Report: North Korea Economy Shrank Sharply in 2017

North Korea’s economy contracted at the sharpest rate in two decades in 2017, South Korea’s central bank estimated Friday, in a sign international sanctions imposed to stop Pyongyang’s nuclear and missile programs have hit growth hard.

Gross domestic product (GDP) in North Korea last year contracted 3.5 percent from the previous year, marking the biggest contraction since a 6.5 percent drop in 1997 when the isolated nation was hit by a devastating famine, the Bank of Korea said.

Industrial production, which accounts for about a third of the nation’s total output, dropped by 8.5 percent and also marked the steepest decline since 1997 as factory production collapsed on restrictions of flows of oil and other energy resources into the country. Output from agriculture, construction industries also fell by 1.3 percent and 4.4 percent, respectively.

“The sanctions were stronger in 2017 than they were in 2016,” Shin Seung-cheol, head of the BOK’s National Accounts Coordination Team said.

“External trade volume fell significantly with the exports ban on coal, steel, fisheries and textile products. It’s difficult to put exact numbers on those but it (export bans) crashed industrial production,” Shin said.

The steep economic downturn comes as analysts highlight the need for the isolated country to shift toward economic development.

Switch to economic construction

North Korean leader Kim Jong Un in April vowed to switch the country’s strategic focus from the development of its nuclear arsenal to emulating China’s “socialist economic construction.”

“As long as exports of minerals are part of the sanctions, by far the most profitable item of its exports, Pyongyang will have no choice but to continue with its current negotiations with the U.S. (to remove the sanctions),” said Kim Byeong-yeon, an economics professor at the Seoul National University with expertise in the North Korean economy.

North Korea’s coal-intensive industries and manufacturing sectors have suffered as the U.N. Security Council ratcheted up the sanctions in response to years of nuclear tests by Pyongyang.

China, its biggest trading partner, enforced sanctions strictly in the second half of 2017, hurting North Korea’s manufacturing sector.

Beijing’s suspended coal purchases last year cut North Korea’s main export revenue source while its suspended fuel sales to the reclusive state sparked a surge in gasoline and diesel prices, data reviewed by Reuters showed earlier.

2018 to be ‘a lot worse’

“This year will be a lot worse. Shrinking trade first hits the Kim regime and top officials, and then later affects unofficial markets,” said Kim at Seoul National University, adding that a reduction in tradable goods would eventually decrease household income and private consumption.

North Korea’s black market, or Jangmadang, has grown to account for about 60 percent of the economy, and is where individuals and wholesalers buy and sell Chinese-made consumer goods or agricultural products, according to the Institute for Korean Integration of Society.

China’s total trade with North Korea dropped 59.2 percent in the first half of 2018 from a year earlier, China’s customs data showed last week.

The BOK uses figures compiled by the government and spy agencies to make its economic estimates. The bank’s survey includes monitoring of the size of rice paddy crops in border areas, traffic surveillance, and interviews with defectors.

North Korea does not publish economic data.

North Korea’s Gross National Income per capita stands at 1.46 million won ($1,283.52), making it about 4.4 percent the size of South Korea’s, the BOK said.

Overall exports from North Korea dropped 37.2 percent in 2017, marking the biggest fall since a 38.5 percent decline in 1998, the BOK said Friday, citing data from the Korea Trade-Investment Promotion Agency.


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China Boosts Liquidity as Trade War Threatens Economy

Chinese policymakers are pumping more liquidity into the financial system and channeling credit to small- and medium-sized firms, and Beijing looks set to further loosen monetary conditions to mitigate threats to growth from a heated Sino-U.S. trade war.

The world’s second-biggest economy has started to lose momentum this year as a government campaign to reduce a dangerous build-up of debt has lifted borrowing costs, hitting factory output, business investment and the property sector.

As an intensifying trade conflict raises risks to exporters and overall growth, many economists expect the central bank to further reduce reserve requirements in the coming months, on top of the three reductions made so far this year.

Benchmark rate unchanged

However, few see a cut in the benchmark policy rate this year, as authorities walk a fine line between keeping liquidity conditions supportive and preventing any destabilizing capital outflows that could put the skids on a fragile yuan currency.

