by federal officers likely to be opposed and the use of tone in Poland’s foreign policy, the 64- question of “repolonising” the media,
tration’s approach to the pro- in unmarked camouflage aggressive tactics against protesters is year-old — who became foreign minis- some of which is owned by German
tests. The White House has con- gear. popular with parts of Mr Trump’s politi- ter in 2018 and previously worked in groups such as Axel Springer and Ver-
sistently sought to depict many “I am basically tossed cal base. academia — said that the current line lagsgruppe Passau.

Contracts & Tenders Public Notice
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Tuesday 21 July 2020 ★ FINANCIAL TIMES 9
y
Ed Cole The People’s Bank of China has more firepower in its stimulus options than the US Fed
MARKETS INSIGHT, PAGE 14
Chevron to
RBS tells most
Restricted viewing Chinese cinemas reopen
staff to stay at
but coronavirus curbs put survival at stake
buy US energy
home until at
least next year
group Noble
Daniel Thomas and Nicholas Megaw
Royal Bank of Scotland has told about
in $13bn tie-up 50,000 staff that they will continue to
work from home until at least 2021,
dealing a blow to efforts to encourage
people back to offices to help boost the
economy.
3 First big sector deal since virus crisis The state-backed bank has told employ-
ees it will adopt a “cautious” approach to
3 Move expected to trigger M&A wave returning to work. Its decision affects
about four-fifths of them.
Since lockdown started 10,000 RBS
Derek Brower, Myles McCormick and where several countries are racing to staff have been working mostly in
David Sheppard — London develop the region’s huge gas reserves branches and some offices to support
James Fontanella-Khan — Pavia
for export. It also gives Israel’s energy customers. In June, a further 400 people
Chevron has agreed to buy Noble sector the supermajor investor — with whose jobs are difficult to do from home
Energy for $13bn including debt in the political clout — that its government has for operational and regulatory reasons
oil and gas industry’s first big deal since craved since Noble began finding huge were asked to return to work in the
geopolitical tensions and the global pan- offshore gas reserves there more than bank’s offices and call centres.
demic sparked a collapse in crude 20 years ago. Chevron will now become The decision comes just a few days
prices. the operator of the giant Leviathan field after Boris Johnson, the prime minister,
Under the terms of the all-share and take over Noble’s other Mediterra- said people could return to their work-
tie-up, which values the independent oil nean assets, including in Cyprus. places from next month at the “discre-
and gas producer’s equity at $5bn, The deal comes despite the com- tion” of their employers. The previous
investors will receive 0.1191 shares in pany’s wider investments in the Middle advice was to work from home where
the supermajor for each one they hold in East, where it has a leading role in the possible.
its smaller US rival. neutral zone shared between Saudi Ara- Business groups have warned that
The acquisition is expected to trigger bia and Kuwait, and a position in Iraq. high streets and city centres are unlikely
a string of deals in the oil sector as deep- Total chief executive Patrick Pouy- to recover until more workers return to
anné said last year that Israel was too offices. Footfall in cafés, pubs and shops
‘This is a cost-effective “complex” a market to invest in because is still sharply lower even though lock-
of his group’s assets elsewhere in the down has been eased in the past month.
opportunity to acquire
region. RBS said it had considered the new
additional proved reserves’ The deal also significantly expands US government guidance before making
Chevron’s shale position, including in the decision, which comes into effect
Michael Wirth, Chevron chief Texas’s Permian, the world’s most pro- China’s cinemagoers must wear masks and sit at least one seat apart, with food and drinks banned from August 1. Staff were told in an
— Alex Plavevski
lific oilfield, where it said that Noble’s internal memo seen by the Financial
pocketed groups such as Chevron and acreage would be contiguous with its Sun Yu — Beijing “The worst days are not over,” said condition that allows us to make ends Times yesterday.
