Category Archives: Business

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With Rates Still Low, Fed Officials Fret Over Next US Recession

Federal Reserve policymakers fretted on Friday that they could face the next U.S. recession with virtually the same arsenal of policies used in the last downturn and, with interest rates still relatively low, those will not pack the same punch.

In the midst of an unprecedented leadership transition, Fed officials are publicly debating whether to scrap their approach to inflation targeting, how much of its bond portfolio to retain, and how much longer they can raise interest rates in the face of an unexpectedly large boost from tax cuts and government spending.

After years of near-zero rates and $3.5 trillion in bond purchases all meant to stimulate the economy in the wake of the 2007-09 recession, the Fed has gradually tightened policy since late 2015. Its key rate is now in the range of 1.25 to 1.5 percent, and while the Fed plans to hike three more times this

year it has also forecast that it is about halfway to its goal.

That could leave little room to provide stimulus when the world’s largest economy, which is heating up, eventually turns around.

“We would be better off, rather than thinking about what we would do next time when we hit zero, making sure that we don’t get back there. We just don’t want to be there,” Boston Fed President Eric Rosengren told a conference of economists and the majority of his colleagues at the central bank.

Rosengren, one of only a few sitting policymakers who also served during the last downturn, said the expanding U.S. deficits could further erode the government’s ability to help curb any future recession. “With the deficits we are running up, it’s not likely [fiscal policy] will be helpful in the next

recession either,” he said.

Since mid-December, the Republican-controlled Congress and U.S. President Donald Trump aggressively cut taxes and boosted spending limits, two fiscal moves that are expected to push the annual budget deficit above $1 trillion next year and expand the $20 trillion national debt.

Overheating

That stimulus, combined with synchronized global growth, signs of U.S. inflation perking up, and unemployment near a 17-year low could set the stage for overheating that ends one of the longest economic expansions ever.

“We want more shock absorbers out there and really … the main shock absorber is the ability to reduce the fed funds rate, which means that you want to get to a higher inflation rate so that the pre-shock fed funds rate is 4 and not 2,” said Paul Krugman, the Nobel Prize-winning economist and professor at City University of New York.

In a speech to the conference hosted by the University of Chicago Booth School of Business, Krugman said every recession since 1982 has been caused by “private sector over-reach” and not Fed tightening, as in decades past.

The conference’s main research paper argued the central bank should focus on cutting rates in the next recession and avoid relying on asset purchases that are less effective in stimulating investment and growth than previously thought.

In October the Fed began trimming some of its assets and it has yet to decide how far it will go. William Dudley, president of the New York Fed, told the conference that, to be sure, the ability to again purchase bonds if and when rates hit zero “seems like a good tool to have.”

The Fed’s approach to any economic slowdown would likely be to cut rates, pledge further stimulus, and only then buy bonds.

Rosengren and others dismissed the possibility of adopting negative interest rates, as some other central banks have done.

Yet five years of below-target inflation, combined with an aging population and slowdown in labor force growth, has sparked a debate over ditching a long-standing 2 percent price target.

Some see this month’s succession of Fed Chair Janet Yellen by Jerome Powell as ideal timing to consider new frameworks that could help drive inflation, and rates, higher. Cleveland Fed President Loretta Mester, whom the White House is considering for Fed vice chair, told the conference the central bank could begin to reassess the framework later this year, though she added that the threshold for change should be high.

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With Rates Still Low, Fed Officials Fret Over Next US Recession

Federal Reserve policymakers fretted on Friday that they could face the next U.S. recession with virtually the same arsenal of policies used in the last downturn and, with interest rates still relatively low, those will not pack the same punch.

In the midst of an unprecedented leadership transition, Fed officials are publicly debating whether to scrap their approach to inflation targeting, how much of its bond portfolio to retain, and how much longer they can raise interest rates in the face of an unexpectedly large boost from tax cuts and government spending.

After years of near-zero rates and $3.5 trillion in bond purchases all meant to stimulate the economy in the wake of the 2007-09 recession, the Fed has gradually tightened policy since late 2015. Its key rate is now in the range of 1.25 to 1.5 percent, and while the Fed plans to hike three more times this

year it has also forecast that it is about halfway to its goal.

That could leave little room to provide stimulus when the world’s largest economy, which is heating up, eventually turns around.

