BEIJING, March 5 — China will seek to heal social rifts and spur home-driven growth with more public welfare and rural spending even as the government tightens its belt after a burst of feverish spending, Premier Wen Jiabao said today.

Wen told the country’s parliament that China’s economy faced a clouded international outlook in 2010 and would stick to a steady policy course this year, shifting tack if needed to counter the lingering impact of the global credit crunch.

China would maintain an appropriately easy monetary stance and an active fiscal policy, he added, showing no sign of a break from current settings.

Wen also signalled continued caution towards the yuan, reiterating standard language that Beijing would seek to keep the currency basically steady at a reasonable and balanced level.

To the dismay of Washington and Brussels, China has frozen the yuan’s exchange rate at around 6.83 per dollar since mid-2008 to preserve the international competitiveness of its exporters.

In his annual “State of the Union”-style report to the National People’s Congress, Wen unveiled increases in spending for China’s poorer citizens and 700-million strong farming population that outstripped the planned rise in military outlays.

China wants to slow spending and bank lending after pumping out cash to counter the global downturn, but Wen said improvements in social welfare, healthcare and rural services were needed to secure the nation’s economic health and the ruling Communist Party’s hold over an increasingly fractured society.

“We can ensure that there is sustained impetus for economic development, a solid foundation for social progress, and lasting stability for the country only by working hard to ensure and improve people’s well-being,” Wen told the nearly 3,000 delegates of the Communist Party-controlled legislature.

China escaped the worst of the global slump by ramping up credit, slashing interest rates and launching a 4 trillion yuan (RM2 billion) infrastructure programme in late 2008.

The economy grew 8.7 per cent last year as a result, by far the fastest pace of any major country, but Wen played down the achievement.

More domestically-driven growth, fuelled by consumers more confident about their health, incomes and welfare protection, was needed to keep the world’s third-biggest economy growing at a solid pace, he said.

“We must not interpret the economic turnaround as a fundamental improvement in the economic situation,” Wen said in the cavernous Great Hall of the People.

“There are insufficient internal drivers of economic growth,” he added, reading aloud the 36-page report in a practiced, steady voice, occasionally pausing for effect and applause.

Wen said China was targeting 8 per cent growth in gross domestic product — the goal it traditionally sets every year — and an inflation rate of about 3 per cent.

Wen announced increases of 8.8 per cent on social spending and 12.8 per cent on rural outlays — more than the rise of 7.5 per cent in the military budget — to narrow the yawning wealth gap that economists blame for dampening domestic consumption.

China’s parliament is a party-run spectacle that affirms policy, rather than making or challenging it.

But the gathering offers an opportunity for the party leadership to sell their policies, which face growing doubts from wealthier taxpayers and from local officials who see little wrong with the country’s traditional recipe of industrial growth.

“We will continue to give preference to agriculture, farmers and rural areas, and to improving people’s well-being and developing social programmes,” said Wen, whose second and final five-year term running the Chinese government ends in 2013.

Still, the projected growth in welfare and agriculture spending is much slower than in 2009 when the financial crisis was raging.

Reflecting the conservatism of China’s financial planners, the budget deficit will again be kept below 3 per cent of national income, Wen said.

Last year the deficit was just 2.2 per cent of GDP despite massive government spending on infrastructure and job creation. — Reuters

SINGAPORE, March 5 — Singapore’s biggest sovereign wealth fund GIC and Qatar Holding LLC have committed to underwrite a significant portion of UK Prudential’s US$20 billion (RM68 billion) rights issue.

GIC is an existing shareholder, with a 0.5 per cent stake in Prudential, but Qatar does not appear to rank as an existing investor, signalling that the British insurer is inviting new investors to make the deal a success.

GIC’s potential investment comes amid news that it may be sitting on a paper loss of about US$5 billion on its investment in UBS following the conversion of its mandatory notes into shares.

It also shows how sovereign wealth funds are getting more active in global dealmaking after they turned cautious last year when they were burnt by early investments in Western banks such as Citigroup.

“The joint global co-ordinators have confirmed that syndication since the announcement has been very well received, with demand for primary underwriting well in excess of the size of the rights issue,” Prudential said in a regulatory filing in London.

Credit Suisse, HSBC and J.P. Morgan Cazenove are acting as joint global co-ordinators and joint bookrunners, it said.

Prudential said it has enlisted over 30 global and Asian banks as joint lead managers, co-lead managers and co-managers for the fund raising that will be used to finance its US$35.5 billion acquisition of AIG’s Asian unit.

In what is the insurance industry’s biggest acquisition, Prudential is buying American International Assurance in a big bet on soaring demand in Asia for personal financial services. AIA is regarded as AIG’s crown jewel because of its size, cash generation and presence in fast-growth Asia.

The latest announcement came when chief executives of Prudential CEO Tidjane Thiam and his AIG counterpart Robert Benmosche are leading a series of “town hall” meetings across Asia that aim to allay concerns among staff of both companies. [

The CEOs are reiterating they plan to keep the businesses and brands separate, with overlap mainly in back- and middle-office operations, according to people who attended the meetings.