ExxonMobil lead a wave of consolida- own assets. “We really like unconven- Cheng Hang, the owner of Brilliance meet.” The bank said: “Like we’ve done
Chinese cinema operators have said
tion across the heavily indebted US tionals,” said Mr Wirth, referring to the Cinema in Hangzhou. “We can’t run a AMC Entertainment, the world’s throughout the pandemic the decision
that restrictions to prevent the
shale patch. addition of Noble’s US shale oil assets. normal business with no blockbusters biggest chain, was forced to tap has been made carefully, including con-
spread of Covid-19 as the industry
Vitol, the world’s largest independent “This gives us another piston in the and more than half of the seats being capital markets for $500m early in sidering the latest guidance from the UK
reopens after six months of closure
oil trader, announced yesterday that it unconventional engine.” unavailable.” the pandemic. government on Friday and our own
mean that they will struggle to sur-
was establishing a US oil production Chevron said that it was buying “low- China Film Administration, the reg- Cineworld of the UK has backed out health and safety standards and proce-
vive financially.
business called Vencer Energy looking capital, cash-generating offshore assets” ulator, said last week that film-goers of a $2.3bn deal to buy Canadian rival dures. It’s a cautious approach but we
to acquire “mature, producing oil and as well as “de-risked acreage” in the US, Cinemas posted Rmb3.3m must sit at least one seat apart, leaving Cineplex. feel the right one to take currently.”
gas assets”. adding that the deal would generate ($472,200) in takings yesterday after occupancy rates at or below 30 per China is the second-largest cinema It has put in safety measures for work-
“Our strong balance sheet and finan- “run-rate cost synergies of approxi- Beijing’s announcement last week cent for many theatres. market, with takings rising to ers in its offices and branches, including
cial discipline gives us the flexibility to mately $300m” and be “accretive to free that the sector could reopen in “low- CFA has asked for the number of Rmb63.6bn last year, up from limits of two people per lift, tempera-
be a buyer of quality assets during these cash flow, earnings, and book returns risk” areas. daily showings to be reduced by half Rmb5.4bn a decade ago. ture checks at building entrances and
challenging times,” said Chevron chair- one year after close”. China’s cinemas earned an average and that films should be no more than The country had 12,408 cinemas as one-way corridors. Other banks are tak-
man and chief executive Michael Wirth. The acquisition will increase Chev- of Rmb174m a day last year, according two hours long. of last year and media reports showed ing a similarly cautious approach, while
“This is a cost-effective opportunity for ron’s total reserves base by almost a fifth to Wind, a financial data provider. Food and beverages are also cur- that between 25 and 75 per cent of the- workers remain worried over using
Chevron to acquire additional proved at a cost of less than $5 a barrel of oil Cinemas that have reopened have rently banned in auditoriums. atres had reopened yesterday. public transport in particular, despite
reserves and resources.” equivalent, while offering further done so with limited seating, a ban on Mr Cheng said that the measures The industry in China is dominated changes to guidance last week.
The purchase fits with Chevron’s plan growth potential in west Africa, where food and a shortage of new releases. meant that he would only make up to by a few large participants, with Patrick Vallance, the government’s
to focus on the international natural gas Noble has a position in Equatorial Audiences and staff must wear masks roughly Rmb1,000 in revenue a day, Wanda Film accounting for 13 per chief scientific adviser, last week
business and US shale production. It is Guinea. Noble’s debt, included in the and they are subject to temperature less than half of what he needed to cent of the market last year. advised people to keep working from
already one of the largest natural gas acquisition, amounts to almost $9bn checks. break even. This month, the company said that home. Some companies have been grad-
producers. against assets currently valued at just Operators say the rules have crip- “The government has given us the its business had been badly hit and ually bringing staff back into offices
The deal significantly expands its over $17bn, according to S&P Capital IQ. pled cinemas even as the government green light to reopen,” he said. that it would fall to a loss in the first over the summer, with many more
position in the eastern Mediterranean, Lex page 24 has allowed the industry to reopen. “But it hasn’t created a favourable six months of the year. expected to come back in September.