“We would be better off, rather than thinking about what we would do next time when we hit zero, making sure that we don’t get back there. We just don’t want to be there,” Boston Fed President Eric Rosengren told a conference of economists and the majority of his colleagues at the central bank.

Rosengren, one of only a few sitting policymakers who also served during the last downturn, said the expanding U.S. deficits could further erode the government’s ability to help curb any future recession. “With the deficits we are running up, it’s not likely [fiscal policy] will be helpful in the next

recession either,” he said.

Since mid-December, the Republican-controlled Congress and U.S. President Donald Trump aggressively cut taxes and boosted spending limits, two fiscal moves that are expected to push the annual budget deficit above $1 trillion next year and expand the $20 trillion national debt.

Overheating

That stimulus, combined with synchronized global growth, signs of U.S. inflation perking up, and unemployment near a 17-year low could set the stage for overheating that ends one of the longest economic expansions ever.

“We want more shock absorbers out there and really … the main shock absorber is the ability to reduce the fed funds rate, which means that you want to get to a higher inflation rate so that the pre-shock fed funds rate is 4 and not 2,” said Paul Krugman, the Nobel Prize-winning economist and professor at City University of New York.

In a speech to the conference hosted by the University of Chicago Booth School of Business, Krugman said every recession since 1982 has been caused by “private sector over-reach” and not Fed tightening, as in decades past.

The conference’s main research paper argued the central bank should focus on cutting rates in the next recession and avoid relying on asset purchases that are less effective in stimulating investment and growth than previously thought.

In October the Fed began trimming some of its assets and it has yet to decide how far it will go. William Dudley, president of the New York Fed, told the conference that, to be sure, the ability to again purchase bonds if and when rates hit zero “seems like a good tool to have.”

The Fed’s approach to any economic slowdown would likely be to cut rates, pledge further stimulus, and only then buy bonds.

Rosengren and others dismissed the possibility of adopting negative interest rates, as some other central banks have done.

Yet five years of below-target inflation, combined with an aging population and slowdown in labor force growth, has sparked a debate over ditching a long-standing 2 percent price target.

Some see this month’s succession of Fed Chair Janet Yellen by Jerome Powell as ideal timing to consider new frameworks that could help drive inflation, and rates, higher. Cleveland Fed President Loretta Mester, whom the White House is considering for Fed vice chair, told the conference the central bank could begin to reassess the framework later this year, though she added that the threshold for change should be high.

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EU Leaders Draw Up Battle Lines for Post-Brexit Budget

European Union leaders staked out opening positions Friday for a battle over EU budgets that many conceded they are unlikely to resolve before Britain leaves next year, blowing a hole in Brussels’ finances.

At a summit to launch discussion on the size and shape of a seven-year budget package to run from 2021, ex-communist states urged wealthier neighbors to plug a nearly 10 percent annual revenue gap being left by Britain, while the Dutch led a group of small, rich countries refusing to chip in any more to the EU.

Germany and France, the biggest economies and the bloc’s driving duo as Britain prepares to leave in March 2019, renewed offers to increase their own contributions, though both set out conditions for that, including new priorities and less waste.

Underlining that a divide between east and west runs deeper than money, French President Emmanuel Macron criticized what he said were poor countries abusing EU funds designed to narrow the gap in living standards after the Cold War to shore up their own popularity while ignoring EU values on civil rights or to undercut Western economies by slashing tax and labor rules.

Noting the history of EU “cohesion” and other funding for poor regions as a tool of economic “convergence,” Macron told reporters: “I will reject a European budget which is used to finance divergence, on tax, on labor or on values.”

Poland and Hungary, heavyweights among the ex-communist states which joined the EU this century, are run by right-wing governments at daggers drawn with Brussels over their efforts to influence courts, media and other independent institutions.

The European Commission, the executive which will propose a detailed budget in May, has said it will aim to satisfy calls for “conditionality” that will link getting some EU funding to meeting treaty commitments on democratic standards such as properly functioning courts able to settle economic disputes.

But its president, Jean-Claude Juncker, warned on Friday against deepening “the rift between east and west” and some in the poorer nations see complaints about authoritarian tendencies as a convenient excuse to avoid paying in more to Brussels.

At around 140 billion euros ($170 billion) a year, the EU budget represents about 1 percent of economic output in the bloc or some 2 percent of public spending, but for all that it remains one of the bloodiest subjects of debate for members.