On Wednesday, a source with direct knowledge of the matter said the People’s Bank of China (PBOC) plans to introduce incentives that will boost the liquidity of commercial banks.

These are aimed at encouraging banks to expand lending and increase their investment in bonds issued by corporations and other entities, such as local government financing vehicles (LGFVs).

The PBOC has also been ensuring ample liquidity by allowing commercial banks to tap its Medium-Term Loan Facility (MLF), especially lenders that have invested in bonds rated AA+ and below, the source said.

The improved cash conditions have been reflected in reduced short-term borrowing costs for banks, with the country’s key seven-day money rate at 2.6409 percent Thursday, 37 basis points lower than recent highs at the end of June.

Economy expansion slows

The combination of lower interbank rates and the push to boost bank support should help to ease financing pressures for weaker firms, analysts said.

“This should spell good news for lower-grade bond markets which have been suffering from a flight to quality-grade bonds, and some firms have subsequently found access to liquidity difficult,” analysts at Everbright Sun Hung Kai said in a note.

China’s economy expanded a slower-than-expected 6.7 percent in the second quarter, and June factory output growth weakened to a two-year low as the trade dispute with the United States intensified.

To be sure, markets don’t expect aggressive policy loosening, given Beijing’s broad deleveraging pledge and fears that doing so could hit the yuan and trigger a spike in capital outflows.

Trade war worries have already weighed on the yuan, which hit a one-year low on Thursday.

Focus on small, medium businesses

A key focus is on small- and medium-sized enterprises (SMEs), which account for 80 percent of all jobs in China, and have suffered from rising borrowing costs and a shrinking credit pool amid Beijing’s three-year-long crackdown on off-balance sheet financing and a corporate debt build-up.

A trader at a state-run copper smelter in southern China told Reuters his firm has resorted to selling inventory to raise cash in light of the tougher financing conditions.

“Banks give, but the cost has gone up,” said the trader, who declined to be identified as he was not authorized to comment on his firm’s finances.

While the PBOC did not respond to faxed questions about its plans, a Shanghai-based trader at an Asian bank said the bond market had seen a notable pick-up in the volume of trade of LGFV debt.


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Trump Administration Wants to Scrap Some Species Protection

The Trump administration wants to scrap automatic federal protection for threatened plants and animals, a move that would anger environmentalists but please industry.

A proposal unveiled Thursday would no longer grant threatened species the same instant protection given to endangered species. It would also limit what can be declared a critical habitat for such plants and animals.

Officials with the Interior Department and Fish and Wildlife Service said Thursday that they wanted to streamline regulations. They said current rules under the Endangered Species Act were inconsistent and confusing.

Deputy Interior Secretary David Bernhardt said the new rules would still be very protective of endangered animals.

“At the same time, we hope that they ameliorate some of the unnecessary burden, conflict and uncertainty that is within our current regulatory structure,” he told reporters.

But conservationists called the changes a “wrecking ball” and a gift to big businesses.

“They could decide that building in a species habitat or logging in trees where birds nest doesn’t constitute harm,” the Center for Biological Diversity’s Noah Greenwald said.

Industries such as logging, mining and oil drilling have long complained that the Endangered Special Act has stopped them from gaining access to new sources of energy and has stifled economic development.


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US Seen Receiving Frosty Reception at G-20 Meeting

The financial leaders of the world’s 20 biggest economies meet in Buenos Aires this weekend for the first time since long-simmering trade tensions burst into the open when China and the United States put tariffs on $34 billion of each other’s goods.

The United States will seek to persuade Japan and the European Union to join it in taking a more aggressive stance against Chinese trade practices at the G-20 meeting of finance ministers and central bank presidents, according to a senior U.S. Treasury Department official who spoke on condition on anonymity.

But those efforts will be complicated by frustration over U.S. steel and aluminum import tariffs on the EU and Canada. Both responded with retaliatory tariffs in an escalating trade conflict that has shaken markets and threatens global growth.

“U.S. trading partners are unlikely to be in a conciliatory mood,” said Eswar Prasad, international trade professor at Cornell University and former head of the International Monetary Fund’s China Division. “[U.S.] hostile actions against long-standing trading partners and allies have weakened its economic and geopolitical influence.”

At the close of the last G-20 meeting in Argentina in March, the financial leaders representing 75 percent of world trade and 85 percent of gross domestic product released a joint statement that rejected protectionism and urged “further dialogue,” to little concrete effect.

