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LONDON: The UK government has announced the sale of its remaining 30 percent share in Britain's Royal Mail this year as part of a £4.5 billion plan to reduce public sector debt.

Current value of the stake is £1.5 billion, based on a share price of 526 pence, and when sold will complete a privatization program that began in October 2013 and raised £1.7 billion.

Royal Mail Magna Carta 1A day after the flotation that saw 10 percent of the shares going to employees, the Royal Mail stock price rose to 455 pence - valuing the company at £4.55 billion and leading to charges the government had undersold it.

Of the remaining stake, Conservative government finance minister George Osborne said: "It is the right thing to do for the Royal Mail, the businesses and families who depend on it – and crucially for the taxpayer." He added that reducing the country's public debt would deliver lasting economic security: "For as everyone knows, when it comes to living within your means, the sooner you start the smoother the ride."

As part of his latest budget cuts, Osborne also announced the UK Department for Transport will sell land adjacent to London's King's Cross railway station that has a current book value of £345 million.

Moya Greene Royal Mail CEOIn May, Royal Mail reported a 2014 pre-tax profit of £400 million on revenue of £9.42 billion. Total investment increased from £617 million to £658 million during the period as net debt fell from £555 million to £275 million.

CEO Moya Greene (right) commented: "We have delivered operating profits in line with our expectations. Our continued focus on efficiency resulted in a better than expected UK cost performance, offsetting lower than anticipated UK parcel revenue. At the same time we have delivered a large number of innovations at pace as we transform our business."

The company said parcel delivery volume in the UK covering business-to-consumer (B2C), consumer-to-any-recipient (C2X) and business-to-business (B2B), will grow at four percent per annum in the medium term. "However, we estimate that the impact of Amazon delivering an increasing number of parcels using its own delivery network will reduce the annual rate of growth in our addressable market to around 1-2 per cent in the short term."

The fastest areas of growth for UK parcels traffic is expected to be clothing, footwear, toys and sports equipment.

In March this year, the company launched a shopfront on Alibaba's Tmall Global e-marketplace. The platform will offer 300 million Chinese consumers the opportunity to buy British products and have them delivered by Royal Mail's Parcelforce Worldwide service.

Related: Employees to get more Royal Mail shares.

 

WASHINGTON, DC: According to the International Monetary Fund (IMF), global energy subsidies increased from US$4.2 trillion in 2011 to US$5.3 trillion in 2015.

As a percent of world GDP, the subsidies rose from 5.8 percent in 2011 to 6.5 percent in 2015 and now exceed worldwide government health spending estimated by the World Health Organization at US$4.3 trillion.

The largest subsidies are in China (US$2.3 trillion), the United States (US$699 billion), Russia (US$335 billion), European Union (US$330 billion), India (US$277 billion), and Japan (US$157 billion).

Greenpeace Artic oilThe IMF claims in a new report this externality hides the true cost of energy consumption that includes supply costs and the damage that energy consumption inflicts on people and the environment. The report says eliminating energy subsidies would lower global carbon dioxide emissions by over 20 percent.

According to Victor Gaspar, IMF director of its Fiscal Affairs Department, the fiscal gain from energy subsidy reform would have been US$3.0 trillion in 2013 and US$2.9 trillion in 2015 – equal to 4.0 percent and 3.6 percent of global GDP respectively.

He said that increasing energy prices gradually and predictably to reflect their true costs would generate fiscal gains of about 3.5 percent of global GDP. Recently, several countries have narrowed the gap between domestic and international prices that resulted in a subsidy reduction of US$190 billion between 2011 and 2015.

Describing the current subsidy level as "shocking", Gaspar noted that because global energy prices have dropped significantly, there is a window of opportunity for countries to act ahead of the Paris 2015 UN climate conference.

According to a report in the Guardian newspaper, economist Nicholas Stern, author of the British government's 2006 landmark study Economics of Climate Change, said Shell and other hydrocarbon companies are "getting it wrong" on the potential of renewables technology and that people will insist on policies to hold global warming to 2 degrees Celsius.