Focus on payments

The Commission has suggested that the next package should be increased by about 10 percent, but there was little sign Friday that the governments with cash are willing to pay that.

“When the UK leaves the EU, then that part of the budget should drop out,” said Dutch Prime Minister Mark Rutte, who leads a group of hawks including Sweden, Denmark and Austria.

“In any case, we do not want our contribution to rise and we want modernization,” he added, saying that meant reconsidering the EU’s major spending on agriculture and regional cohesion in order to do more in defense, research and controlling migration.

On the other side, Czech Prime Minister Andrej Babis said his priorities were “sufficient financing of cohesion policy” a good deal for businesses from the EU’s agricultural subsidies.

German Chancellor Angela Merkel said there had been broad agreement that new priorities such as in defense, migration and research should get new funding and she called for a “debureaucratization” of traditional EU spending programs.

Summit chair Donald Tusk praised the 27 leaders — Prime Minister Theresa May was not invited as Britain will have left before the new budget round starts — for approaching the issue “with open minds, rather than red lines.” But despite them all wanting to speed up the process, a deal this year was unlikely.

Quick deal unlikely

Although all agree it would be good to avoid a repeat of the 11th-hour wrangling ahead of the 2014-20 package, many sounded doubtful of a quick deal even early next year.

“It could go on for ages,” Rutte said. He added that it would be “nice” to finish by the May 2019 EU election: “But that’s very tight.”

Among the touchiest subjects will be accounting for the mass arrival of asylum-seekers in recent years. Aggrieved that some eastern states refuse to take in mainly Muslim migrants, some in the west have suggested penalizing them via the EU budget.

Merkel has proposed that regions which are taking in and trying to integrate refugees should have that rewarded in the allocation of EU funding — a less obviously penal approach but one which she had to defend on Friday against criticism in the east. It was not meant as a threat, the chancellor insisted.

In other business at a summit which reached no formal legal conclusions, leaders broadly agreed on some issues relating to next year’s elections to the European Parliament and to the accompanying appointment of a new Commission for five years.

They pushed back against efforts, notably from lawmakers, to limit their choice of nominee to succeed Juncker to a candidate who leads one of the pan-EU parties in the May 2019 vote. They approved Parliament’s plan to reallocate some British seats and to cut others altogether and also, barring Hungary, agreed to a Macron proposal to launch “consultations” with their citizens this year on what they want from the EU.

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EU Leaders Draw Up Battle Lines for Post-Brexit Budget

European Union leaders staked out opening positions Friday for a battle over EU budgets that many conceded they are unlikely to resolve before Britain leaves next year, blowing a hole in Brussels’ finances.

At a summit to launch discussion on the size and shape of a seven-year budget package to run from 2021, ex-communist states urged wealthier neighbors to plug a nearly 10 percent annual revenue gap being left by Britain, while the Dutch led a group of small, rich countries refusing to chip in any more to the EU.

Germany and France, the biggest economies and the bloc’s driving duo as Britain prepares to leave in March 2019, renewed offers to increase their own contributions, though both set out conditions for that, including new priorities and less waste.

Underlining that a divide between east and west runs deeper than money, French President Emmanuel Macron criticized what he said were poor countries abusing EU funds designed to narrow the gap in living standards after the Cold War to shore up their own popularity while ignoring EU values on civil rights or to undercut Western economies by slashing tax and labor rules.

Noting the history of EU “cohesion” and other funding for poor regions as a tool of economic “convergence,” Macron told reporters: “I will reject a European budget which is used to finance divergence, on tax, on labor or on values.”

Poland and Hungary, heavyweights among the ex-communist states which joined the EU this century, are run by right-wing governments at daggers drawn with Brussels over their efforts to influence courts, media and other independent institutions.

The European Commission, the executive which will propose a detailed budget in May, has said it will aim to satisfy calls for “conditionality” that will link getting some EU funding to meeting treaty commitments on democratic standards such as properly functioning courts able to settle economic disputes.

But its president, Jean-Claude Juncker, warned on Friday against deepening “the rift between east and west” and some in the poorer nations see complaints about authoritarian tendencies as a convenient excuse to avoid paying in more to Brussels.

