OK…here is a bit of gratuitous sex from the bloggers at MBS. Of course, we could tell you that our interest in the subject is strictly from a business standpoint and how prostitution is affected by the global financial crisis, blah, blah, blah.
Anyway, there are no photos (disappointed?) in this article from the International Herald Tribune (www.iht.com). Hey…isn’t the Tribune owned by the verging on bankruptcyNew York Times? Maybe if their columnists would write more articles like this one they would be doing better……..
World’s oldest profession, too, feels crisis
By Dan Bilefsky
Monday, December 8, 2008
PRAGUE:On a recent night at Big Sister, which calls itself the world’s biggest Internet brothel, a middle-aged man selected a prostitute from an electronic menu on a flat-screen television, pressing his index finger against it to review the age, hair color, weight and languages spoken by the women on offer.
Once he had chosen an 18-year-old brunette, he put on a mandatory burgundy terry cloth robe and proceeded to one of the brothel’s luridly-lit theme rooms, an Alpine suite decorated with foam rubber mountains covered with fake snow.
Nearby, in the brothel’s cramped control room, two young technicians used joysticks to control the dozens of hidden cameras that would film his performance and stream it, live, on Big Sister’s Internet site.
Sex is free at Big Sister, but that is not cheap enough for some men. Customers get the cut rate in return for signing a release form that allows the brothel to film their sexual exploits.
Even with this financial incentive, Big Sister’s marketing manager, Carl Borowitz, 26, a Moravian computer engineer, lamented that the global financial crisis had diminished the number of sex tourists in Prague.
“Sex is a steady demand, because everyone needs it, and it used to be taboo, which made a service like ours all the more attractive,” said Borowitz, who looks more like Harry Potter than a Czech Larry Flynt. “But the problem today is that there is too much competition, too many free pornography sites and people are thinking twice before making impulse purchases, including paying for sex.”
Big Sister is not the only brothel suffering the effects of a battered global economy. While the world’s oldest profession may also be one of its most recession-proof businesses, brothel owners in Europe and the United States say belt-tightening caused by the global financial crisis is undermining a once-lucrative industry.
Egbert Krumeich, manager of Artemis, the largest brothel in Berlin, said that the recession had helped dent revenue by 20 percent in November, which is usually peak season for the sex trade. Meanwhile, in Reno, Nevada, the multimillion-dollar Mustang Ranch recently laid off 30 percent of its staff, citing a decline in high-spending clients.
Big Sister is not struggling as much as some of its more traditional rivals; its revenue is largely derived from the 30, or $40 monthly fee each of the company’s 10,000 clients pay to gain access to its Web site.
But Borowitz said Big Sister hoped to offset a 15 percent drop in revenue over the past quarter by expanding into the United States. Big Sister also produces cable TV shows that air on Sky Italia and Television X in Britain, as well as DVDs like “World Cup Love Truck” and “Extremely Perverted.”
Ester, an 18-year-old prostitute at Big Sister who declined to give her last name, said that big-spending clients had diminished, but noted that she was still earning nearly 3,000 a month, enough to pay rent and to pay for her favorite Louis Vuitton purses.
“The reason I do this is for the money,” she said, after gyrating half-naked around a pole. Being filmed, she added, made her feel more like an actress than a sex object.
In the Czech Republic, where prostitution operates in a gray zone but is largely tolerated, the sex industry is big business, generating nearly 400 million in annual revenues, 60 percent of which is derived from foreign visitors, according to Mag Consulting, a tourism research company in Prague that also studies the sex industry.
Since the fall of Communism in 1989, the Czech Republic has become a major transit and destination country for women and girls trafficked from countries farther east, including Ukraine, Russia, Belarus and Moldova, the police say. Czechs and those transiting the country are most often sent to Western Europe or the United States.
Since 1989, tens of thousands of sex tourists have streamed into Prague, the pristinely beautiful Czech capital, drawn by inexpensive erotic services, an atmosphere of anonymity for customers and a liberal population tolerant of adultery.
Mag Consulting said 14 percent of Czech men admit to having had sex with prostitutes, compared with an EU-wide average of 10 percent.
Dozens of cheap flights to Prague have also ensured a steady flow of bachelor parties from across Europe. In 2005, an average of 30 flights arrived in Prague every day from Britain alone, a figure that analysts said has dropped by a third.
Jaromir Beranek, the director of Mag, said that when Germany and Britain - the two countries that send the most tourists to Prague - began to stagnate, sexual tourism suffered too.
The strength of the Czech crown against the euro, lower spending power and competition from even lower-cost sex capitals like Riga, Latvia, and Krakow, Poland, were threatening one of the country’s most thriving sectors, he said. “If you ski and there is no snow, you stay home. The same applies to sex.”
Many Czechs are more than happy to see Prague shrug off its reputation as one of the world’s top-20 sex destinations, but some in the hotel industry are so alarmed by the drop in tourists that they are lobbying the government to legalize the trade, in hope that it will help lure more clients.
Jiri Gajdosik, the manager of Le Palais, one of Prague’s top hotels, argues that regulating prostitution would help attract business by making prostitution safer. “We must ensure that the city loses its bad reputation of a city where foreigners are afraid that they will be robbed,” he said in an interview with Hospodarske noviny, a Czech financial daily.
While some critics have warned that legalization would effectively transform the Czech state into the country’s biggest pimp, the government is considering whether to emulate the Netherlands and Germany by regulating prostitution, just as it would any other industry. It is considering passing legislation by the end of this year that would require the Czech Republic’s estimated 10,000 prostitutes to register with the local authorities.
Dzamila Stehlikova, the Green Party minister for minorities and human rights who is shepherding the bill through Parliament, said that forcing the business out into the open would make it harder for human traffickers to thrive, while also helping to assure mandatory health check-ups for prostitutes. Other advocates argue that legalization would generate millions of euros in tax revenue from an industry that now largely operates underground.
Not everyone is enthusiastic, including the prostitutes themselves, who warn that being issued prostitution identification cards would further stigmatize them.
Hana Malinova, director of Bliss Without Risk, a prostitution outreach group, said she feared the current credit crunch was pushing more poor women into prostitution, since they could make more money selling their bodies - about 120 for a half-hour session at some upmarket sex clubs in Prague - than flipping burgers at McDonalds.
Even with the economic downturn, she added, prostitution was far more resilient than other industries, though the downturn was discouraging adultery.
“An Austrian farmer from a remote area who is not married will still cross the border to the Czech Republic looking for sex,” Malinova said. “On the other hand, the recession is helping to keep husbands at home who might otherwise be cheating on their wives.”
Near the border with Germany, in towns in northern Bohemia that were long blighted by a daily influx of sex tourists seeking cheap thrills, many are rejoicing in the decline.