The chief executives met employees in Malaysia and Singapore yesterday and are expected to visit Thailand today.

AIA serves more than 20 million customers in Asia. Prudential has more than 11 million life insurance customers in the region.

The deal, which AIG chose over a planned AIA initial public offering in Hong Kong, would help the bailed-out US group repay a big chunk of its taxpayer debt.

The banks that joined the syndicate are Banca IMI, Banco Santander, BofA Merrill Lynch, Citigroup, Deutsche Bank, ING Bank N.V., Morgan Stanley, RBS Hoare Govett and UBS Investment Bank as joint lead managers.

Barclays Capital, BNP Paribas, Credit Agricole CIB, Mediobanca, Natixis, Nomura International, Scotia Capital, Societe Generale, Standard Chartered, UniCredit Bank AG and United Overseas Bank are co-lead managers.

BBVA, BOC International, Commerzbank, DBS Bank, Fortis Bank Nederland, ICBC International Securities, Keefe, Bruyette & Woods, Lloyds TSB Corporate Markets, Macquarie Capital and RBC Capital Markets as co-managers. — Reuters

A MRT train travels along a track in a neighbourhood in Singapore which expects to see more tourist arrivals this year. — Reuters pic

SINGAPORE, March 5 — Visitor arrivals in Singapore are expected to rise 20-30 per cent to 11.5-12.5 million this year, helped by a pickup in the global economy and the draw of the city-state’s new casinos, the government said today.

Singapore Tourism Board (STB) CEO Aw Kah Peng told a tourism industry conference she expects tourism revenue to rise 41-50 per cent from 2009 to S$17.5-S$18.5 billion.

“This is hugely, hugely ambitious,” she acknowledged, but said she was hoping the final result could outperform the forecast.

In January, Singapore saw a 17.6 per cent rise in visitor arrivals from a year earlier. — Reuters

BARCELONA, Spain: Apple Inc. rocked the wireless business by combining the functions of a phone and an iPod. Now, more than two years later, Microsoft Corp. has its comeback: phone software that works a lot like its own Zune media player.

The software, which was unveiled Monday at the Mobile World Congress, is a dramatic change from previous generations of the software that used to be called Windows Mobile.

But Microsoft is, for now, sticking to its model of making the software and selling it to phone manufacturers, rather than making its own phones.

Microsoft's mobile system powered 13.1 percent of smart phones sold in the U.S. last year, according to research firm In-Stat.

That made it No. 3 after Research In Motion Ltd.'s BlackBerry and the iPhone.

But Microsoft has been losing market share while Apple and Google Inc.'s Android gained.

All the while, the market is becoming increasingly important. People are spending more and more time on their phones, and the devices steer people to potentially lucrative Web services and ads.

Phones with the new software will be on the market by the holidays, Microsoft said.

All four major U.S. carriers will offer phones, just as they sell current Windows phones.

The new ones won't be called "Zune phones," as had been speculated. The software will be called "Windows Phone 7 series."

Forrester Research analyst Charles Golvin said the new software looked promising, but that it was also Microsoft's "final chance to get it right."

He notes that those who have current Windows phones don't seem excited about the brand - many of them believe their phones are made by Apple or Nokia Corp., according to his firm's research.

Andy Lees, senior vice president of Microsoft's mobile communications business, said Windows Mobile suffered from the company's chaotic approach to the market.

The software maker gave phone hardware makers and wireless carriers so much freedom to alter the system and install it on so many different devices that none worked the same way.

As a result, while other phone vendors such as Apple linked their hardware and software tightly to ensure a better experience, Windows Mobile might not have looked like it quite fit on a certain handset.

With the new software, "We really wanted to lead and take much more complete accountability than we had in earlier versions of the Windows phone for the end user experience," CEO Steve Ballmer said at the Barcelona launch event.

Microsoft is imposing a set of required features for Windows phones.

Manufacturers must include permanent buttons on the phone for "home," "search" and "back"; a high-resolution screen with the same touch-sensing technology as the iPhone; and a camera with at least 5 megapixels of resolution and a flash.

Hardware QWERTY keyboards will be optional. A test device from Asus, which Microsoft used to demonstrate the new phone software for The Associated Press in Redmond, Wash., also had a front camera and a speaker.

The iPhone's success has spurred lots of look-alike phones with screenfuls of tiny square icons representing each program.

Just as it did with the Zune, Microsoft has tried to avoid an icon-intensive copy of that setup. Instead, it relies more on clickable words and images pulled from the content itself.

For example, if you put a weather program on the device's home page, it shows a constantly updated snapshot of conditions where you are, rather than a static icon that you have to click in order to see the weather.

The idea of pulling information from different Web sites, like Facebook, and presenting them on the phone's "home" screen isn't unique to Microsoft: Motorola Inc. and HTC Corp. have created such software for their own phones.