At around 140 billion euros ($170 billion) a year, the EU budget represents about 1 percent of economic output in the bloc or some 2 percent of public spending, but for all that it remains one of the bloodiest subjects of debate for members.

Focus on payments

The Commission has suggested that the next package should be increased by about 10 percent, but there was little sign Friday that the governments with cash are willing to pay that.

“When the UK leaves the EU, then that part of the budget should drop out,” said Dutch Prime Minister Mark Rutte, who leads a group of hawks including Sweden, Denmark and Austria.

“In any case, we do not want our contribution to rise and we want modernization,” he added, saying that meant reconsidering the EU’s major spending on agriculture and regional cohesion in order to do more in defense, research and controlling migration.

On the other side, Czech Prime Minister Andrej Babis said his priorities were “sufficient financing of cohesion policy” a good deal for businesses from the EU’s agricultural subsidies.

German Chancellor Angela Merkel said there had been broad agreement that new priorities such as in defense, migration and research should get new funding and she called for a “debureaucratization” of traditional EU spending programs.

Summit chair Donald Tusk praised the 27 leaders — Prime Minister Theresa May was not invited as Britain will have left before the new budget round starts — for approaching the issue “with open minds, rather than red lines.” But despite them all wanting to speed up the process, a deal this year was unlikely.

Quick deal unlikely

Although all agree it would be good to avoid a repeat of the 11th-hour wrangling ahead of the 2014-20 package, many sounded doubtful of a quick deal even early next year.

“It could go on for ages,” Rutte said. He added that it would be “nice” to finish by the May 2019 EU election: “But that’s very tight.”

Among the touchiest subjects will be accounting for the mass arrival of asylum-seekers in recent years. Aggrieved that some eastern states refuse to take in mainly Muslim migrants, some in the west have suggested penalizing them via the EU budget.

Merkel has proposed that regions which are taking in and trying to integrate refugees should have that rewarded in the allocation of EU funding — a less obviously penal approach but one which she had to defend on Friday against criticism in the east. It was not meant as a threat, the chancellor insisted.

In other business at a summit which reached no formal legal conclusions, leaders broadly agreed on some issues relating to next year’s elections to the European Parliament and to the accompanying appointment of a new Commission for five years.

They pushed back against efforts, notably from lawmakers, to limit their choice of nominee to succeed Juncker to a candidate who leads one of the pan-EU parties in the May 2019 vote. They approved Parliament’s plan to reallocate some British seats and to cut others altogether and also, barring Hungary, agreed to a Macron proposal to launch “consultations” with their citizens this year on what they want from the EU.

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Stocks Rally as Fed Eases Rate Worry, Tech Climbs

U.S. stocks rallied on Friday, lifted by gains in technology stocks and a retreat in Treasury yields as the Federal Reserve eased concerns about the path of interest rate hikes this year.

The U.S. central bank, looking past the recent stock market sell-off and inflation concerns, said it expected economic growth to remain steady and saw no serious risks on the horizon that might pause its planned pace of rate hikes.

Investors largely expect the Fed to raise rates three times this year, beginning with its next meeting in March, the first under new Chair Jerome Powell. Traders currently see a 95.5 percent chance of a quarter-percentage-point hike next month, according to Thomson Reuters data.

“Certainly bond yields pulling back today is helpful for stocks, at least for the short term, that has been the narrative that is out there — that higher bond yields are weighing on stocks and this preoccupation with three percent,” said Willie Delwiche, investment strategist at Baird in Milwaukee. “So moving away from that, for today at least, provides a bid for equities.”

Powell’s first public outing will be on Tuesday, when he will testify separately before the House and Senate committees.

The Dow Jones Industrial Average rose 347.51 points, or 1.39 percent, to 25,309.99, the S&P 500 gained 43.34 points, or 1.60 percent, to 2,747.30 and the Nasdaq Composite added 127.30 points, or 1.77 percent, to 7,337.39.

Benchmark 10-year U.S. Treasury notes last rose 13/32 in price to yield 2.8714 percent, from 2.917 percent late on Thursday.

The dip in yields helped boost bond proxy sectors such as utilities, up 2.66 percent, and real estate, up 1.72 percent. The sectors have been among the worst performers so far this year on expectations of climbing rates.

Tech shares climbed 2.17 percent led by gains in Hewlett Packard Enterprise, which rose 10.5 percent and HP Inc, up 3.5 percent.