Only a few years ago, the town of Dubi was so overrun by prostitution that a nearby orphanage was opened to provide refuge for dozens of unwanted babies of prostitutes and their German clients. Sex could be purchased for as little as 5 - the price of a hamburger in nearby Dresden - drawing a daily influx of more than 1,000 sex tourists.
The more than three dozen brothels that once operated in Dubi have been winnowed down to four, with several of the former brothels having transformed into goulash restaurants or golf clubs.
Petr Pipal, the conservative mayor of Dubi whose zero-tolerance policy is largely responsible for the change, said that installing surveillance cameras and police officers at the entrance of brothels had deterred sex tourists by depriving them of their anonymity. Rising prices for sexual services and the global financial crisis, he added, were also helping to tame demand.
“Two or three years ago, we would get 1,000 men coming here for sex on a Friday night, which is a lot for a town of 8,000 people,” Pipal said from police headquarters, where members of the anti-prostitution squad sat in a surveillance room, controlling outdoor cameras filming 13 now mostly deserted streets.
“The one good thing about the economic crisis is that it is helping to keep sex tourists away.”
Even brothels in areas of the Czech capital most popular with tourists complain that they are suffering from economic hardship. On a recent night near Wenceslas Square in Prague, dozens of young men outside a row of neon-lit sex clubs beckoned tourists with offers of complimentary alcohol and racy strip shows.
Inside Darling, a giant multifloor cabaret famous for cancan shows modeled on the Moulin Rouge in Paris, scantily clad young women stripped on a stage surrounded by leopard skin couches, flashing disco balls and French impressionist paintings of naked women.
Suzana Brezinova, the club’s marketing director, said sex tourism to Prague had been hit because prices had risen nearly to the levels of Rome. But she added that some high-spending businessmen still came to Darling to shrug off the economic doldrums, thinking nothing of splurging 1200 for a night of sexual pleasure and escapism.
“People have less money,” she said. “But hard times also mean that people want to be cheered up.”
Jan Krcmar contributed reporting from Prague and Victor Homola from Berlin.
Wizz Air Ukraine proposes tickets to London at less than 1 euro
Wizz Air Ukraine, the first Ukrainian low fare - low cost airline, announced on Tuesday that it would proposes its passengers to buy one-way tickets to domestic and international flights at only 9 hryvnias [to compare, 1 euro makes 9.6 hryvnias, $1 – 7.5 hryvnias].
The company’s press-service disclosed this to UNIAN.
According to the information of the press-service, during January 12 – March 29 of the year 2009, the company will put for sale 10 thousand one-way tickets at this price on flights from Kyiv to Lviv, Symferopol, Dortmund, and London Luton.
The tickets for these flights may be booked during December 15-21 of the year 2008.
As with many emerging markets, Russia should continue to grow despite the Global Economic situation. The direct link between oil price levels and economic growth is key.
10 December 2008By Maria Levina / Special to The Moscow Times
Economic growth fell to its slowest rate in three years in the third quarter, at 6.2 percent, the State Statistics Service reported Tuesday, and economists say even lower growth is in store for 2009.
Actual GDP growth in the quarter missed the Economic Development Ministry’s forecast of 7.1 percent, driven by significantly slower growth in the construction, retail, transport and communications sectors.
The decline continued a slide from 8.5 percent GDP growth in the first quarter and 7.5 percent in the second, and if the trend continues the final number for the year could be in the 6 percent range.
“Next year’s GDP growth could range from negative 5 percent to plus 5 percent, depending on what happens to oil prices and the steps taken by the Russian government,” said Yevgeny Gavrilenkov, chief economist at Troika Dialog. “If it continues to throw away currency reserves to defend the ruble, Russia may face a fiscal deficit and zero economic growth.”
He said allowing the ruble to depreciate is one step that could be taken to prop up growth numbers.
“In the past, the Russian economy grew even with oil prices of $30, $40 and $50 per barrel but at a different exchange rate,” he said. “In the current environment, Russia’s goal should be to achieve positive economic growth and avoid a fiscal deficit.”
In year-on-year terms, growth in the fourth quarter could end up at zero, partly as a result of slower production growth and partly because the number was strong in the final quarter of last year, said Yekaterina Malofeyeva, chief economist at Renaissance Capital.
She said she expects growth this year to finish above the 6 percent mark — at 6.2 percent — and that next year’s figure could range from zero to 3 percent.
“If oil prices average $70 a barrel next year and the ruble is allowed to depreciate, GDP growth could reach 3 percent,” Malofeyeva said. “Otherwise, it could be flat.”
Although the Economic Development Ministry has yet to release an official forecast, in recent informal comments it has put the number at 3 percent to 3.5 percent if oil prices average $50 per barrel for the year.
But economists say conditions have been shifting so rapidly that providing anything resembling an accurate forecast for 2009 would be difficult until all the numbers for the final quarter of this year have been released.
The Economic Development Ministry said Monday that it was revising its forecast for manufacturing growth for the year downward, from 5.2 percent to 2.9 percent. The figure for the first 10 months of this year was 4.9 percent, so the ministry’s forecast suggests that it is expecting disastrous results in November and December, with production dropping by over 10 percent.
Gavrilenkov said he believed that a 2.9 percent production forecast was overly pessimistic but, if accurate, would mean that the country is entering a severe depression.
He added that losses on the manufacturing side could be balanced somewhat by growth in the service sector, as consumer spending has remained relatively strong. As such, he said he expected GDP growth of 6.8 percent to 6.9 percent this year.
Natalya Orlova, chief economist at Alfa Bank, said she was surprised by how low the production numbers were.
“Given that the October numbers showed there was essentially no growth (0.6 percent), we originally assumed a drop in production of 2 to 3 percent in November and December, which would still imply a growth rate of around 5 percent for the year,” Orlova said. “But if we are to believe the numbers from [Economic Development Minister] Nabiullina, with a drop of more than 10 percent in November and December, then the situation seems more serious.”
If only I had the crystal ball the World Bank seems to have for telling us the obvious. Once again, the Financial Times (www.ft.com) delivers the timely news to those of us watching and waiting to decide where to put our hard earned kopecks.
Looks like commodities will not be the ticket to riches that I had supposed….if I follow the World Bank. Of course, this won’t be good news for our Russian friends, but I wouldn’t sell the Bentley just yet. I have a feeling that some of Wall Street gurus like Jim Rogers…who lives in Asia now…may be right about this being a dip before commodities resume their rise to the sky. Just think of all those governments and central banks…including mine in the United States…that will need to inflate to pay for all that stimulus, debt, bailouts and universal health care.
The bottom line is that commodities-like equities and real estate- experienced a boom due to real demand as well as unreal interest rates, cheap money, and lots of speculation. The flip side is that hard assets will make a comeback-though maybe not to the stratosphere-but will post solid gains in the inflationary environment that we could see within the next several years.