Speaking at the May Climate Week conference in Paris, French Finance minister Michel Sapin said France will soon pass a law requiring institutional investors to disclose their carbon footprint. It will be a "game-changer" he declared and in line with government's need to "have a better understanding of climate emissions before allowing credit for any project".

He added the measure is also intended to help institutional investors "understand how their assets are exposed to climate change" in order to convince them to "decarbonize their portfolios". The new French law would facilitate divestment from fossil fuels to low carbon investments.

Meanwhile, as part of its campaign against Shell drilling in the Artic, Greenpeace asked British artists KennardPhillipps to create a new version (above) of the painting 'An Arctic Summer: Boring Through the Pack in Melville Bay' by William Bradford. It depicts an oil pipeline spill and rig explosion.

MANILA/GENEVA: The 20 members states of the Climate Vulnerable Forum (CVF), chaired by the Philippines, says the current 2 °Celsius climate ceiling expected to be reaffirmed at the Paris climate summit (COP 21) this December is too high.

Presenting three new independent reports to the UN Framework Convention on Climate Change, the group says 2 °C is "inadequate" and poses serious threats to human rights, labor and migration.

cyclone pam 2"How can we possibly subscribe to more than double current warming given what less than 1 °C has entailed?" declared secretary of the Philippines Climate Change Commission, Mary Ann Lucille L. Sering. "When we see that warming emissions from the energy sector actually stalled last year despite economic growth, or if we look at the unpredicted pace of low-carbon tech uptake, arguments not to strengthen our aims start to wear thin," she added.

The CVF is calling on the 196-COP member states to interact with the expert authors of the three reports and consider other new information at an additional session prior to the Paris summit.

"It is less well-known that at the COP 21 governments must also take a decision on whether limiting the increase in the temperature to less than 2 degrees is adequate. Meeting that goal is central to much of what is already in place and what more is hoped to figure in a future Paris agreement applicable to major economies and small nations alike. If governments decide a more stringent limit is now needed because of the Review, including these studies, this will imply greater efforts by all across the board," explained Neil Buhne, director of the UN Development Programme's (UNDP) Geneva office.

Following the cyclone that hit Vanuatu In March this year, a statement by the CVF noted the dangers of human interference with the global climate, and emphasized that limiting global warming to 1.5 degrees Celsius would help prevent "unmanageable suffering and devastation".

The CVF includes Afghanistan, Bangladesh, Barbados, Bhutan, Costa Rica, Ethiopia, Ghana, Kenya, Kiribati, Madagascar, Maldives, Nepal, Philippines, Rwanda, Saint Lucia, Tanzania, Timor-Leste, Tuvalu, Vanuatu and Vietnam.

U.S. Customs and Border Protection Commissioner R. Gil KerlikowskeWASHINGTON, DC: U.S. Customs and Border Protection (CBP) Commissioner R. Gil Kerlikowske says the agency's strategy and vision for the next five years will focus on collaboration, innovation and integration.

Kerlikowske (right) said the CBP has four goals: to combat terrorism and transnational organized crime; advance comprehensive border security and border management; improve U.S. economic competitiveness by enabling lawful trade and travel; and promote organizational integration, innovation, and agility.

The 60,000 employees of America's border agency have a budget of US$12.4 billion to enforce 500 laws on behalf of 47 federal agencies. Last year the CBP cleared US$2.5 trillion in imports and US$1.6 trillion in exports via 26 million cargo containers – a four percent increase over 2013.

Kerlikowske, who was director of the White House Office of National Drug Control Policy prior to his appointment in March last year, said the new outlook "clearly recognizes that CBP must balance border security with enhancing our nation's economic competitiveness. These are two sides of the same coin".

He noted that after the first six months of fiscal year 2015, the agency is on track to reduce its total use of force by nearly 30 percent: "There are times when some level of force must be used, in those instances, the use of force must be justified and within CBP policy. The public's trust in us depends on it," he added.

A typical CBP work day last year included processing more than one million people at 328 land, air, and sea ports; screening more than 70,000 truck, rail, and ocean containers; clearing U$4.4 billion in exports and US$6.8 billion in imports; and seizing more than five tons of illicit drugs.