The two companies created from the split of Hewlett Packard Co in 2015, reported strong results and HPE also announced a plan to return $7 billion to shareholders.

For the week, the Dow rose 0.37 percent, the S&P advanced 0.56 percent and the Nasdaq gained 1.35 percent.

Blue Buffalo Pet Products jumped 17.23 percent after General Mills said it would buy the natural pet food maker for $8 billion. General Mills was the biggest percentage decline on S&P 500, falling 3.59 percent.

Advancing issues outnumbered declining ones on the NYSE by a 4.54-to-1 ratio; on Nasdaq, a 2.82-to-1 ratio favored advancers.

The S&P 500 posted 10 new 52-week highs and one new low; the Nasdaq Composite recorded 64 new highs and 57 new lows.

Volume on U.S. exchanges was 6.05 billion shares, well below the 8.38 billion average over the last 20 trading days.

Reporting by Chuck Mikolajczak.

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Corruption Monitor Paints Grim Picture in Africa for 2017

Sub-Saharan Africa continues to appear at the bottom of Transparency International’s annual index, with the violent, chaotic East African nation of Somalia maintaining its 12-year streak as the lowest rated nation on the chart that tracks perceptions of corruption in 180 countries.

 

The index also found that more than two thirds of the countries surveyed scored below 50 points on the 100-point scale, with an average score of 43.  African nations averaged a score of 32.  No nation has ever earned a perfect score.  New Zealand leads the index with 89 points.  Somalia scored just nine.

Transparency International’s regional adviser for Southern Africa, Kate Muwoki, described the year in corruption on the continent.

 

“To put it simply, most African governments are failing to address corruption in the region, although we do have leaders that have invested in systemic responses to build strong institutions and create behavior change,” she told VOA from Berlin, where the organization is based.  “… So, in terms of some of these rays of hope, at the top of the table we have Botswana, Seychelles, Cabo Verde, Rwanda and Namibia, who all score, currently, over 50 … And then, in terms of the very bottom of the table, there hasn’t been much change.  We still have the likes of South Sudan, Somalia, right at the bottom, and significant declines from countries like Malawi, Madagascar, Mozambique and Guinea-Bissau.”

But Muwoki says things may change, as the African Union and several key African leaders, notably the presidents of the two largest economies on the continent, Nigeria and South Africa, have recently made clean governance a pet issue.

 

Key resignations

The year 2017 also saw the fall of several regimes long accused of shady dealings.

No fewer than four heads of state accused of major financial crimes resigned in the past year: Gambia’s Yahya Jammeh, Angola’s Jose Eduardo dos Santos, Zimbabwe’s Robert Mugabe and, most recently, South Africa’s Jacob Zuma.  A high-level corruption scandal also tainted the administration of Ethiopian Prime Minister Hailemariam Desalegn, who resigned earlier this month amid mounting anti-government protests.

But holdouts remain: The Democratic Republic of Congo’s entrenched, corruption-accused leader has repeatedly postponed elections, and the leaders of Uganda, Equatorial Guinea, Gabon, Congo, and Cameroon have all long remained in power amid allegations of mismanagement.  Corruption investigations continue into current and former officials across the continent.

 

Rays of hope

Zuma’s successor, Cyril Ramaphosa, has made fighting corruption his key issue.  The multi-millionaire  businessman, this week, called for top government officials to be audited, starting with himself.  Several other African heads of state have done the same in recent years.

 

“Now, if there ever has been anything that many South Africans would like to have line of sight of, it is the lifestyle audit of their public representatives,” he said Tuesday.  “Now that is something that I believe we have to do, and this will be done starting with the executive of the country, yes, we will go in that way,” Ramaphosa said.

And in Nigeria, President Muhammadu Buhari recently announced that all national assets recovered in a recent anti-corruption drive would be sold to benefit the treasury.  Buhari is also the chairman of the AU anti-corruption effort.

Muwoki says the global watchdog has noted these new developments, but urged citizens to keep up the pressure by shining light on suspected corruption.

 

“2018 marks a very important year for the continent,” she said.  “We have seen this renewed commitment from the African Union and from leaders at the recent summit in Addis Ababa.  It is encouraging and we definitely support this … these are some of the things that we would be encouraging civil society and media, and some of these other key stakeholders to hold these leaders to account.”