Windows Phone 7 Series borrows the clean look of the Zune software, departing from the more "computer screen" look of earlier Microsoft efforts.

These were also reliant on the user pulling out a stylus for more precise maneuvering, while the software is designed to be used with the fingers.

It's not clear how older third-party application designed for the stylus will work on the new phones.

Most of the built-in applications complement or connect with existing Microsoft programs or services, such as the Bing search engine.

The games "hub" connects to an Xbox Live account and lets players pick up where they left off with multiplayer games.

They will even be able to play games against PC users.

Microsoft also turns to the Zune programming for the phones' entertainment hub, much in the way the iPhone's music library is called iPod.

And when users plug the phone into a PC, the Zune software pops up to manage music, movies and podcasts.

About 18 months ago, Microsoft stopped most improvements to its existing smart-phone operating software and started from scratch on Windows Phone 7 Series.

Microsoft "is resolved at a company level to be successful in mobile," Lees said.

He indicated Microsoft is willing to spend hundreds of millions of dollars on marketing to ensure it's successful. - AP

JEDDAH, Saudi Arabia: A top Saudi energy official expressed serious concern Monday that world oil demand could peak in the next decade and said his country was preparing for that eventuality by diversifying its economic base.

Mohammed al-Sabban, lead climate talks negotiator, said the country with the world's largest proven reserves of conventional crude is working to become the top exporter of energy, including alternative forms such as solar power.

Saudi Arabia was among the most vocal opponents of proposals during the climate change talks in Copenhagen.

And al-Sabban criticized what he described as efforts by developed nations to adopt policies biased against oil producers through the imposition of taxes on refined petroleum products while offering huge subsidies for coal - a key industry for the United States.

Al-Sabban said the potential that world oil demand had peaked, or would peak soon, was an "alarm that we need to take more seriously" as Saudi charts a course for greater economic diversification.

"We cannot stay put and say 'well, this is something that will happen anyway," al-Sabban said at the Jeddah Economic Forum.

The "world cannot wait for us before we are forced to adapt to the reality of lower and lower oil revenues," he added later.

Some experts have argued that demand for oil, the chief export for Saudi Arabia and the vast majority of other Gulf Arab nations, has already peaked.

Others say consumption will plateau soon, particularly in developed nations that are pushing for greater reliance on renewable energy sources.

With oil demand only now starting to pick up after it was pummeled by the global recession, some analysts say consumers may have learned to live permanently with a lower level of consumption.

The Organization of the Petroleum Exporting Countries, as well as other international energy organizations, is forecasting a slight rise in oil demand this year, based mainly on increased consumption in Asia after last year's sharp hit.

Either peak oil scenario presents grave challenges for the Gulf region and OPEC, whose countries rely on oil sales for as much as 90 percent of their budgets.

Al-Sabban, who also serves as the chief economic adviser to Saudi Oil Minister Ali Naimi, said an oil demand peak would be "very serious" for the country.

Saudi has about 264 billion barrels of crude reserves and currently produces about 8 million barrels per day out of its overall output capacity of around 12 million barrels per day.

The kingdom, widely seen as the de facto leader of the 12-member OPEC, has embraced an ambitious expenditure program aimed not only at further developing its oil base but also expanding and diversifying its economic base.

Its expansionary policies came even as other nations were tightening purse strings in response to the world's worst financial crisis in over six decades.

The outlays included billions of dollars for a new research university that opened last year, as well as major ventures such as the construction of new economic cities and other infrastructure.

Oil's pre-recession price boom also helped pad Saudi Arabia's foreign reserves, now in excess of $400 billion, and have helped the government weather the worst of the global crisis.

International ratings agency Moody's, in a reflection of the country's macroeconomic position, on Monday upgraded Saudi Arabia's foreign and local currency government ratings to Aa3 from A1 citing "the continued solid state of government finances which have largely withstood oil price volatility and the global economic crisis."

Al-Sabban said that along with investing in education and economic diversification, Saudi must ensure that it become the top energy exporter, including in solar power, to keep moving forward.

The country recently launched its first solar-powered desalination plant and al-Sabban said oil giant Saudi Aramco was working on a pilot project to inject carbon emissions back into wells to help boost output.

The carbon sequestration project, which he said would be operational by 2012, was a sign of Saudi Arabia's commitment to environmentally sound energy development.

The push for cleaner technology is pivotal for the oil rich kingdom. - AP

SYDNEY: Westpac Banking Corp., one of Australia's largest banks, said Tuesday its first quarter earnings grew by a third, as impairment charges dropped and the economy continued to bounce back from the global financial meltdown.

Unaudited cash profit was about 1.6 billion Australian dollars (US$1.4 billion) for the three months ended Dec. 31, the Sydney-based bank said in a statement. That's up from AU$1.2 billion in the same period a year ago.

CEO Gail Kelly said the boost in earnings was a result of reduced impairments and good momentum across all businesses.

"Although we remain cautious on the economic outlook, we believe that the worst of the crisis is now behind us and this is reflected in the significant fall in impairment charges," Kelly said in a statement.