Global demand for oil to plummet
By Javier Blas in London and Krishna Guha in Washington
Published: December 9 2008 20:09 | Last updated: December 9 2008 20:09
Global oil demand will collapse next year and commodities will not return to the highs they reached this summer in the foreseeable future, two authoritative reports said on Tuesday as they forecast a long and painful worldwide recession.
The stark conclusions came as the World Bank’s chief economist predicted that the world faced “the worst recession since the Great Depression”.
The US energy department said global oil demand will fall this year and next, marking the first two consecutive years’ decline in 30 years.
“The increasing likelihood of a prolonged global economic downturn continues to dominate market perceptions, putting downward pressure on oil prices,” it said, forecasting that demand would drop 50,000 barrels a day this year and a hefty 450,000 b/d in 2009. US oil demand will drop next year to the lowest level in 11 years.
Meanwhile, the World Bank’s Global Economic Prospects report said the commodities boom of the past five years – which drove up prices 130 per cent – had “come to an end”.
The World Bank’s analysis of the commodities boom contrasts with the prevalent view among natural resources companies – and most Wall Street analysts – that the ongoing price drop is a correction within an upward trend.
Although it ruled out a return to the torrid high prices of this summer, it said commodities prices would not fall back to the depressed levels of the 1990s.
Oil would return to about $75 a barrel within the next three years, it said, while food would trade 60 per cent higher than in 2003, but about half below this year’s record.
“Over the longer run, the price of extracted commodities should fall,” the bank said, adding that because of slower population and income growth, world demand for raw materials will ease.
Andrew Burns, the leading author of the report, dismissed the idea – widely supported among the industry and international bodies such as the International Energy Agency – that the credit crunch could result in higher prices when the economy recovers as companies cancel supply expansion projects.
The bank forecast that world trade – an engine of growth for many developing countries – would contract for the first time since 1982.
Justin Lin, the World Bank’s chief economist, said the current downturn was likely to see simultaneous recessions in most of the industrialised world, and that these recessions were likely to last longer than in the early 1980s, and the decline in growth would be more universal than in past episodes in recent decades.
OK…here is a bit of gratuitous sex from the bloggers at MBS. Of course, we could tell you that our interest in the subject is strictly from a business standpoint and how prostitution is affected by the global financial crisis, blah, blah, blah.
Anyway, there are no photos (disappointed?) in this article from the International Herald Tribune (www.iht.com). Hey…isn’t the Tribune owned by the verging on bankruptcyNew York Times? Maybe if their columnists would write more articles like this one they would be doing better……..
World’s oldest profession, too, feels crisis
By Dan Bilefsky
Monday, December 8, 2008
PRAGUE:On a recent night at Big Sister, which calls itself the world’s biggest Internet brothel, a middle-aged man selected a prostitute from an electronic menu on a flat-screen television, pressing his index finger against it to review the age, hair color, weight and languages spoken by the women on offer.
Once he had chosen an 18-year-old brunette, he put on a mandatory burgundy terry cloth robe and proceeded to one of the brothel’s luridly-lit theme rooms, an Alpine suite decorated with foam rubber mountains covered with fake snow.
Nearby, in the brothel’s cramped control room, two young technicians used joysticks to control the dozens of hidden cameras that would film his performance and stream it, live, on Big Sister’s Internet site.
Sex is free at Big Sister, but that is not cheap enough for some men. Customers get the cut rate in return for signing a release form that allows the brothel to film their sexual exploits.
Even with this financial incentive, Big Sister’s marketing manager, Carl Borowitz, 26, a Moravian computer engineer, lamented that the global financial crisis had diminished the number of sex tourists in Prague.
“Sex is a steady demand, because everyone needs it, and it used to be taboo, which made a service like ours all the more attractive,” said Borowitz, who looks more like Harry Potter than a Czech Larry Flynt. “But the problem today is that there is too much competition, too many free pornography sites and people are thinking twice before making impulse purchases, including paying for sex.”
Big Sister is not the only brothel suffering the effects of a battered global economy. While the world’s oldest profession may also be one of its most recession-proof businesses, brothel owners in Europe and the United States say belt-tightening caused by the global financial crisis is undermining a once-lucrative industry.
Egbert Krumeich, manager of Artemis, the largest brothel in Berlin, said that the recession had helped dent revenue by 20 percent in November, which is usually peak season for the sex trade. Meanwhile, in Reno, Nevada, the multimillion-dollar Mustang Ranch recently laid off 30 percent of its staff, citing a decline in high-spending clients.
Big Sister is not struggling as much as some of its more traditional rivals; its revenue is largely derived from the 30, or $40 monthly fee each of the company’s 10,000 clients pay to gain access to its Web site.
But Borowitz said Big Sister hoped to offset a 15 percent drop in revenue over the past quarter by expanding into the United States. Big Sister also produces cable TV shows that air on Sky Italia and Television X in Britain, as well as DVDs like “World Cup Love Truck” and “Extremely Perverted.”
Ester, an 18-year-old prostitute at Big Sister who declined to give her last name, said that big-spending clients had diminished, but noted that she was still earning nearly 3,000 a month, enough to pay rent and to pay for her favorite Louis Vuitton purses.
“The reason I do this is for the money,” she said, after gyrating half-naked around a pole. Being filmed, she added, made her feel more like an actress than a sex object.
In the Czech Republic, where prostitution operates in a gray zone but is largely tolerated, the sex industry is big business, generating nearly 400 million in annual revenues, 60 percent of which is derived from foreign visitors, according to Mag Consulting, a tourism research company in Prague that also studies the sex industry.
Since the fall of Communism in 1989, the Czech Republic has become a major transit and destination country for women and girls trafficked from countries farther east, including Ukraine, Russia, Belarus and Moldova, the police say. Czechs and those transiting the country are most often sent to Western Europe or the United States.
Since 1989, tens of thousands of sex tourists have streamed into Prague, the pristinely beautiful Czech capital, drawn by inexpensive erotic services, an atmosphere of anonymity for customers and a liberal population tolerant of adultery.
Mag Consulting said 14 percent of Czech men admit to having had sex with prostitutes, compared with an EU-wide average of 10 percent.
Dozens of cheap flights to Prague have also ensured a steady flow of bachelor parties from across Europe. In 2005, an average of 30 flights arrived in Prague every day from Britain alone, a figure that analysts said has dropped by a third.
Jaromir Beranek, the director of Mag, said that when Germany and Britain - the two countries that send the most tourists to Prague - began to stagnate, sexual tourism suffered too.
The strength of the Czech crown against the euro, lower spending power and competition from even lower-cost sex capitals like Riga, Latvia, and Krakow, Poland, were threatening one of the country’s most thriving sectors, he said. “If you ski and there is no snow, you stay home. The same applies to sex.”