Since then, the United States and China have slapped tariffs on $34 billion of each other’s imports and U.S. President Donald Trump has threatened further tariffs on $200 billion worth of Chinese goods unless Beijing agrees to change its intellectual property practices and high-technology industrial subsidy plans.

Trump has said the U.S. tariffs aim to close the $335 billion annual U.S. trade deficit with China.

U.S. Treasury Minister Steven Mnuchin has no plans for a bilateral meeting with his Chinese counterpart in Buenos Aires, a U.S official said this week.

Growth concerns

Rising trade tensions have led to concerns within the Japanese government over currency volatility, said a senior Japanese G-20 official who declined to be named. Such volatility could prompt an appreciation in the safe-haven yen and threaten Japanese exports.

Trump’s metals tariffs prompted trade partners to retaliate with their own tariffs on U.S. goods ranging from whiskey to motorcycles. The United States has said it will challenge those tariffs at the World Trade Organization.

The EU finance ministers signed a joint text last week that will form their mandate for this weekend’s meeting, criticizing “unilateral” U.S. trade actions, Reuters reported. The ministers will stress that trade restrictions “hurt everyone,” a German official said.

In a briefing note prepared for the G-20 participants, the International Monetary Fund said if all of Trump’s threatened tariffs — and equal retaliation — went into effect, the global economy could lose up to 0.5 percent of GDP, or $430 billion, by 2020.

Global growth also may have peaked at 3.9 percent for 2018 and 2019, and downside risks have risen due to the tariff spat, the IMF said.

“While all countries will ultimately be worse off in a trade conflict, the U.S. economy is especially vulnerable,” IMF Managing Director Christine Lagarde wrote in a blog post. “Policymakers can use this G-20 meeting to move past

self-defeating tit-for-tat tariffs.”

Trade is not on host country Argentina’s published agenda for the July 21-22 ministerial, which focuses on the “future of work” and infrastructure finance. But it will likely be discussed during a slot devoted to risks facing the global

economy, much as in March, according to an Argentine official involved in G-20 preparations, who asked not be named.


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US Weekly Jobless Claims Hit Lowest Point Since Late ’69

The number of Americans filing for unemployment benefits dropped last week to its lowest point in more than 48 years as the labor market strengthens further, but trade tensions are casting a shadow over the economy’s outlook.

Other data on Thursday showed manufacturing activity in the mid-Atlantic region accelerated in July amid a surge in orders received by factories. But the Philadelphia Federal Reserve survey also showed manufacturers paying more for inputs and less upbeat about business conditions over the next six months.

Fewer manufacturers planned to increase capital spending, suggesting trade tensions, marked by tit-for-tat import tariffs between the United States and its trade partners, including China, Canada, Mexico and the European Union, could be starting to hurt business sentiment.

The survey came on the heels of the Federal Reserve’s Beige Book report on Wednesday, showing manufacturers in all districts worried about the tariffs and reporting higher prices and supply disruptions, which they blamed on the new trade policies.

“Yesterday’s Beige Book and the recent decline in the investment intentions balance in the Philly Fed survey show that escalating trade tensions are starting to have a material impact on companies’ confidence about the future,” said Brian Coulton, chief economist at ratings agency Fitch.

Increase had been forecast

Initial claims for state unemployment benefits dropped 8,000 to a seasonally adjusted 207,000 for the week ended July 14, the lowest reading since early December 1969, the Labor Department said. Economists polled by Reuters had forecast claims rising to 220,000 in the latest week.

The second straight weekly decline in claims, however, likely reflects difficulties in adjusting the data for seasonal fluctuations around this time of the year, when motor vehicle manufacturers shut assembly lines for annual retooling.

The four-week moving average of initial claims, considered a better measure of labor market trends as it irons out week-to-week volatility, fell 2,750 to 220,500 last week.

The dollar firmed against a basket of currencies. Stocks on Wall Street were lower, while prices for U.S. Treasury securities rose.

​Worker shortage

The claims data covered the survey week for the nonfarm payrolls component of July’s employment report. The four-week average of claims dipped 500 between the June and July survey periods, suggesting solid job growth this month.