Pandemic spurs change in banks’ attitude to cloud-based services
100,000 staff across Santander’s global Over the past couple of years, though,
inside business
operations, building on a cloud contract the mood has gradually brightened.
struck with the Spanish bank last year. Tech giants have engaged with regula-
finance
The pandemic is also accelerating the tors. Their pitch to win bank business
trend towards digital banking. Dutch has been helped by a broader trend in
Patrick group ING said this month it would close cloud computing towards so-called
a quarter of its branches. Cloud provid- “container technology”. This allows
Jenkins ers are increasingly casting themselves companies to use multiple cloud provid-
as “digitisation partners” for the banks. ers as back-up. Banks and their supervi-
Pre-pandemic, the banking sector sors have also been persuaded that
was more reluctant than most to move cloud systems, backed by vast well-fi-
to the cloud. A Bank of England report nanced tech companies with the most
A s their booming share on digital finance last year — authored sophisticated cyber security, should be
prices testify, technology by Huw van Steenis, an adviser to especially secure.
groups have been brim- former governor Mark Carney — esti- A step change in attitudes was evi-
ming over with new busi- mated that only a quarter of the activi- denced by that 2019 Bank of England
ness during the pandemic. ties of the largest global banks were report. It concluded that the BoE
For banks, there has been a special cloud-based. “should embrace cloud technologies,
tech awakening: to the merits of cloud That tally is far lower than in other which have matured to the point they
computing. After years of foot- sectors, though McKinsey has forecast can meet the high expectations of regu-
dragging, many have been abandoning that 40-90 per cent of banks’ workloads lators and financial services”.
their cautious approach to cloud-based could move to the If it all sounds too good to be true, it
services and signing up with gusto to cloud in a decade. Banks’ reluctance reflects may be. Capital One, the US bank, still
outsource their storage of data and Bankers believe declares in a case study advertised by
regulatory concerns about
other activities that demand high- coronavirus will AWS: “The most important benefit of
intensity computing power. hasten that shift. the robustness of cloud working with AWS is that we don't have
In the past few days alone, Amazon An executive at one to worry about building and operating
services and concentration
Web Services struck a deal with HSBC big cloud provider the infrastructure.” But that insouci-
while Google announced partnerships says: “So far it’s risk in the sector ance backfired last year when it suffered
with Goldman Sachs and Deutsche been high-com- a vast cloud breach exposing the per-
Bank. Why now? As banks come under pute intensity areas, such as risk man- sonal details of more than 100m credit
pressure from the financial costs of agement modelling, that have moved on card customers and applicants and
lockdown — a decline in economic activ- to the cloud. Personally sensitive data access to 80,000 bank accounts.
ity, an explosion of loan losses — they and trading data have not moved. But A different kind of privacy threat
are seizing any opportunity to cut costs. we’re starting to see that change.” emerged in Hong Kong last week, with
Businesses For Sale
Cloud services tend to be priced in Banks’ historic reluctance stems in the big cloud companies fighting off reg-
ways that mean you pay for what you part from their nervousness about secu- ulatory attempts to gain access to cus-
use, rather than committing to billions rity and privacy. But it also reflects long- tomer data. It remains to be seen
of dollars of investment upfront. standing regulatory concerns about the whether hostile regulators have more or
But the enthusiasm for cloud comput- robustness of cloud-based services. less leverage over big tech than over big
ing is not just about scrimping. Banks Thirty of the biggest banks, deemed banks. But given that the dominant glo-
have been among the most enthusiastic systemically important, are subject to bal cloud companies are all American,
Business for Sale, Business Opportunities, Business Services,
adopters of cloud-based software and regulatory capital surcharges in the mounting geopolitical tensions between
Business Wanted, Franchises
videoconferencing services to facilitate name of safety. If 90 per cent of bank the US and China, and other parts of the Runs Daily
working from home. Just as the pan- data move to the cloud, how much more world, will not be helpful. .........................................................................................................................................................................................................................................................................