"Consumer asset quality remains strong although we expect a small increase in delinquencies throughout the year."

The strong result follows rival Commonwealth Bank of Australia Ltd.'s announcement last week that it had posted a 54 percent rise in half-year cash profit to AU$2.9 billion on lower bad debts. - AP

SINGAPORE: Oil prices hovered above $74 a barrel Tuesday in Asia as investors looked for signs of improving global crude demand amid light holiday trading.

Benchmark crude for March delivery was up 9 cents at $74.22 a barrel at midday Singapore time in electronic trading on the New York Mercantile Exchange.

With markets closed Monday in the U.S. for the Presidents Day holiday, the contract last settled on Friday, falling $1.15 to $74.13.

Trading volume was light in Asia as markets in China, Hong Kong, Taiwan, South Korea, Singapore, and Malaysia were closed for the Lunar New Year holiday.

Oil has traded between $69 a barrel and $84 for the last few months as investors struggle to gauge global crude demand.

On Monday, Japan said its economy grew an annualized 4.6 percent in the fourth quarter while China raised reserve requirements for banks last week in a bid to slow economic growth and avoid asset bubbles.

"There are some signs of improvement in OECD countries as a whole with strong Japanese growth data," Barclays Capital said in a report.

"Worries about softening in China's commodity demand are overblown."

In other Nymex trading in March contracts, heating oil was steady at $1.9203 a gallon, and gasoline fell 0.47 cent to $1.9248 a gallon.

Natural gas rose 4.6 cents to $5.51 per 1,000 cubic feet.

In London, Brent crude was up 35 cents at $72.86 on the ICE futures exchange. - AP

Mobile operators, broadband service providers and pay-TV operators will now know how much it will cost them to ride on TM's fibre optics network

Telekom Malaysia Bhd (TM) (4863), the country's dominant fixed-line operator, has finally revealed the pricing for its High Speed Broadband (HSBB) access to industry players, more than one year after the project was first announced.

This means that service providers, including mobile operators, broadband service providers and pay-TV operators will now know how much it will cost them to ride on TM's fibre optics network to offer services like video-on-demand, Internet protocol television (IPTV), voice call and Internet surfing.

TM met with some 100 industry players in Kuala Lumpur yesterday evening, which lasted over two hours. Besides revealing the prices, TM also made its indicative terms and conditions (ITC) documents available to the players.

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It is believed that most of the industry players came away feeling that the pricing offered by TM was "good" and "reasonable", but remained concerned on how the prices will affect them in the long run.
"I am concerned over the prices five years down the road. (That's because) the HSBB access pricing is not in the official access list under the Malaysian Communications and Multimedia Commission (MCMC). This means that TM may increase the pricing significantly in the future (if it wants to).

"If it was in the access list, then there's a little bit more control," said an industry player who declined to be named.

Meanwhile, TM executive vice-president Rafaai Samsi gave an assurance that the company would not abuse its "power".

"From our understanding, the government/regulator will only step in when there's a market failure. So it is in our best interest to keep the pricing reasonable to all, to avoid a market failure," Rafaai told Business Times in an interview yesterday.

Still, some industry players feel that the HSBB access pricing was complicated.

The pricing comes in two forms: a one-time charge and a monthly recurring charge.

It charges service providers one-time fees of between RM100 and RM200 for activation of each Internet port. On a monthly basis, it charges the service providers between RM50 and RM550 per megabit per second (Mbps) for bandwidth subscription. Different monthly charges are catered for different type of usage.

"The pricing we got was too broad. We will need another discussion with them (TM) personally to get more clarity on the pricing, the timeline as well as the roll-out locations," said an official from Packet One Networks Sdn Bhd.

Still, Rafaai believes that customers will see value in its pricing after studying it in detail.

TM held its first briefing with the industry players March last year to reveal the ITC of the HSBB Transmission service. However, it did not reveal its pricing then.

The launch of the HSBB consumer retail service is on schedule: in March this year in Bangsar, Taman Tun Dr Ismail, Shah Alam and Subang Jaya.

The ringgit is expected to rise against US dollar next week with Asian currencies lending support on positive economic signs in the region, dealers said.

"The ringgit will be well supported at the 3.40 level next week," said one of the dealers, who added that the ringgit may break the resistance level of 3.38 next week.

However, the dealer said that the fundamentals were still weak in the absence of strong leads.

"Any unfavourable news in the United States will downgrade the greenback's value in overseas markets, hence the ringgit is likely to ride on this weakness," he said.

Another dealer said the US Commerce Department will release its fourth-quarter gross domestic product (GDP) data on Friday and negative numbers will encourage investors to take positions on the US dollar.

He did not rule out the possibility of strong buying of US dollars if the data comes in much weaker than expected as most investors preferred to keep the greenback as a "safe haven" during economic crisis.

The local market will be closed on Monday for the Federal Territory Day public holiday.

On a week-to-week basis, the ringgit depreciated against the US dollar to 3.4060/4110 from 3.3940/3990 recorded last Friday.