The economy created 213,000 jobs in June, with the unemployment rate rising two-tenths of a percentage point to 4.0 percent as more Americans entered the labor force, in a sign of confidence in their job prospects.

Federal Reserve Chairman Jerome Powell told lawmakers this week that with appropriate monetary policy, the job market will remain strong “over the next several years.”

The labor market is viewed as being near or at full employment. There were 6.6 million unfilled jobs in May, an indication that companies cannot find qualified workers.

That was reinforced by the Beige Book, which showed worker shortages persisting in early July across a wide range of occupations, including highly skilled engineers, specialized construction and manufacturing workers, information technology professionals and truck drivers.

Thursday’s survey from the Philadelphia Fed showed its business conditions index jumped to a reading of 25.7 in July from 19.9 in June. The survey’s measure of new orders increased to 31.4 from a reading of 17.9 in June.

Prices paid index jumps

But its gauge of factory employment fell, as did the average workweek. Manufacturers also continued to report higher prices for both purchased inputs and their own manufactured goods. The survey’s prices paid index soared to 62.9 this month, the highest level since June 2008, from 51.8 in June. The index has risen 30 points since January. Sixty-three percent of manufacturers in the region reported paying more for inputs this month compared with 54 percent in June.

The price increases are likely related to tariffs on steel and aluminum imports, which were imposed by the Trump administration to protect domestic industries from what it says is unfair foreign competition.

Wednesday’s Beige Book mentioned a machinery manufacturer in the Philadelphia area who described the effects of the steel tariffs as “chaotic to its supply chain, disrupting planned orders, increasing prices and prompting some panic buying.”

The Philadelphia survey’s index for future activity decreased for the fourth straight month. Capital spending plans over the next six months also fell as did intentions to hire more factory workers. 

“Further escalation could create worse conditions and this remains a downside risk to the otherwise positive outlook over the next year,” said Adam Ozimek, a senior economist at Moody’s Analytics in West Chester, Pennsylvania.


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Commerce Secretary: ‘Too Early’ to Say if US Will Impose Auto Tariffs

Commerce Secretary Wilbur Ross said Thursday it was “too early” to say if the United States would impose tariffs of up to 25 percent on imported cars and parts, a suggestion that has been met with harsh criticism from the industry.

The department opened an investigation in May into whether imported autos and parts pose a national security risk and was holding a hearing on the probe Thursday, taking testimony from auto trade groups, foreign governments and others.

Ross’ remarks came at the start of the public hearing, which he said was aimed at determining “whether government action is required to assure the viability of U.S. domestic production.”

A group representing major automakers told Commerce on Thursday that imposing tariffs of 25 percent on imported cars and parts would raise the price of U.S. vehicles by $83 billion annually and cost hundreds of thousands of jobs.

Automakers say there is “no evidence” that auto imports pose a national security risk, and that the tariffs could actually harm U.S. economic security.

They are also facing higher prices after tariffs were imposed on aluminum and steel.

The Alliance of Automobile Manufacturers, whose members include General Motors Co, Volkswagen AG and Toyota Motor Corp, warned on the impact of the tariffs.

“Higher auto tariffs will harm American families and workers, along with the economy” and “would raise the price of an imported car nearly $6,000 and the price of a U.S.-built car $2,000,” said Jennifer Thomas, a vice president for the group.

She noted that the U.S. exports more than $100 billion of autos and parts annually to other countries, while “there is a long list of products that are largely no longer made in the U.S., including TVs, laptops, cellphones, baseballs, and commercial ships.”

No automaker or parts company has endorsed the tariffs, and they have pointed to near-record sales in recent years.

Warnings

Jennifer Kelly, the United Auto Workers union research director, noted that U.S. auto production has fallen from 12.8 million vehicles in 2000 to 11.2 million in 2017 as the sector has shed about 400,000 jobs over that period, with many jobs moving to Mexico or other low-wage countries.

“We caution that any rash actions could have unforeseen consequences, including mass layoffs for American workers, but that does not mean we should do nothing,” she said, suggesting “targeted measures.”

Many firms that sell vintage vehicles also warned that the tariffs could devastate the industry because many older cars need parts that are only made outside the United States. Polaris Industries Inc warned that off-road vehicles could also be inadvertently covered by the tariffs.