Classified Business Advertising
demic hit, Microsoft completed the roll- risky is it that a few largely unregulated
UK: [phone] | Email: [email protected]
out of its Teams video service to companies dominate that space? [email protected]
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10 ★ † FINANCIAL TIMES Tuesday 21 July 2020
COMPANIES & MARKETS
Technology Technology
Ebay nears $9bn deal with Adevinta Investor anger
at Line puts
Japan’s merger
Tie-up with classified ads auction that was launched after activists Those bidders, which included Hell- shares in Adevinta were suspended per cent — $248m — of eBay’s total reve- protections
pressured eBay to slim its business. man & Friedman and Blackstone, as after the Wall Street Journal reported nue in the first quarter of 2020. Pre-
unit ends multi-month
The eBay classifieds business includes well as a separate bid from Prosus, the that the two sides were closing in on a pandemic, the segment was valued by to the test
auction after activist heat Gumtree and Canada’s Kijiji, along with Dutch-lised arm of South Africa’s deal. Prosus, Hellman & Friedman and analysts at between $8bn and $12bn.
vehicle marketplaces in Denmark, Ger- Napsers, offered mostly cash to eBay for Blackstone declined to comment. Ebay’s business has benefited from
many, Italy and the UK, such as the unit, other people in the auction told It would mark the second big disposal coronavirus lockdown conditions but it
Arash Massoudi and
motors.co.uk. the Financial Times. of an eBay asset since calls to focus is still being outpaced by its rivals. Its
Kaye Wiggins — London
Richard Milne — Oslo The selection of Adevinta came after a By merging rather than selling the solely on its marketplace, which had market share growth has languished Kana Inagaki — Tokyo
Ebay is nearing a $9bn agreement to series of board meetings on Friday and unit, eBay would also save on taxes that “weathered prolonged, self-inflicted behind Target, Walmart, Best Buy and Robert Smith — London
combine its classified advertising busi- Saturday in which Jamie Iannone, eBay would have been due from a disposal. misexecution”, according to a letter others, which have adapted their physi-
Japanese WhatsApp rival Line is facing
ness with Norway’s Adevinta in a deal chief executive, convinced the US com- Adevinta was spun-off from Schib- from activist investor Elliott Manage- cal retail offerings to cater to the appe-
a potential revolt over a deal to create a
that would give it a significant stake in pany’s directors that it should retain sted in April 2019 and currently has a ment at the start of last year. tite for click-and-collect shopping.
$30bn technology group with Soft-
the European group, five people with exposure to the classifieds unit. market capitalisation of NKr79bn Ebay announced in March 2019 that it Schibsted first entered the classified
Bank-backed Z Holdings.
knowledge of the matter said. The exact terms of the $9bn deal with ($8.5bn). Schibsted owns about 60 per would seek buyers for its StubHub tick- business in 2000 when it launched
The decision to combine eBay’s classi- Adevinta could not be learnt but the cent of the company before any dilution et-reselling business and its classifieds finn.no, an ad platform in Norway that Minority shareholders are unhappy
fied business with Adevinta, a former proposal included a significant stock that will result from the eBay deal. group. The group sold its StubHub busi- is popular for selling everything from with the low pricing of a tender offer
unit of Norwegian publishing group component that made its offer stand out Ebay and Adevinta did not respond to ness to Viagogo for $4bn last year. houses to vinyl records and which the that has been delayed by coronavirus.
Schibsted, would end a multi-month against rival bidders. an email seeking comment. Oslo-traded Classifieds contributed just over 10 media company still owns. Investors say the deal, agreed in
November, is one of the sternest tests
yet of Japan’s “fair mergers and acquisi-
tions guidelines”, aimed at strengthen-
Technology. Ecommerce ing protection for minority sharehold-
ers. If mishandled, they add, the issue
risks curtailing progress on governance
Battle is joined for SE Asia’s online shoppers
that was made before the pandemic.