Many Czechs are more than happy to see Prague shrug off its reputation as one of the world’s top-20 sex destinations, but some in the hotel industry are so alarmed by the drop in tourists that they are lobbying the government to legalize the trade, in hope that it will help lure more clients.
Jiri Gajdosik, the manager of Le Palais, one of Prague’s top hotels, argues that regulating prostitution would help attract business by making prostitution safer. “We must ensure that the city loses its bad reputation of a city where foreigners are afraid that they will be robbed,” he said in an interview with Hospodarske noviny, a Czech financial daily.
While some critics have warned that legalization would effectively transform the Czech state into the country’s biggest pimp, the government is considering whether to emulate the Netherlands and Germany by regulating prostitution, just as it would any other industry. It is considering passing legislation by the end of this year that would require the Czech Republic’s estimated 10,000 prostitutes to register with the local authorities.
Dzamila Stehlikova, the Green Party minister for minorities and human rights who is shepherding the bill through Parliament, said that forcing the business out into the open would make it harder for human traffickers to thrive, while also helping to assure mandatory health check-ups for prostitutes. Other advocates argue that legalization would generate millions of euros in tax revenue from an industry that now largely operates underground.
Not everyone is enthusiastic, including the prostitutes themselves, who warn that being issued prostitution identification cards would further stigmatize them.
Hana Malinova, director of Bliss Without Risk, a prostitution outreach group, said she feared the current credit crunch was pushing more poor women into prostitution, since they could make more money selling their bodies - about 120 for a half-hour session at some upmarket sex clubs in Prague - than flipping burgers at McDonalds.
Even with the economic downturn, she added, prostitution was far more resilient than other industries, though the downturn was discouraging adultery.
“An Austrian farmer from a remote area who is not married will still cross the border to the Czech Republic looking for sex,” Malinova said. “On the other hand, the recession is helping to keep husbands at home who might otherwise be cheating on their wives.”
Near the border with Germany, in towns in northern Bohemia that were long blighted by a daily influx of sex tourists seeking cheap thrills, many are rejoicing in the decline.
Only a few years ago, the town of Dubi was so overrun by prostitution that a nearby orphanage was opened to provide refuge for dozens of unwanted babies of prostitutes and their German clients. Sex could be purchased for as little as 5 - the price of a hamburger in nearby Dresden - drawing a daily influx of more than 1,000 sex tourists.
The more than three dozen brothels that once operated in Dubi have been winnowed down to four, with several of the former brothels having transformed into goulash restaurants or golf clubs.
Petr Pipal, the conservative mayor of Dubi whose zero-tolerance policy is largely responsible for the change, said that installing surveillance cameras and police officers at the entrance of brothels had deterred sex tourists by depriving them of their anonymity. Rising prices for sexual services and the global financial crisis, he added, were also helping to tame demand.
“Two or three years ago, we would get 1,000 men coming here for sex on a Friday night, which is a lot for a town of 8,000 people,” Pipal said from police headquarters, where members of the anti-prostitution squad sat in a surveillance room, controlling outdoor cameras filming 13 now mostly deserted streets.
“The one good thing about the economic crisis is that it is helping to keep sex tourists away.”
Even brothels in areas of the Czech capital most popular with tourists complain that they are suffering from economic hardship. On a recent night near Wenceslas Square in Prague, dozens of young men outside a row of neon-lit sex clubs beckoned tourists with offers of complimentary alcohol and racy strip shows.
Inside Darling, a giant multifloor cabaret famous for cancan shows modeled on the Moulin Rouge in Paris, scantily clad young women stripped on a stage surrounded by leopard skin couches, flashing disco balls and French impressionist paintings of naked women.
Suzana Brezinova, the club’s marketing director, said sex tourism to Prague had been hit because prices had risen nearly to the levels of Rome. But she added that some high-spending businessmen still came to Darling to shrug off the economic doldrums, thinking nothing of splurging 1200 for a night of sexual pleasure and escapism.
“People have less money,” she said. “But hard times also mean that people want to be cheered up.”
Jan Krcmar contributed reporting from Prague and Victor Homola from Berlin.
Wizz Air Ukraine proposes tickets to London at less than 1 euro
Wizz Air Ukraine, the first Ukrainian low fare - low cost airline, announced on Tuesday that it would proposes its passengers to buy one-way tickets to domestic and international flights at only 9 hryvnias [to compare, 1 euro makes 9.6 hryvnias, $1 – 7.5 hryvnias].
The company’s press-service disclosed this to UNIAN.
According to the information of the press-service, during January 12 – March 29 of the year 2009, the company will put for sale 10 thousand one-way tickets at this price on flights from Kyiv to Lviv, Symferopol, Dortmund, and London Luton.
The tickets for these flights may be booked during December 15-21 of the year 2008.
As with many emerging markets, Russia should continue to grow despite the Global Economic situation. The direct link between oil price levels and economic growth is key.
10 December 2008By Maria Levina / Special to The Moscow Times
Economic growth fell to its slowest rate in three years in the third quarter, at 6.2 percent, the State Statistics Service reported Tuesday, and economists say even lower growth is in store for 2009.
Actual GDP growth in the quarter missed the Economic Development Ministry’s forecast of 7.1 percent, driven by significantly slower growth in the construction, retail, transport and communications sectors.
The decline continued a slide from 8.5 percent GDP growth in the first quarter and 7.5 percent in the second, and if the trend continues the final number for the year could be in the 6 percent range.
“Next year’s GDP growth could range from negative 5 percent to plus 5 percent, depending on what happens to oil prices and the steps taken by the Russian government,” said Yevgeny Gavrilenkov, chief economist at Troika Dialog. “If it continues to throw away currency reserves to defend the ruble, Russia may face a fiscal deficit and zero economic growth.”
He said allowing the ruble to depreciate is one step that could be taken to prop up growth numbers.
“In the past, the Russian economy grew even with oil prices of $30, $40 and $50 per barrel but at a different exchange rate,” he said. “In the current environment, Russia’s goal should be to achieve positive economic growth and avoid a fiscal deficit.”
In year-on-year terms, growth in the fourth quarter could end up at zero, partly as a result of slower production growth and partly because the number was strong in the final quarter of last year, said Yekaterina Malofeyeva, chief economist at Renaissance Capital.
She said she expects growth this year to finish above the 6 percent mark — at 6.2 percent — and that next year’s figure could range from zero to 3 percent.
“If oil prices average $70 a barrel next year and the ruble is allowed to depreciate, GDP growth could reach 3 percent,” Malofeyeva said. “Otherwise, it could be flat.”