The local currency declined against the Singapore dollar at 2.4256/4319 from 2.4203/4260 last Friday and was also weaker against the Japanese yen at 3.7748/7820 from 3.7586/7658 previously.

The ringgit, however, strengthened against the euro at 4.7602/7679 from 4.7978/8055 last Friday and also against the British pound at 5.5078/5173 from 5.5183/5281 previously. -- BERNAMA

The Prime Minister said the move by the government to offer several subsidiaries of the Ministry of Finance Inc to private companies is in line with its role as a business facilitator and not as a business entity.

Datuk Seri Najib Tun Razak, who is the Finance Minister, said the government was now identifying the subsidiaries involved which would be offered through open bidding.

He was speaking to reporters after opening the "Digital Pekan 1Malaysia" today.

Also present were Menteri Besar Datuk Seri Adnan Yaakob and Information Communication and Culture Minister Datuk Seri Dr Rais Yatim.

Najib was asked to comment on the statement by Second Finance Minister Datuk Seri Ahmad Husni Hanadzlah yesterday that the government planned to transfer some of the MOF Inc-owned companies to private companies to boost private sector investment.

Najib said: "It's not because the government has no money. Most of these companies are handled by the government, which, in principle, is a business facilitator and not directly involved in the activity." -- Bernama

PARIS (AP): Hermes stepped back from the fashion fray on Saturday by delivering a collection of timeless pieces that willfully snubbed trendiness.

GEORGETOWN, Guyana (AP): A Canadian company will soon begin drilling for oil and gas in Guyana's southwestern savanna region that borders Brazil.

SAN FRANCISCO (AP): Another newspaper publisher desperate to dump debt has filed for bankruptcy protection in hopes of recovering from an advertising meltdown that has obliterated much of the print media's revenue.

SAN FRANCISCO: A co-president of software maker Oracle acknowledges he had an affair with a woman he was shown snuggling with on billboards in New York, Atlanta and San Francisco.

Charles Phillips released a statement Thursday about his relationship with YaVaughnie Wilkins after blogs went abuzz over the mysterious billboards.

"I had an 81/2 year serious relationship with YaVaughnie Wilkins," Phillips said.

"My divorce proceedings began in 2008. The relationship with Ms. Wilkins has since ended and we both wish each other well."

Wilkins did not respond to calls for comment, and no one has taken credit for the billboards, which were taken down by Friday.

The billboards directed viewers to a Web site, charlesphillipsandyavaughniewilkins.com, which is now out of service.

The site included pictures purported to be of the pair, organized by yearly albums starting in 2001.

The pictures appeared to show Wilkins and Phillips at parties, on vacation and hanging out with friends.

The site also included digital images of love letters supposedly sent to Wilkins from Phillips and recordings of the pair singing karaoke.

The man who designed the site, Bela Kovacs, told The Wall Street Journal that Wilkins commissioned the site in late summer.

Kovacs said he assumed the site was for a happy couple and he never met Phillips.

Kovacs told The New York Post that Wilkins told him the site, which cost about $1,400, was a gift for Phillips.

A former Marine, Phillips is a co-president of Redwood Shores-based Oracle Corp.

According to the company's Web site, he was appointed last year to President Obama's Economic Recovery Advisory Board. - AP

CHENNAI: Indians spent almost RM500 million over the last seven years purchasing properties in Malaysia, making them the fourth biggest property buyers in Malaysia.

International Trade and Industry Minister Datuk Mustapa Mohamed said after Singapore, United Kingdom and South Korea, cash-rich Indians have emerged as major investors in Malaysia's property sector.

"India is now the fourth highest buyer of properties, they have a growing strong middle-class with good purchasing power.

"And, the close connectivity to Malaysia from India, and also the commonalities between both countries are some of the reasons why more Indians are coming to Malaysia to buy properties," Mustapa told reporters at the Malaysia Property Expo 2010, which opened in Chennai on Saturday. -- Bernama

The property market in Malaysia is on an upward trend with middle class suburban property prices rising driven by the steady stock market movement.

Ho Chin Soon, director of Ho Chin Soon Research, a property company that specialises in land use and ownership maps, said the KLCI which has been moving upwards from 2009 to 2010, will be a catalyst for the property market.

"However, the high-end and high-rise property market is still in a cautious mode with property developed by branded developers expected to do well," he said during a talk on "2010 Asian Equity and Property Outlook" on Saturday.

"Sentiment will be much better this year onwards, provided the economy holds up," he said.

Ho said demand for high rise properties in Kuala Lumpur was expected to continue due to limited land space.

"High rise residential units in KL generally grew some 12 to 18 per cent per annum for the past 15-20 years. Whatever small growth that KL has is channeled into high rise projects," he said.

Another prime property location was also in Mont Kiara in Kuala Lumpur where development has become more commercial, he said.

Elsewhere in the region, Ho said the property markets in Singapore and Hong Kong were doing exceptionally well with property prices shooting up.