The dispute comes as SoftBank has
promised to improve oversight of its
subsidiaries and the vast web of compa-
nies in which it invests following the cri-
sis at US property group WeWork.
China heavyweights The controversy was deepened in late
June by an announcement from Z Hold-
place large bets on Lazada,
ings, a subsidiary of SoftBank’s telecoms
Shopee and Tokopedia arm formerly known as Yahoo Japan,
and Line, which is 73 per cent owned by
South Korean internet search group
Mercedes Ruehl — Singapore Naver. The pair said they were delaying
Henny Sender — Hong Kong the October closing date because of
Lazada, the south-east Asian online coronavirus-related delays in obtaining
shopping site owned by Alibaba, should regulatory approvals.
have benefited when the virus crisis hit In separate letters sent to Line’s board
Singapore in April. this month, several overseas hedge
But as the country went into lock- funds questioned both the deal’s valua-
down, Lazada was unable to meet
demand, cutting the number of goods At the heart of
on its grocery platform and limiting cus-
the disagreement is
tomers to 35 items.
“Lazada restricted supply and the tender offer price
reduced the range of goods just when
for Line’s shares
they were most needed,” said the head
of a Singapore-based venture capital
fund with many ecommerce invest- tion and the process by which the tender
ments. “Everyone was fighting over offer price was reached, according to
delivery slots, and it just angered peo- three people involved in writing the let-
ple. I didn’t hear about Alibaba doing ters. The funds declined to be identified
that in China.” for this article.
By June, Pierre Poignant, Lazada’s These investors argued that Line’s
chief executive, had been replaced. three-member special committee was
Chun Li, the new incumbent, is the site’s not independent, as defined by the gov-
fourth boss in just over two years. ernment guidelines, since two of its
The reshuffle was the latest distress members were appointed to the board
sign from the eight-year-old company, of Z Holdings last month despite being
which Alibaba bought from Berlin- in charge of evaluating the integration
based Rocket Internet and other inves- on behalf of minority shareholders.
tors, including Tesco, in 2016. The M&A guidelines, drawn up by
At the time of the deal, it seemed a Japan’s Ministry of Economy, Trade and
straightforward task to replicate the Staff pack items Lazada said it had more than 70m ing with not only Shopee but local Rivalry is Lucy Peng, Lazada’s chair and a co- Industry, take aim at transactions that
China heavyweight’s success at home for delivery at unique customers across the six coun- online shopping app Tokopedia, which founder of Alibaba, said last month that involve separately listed parent compa-
intense in
across south-east Asia, where Amazon Lazada’s godown tries on its platform in the 12 months to is also backed by Alibaba, as well as Soft- the group would step up its innovation, nies — such as the Line-Z Holdings deal
is yet to make significant progress. in Depok, March. Bank. There is a fourth performer in Indonesia such as merging shopping with enter- — given the strong potential for abuse of
But after injecting at least $4bn into West Java It said: “App downloads and web traf- Bukalapak. tainment and social experiences includ- minority shareholders and conflicts of
with its
the company to date, making it one of its Darren Whiteside/Reuters fic are neither investor-recognised met- Analysts believe consolidation is inev- ing live-streaming. interest.
costliest overseas ventures, Alibaba has rics nor our focus.” itable. One option is a merger between 267m But relying more heavily on Alibaba At the heart of the disagreement is the
not found a winning formula. Shopee’s parent is the $50bn Singa- Lazada and Tokopedia, since both com- brings its own worries. Wary south-east tender offer price for Line’s shares.
population
While it does not break out Lazada’s pore-based Sea Group, a conglomerate panies share Alibaba as an investor. Asian shoppers perceive Lazada as a for- Investors have complained it is too low,
performance, Alibaba warned in its of gaming and ecommerce businesses in But instead of being the most fear- and per eign company, first German, now Chi- especially in light of the coronavirus-
annual report this year that Lazada was which Tencent, Alibaba’s rival in China, some operator, Lazada was a potential nese, compared with Shopee, which has driven rally in global internet stocks.