Although the Economic Development Ministry has yet to release an official forecast, in recent informal comments it has put the number at 3 percent to 3.5 percent if oil prices average $50 per barrel for the year.
But economists say conditions have been shifting so rapidly that providing anything resembling an accurate forecast for 2009 would be difficult until all the numbers for the final quarter of this year have been released.
The Economic Development Ministry said Monday that it was revising its forecast for manufacturing growth for the year downward, from 5.2 percent to 2.9 percent. The figure for the first 10 months of this year was 4.9 percent, so the ministry’s forecast suggests that it is expecting disastrous results in November and December, with production dropping by over 10 percent.
Gavrilenkov said he believed that a 2.9 percent production forecast was overly pessimistic but, if accurate, would mean that the country is entering a severe depression.
He added that losses on the manufacturing side could be balanced somewhat by growth in the service sector, as consumer spending has remained relatively strong. As such, he said he expected GDP growth of 6.8 percent to 6.9 percent this year.
Natalya Orlova, chief economist at Alfa Bank, said she was surprised by how low the production numbers were.
“Given that the October numbers showed there was essentially no growth (0.6 percent), we originally assumed a drop in production of 2 to 3 percent in November and December, which would still imply a growth rate of around 5 percent for the year,” Orlova said. “But if we are to believe the numbers from [Economic Development Minister] Nabiullina, with a drop of more than 10 percent in November and December, then the situation seems more serious.”
If only I had the crystal ball the World Bank seems to have for telling us the obvious. Once again, the Financial Times (www.ft.com) delivers the timely news to those of us watching and waiting to decide where to put our hard earned kopecks.
Looks like commodities will not be the ticket to riches that I had supposed….if I follow the World Bank. Of course, this won’t be good news for our Russian friends, but I wouldn’t sell the Bentley just yet. I have a feeling that some of Wall Street gurus like Jim Rogers…who lives in Asia now…may be right about this being a dip before commodities resume their rise to the sky. Just think of all those governments and central banks…including mine in the United States…that will need to inflate to pay for all that stimulus, debt, bailouts and universal health care.
The bottom line is that commodities-like equities and real estate- experienced a boom due to real demand as well as unreal interest rates, cheap money, and lots of speculation. The flip side is that hard assets will make a comeback-though maybe not to the stratosphere-but will post solid gains in the inflationary environment that we could see within the next several years.
Global demand for oil to plummet
By Javier Blas in London and Krishna Guha in Washington
Published: December 9 2008 20:09 | Last updated: December 9 2008 20:09
Global oil demand will collapse next year and commodities will not return to the highs they reached this summer in the foreseeable future, two authoritative reports said on Tuesday as they forecast a long and painful worldwide recession.
The stark conclusions came as the World Bank’s chief economist predicted that the world faced “the worst recession since the Great Depression”.
The US energy department said global oil demand will fall this year and next, marking the first two consecutive years’ decline in 30 years.
“The increasing likelihood of a prolonged global economic downturn continues to dominate market perceptions, putting downward pressure on oil prices,” it said, forecasting that demand would drop 50,000 barrels a day this year and a hefty 450,000 b/d in 2009. US oil demand will drop next year to the lowest level in 11 years.
Meanwhile, the World Bank’s Global Economic Prospects report said the commodities boom of the past five years – which drove up prices 130 per cent – had “come to an end”.
The World Bank’s analysis of the commodities boom contrasts with the prevalent view among natural resources companies – and most Wall Street analysts – that the ongoing price drop is a correction within an upward trend.
Although it ruled out a return to the torrid high prices of this summer, it said commodities prices would not fall back to the depressed levels of the 1990s.
Oil would return to about $75 a barrel within the next three years, it said, while food would trade 60 per cent higher than in 2003, but about half below this year’s record.
“Over the longer run, the price of extracted commodities should fall,” the bank said, adding that because of slower population and income growth, world demand for raw materials will ease.
Andrew Burns, the leading author of the report, dismissed the idea – widely supported among the industry and international bodies such as the International Energy Agency – that the credit crunch could result in higher prices when the economy recovers as companies cancel supply expansion projects.
The bank forecast that world trade – an engine of growth for many developing countries – would contract for the first time since 1982.
Justin Lin, the World Bank’s chief economist, said the current downturn was likely to see simultaneous recessions in most of the industrialised world, and that these recessions were likely to last longer than in the early 1980s, and the decline in growth would be more universal than in past episodes in recent decades.
This is the kind of news….that is not really news…at least to someone who does business in emerging markets. Nonetheless, it is good to keep tabs on where bribes need to be paid to get business.
It an ironic way, the authors of this report-Transparency International-have raised the bar not only in emerging markets like Russia, China and Ukraine, but also in the developed economies like the United States. This would apply not only to the financing of political campaigns or the “sale” of Senatorial offices, but specifically to the types of financial instruments that may have been the catalyst for the Global Economic meltdown.
What is needed is greater transparency in the financial services industry. Many investors had been blinded or lulled into a false sense of security by the advice of institutions that have a direct financial stake in keeping information private. Indirectly, these companies were being “bribed” by their clients to give favorable ratings and analysis. As I was reminded during my short time on Wall Street, “when was the last time you heard of an investment bank urging their clients to sell?”
In some ways, emerging markets are more “honest,” as it is assumed that corruption is part of the normal process of doing business. While this doesn’t negate the need for reform, or diminish the fact that corruption is a huge obstacle preventing development in emerging market economies, it also means those with higher standings in the “least corrupt” category need to look at their own institutions more carefully as well.
Published: December 9 2008 15:57 | Last updated: December 9 2008 15:57
Chinese, Indian and Russian companies bribe routinely to win overseas contracts, a global survey of executives claimed on Tuesday, highlighting fears that leading emerging economies are undermining international efforts to tackle corruption.
The bribe-payers’ index published byTransparency International, the anti-corruption group, ranks the three nations and Brazil in the bottom five of 22 countries surveyed.
The research highlights how intensifying global competition for natural resources and infrastructure projects threatens a “race to the bottom” between established western multinationals and leading companies from the new financial powers.
Huguette Labelle, Transparency International chair, called on all big exporting countries to join the landmark OECD anti-bribery treaty, which so far has been signed by 38 mainly rich nations.
Ms Labelle said Transparency International’s research “provides evidence that a number of companies from major exporting countries still use bribery to win business abroad, despite awareness of its damaging impact on corporate reputations and ordinary communities.”
The Transparency International index ranked Russia in last place with a score of 5.9 out of 10, with India and China also both scoring below 7.
Belgium and Canada topped the rankings jointly with a score of 8.8, while all the other members of the Group of Seven leading industrialised nations except Italy scored more than 8.