Ho said Malaysia was relatively sheltered from the global financial crisis (compared to the Asian financial crisis) and there was still an upside potential in property investment in Malaysia.

Another speaker, Joanne Goh, senior equity strategist and vice president of group research in DBS Bank, said sustainable growth was expected this year with Asian economies projecting a six per cent growth while the G3 countries were forecast to grow at two per cent this year.

The "continuation of the governments' stimulus programme in Asia this year will benefit economic growth in the various countries concerned," she said during the seminar.

"Stock markets in Asia, excluding Japan, are fairly valued with a minimum 15 per cent upside on earnings growth," she said.

However, Goh warned that there will be economic risk concerns this year.

"There is still economic growth concerns this year such as the effect of the expected rising interest rates and developments in the United States such as the unemployment rate," Goh said.

She said while there were concerns that interest rates could go up due to pressures from cost push inflation such as rising oil prices, materials and business costs, the numbers will not be scary.

"The low interest rate enviromment will likely continue," she said.

Another effect that could have an impact on stock markets was the impending World Cup this year whereby bourses were expected to be quiet before and after the event, she said. -- Bernama

SEATTLE, Jan 21 — Young people wearing hoodies and chunky glasses are sipping microbrew beers and espressos, nibbling on cheese and baguettes made at a local bakery and listening to a guitarist strum and sing.

The scene could be at any independent coffeehouse around the United States. Instead, it is at a Starbucks-owned shop called 15th Avenue Coffee and Tea.

The new store, one of two in Seattle1s trendy Capitol Hill neighbourhood, grew out of a series of brainstorming sessions by a group of Starbucks employees after Howard D. Schultz, Starbucks1 chief executive, told them to “break the rules and do things for yourself.”

The directive was part of his effort, since he returned as chief executive two years ago, to turn the struggling company around by injecting the multinational chain with a dose of the urgency, nimbleness and risk-taking of a start-up company.

“We lost our way,” he said. “We went back to start-up mode, hand-to-hand combat every day” to find it. “And with the kind of discussion and focus that probably we had not had as a company since the early days — the fear of failure, the hunger to win.”

There are indications that Starbucks1 turnaround efforts are working. Yesterday, the company reported that in the first quarter, which included the important holiday season, net income was US$241.5 million (RM821 million), up from US$64.3 million in the year-ago quarter.

Revenue climbed 4 per cent, to US$2.7 billion. Same-store sales were up 4 per cent, reversing steady declines. In the last year, the company1s stock has nearly tripled to US$23.29, though that is still significantly below the record high of nearly US$40 in 2006.

But even if Schultz, who bought the first six Starbucks stores in 1987, still sees the company through an entrepreneur1s eyes, it is no longer a start-up and its stores are not local coffeehouses. Some analysts wonder whether Starbucks is refusing to accept its new identity.

“That kind of resonance it had at one point is going to be hard to recapture,” said Bryant Simon, a history professor at Temple University and author of a book about Starbucks titled “Everything but the Coffee.” “It1s his own sense of the brand overtaking what1s doable right now.”

When Schultz returned in January 2008, Starbucks had just posted its first quarterly decline in the number of transactions at stores in the United States. As the chain opened a record 2,571 stores in 2007, the onetime growth stock lost 42 per cent of its value.

Then, in a one-two punch, consumer spending plummeted, and Starbucks, selling a luxury rather than a necessity, was one of the first to feel the pinch. Meanwhile, competition emerged from a new corner of the market when McDonald1s began serving espresso.

When Schultz, standing at the bar in one of the new Seattle shops and sampling espressos with whole milk, talks about Starbucks, he uses phrases like “the authenticity of the coffee experience” and “the romance, the theatre of bringing that to life.”

But that does not match the reality of many Starbucks customers, who rush through each morning on their way to work, or many of its former customers, who have rejected the chain1s cookie-cutter shops in favour of small local shops that serve more carefully made coffee.

Schultz1s first job upon returning was to halt the marathon store openings, lay off 1,500 United States store employees and 1,700 global corporate employees and figure out how to get the remaining 150,000 to think like employees of a scrappy little company that just wants to serve a good cup of coffee. Starbucks1 coffee buyers, for example, had chosen only varieties of beans that were produced in large enough quantities to supply all Starbucks stores. They rejected coffees made in small batches, which artisanal coffeehouses specialise in. Schultz changed that. “We1re not one size fits all.”

Even as Schultz tries to manage more like a start-up founder, he has given in to traditional big-company ideas that he had previously resisted. Last year, Starbucks embraced customer research surveys and ran its first major advertising campaign.

Entrepreneurs, more than traditional chief executives, “keep shaking things up and pulling the stakes out of the tent because they like the mud and the chaos of reinventing, and Howard has a bit of that in him,” said Warren Bennis, founder of the Leadership Institute at the University of Southern California, who has known Schultz since the mid-1990s.

But he has also noticed that Schultz has developed “more gravitas, more depth.”