capita
one of the companies that it expected has a significant stake. acquisition target, said Paul McKenzie, emphasised local hiring programmes. Since the deal was first reported,
“to have a negative effect on our finan- Last year Shopee had more than 1.2bn analyst at CLSA. income Lazada’s upper and middle managers shares in Z Holdings have risen 30 per
cial results at least in the short term”. orders worth $17.6bn, but its rapid “By 2023, Shopee . . . and Tokopedia — for tech roles at least — tend to be cent while Naver has climbed 66 per
four times
Lazada appears to be falling behind its growth has been partly driven by gener- will control two-thirds of the market,” imported from China. They “may not be cent. But Line has hovered near its ten-
biggest rival Shopee in some, if not all, of ous subsidies. he said. India’s as familiar” with the region, said Taohai der offer price of ¥5,380 ($50), only
its key markets. In its annual report, Sea Group, which There is the difficulty in rolling out Lin, a consumer and retail analyst at briefly rising to ¥5,670 on expectations
According to research from iPrice recorded a $1.45bn loss for 2019, Lazada’s model, which focuses like Fitch Solutions. the pricing could be reviewed.
Group, App Annie, and SimilarWeb, warned that “revenue generated from Alibaba and Amazon on high-quality The competition is set to intensify. The original ¥5,380 tender offer price
Shopee overtook Lazada as the region’s monetising our Shopee marketplace customer service and running its own Investors and rivals are preparing for was a 17 per cent premium to the closing
most used online shopping app in 2019 may not offset its significant operating logistics. Amazon, which has launched in Singa- price of November 13 before shares
and was downloaded more often in the costs, causing it to operate with losses Lazada had always been “top-heavy”, pore, to continue its advance in the surged on media reports of the deal.
year to May 2020 in the six countries in for the foreseeable future”. said Willson Cuaca, founder of venture region. Tokopedia is raising at least Since Line’s minority shareholders
which both companies operate: Indone- Mr Wintels said: “You can get pretty capital firm East Ventures, which is another $1bn from investors. are being pushed out at ¥5,380 a share
sia, Malaysia, the Philippines, Thailand, far if you’re willing to spend this invested in Tokopedia. “They always “If I had to back one company, I would under the tender offer, they argue they
Vietnam, and Singapore. money.” did everything themselves, like owning pick Tokopedia,” said Yinglan Tan, have been unable to benefit from the
In the two biggest markets, Indonesia Nowhere has the expensive battle their own warehouses.” founder of Insignia Ventures Partners in market rise while SoftBank’s mobile
and Vietnam, Shopee had more active played out more intensely than in Indo- By contrast, Shopee and Tokopedia Singapore. unit and Naver are getting better terms
users than Lazada in May. nesia, the most promising emerging are “marketplaces” on which small It “has the model of Taobao [consum- under the integration.
“You do see faster growth off a small market in the region given its 267m pop- businesses list their goods for sale and er-to-consumer], while Lazada started Line declined to comment, pointing
base by Shopee. Lazada was signifi- ulation and a per capita income that is arrange delivery themselves. with the business-to-consumer model to its statement last month in which it
cantly bigger four years ago,” said Simon four times India’s. To win back customers, Lazada is of T-Mall. It is the wrong timing. It is too said “no change is currently anticipated
Wintels, a partner at McKinsey. Here, Lazada has found itself compet- looking to leverage Alibaba’s tech. sophisticated for Indonesia.” to the tender offer prices”.