A study released by a U.S. auto dealer group warned that the tariffs could cut U.S. auto sales by 2 million vehicles annually and cost more than 117,000 auto dealer jobs, or about 10 percent of the workforce.

President Donald Trump has repeatedly suggested he would move quickly to impose tariffs, even before the government launched its probe.

‘Tremendous retribution’

“We said if we don’t negotiate something fair, then we have tremendous retribution, which we don’t want to use, but we have tremendous powers,” Trump said Wednesday. “We have to — including cars. Cars is the big one. And you know what we’re talking about with respect to cars and tariffs on cars.”

The European Union, Japan, Canada and Mexico, along with many automotive trade groups, are among 45 witnesses scheduled to testify during the daylong hearing.

The Commerce Department said earlier this week it aimed to complete the investigation “within a couple months.”


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Trade Pain: US Small Companies Hit by Import, Export Tariffs

Time and effort have gone down the drain for Steve Gould, who is scrambling to find new customers for his gin, whiskey and other spirits since the United States has taken a tough stance on trade issues.

Before the European Union retaliated against new U.S. tariffs with taxes of its own, Gould expected revenue from the EU at his Golden Moon Distillery in Colorado to reach $250,000 or $350,000 this year. Now he’s concerned that European exports will total just $25,000. Golden Moon already saw an effect when then-candidate Donald Trump made trade an issue during the 2016 campaign. Gould lost one of his Mexican importers and an investor, as overseas demand for small-distiller spirits was growing.

“We’ve lost years of work and hundreds of thousands of dollars in building relationships with offshore markets,” says Gould, who’s hoping to find new customers in countries like Japan. 

President Donald Trump’s aggressive trade policies are taking a toll on small U.S. manufacturers. The president has imposed tariffs of 25 percent on steel and 10 percent on aluminum imports from most of the world, including Europe, Mexico and Canada, driving up costs for companies that rely on those metals. And he has slapped 25 percent taxes on $34 billion in Chinese imports in a separate trade dispute, targeting mostly machinery and industrial components so far. Trump’s tariffs have drawn retaliation from around the world. China is taxing American soybeans, among other things; the European Union has hit Harley-Davidson motorcycles and Kentucky bourbon; Canada has imposed tariffs on a range of products — from U.S. steel to dishwasher detergent.

More businesses could be feeling the pain as the trade disputes escalate — the administration on Tuesday threatened to impose 10 percent tariffs on thousands of Chinese products including fish, apples and burglar alarms. And China responded with a tariff threat of its own, although it didn’t say what U.S. exports would be targeted.

Small businesses are particularly vulnerable to tariffs because they lack the financial resources larger companies have to absorb higher costs. Large companies can move production overseas — as Harley-Davidson recently announced it would do to escape 25 percent retaliatory tariffs in Europe. But “if you’re a small firm, it’s much harder to do that; you don’t have an international network of production locations,” says Lee Branstetter, professor of economics and public policy at Carnegie Mellon University’s Heinz College.

Shifting manufacturing away from items that use components that are being taxed is also harder since small businesses tend to make fewer products, he says. And if tariffs make it too expensive to export to their current markets, small companies may not be able to afford the effort of finding new ones.

Small-business owners have been growing more confident over the past year as the economy has been strong, and they’ve been hiring at a steady if not robust pace. But those hurt by tariffs are can lose their optimism and appetite for growth within a few months.

“They have narrow profit margins and it’s a tax,” says Kent Jones, an economics professor at Babson College. “That lowers their profit margins and increases the possibility of layoffs and even bankruptcies.”

Yacht company

Bertram Yachts is one company finding it trickier to maneuver. The U.S. has put a 25 percent tariff on hundreds of boat parts imported from China, where most marine components are made. And European countries have imposed a 25 percent tariff on U.S.-made boats. Last year, Bertram exported about a third of its boats, with half going to Europe.

“We have been squeezed on both sides,” says Peter Truslow, CEO of the Tampa, Florida-based boat maker.

Truslow doesn’t know how the tariffs will affect the company’s sales and profits, but dealers he’s spoken to in Europe have already gotten cancellations on boats that run into the millions of dollars. Bertram plans to try to build up its strong U.S. business and seek more customers in countries that aren’t involved in trade disputes with the U.S., including Japan and Australia.