The countries ranked in the index account for about three-quarters of world foreign direct investment outflows and exports of goods and services. The survey – carried out by Gallup International, the polling organisation – is based on the perceptions of 2,742 business executives from 26 countries, including six in Africa, four in Central and South America, and eight in Asia.
The research says the most corrupt sectors among 19 surveyed are construction, real estate, energy, heavy manufacturing and mining, while the cleanest are information technology, fisheries and banking.
Many anti-corruption activists warn that the expansion of companies from emerging economic powers into resource-rich but often poorly governed countries in Africa and elsewhere could prolong and extend a tradition of bribery already established by western multinationals.
The OECD has launched a partnership with the African Development Bank to fight bribery on the continent, while Chinese officials will attend a meeting of the OECD’s anti-bribery working group this week .
Another TI index published in September accused the world’s wealthiest countries of failing to live up to their commitments to fight corruption, highlighting fears that only the US and a few other nations were serious about tackling graft by their businesses.
TI’s surveys are widely seen as useful yardsticks on corruption, although their basis on business executives’ perceptions rather than more objective measures means they are susceptible to individual prejudices.
Funders of the latest index include the German and Norwegian development agencies and Ernst & Young, the international accounting firm.
OK…here is a bit of gratuitous sex from the bloggers at MBS. Of course, we could tell you that our interest in the subject is strictly from a business standpoint and how prostitution is affected by the global financial crisis, blah, blah, blah.
Anyway, there are no photos (disappointed?) in this article from the International Herald Tribune (www.iht.com). Hey…isn’t the Tribune owned by the verging on bankruptcyNew York Times? Maybe if their columnists would write more articles like this one they would be doing better……..
World’s oldest profession, too, feels crisis
By Dan Bilefsky
Monday, December 8, 2008
PRAGUE:On a recent night at Big Sister, which calls itself the world’s biggest Internet brothel, a middle-aged man selected a prostitute from an electronic menu on a flat-screen television, pressing his index finger against it to review the age, hair color, weight and languages spoken by the women on offer.
Once he had chosen an 18-year-old brunette, he put on a mandatory burgundy terry cloth robe and proceeded to one of the brothel’s luridly-lit theme rooms, an Alpine suite decorated with foam rubber mountains covered with fake snow.
Nearby, in the brothel’s cramped control room, two young technicians used joysticks to control the dozens of hidden cameras that would film his performance and stream it, live, on Big Sister’s Internet site.
Sex is free at Big Sister, but that is not cheap enough for some men. Customers get the cut rate in return for signing a release form that allows the brothel to film their sexual exploits.
Even with this financial incentive, Big Sister’s marketing manager, Carl Borowitz, 26, a Moravian computer engineer, lamented that the global financial crisis had diminished the number of sex tourists in Prague.
“Sex is a steady demand, because everyone needs it, and it used to be taboo, which made a service like ours all the more attractive,” said Borowitz, who looks more like Harry Potter than a Czech Larry Flynt. “But the problem today is that there is too much competition, too many free pornography sites and people are thinking twice before making impulse purchases, including paying for sex.”
Big Sister is not the only brothel suffering the effects of a battered global economy. While the world’s oldest profession may also be one of its most recession-proof businesses, brothel owners in Europe and the United States say belt-tightening caused by the global financial crisis is undermining a once-lucrative industry.
Egbert Krumeich, manager of Artemis, the largest brothel in Berlin, said that the recession had helped dent revenue by 20 percent in November, which is usually peak season for the sex trade. Meanwhile, in Reno, Nevada, the multimillion-dollar Mustang Ranch recently laid off 30 percent of its staff, citing a decline in high-spending clients.
Big Sister is not struggling as much as some of its more traditional rivals; its revenue is largely derived from the 30, or $40 monthly fee each of the company’s 10,000 clients pay to gain access to its Web site.
But Borowitz said Big Sister hoped to offset a 15 percent drop in revenue over the past quarter by expanding into the United States. Big Sister also produces cable TV shows that air on Sky Italia and Television X in Britain, as well as DVDs like “World Cup Love Truck” and “Extremely Perverted.”
Ester, an 18-year-old prostitute at Big Sister who declined to give her last name, said that big-spending clients had diminished, but noted that she was still earning nearly 3,000 a month, enough to pay rent and to pay for her favorite Louis Vuitton purses.
“The reason I do this is for the money,” she said, after gyrating half-naked around a pole. Being filmed, she added, made her feel more like an actress than a sex object.
In the Czech Republic, where prostitution operates in a gray zone but is largely tolerated, the sex industry is big business, generating nearly 400 million in annual revenues, 60 percent of which is derived from foreign visitors, according to Mag Consulting, a tourism research company in Prague that also studies the sex industry.
Since the fall of Communism in 1989, the Czech Republic has become a major transit and destination country for women and girls trafficked from countries farther east, including Ukraine, Russia, Belarus and Moldova, the police say. Czechs and those transiting the country are most often sent to Western Europe or the United States.
Since 1989, tens of thousands of sex tourists have streamed into Prague, the pristinely beautiful Czech capital, drawn by inexpensive erotic services, an atmosphere of anonymity for customers and a liberal population tolerant of adultery.
Mag Consulting said 14 percent of Czech men admit to having had sex with prostitutes, compared with an EU-wide average of 10 percent.
Dozens of cheap flights to Prague have also ensured a steady flow of bachelor parties from across Europe. In 2005, an average of 30 flights arrived in Prague every day from Britain alone, a figure that analysts said has dropped by a third.
Jaromir Beranek, the director of Mag, said that when Germany and Britain - the two countries that send the most tourists to Prague - began to stagnate, sexual tourism suffered too.
The strength of the Czech crown against the euro, lower spending power and competition from even lower-cost sex capitals like Riga, Latvia, and Krakow, Poland, were threatening one of the country’s most thriving sectors, he said. “If you ski and there is no snow, you stay home. The same applies to sex.”
Many Czechs are more than happy to see Prague shrug off its reputation as one of the world’s top-20 sex destinations, but some in the hotel industry are so alarmed by the drop in tourists that they are lobbying the government to legalize the trade, in hope that it will help lure more clients.
Jiri Gajdosik, the manager of Le Palais, one of Prague’s top hotels, argues that regulating prostitution would help attract business by making prostitution safer. “We must ensure that the city loses its bad reputation of a city where foreigners are afraid that they will be robbed,” he said in an interview with Hospodarske noviny, a Czech financial daily.
While some critics have warned that legalization would effectively transform the Czech state into the country’s biggest pimp, the government is considering whether to emulate the Netherlands and Germany by regulating prostitution, just as it would any other industry. It is considering passing legislation by the end of this year that would require the Czech Republic’s estimated 10,000 prostitutes to register with the local authorities.