Bennis added: “I don1t think he1s going to become the classic entrepreneur who can invent but doesn1t manage.”

Schultz brought Cliff Burrows, who was managing stores abroad, back to Seattle to run American operations. One of the first discoveries he made talking to customers seemed basic, but had been lost in Starbucks1 push to open stores.

Coffee drinkers in the Sun Belt, it turns out, prefer cold drinks, while those in the Northeast generally like drip coffee and those in the Pacific Northwest drink more espresso. Yet the executives in charge of regions of the country were divided along time zones and out of touch with what different customers wanted.

Burrows shifted the geographic divisions. “All of a sudden you start to see it1s not a numbers game — it1s about consumers influenced by where they live,” he said.

Schultz also recruited Arthur Rubinfeld, who had left the company in 2002, to return as president of global development in charge of choosing sites and designing stores. To shed the sameness, Rubinfeld is trying to give each store a feeling of “local-ness,” he said, reflecting the neighbourhood and its architectural history.

At the University Village store in Seattle, for example, there is a long communal table hewn from an ash tree that fell in the Wallingford neighbourhood of Seattle, and it is lined with electrical outlets because at night it is filled with students studying.

At the Starbucks stores in the Capitol Hill neighbourhood, bunches of wildflowers sit in mismatched jugs on tables found in antique shops. Beans are ground to order and poured through a cone like those used in artisanal coffeehouses. On the outdoor patio, coffee grounds are piled in a bucket with a handwritten sign encouraging neighbours to take them for composting in their gardens.

One customer, Joshua Covell, was visiting from San Francisco, where he said he never went to Starbucks. “All the Starbucks have that cookie-cutter feel,” he said. “It1s natural not to like corporate giants, but you can see they1re trying.”

But Sylvia Lee, a doctor who lives in the neighbourhood, said she was excited when she saw the shop was opening — until she discovered it was owned by Starbucks. “No one wants to be the duped customers won over,” she said.

For Starbucks, the stores are partly learning laboratories. Some of the things they sell, like small-batch beans and brewed-to-order cups of coffee, will appear in other stores.

But they are also venues for Schultz to scratch his start-up founder1s itch. He said he planned to open similar stores in other cities, complete with local artists1 work and salvaged furniture. “I think we1ll be able to scale this in a similar fashion at a lower cost.” — NYT

BAGHDAD: Iraq gave final approval Sunday to a deal by a Shell-Petronas led consortium to develop one of its largest oil fields, marking a crucial step toward the nation's postwar rebuilding by boosting the production of its most lucrative resource.

Royal Dutch Shell PLC and its partner, Malaysia's state-run Petronas, won the right to develop the 12.5 billion barrel Majnoon field last month during Iraq's second postwar bidding round.

As part of the deal, Shell and Petronas will pay the Iraqi government a $150 million signing bonus.

At a Baghdad signing ceremony, Oil Minister Hussain al-Shahristani hailed the deal as a "major step that will transform the region from an area of misery and deprivation into a prosperous one."

Shell Chief Executive Peter Voser said his company looks "forward to a good cooperation with the government," but he refused to say how much money will be spent on the project.

The oil deal for Majnoon, located in Basra province near the Iranian border, was one of seven that the Iraqi government awarded last month.

The 20-year contract calls for the companies to be paid $1.39 per barrel produced above current output levels.

The businesses have said they hope to raise production from the current 45,900 barrels per day to 1.8 million barrels per day by 2020.

The Majnoon field was discovered in 1976 and was partially developed until the Iran-Iraq war halted work there in the early 1980s.

Oil production resumed in 2002.

For Iraq, the oil deals mark a crucial step forward in the country's so-far faltering bid to raise oil output.

Although it sits atop the world's third-largest proven reserves of conventional crude oil, Iraq produces a comparatively modest 2.5 million barrels per day, of which about 1.9 million barrels a day are exported.

Decades of neglect of the fields have been compounded by the effects of the fighting and sabotage after the 2003 U.S.-led invasion to oust Saddam Hussein.

That violence has meant that Iraq has been unable to even reach its prewar output levels of oil.

Crude oil sales account for roughly 90 percent of the government's budget.

Of the seven deals awarded in December, Iraq's Cabinet has approved four, including Majnoon.

The Cabinet has asked for changes to proposals for the remaining three - awarded to consortiums led by Russia's private oil giant Lukoil, China's CNPC and Russia's Gazprom _ before signing off on them as expected by the end of the month.

On Monday, the Iraqi government will give final approval to a contract to develop the Gharraf field in the southern Nasiriyah province, which is believed to hold 863 million barrels of oil.

That deal, won by a partnership between Petronas and Japan's Japex, seeks to pump 230,000 barrels from Gharraf daily by 2023, for $1.49 per barrel.

On Jan. 26, the government is scheduled to sign off on contracts to let Angola's Sonangol develop two oil fields in the northern province of Ninevah, about 225 miles (360 kilometers) northwest of Baghdad.