Still, the company’s growth and job creation stand to slow. “It’s probably going to be more about a reduction in hiring than it is about layoffs,” Truslow says.

The ripples are being felt across the industry, says Tom Dammrich, president of the National Marine Manufacturers Association trade group. He estimates there are about 1,000 manufacturers, almost all small or mid-size businesses, and says some parts can only be bought from China.

Metal fabrication

Matt Barton’s metal fabrication company, which makes custom replacement parts for farm equipment, outdoor signs and people who race hot rods, is paying its suppliers up to 20 percent more for metals than it did a year ago.

Prices had soared as much as 40 percent months ago amid expectations of U.S. tariffs on aluminum and steel. They have since steadied, but are expected to remain high for three to six months. Barton’s Pittsboro, Indiana-based company, The Hero Lab, is absorbing part of the increases. Some racing customers are still delaying orders.

“What they budgeted to cost $1,000 now is now $1,200 or $1,500,” Barton says. “They’re pushing their orders back four to six weeks, waiting for a few more paychecks to come in.”

Cheese maker

Jeff Schwager’s cheese company, Sartori, is selling products to Mexico at break-even prices because of that nation’s retaliatory 25 percent tariff. Twelve percent of the Plymouth, Wisconsin-based company’s revenue comes from exports, which is the fastest-growing segment of the business.

Sartori and its Mexican importer are each absorbing half the costs of the tariff. Schwager, the CEO, doesn’t see leaving the Mexican market as an option.

“If you lose space on the grocery store shelf, or you’re taken out of recipes in restaurants, that takes years to get back,” he says. He hopes the trade dispute can be resolved and tariffs rolled back.

Flatware maker

But some small manufacturers believe they can benefit from a trade dispute. Greg Owens, president of flatware maker Sherrill Manufacturing, says if his competitors in China are hit by U.S. tariffs, he could see revenue increase.

“They would have to raise the retail price, which would allow us to raise our prices,” says Owens, whose company is located in Sherrill, New York. In turn, Owens says, that would allow “long overdue” raises for workers and upgrades to capital equipment.


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Solar Power Seen as Tool Against Extremism in Sahel

Grinding poverty and climate change are pushing communities in West

Africa’s Sahel region into the arms of extremist groups like Boko Haram, but providing people with clean energy could help slow that trend, said a top international official.

Rachel Kyte, CEO of Sustainable Energy for All, set up by the United Nations, learned on a trip to Niger this month how women and girls are being recruited by Islamist militants who offer them work, food and other essentials.

Kyte, who serves as the U.N. secretary-general’s special representative on energy access, said Boko Haram “is moving into the provision of basic social services.”

At the same time, in impoverished Niger, recurring and more intense drought “is absolutely punishing,” she said. 

The Islamist group is based in northeast Nigeria but active in other West African states.

Kyte said villagers need better ways to grow crops to feed their families and boost incomes to make them less susceptible to the extremists targeting them.

U.N. Deputy Secretary-General Amina J. Mohammed, who visited Niger with Kyte, last week spelled out the links between climate change stresses and regional insecurity in remarks to the U.N. Security Council.

In rural Niger, where only about 1 percent of people have access to electric power, supplying cheap and green energy — mainly from the sun — could make a difference, Kyte said.

Irrigation, cold storage

For example, solar pumps could drive simple, efficient irrigation systems, and installing small-scale local grids could power cold storage, enabling villagers to process their crops and earn more money, she noted.

“It just became very, very clear that without energy, there’s no way to improve incomes — without energy, it’s going to be difficult to bring productivity into the rural economy,” Kyte said in an interview from New York after the visit,

organized by the United Nations and the African Union.

In addition, equipping hospitals and clinics with solar systems in both cities and rural areas could reduce patient infections and increase the number of operations for common problems like fistula by supplying reliable power, Kyte said.

Solar energy could be a way to “beat back and build the resilience of a community to climate change, but also beat back violent extremism,” while “lifting up women and girls whose situation there is just dire,” she added.

Kyte urged government donors and international development banks to think about how access to clean, modern energy enables people to get sufficient food and medical treatment, and earn a decent living.

In a place like Niger, having electricity can be a decisive factor in whether people leave their homes and head north to Europe seeking a better life, she added.