Dzamila Stehlikova, the Green Party minister for minorities and human rights who is shepherding the bill through Parliament, said that forcing the business out into the open would make it harder for human traffickers to thrive, while also helping to assure mandatory health check-ups for prostitutes. Other advocates argue that legalization would generate millions of euros in tax revenue from an industry that now largely operates underground.
Not everyone is enthusiastic, including the prostitutes themselves, who warn that being issued prostitution identification cards would further stigmatize them.
Hana Malinova, director of Bliss Without Risk, a prostitution outreach group, said she feared the current credit crunch was pushing more poor women into prostitution, since they could make more money selling their bodies - about 120 for a half-hour session at some upmarket sex clubs in Prague - than flipping burgers at McDonalds.
Even with the economic downturn, she added, prostitution was far more resilient than other industries, though the downturn was discouraging adultery.
“An Austrian farmer from a remote area who is not married will still cross the border to the Czech Republic looking for sex,” Malinova said. “On the other hand, the recession is helping to keep husbands at home who might otherwise be cheating on their wives.”
Near the border with Germany, in towns in northern Bohemia that were long blighted by a daily influx of sex tourists seeking cheap thrills, many are rejoicing in the decline.
Only a few years ago, the town of Dubi was so overrun by prostitution that a nearby orphanage was opened to provide refuge for dozens of unwanted babies of prostitutes and their German clients. Sex could be purchased for as little as 5 - the price of a hamburger in nearby Dresden - drawing a daily influx of more than 1,000 sex tourists.
The more than three dozen brothels that once operated in Dubi have been winnowed down to four, with several of the former brothels having transformed into goulash restaurants or golf clubs.
Petr Pipal, the conservative mayor of Dubi whose zero-tolerance policy is largely responsible for the change, said that installing surveillance cameras and police officers at the entrance of brothels had deterred sex tourists by depriving them of their anonymity. Rising prices for sexual services and the global financial crisis, he added, were also helping to tame demand.
“Two or three years ago, we would get 1,000 men coming here for sex on a Friday night, which is a lot for a town of 8,000 people,” Pipal said from police headquarters, where members of the anti-prostitution squad sat in a surveillance room, controlling outdoor cameras filming 13 now mostly deserted streets.
“The one good thing about the economic crisis is that it is helping to keep sex tourists away.”
Even brothels in areas of the Czech capital most popular with tourists complain that they are suffering from economic hardship. On a recent night near Wenceslas Square in Prague, dozens of young men outside a row of neon-lit sex clubs beckoned tourists with offers of complimentary alcohol and racy strip shows.
Inside Darling, a giant multifloor cabaret famous for cancan shows modeled on the Moulin Rouge in Paris, scantily clad young women stripped on a stage surrounded by leopard skin couches, flashing disco balls and French impressionist paintings of naked women.
Suzana Brezinova, the club’s marketing director, said sex tourism to Prague had been hit because prices had risen nearly to the levels of Rome. But she added that some high-spending businessmen still came to Darling to shrug off the economic doldrums, thinking nothing of splurging 1200 for a night of sexual pleasure and escapism.
“People have less money,” she said. “But hard times also mean that people want to be cheered up.”
Jan Krcmar contributed reporting from Prague and Victor Homola from Berlin.
Wizz Air Ukraine proposes tickets to London at less than 1 euro
Wizz Air Ukraine, the first Ukrainian low fare - low cost airline, announced on Tuesday that it would proposes its passengers to buy one-way tickets to domestic and international flights at only 9 hryvnias [to compare, 1 euro makes 9.6 hryvnias, $1 – 7.5 hryvnias].
The company’s press-service disclosed this to UNIAN.
According to the information of the press-service, during January 12 – March 29 of the year 2009, the company will put for sale 10 thousand one-way tickets at this price on flights from Kyiv to Lviv, Symferopol, Dortmund, and London Luton.
The tickets for these flights may be booked during December 15-21 of the year 2008.
As with many emerging markets, Russia should continue to grow despite the Global Economic situation. The direct link between oil price levels and economic growth is key.
10 December 2008By Maria Levina / Special to The Moscow Times
Economic growth fell to its slowest rate in three years in the third quarter, at 6.2 percent, the State Statistics Service reported Tuesday, and economists say even lower growth is in store for 2009.
Actual GDP growth in the quarter missed the Economic Development Ministry’s forecast of 7.1 percent, driven by significantly slower growth in the construction, retail, transport and communications sectors.
The decline continued a slide from 8.5 percent GDP growth in the first quarter and 7.5 percent in the second, and if the trend continues the final number for the year could be in the 6 percent range.
“Next year’s GDP growth could range from negative 5 percent to plus 5 percent, depending on what happens to oil prices and the steps taken by the Russian government,” said Yevgeny Gavrilenkov, chief economist at Troika Dialog. “If it continues to throw away currency reserves to defend the ruble, Russia may face a fiscal deficit and zero economic growth.”
He said allowing the ruble to depreciate is one step that could be taken to prop up growth numbers.
“In the past, the Russian economy grew even with oil prices of $30, $40 and $50 per barrel but at a different exchange rate,” he said. “In the current environment, Russia’s goal should be to achieve positive economic growth and avoid a fiscal deficit.”
In year-on-year terms, growth in the fourth quarter could end up at zero, partly as a result of slower production growth and partly because the number was strong in the final quarter of last year, said Yekaterina Malofeyeva, chief economist at Renaissance Capital.
She said she expects growth this year to finish above the 6 percent mark — at 6.2 percent — and that next year’s figure could range from zero to 3 percent.
“If oil prices average $70 a barrel next year and the ruble is allowed to depreciate, GDP growth could reach 3 percent,” Malofeyeva said. “Otherwise, it could be flat.”
Although the Economic Development Ministry has yet to release an official forecast, in recent informal comments it has put the number at 3 percent to 3.5 percent if oil prices average $50 per barrel for the year.
But economists say conditions have been shifting so rapidly that providing anything resembling an accurate forecast for 2009 would be difficult until all the numbers for the final quarter of this year have been released.
The Economic Development Ministry said Monday that it was revising its forecast for manufacturing growth for the year downward, from 5.2 percent to 2.9 percent. The figure for the first 10 months of this year was 4.9 percent, so the ministry’s forecast suggests that it is expecting disastrous results in November and December, with production dropping by over 10 percent.
Gavrilenkov said he believed that a 2.9 percent production forecast was overly pessimistic but, if accurate, would mean that the country is entering a severe depression.
He added that losses on the manufacturing side could be balanced somewhat by growth in the service sector, as consumer spending has remained relatively strong. As such, he said he expected GDP growth of 6.8 percent to 6.9 percent this year.
Natalya Orlova, chief economist at Alfa Bank, said she was surprised by how low the production numbers were.