Sonangol will be paid $6 per barrel produced from the Nejma field, which holds an estimated 858 barrels, and it plans to raise output to 110,000 barrels per day by 2019.

The company also is seeking to develop the nearby Qayara field for $5 per barrel.

There are an estimated 807 million barrels in Qayara, and Sonangol plans to produce 120,000 a day within nine years.

Last June, Iraq awarded only one oil deal, to BP PLC and its partner CNPC of China, for the 17.8 billion-barrel Rumaila field in Basra.

The field is the nation's largest, and two other foreign business consortiums have since revised their bids to develop two other prized oil fields nearby.

Al-Shahristani said one of those deals - a partnership among Italy's Eni, U.S.'s Occidental Petroleum Corp. and South Korea's KOGAS - will be approved next Friday.

He said oil production from those fields could boost output to 12 million barrels per day within by 2017, although some analysts call that an overly optimistic target. - AP

BRUSSELS: The euro is in a rough spot. And it could be there for years.

The economic and financial crisis has ballooned budget deficits in Greece, Ireland and several other member countries - exposing one of the underlying vulnerabilities of Europe's decade-old experiment in a multinational currency.

While few think the 16-country currency zone will actually break up, holding it together through the unfolding debt crisis will mean painful, unpopular measures such as budget cutbacks and higher taxes.

German Chancellor Angela Merkel said in a speech Wednesday that "the euro is in a very difficult phase for the coming years."

And Daniel Gros, director of the Centre for European Policy Studies in Brussels, foresees "lean years ahead and there is very little that European leaders can do about it."

Jean-Claude Trichet, the head of the European Central Bank, faced several questions at his monthly press conference last week about the possible breakup of the euro.

He brusquely dismissed them: "I do not comment myself on absurd hyptheses."

The problem: The eurozone has one currency and one central bank, the Frankfurt-based ECB - but 16 governments.

Before the euro, the governments went their own way on spending.

But since big budget gaps can undermine a currency, the euro members agreed deficits should stay below 3 percent of a country's economic output every year.

So forecasts that Greece's 2009 deficit was set to hit at least 12.5 percent of gross domestic product, and Ireland's 11.7 percent have spread shock waves.

Both countries have announce plans to cut spending and raise taxes.

More trouble is ahead as the euro's states suffer very differently from the crisis, with Spain's jobless rate hitting 19.4 percent in November - the most recent figures available - far ahead of 3.9 percent in the Netherlands.

It will be a challenge for the European Central Bank to find one interest rate to stimulate laggards and, at the same time, prevent inflation in growing economies.

The pain level is already high enough that a few voices are asking whether it's worth it.

Irish economist David McWilliams is advocating the end of his country's "loveless marriage" with the currency.

That would let Dublin instantly devalue its currency to make exports more competitive.

It could also attract jobs to Ireland through comparatively cheaper wages.

"We need a break. We can't keep cutting expenditure when there is no offsetting stimulus coming from a cheaper exchange rate, which allows the trading sector to grow," McWilliams wrote in Ireland's Sunday Business Post newspaper on Jan. 10

But the Irish government is adamant that it won't leave - winning praise from EU officials for massive cutbacks to public spending, cutting government wages 10 percent and demanding every worker pay at least 1 percent last year to plug the budget gap.

Not all is negative.

The euro weathered the first months of the crisis well.

Membership spared Greece and Ireland the currency devaluations that savaged nonmembers Hungary, Iceland, and Ukraine.

Indeed, the euro's exchange rate has remained strong, at times rising in value as investors turned to it when the dollar tumbled. It traded around $1.44 on Friday.

Russia's reserve holdings of euro outweighed dollars for the first time last year.

Ukraine even asked Russia to pay recent gas transit fees in euros, not dollars.

And quitting would not be pretty, according to Barry Eichengreen, an economics professor at the University of California, Berkeley.

In a September 2009 paper for the International Monetary Fund he describes a currency devaluation that would scare investors and devastate savings.

"A systemwide bank run would certainly follow," he wrote.

"This would be the mother of all financial crises. And what sensible government would willingly court this danger?"

Gros at the Centre for European Policy Studies says the current course of making cuts to bend to the EU rules is "the lesser evil."

He sets little store on frantic plans by EU officials to draw up a recovery strategy that promises to generate jobs by making labor markets more flexible, knocking down barriers to business between European countries and focusing on a green, innovation-based economy.

Down the road, the medicine offered by the EU's executive commission may work - but the immediate costs may be hard to bear.

Denmark is touted as a model for Europe with a "flexicurity" system that allows businesses dismiss workers at short notice, gives generous welfare benefits to the unemployed and encourages them to retrain for other jobs.

Following that example and scrapping some labor market rules that make it expensive for companies to hire and fire workers - will likely raise hackles among trade unions in Spain, Italy and France.

Gros sees these only as solutions for the long term.

"There's nothing that can really give a boost in the short run to overcome the effects of this crisis, but that is something that policy makers cannot accept publicly," he said.

"This is very painful process which will take a long time." - AP