 

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Corruption Monitor Paints Grim Picture in Africa for 2017

Sub-Saharan Africa continues to appear at the bottom of Transparency International’s annual index, with the violent, chaotic East African nation of Somalia maintaining its 12-year streak as the lowest rated nation on the chart that tracks perceptions of corruption in 180 countries.

 

The index also found that more than two thirds of the countries surveyed scored below 50 points on the 100-point scale, with an average score of 43.  African nations averaged a score of 32.  No nation has ever earned a perfect score.  New Zealand leads the index with 89 points.  Somalia scored just nine.

Transparency International’s regional adviser for Southern Africa, Kate Muwoki, described the year in corruption on the continent.

 

“To put it simply, most African governments are failing to address corruption in the region, although we do have leaders that have invested in systemic responses to build strong institutions and create behavior change,” she told VOA from Berlin, where the organization is based.  “… So, in terms of some of these rays of hope, at the top of the table we have Botswana, Seychelles, Cabo Verde, Rwanda and Namibia, who all score, currently, over 50 … And then, in terms of the very bottom of the table, there hasn’t been much change.  We still have the likes of South Sudan, Somalia, right at the bottom, and significant declines from countries like Malawi, Madagascar, Mozambique and Guinea-Bissau.”

But Muwoki says things may change, as the African Union and several key African leaders, notably the presidents of the two largest economies on the continent, Nigeria and South Africa, have recently made clean governance a pet issue.

 

Key resignations

The year 2017 also saw the fall of several regimes long accused of shady dealings.

No fewer than four heads of state accused of major financial crimes resigned in the past year: Gambia’s Yahya Jammeh, Angola’s Jose Eduardo dos Santos, Zimbabwe’s Robert Mugabe and, most recently, South Africa’s Jacob Zuma.  A high-level corruption scandal also tainted the administration of Ethiopian Prime Minister Hailemariam Desalegn, who resigned earlier this month amid mounting anti-government protests.

But holdouts remain: The Democratic Republic of Congo’s entrenched, corruption-accused leader has repeatedly postponed elections, and the leaders of Uganda, Equatorial Guinea, Gabon, Congo, and Cameroon have all long remained in power amid allegations of mismanagement.  Corruption investigations continue into current and former officials across the continent.

 

Rays of hope

Zuma’s successor, Cyril Ramaphosa, has made fighting corruption his key issue.  The multi-millionaire  businessman, this week, called for top government officials to be audited, starting with himself.  Several other African heads of state have done the same in recent years.

 

“Now, if there ever has been anything that many South Africans would like to have line of sight of, it is the lifestyle audit of their public representatives,” he said Tuesday.  “Now that is something that I believe we have to do, and this will be done starting with the executive of the country, yes, we will go in that way,” Ramaphosa said.

And in Nigeria, President Muhammadu Buhari recently announced that all national assets recovered in a recent anti-corruption drive would be sold to benefit the treasury.  Buhari is also the chairman of the AU anti-corruption effort.

Muwoki says the global watchdog has noted these new developments, but urged citizens to keep up the pressure by shining light on suspected corruption.

 

“2018 marks a very important year for the continent,” she said.  “We have seen this renewed commitment from the African Union and from leaders at the recent summit in Addis Ababa.  It is encouraging and we definitely support this … these are some of the things that we would be encouraging civil society and media, and some of these other key stakeholders to hold these leaders to account.”

 

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S. Korea official: GM 0ffers $2.8B Investment in S.Korea Over 10 Years

General Motors has proposed $2.8 billion of fresh investment into its South Korean operations over the 10 years as part of its plan to restructure the embattled unit, a South Korean senior government official said on Wednesday.

The offer comes as the Detroit carmaker and the South Korean government discuss restructuring options at loss-making GM Korea, one of GM’s largest offshore operations.

The official with direct knowledge of the matter said GM had also asked South Korea to inject funds into GM Korea in which the country’s state bank also holds a stake. However, the official added that a close look into GM’s proposal was necessary to determine whether the investment plan was sufficient to rescue the unit, which directly employs some 16,000 workers.

“We need to have a closer look through the audit,” the official said.

South Korea’s trade minister said the government has also asked for an audit into GM’s “opaque” management in the country.