Oilfield services Mining
Halliburton slashes costs as losses hit $1.7bn Glencore zinc chief prepares to bow out
Myles McCormick formance in a tough market shows we tives” had allowed Halliburton to beat Neil Hume Glasenberg and Tor Peterson, head of more than $1bn at the company’s cur-
can execute quickly and aggressively to market expectations “despite the very Natural Resources Editor coal trading — are still at the company. rent share price of 182p. Only Mr
Halliburton took a writedown of
$2.1bn yesterday, even as it managed to deliver solid financial results and free stiff macro headwinds”. Glencore’s top zinc executive is to step The rest, including copper kingpin Telis Glasenberg has a larger personal hold-
slash spending, as the crash in crude cash flow despite a severe drop in global Nonetheless, with oil prices remain- down as the generational shift at the Mistakidis and head of oil Alex Beard, ing, with a 9 per cent per cent stake
prices caused work to dry up in the oil- activity,” said Jeff Miller, Halliburton’s ing historically low, the performance is top of the most powerful commodity have left. worth $2.75bn.
field services sector. chief executive. significantly weaker than last year. The trader continues. Mr Glasenberg, who has led the group While Glencore’s zinc business rarely
“Our results demonstrate a significant net loss of $1.7bn compares with a $75m since 2002, has said he will complete the attracts the attention of copper, coal or
The group, one of the biggest oilfield and sustainable reset to the power of our profit in the June quarter of 2019. Total Daniel Maté will leave the Switzerland- transition before considering retire- oil divisions, it is an important source of
services providers, is the latest com- business to generate positive earnings revenue of $3.2bn was down 45 per cent based company at the end of the month, ment. “I’ve always said I don’t want to be income.
pany to account for the crude price col- and free cash flow.” on the same period last year. handing responsibility for zinc and lead an old guy running this company,” Mr Mr Maté hit the headlines in 2015
lapse on its balance sheet. Analysts Services groups carry out the oil ind­- In line with the rest of the services sec- trading to Nikola Popovic, according to Glasenberg, 63, told analysts and inves- when he slashed more than a third of
expect hundreds of billions of dollars ustry’s essential work, from drilling tor, the company has been forced to cut people with knowledge of the situation. tors in December. Glencore’s zinc production in response
worth of writedowns across the sector wells to installing pipes and supplying thousands of jobs. In March it said it The imminent retirement of Mr Maté In the almost half-century that Glen- to a crash in commodity prices.
before the year is out. sand and maintaining roads. They tend would furlough 3,500 employees at its brings closer the break-up of the “bil- core has traded commodities, the com- Last year, Glencore traded 3.1m
The impairment pushed Halliburton to be hit hard by downturns, as produc- Houston headquarters, before cutting lionaire boys’ club”, the members of pany has had just three chief executives, tonnes of zinc. It produced 1m tonnes of
to a net loss of $1.7bn in the three ers cut expenditure and put any new 1,000 jobs in May. which built Glencore into the commod- including founder Marc Rich. the metal, which accounted for about 20
months to June, although efforts to cut work on hold. The bulk of the 100,000 jobs lost in ity industry’s dominant participant and Mr Maté, a Spaniard in his late 50s, per cent of the earnings generated by
costs allowed it to post an adjusted oper- But analysts lauded Halliburton for the US oil and gas industry since the became very wealthy when the com- joined the company from university in Glencore’s “industrial”, or mining, arm.
ating income of $236m — beating ana- managing to impose discipline in the beginning of the crash, triggered by the pany listed in London. 1988 and was appointed head of zinc Mr Maté has already handed over
lysts estimates and sending shares up 8 face of the downturn. pandemic and a price war between Rus- Only two of the divisional heads from “marketing”, or trading, in 1991. most of his responsibilities to Mr Popo-
per cent in early trading. Stephen Gengaro at Stifel Financial sia and Saudi Arabia, have been in the time of Glencore’s initial public He is Glencore’s fifth-largest share- vic, who most recently ran Glencore’s
“Halliburton’s second-quarter per- said the “aggressive cost-cutting initia- ­services. offering in 2011 — chief executive Ivan holder, with a 3.41 per cent stake worth zinc business in Kazakhstan.
JULY 21 2020 Section:Companies Time: 20/7/2020 - 19:53 User: julian.summers Page Name: CONEWS1, Part,Page,Edition: LON, 10, 1