It can also reduce the financial need for poor families to marry their daughters off early.

“This is about using aid money and development finance … to start building a different value proposition for these people that is something that will allow them to stay where they come from, and would allow girls to be part of that economic future,” she said.


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Universal Music Group to Open Nigeria Division

Vivendi’s Universal Music Group (UMG) will launch a new division in Nigeria as part of efforts by the world’s largest music label to expand into Africa’s most populous nation and the wider region.

The music entertainment group said on Tuesday its new strategic division, Universal Music Nigeria, will operate from Nigeria’s commercial capital Lagos.

Nigerian music, much like its Nollywood film industry, is popular across much of Africa. Nigerian music artists have popularized the Afrobeat musical genre and gone on to sign record deals, sell out concerts and work with international artists to increase the global reach of African music.

Music revenue in Nigeria – mostly derived from sales of mobile phone ringtones – grew 9 percent in 2016, year-on-year, to reach $39 million and is expected to rise to $73 million by 2021, auditing firm Pricewaterhouse Coopers (PwC) said last year.

Sipho Dlamini, Managing Director of Universal Music South Africa and sub-Saharan Africa said that the Nigeria division will focus on developing artists and musicians from West Africa countries, particularly Nigeria, Ghana and Gambia.

“Our Nigeria team will support, nurture, and help develop artists, while creating opportunities for new talent from the region to reach the widest possible audience,” said Dlamini.

UMG said the new division will work alongside the label’s existing operations in Ivory Coast and Morocco.

Universal Music Nigeria also plans to open a recording studio in Lagos, which would be the label’s second fully purposed studio in Africa alongside another in Johannesburg, South Africa.

Nigeria’s music industry faces an array of challenges ranging from the lack of proper legal structures, to piracy and difficulties in distributing and monetizing content.

The country’s arts, entertainment and recreation sector contributed 0.29 percent to real GDP in the first quarter of this year, the statistics office said.


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Venezuela Pleads Guilty in US to Role in PDVSA Bribe Scheme

A former official at a Venezuelan state-run electric company pleaded guilty on Monday to U.S. charges that he participated in a scheme to solicit bribes in exchange for helping vendors win favorable treatment from state oil company PDVSA.

Luis Carlos De Leon Perez, 42, pleaded guilty in federal court in Houston to conspiring to violate the Foreign Corrupt Practices Act and to conspiring to commit money laundering, the U.S. Justice Department said.

He became the 12th person to plead guilty as part of a larger investigation by the Justice Department into bribery at Petroleos de Venezuela SA that became public with the arrest of two Venezuelan businessmen in December 2015.

The two men were Roberto Rincon, who was president of Tradequip Services & Marine, and Abraham Jose Shiera Bastidas, the manager of Vertix Instrumentos. Both pleaded guilty in 2016 to conspiring to pay bribes to secure energy contracts.

De Leon is scheduled to be sentenced on Sept. 24. His lawyers did not respond to requests for comment.

De Leon was arrested in October 2017 in Spain and was extradited to the United States after being indicted along with four other former Venezuelan officials on charges they solicited bribes to help vendors win favorable treatment from

PDVSA.

An indictment said that from 2011 to 2013 the five Venezuelans sought bribes and kickbacks from vendors to help them secure PDVSA contracts and gain priority over other vendors for outstanding invoices during its liquidity crisis.

Prosecutors said De Leon was among a group of PDVSA officials and people outside the company with influence at it who solicited bribes from Rincon and Shiera. De Leon worked with those men to then launder the bribe money, prosecutors said.

De Leon also sought bribes from the owners of other energy companies and directed some of that money to PDVSA officials in order help those businesses out, prosecutors said.

Among the people indicted with De Leon was Cesar David Rincon Godoy, a former general manager at PDVSA’s procurement unit Bariven. He pleaded guilty in April to one count of conspiracy to commit money laundering.

Others charged included Nervis Villalobos, a former Venezuelan vice minister of energy; Rafael Reiter, who worked as PDVSA’s head of security and loss prevention; and Alejandro Isturiz Chiesa, who was an assistant to Bariven’s president.

Villalobos and Reiter were, like De Leon, arrested in Spain, where they remain pending extradition, the Justice Department said. Isturiz remains at large.


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