“By opaque we mean the high rate of profits to raw material costs, interest payments regarding loans and unfair financial support made to GM’s headquarters,” said Minister Paik Un-gyu told lawmakers in parliament.

Last week, the U.S. automaker announced it would shut down a factory in Gunsan, southwest of Seoul, and said it was mulling the fate of its three remaining plants in South Korea.

A South Korean lawmaker said earlier that GM had put forward a proposal including the investment plan and a debt to equity swap of the Korea unit’s borrowings to the parent company.

In return, GM requested South Korea to take part in financing the investment and raising capital, according to a statement by Jung You-sub, the lawmaker from Bupyeong where GM runs its biggest factory in South Korea.

Jung’s office was not immediately available for comment.

On Tuesday, Reuters reported GM had offered to convert debt of around $2.2 billion owed by its ailing South Korean operation into equity in exchange for financial support and tax benefits from Seoul, four sources with direct knowledge of the matter said.

 

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S. Korea official: GM 0ffers $2.8B Investment in S.Korea Over 10 Years

General Motors has proposed $2.8 billion of fresh investment into its South Korean operations over the 10 years as part of its plan to restructure the embattled unit, a South Korean senior government official said on Wednesday.

The offer comes as the Detroit carmaker and the South Korean government discuss restructuring options at loss-making GM Korea, one of GM’s largest offshore operations.

The official with direct knowledge of the matter said GM had also asked South Korea to inject funds into GM Korea in which the country’s state bank also holds a stake. However, the official added that a close look into GM’s proposal was necessary to determine whether the investment plan was sufficient to rescue the unit, which directly employs some 16,000 workers.

“We need to have a closer look through the audit,” the official said.

South Korea’s trade minister said the government has also asked for an audit into GM’s “opaque” management in the country.

“By opaque we mean the high rate of profits to raw material costs, interest payments regarding loans and unfair financial support made to GM’s headquarters,” said Minister Paik Un-gyu told lawmakers in parliament.

Last week, the U.S. automaker announced it would shut down a factory in Gunsan, southwest of Seoul, and said it was mulling the fate of its three remaining plants in South Korea.

A South Korean lawmaker said earlier that GM had put forward a proposal including the investment plan and a debt to equity swap of the Korea unit’s borrowings to the parent company.

In return, GM requested South Korea to take part in financing the investment and raising capital, according to a statement by Jung You-sub, the lawmaker from Bupyeong where GM runs its biggest factory in South Korea.

Jung’s office was not immediately available for comment.

On Tuesday, Reuters reported GM had offered to convert debt of around $2.2 billion owed by its ailing South Korean operation into equity in exchange for financial support and tax benefits from Seoul, four sources with direct knowledge of the matter said.

 

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S. Korea’s Cryptocurrency Industry Welcomes Regulator’s Dramatic Change of Heart

South Korea’s cryptocurrency industry is anticipating much better times as the market regulator changes tack from its tough stance on the virtual coin trade, promising instead to help promote blockchain technology.

The regulator said Tuesday that it hopes to see South Korea — which has become a hub for cryptocurrency trade — normalize the virtual coin business in a self-regulatory environment.

“The whole world is now framing the outline [for cryptocurrency] and therefore [the government] should rather work more on normalization than increasing regulation,” Choe Heung-sik, chief of South Korea’s Finance Supervisory Service (FSS), told reporters.

FSS has been leading the government’s regulation of cryptocurrency trading as part of a task force.

Cryptocurrency operators have drawn a new optimism from Choe’s comments, seeing them clearly indicating the government’s cooperation in their plans for self-regulation.

“Though the government and the industry have not yet reached a full agreement, the fact that the regulator himself made clear the government’s stance on cooperation is a positive sign for the markets,” said Kim Haw-joon of the Korea Blockchain Association.

Wednesday’s news is a stark reversal of the justice minister’s warnings in January that the government was considering shutting down local cryptocurrency exchanges, throwing the market into turmoil.

Instead, South Korea banned the use of anonymous bank accounts for virtual coin trading as of January 30 to stop cryptocurrencies being used in money laundering and other crimes.

Bitcoin, the world’s most heavily traded cryptocurrency, is now changing hands at a three-week high of $11,086 on the Luxembourg-based Biststamp exchange after falling as low as $5,920.72 in early February.

South Korean electronics giant Samsung has already started production of cryptocurrency mining technologies, local media reported in January.

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