“Given that the October numbers showed there was essentially no growth (0.6 percent), we originally assumed a drop in production of 2 to 3 percent in November and December, which would still imply a growth rate of around 5 percent for the year,” Orlova said. “But if we are to believe the numbers from [Economic Development Minister] Nabiullina, with a drop of more than 10 percent in November and December, then the situation seems more serious.”
If only I had the crystal ball the World Bank seems to have for telling us the obvious. Once again, the Financial Times (www.ft.com) delivers the timely news to those of us watching and waiting to decide where to put our hard earned kopecks.
Looks like commodities will not be the ticket to riches that I had supposed….if I follow the World Bank. Of course, this won’t be good news for our Russian friends, but I wouldn’t sell the Bentley just yet. I have a feeling that some of Wall Street gurus like Jim Rogers…who lives in Asia now…may be right about this being a dip before commodities resume their rise to the sky. Just think of all those governments and central banks…including mine in the United States…that will need to inflate to pay for all that stimulus, debt, bailouts and universal health care.
The bottom line is that commodities-like equities and real estate- experienced a boom due to real demand as well as unreal interest rates, cheap money, and lots of speculation. The flip side is that hard assets will make a comeback-though maybe not to the stratosphere-but will post solid gains in the inflationary environment that we could see within the next several years.
Global demand for oil to plummet
By Javier Blas in London and Krishna Guha in Washington
Published: December 9 2008 20:09 | Last updated: December 9 2008 20:09
Global oil demand will collapse next year and commodities will not return to the highs they reached this summer in the foreseeable future, two authoritative reports said on Tuesday as they forecast a long and painful worldwide recession.
The stark conclusions came as the World Bank’s chief economist predicted that the world faced “the worst recession since the Great Depression”.
The US energy department said global oil demand will fall this year and next, marking the first two consecutive years’ decline in 30 years.
“The increasing likelihood of a prolonged global economic downturn continues to dominate market perceptions, putting downward pressure on oil prices,” it said, forecasting that demand would drop 50,000 barrels a day this year and a hefty 450,000 b/d in 2009. US oil demand will drop next year to the lowest level in 11 years.
Meanwhile, the World Bank’s Global Economic Prospects report said the commodities boom of the past five years – which drove up prices 130 per cent – had “come to an end”.
The World Bank’s analysis of the commodities boom contrasts with the prevalent view among natural resources companies – and most Wall Street analysts – that the ongoing price drop is a correction within an upward trend.
Although it ruled out a return to the torrid high prices of this summer, it said commodities prices would not fall back to the depressed levels of the 1990s.
Oil would return to about $75 a barrel within the next three years, it said, while food would trade 60 per cent higher than in 2003, but about half below this year’s record.
“Over the longer run, the price of extracted commodities should fall,” the bank said, adding that because of slower population and income growth, world demand for raw materials will ease.
Andrew Burns, the leading author of the report, dismissed the idea – widely supported among the industry and international bodies such as the International Energy Agency – that the credit crunch could result in higher prices when the economy recovers as companies cancel supply expansion projects.
The bank forecast that world trade – an engine of growth for many developing countries – would contract for the first time since 1982.
Justin Lin, the World Bank’s chief economist, said the current downturn was likely to see simultaneous recessions in most of the industrialised world, and that these recessions were likely to last longer than in the early 1980s, and the decline in growth would be more universal than in past episodes in recent decades.
This is the kind of news….that is not really news…at least to someone who does business in emerging markets. Nonetheless, it is good to keep tabs on where bribes need to be paid to get business.
It an ironic way, the authors of this report-Transparency International-have raised the bar not only in emerging markets like Russia, China and Ukraine, but also in the developed economies like the United States. This would apply not only to the financing of political campaigns or the “sale” of Senatorial offices, but specifically to the types of financial instruments that may have been the catalyst for the Global Economic meltdown.
What is needed is greater transparency in the financial services industry. Many investors had been blinded or lulled into a false sense of security by the advice of institutions that have a direct financial stake in keeping information private. Indirectly, these companies were being “bribed” by their clients to give favorable ratings and analysis. As I was reminded during my short time on Wall Street, “when was the last time you heard of an investment bank urging their clients to sell?”
In some ways, emerging markets are more “honest,” as it is assumed that corruption is part of the normal process of doing business. While this doesn’t negate the need for reform, or diminish the fact that corruption is a huge obstacle preventing development in emerging market economies, it also means those with higher standings in the “least corrupt” category need to look at their own institutions more carefully as well.
Published: December 9 2008 15:57 | Last updated: December 9 2008 15:57
Chinese, Indian and Russian companies bribe routinely to win overseas contracts, a global survey of executives claimed on Tuesday, highlighting fears that leading emerging economies are undermining international efforts to tackle corruption.
The bribe-payers’ index published byTransparency International, the anti-corruption group, ranks the three nations and Brazil in the bottom five of 22 countries surveyed.
The research highlights how intensifying global competition for natural resources and infrastructure projects threatens a “race to the bottom” between established western multinationals and leading companies from the new financial powers.
Huguette Labelle, Transparency International chair, called on all big exporting countries to join the landmark OECD anti-bribery treaty, which so far has been signed by 38 mainly rich nations.
Ms Labelle said Transparency International’s research “provides evidence that a number of companies from major exporting countries still use bribery to win business abroad, despite awareness of its damaging impact on corporate reputations and ordinary communities.”
The Transparency International index ranked Russia in last place with a score of 5.9 out of 10, with India and China also both scoring below 7.
Belgium and Canada topped the rankings jointly with a score of 8.8, while all the other members of the Group of Seven leading industrialised nations except Italy scored more than 8.
The countries ranked in the index account for about three-quarters of world foreign direct investment outflows and exports of goods and services. The survey – carried out by Gallup International, the polling organisation – is based on the perceptions of 2,742 business executives from 26 countries, including six in Africa, four in Central and South America, and eight in Asia.
The research says the most corrupt sectors among 19 surveyed are construction, real estate, energy, heavy manufacturing and mining, while the cleanest are information technology, fisheries and banking.
Many anti-corruption activists warn that the expansion of companies from emerging economic powers into resource-rich but often poorly governed countries in Africa and elsewhere could prolong and extend a tradition of bribery already established by western multinationals.
The OECD has launched a partnership with the African Development Bank to fight bribery on the continent, while Chinese officials will attend a meeting of the OECD’s anti-bribery working group this week .
Another TI index published in September accused the world’s wealthiest countries of failing to live up to their commitments to fight corruption, highlighting fears that only the US and a few other nations were serious about tackling graft by their businesses.
TI’s surveys are widely seen as useful yardsticks on corruption, although their basis on business executives’ perceptions rather than more objective measures means they are susceptible to individual prejudices.
Funders of the latest index include the German and Norwegian development agencies and Ernst & Young, the international accounting firm.