Acknowledging a "challenging" first year on the job, Kerlikowske said CBP remains focused on streamlining and modernizing its trade processing and trade enforcement processes. They include the Automated Commercial Environment; the "eBond" that lets Customs brokers file electronically to CBP; Air Cargo Advance Screening to identify high-risk shipments prior to loading; and the Customs-Trade Partnership Against Terrorism program designed to strengthen and improve security of global supply chains.

WASHINGTON, DC: The U.S. government's General Accounting Office (GAO) says that of the 12 million ocean shipments landed in 2013, U.S. Customs & Border Protection (CBP) considered less than one percent high risk.

Customs-Inspection-1The CBP is required to hold high-risk shipments for examination unless there is evidence to show they can be waived. However the GAO says the agency doesn't have accurate data showing what happens to the shipments that are stopped.

In a 12-month study to January 2015, the GAO found that CBP examined the vast majority of high-risk shipments, but its data are not accurate because of "various factors"—such as the inclusion of data on shipments that were never sent to the United States—and that the data overstated the number of high-risk shipments.

As a result, some CBP staff may be unnecessarily holding shipments for examination while others may be waiving through shipments that should be examined.

In a report to the U.S. House of Representatives committee on Homeland Security, the GAO recommends the CBP defines standard categories for exception waivers; enhance its methodology for selecting shipments for self- inspections; and change the way it calculates the rate of compliance.

The GAO notes the Department of Homeland Security agrees with its proposals and says the CBP plans to develop a definition for each of the standard exception waiver categories; provide guidance on issuing waivers based on "articulable reasons" in its updated National Cargo Targeting Policy; update its self- inspection worksheet for the 2015 inspection cycle; generate reports on non-compliant high-risk shipments; and require port directors or their designees to review the reports and take the necessary corrective action.

BRUSSELS: In a newly published summary, the European Commission (EC) says the decision to block the UPS acquisition of TNT Express in 2013 was based on its conclusion that the intra-European express market would have been dominated by just two companies – DHL and UPS.

The EC began its merger due diligence on the assumption there are a number of different operators active in the industry: integrators, national and local postal operators, partner networks and freight forwarders - each of them with a different operating model based on the structure and type of its network.

TNT LiegeThe EC determined the main characteristic of an integrator is its full operational control over the logistics of the parcel delivery from origin to destination, including air transport. Within the European Economic Area (EEA) that means UPS, TNT, DHL and FedEx.

National mail operators, while operating extensive ground networks, could not be considered "fully-fledged competitors and exert a sufficient competitive constraint on integrators" because they do not operate their own aircraft fleets.

As a result, the EC focused on the competitive counterbalance of FedEx to a merged UPS/TNT and DHL. It determined that FedEx was the weakest of the four integrators and post-merger would have held the smallest market share in all 29 EEA-countries with a less-developed network and therefore "significantly higher costs than those of UPS and TNT".

So the EC concluded that FedEx wouldn't have provided sufficient competition to the resultant duopoly of a merged TNT/UPS and DHL – apparently a view shared by customers as well as other operators.

Commenting on the publication of the EC conclusions, UPS said the decision last April "prevented a sizeable investment in Europe of approximately US$6.8 billion, better services and pricing, and more important, an improvement of the European logistics infrastructure in those economies that are still struggling to return to economic growth".

The company said the EC's decision – which cost it US$200 million in cancellation fees to TNT - was not based on an accurate assessment of the multi-product nature of customer contracts, only focused on next day cross-border shipments, ignored evidence about the strength and number of other competitors, and considered only a fraction of the efficiencies that would have been created following the acquisition.

The UPS statement did not acnowledge the EC's main conclusion in respect to FedEx and the lack of equivalent competition.

WASHINGTON, DC: Notwithstanding Deutsche Bahn's apparent attempt to bankrupt a large part of the cargo airline industry for alleged cartel practices, the U.S. Department of Justice (DoJ) remains pre-eminent in its ability to extract cash from corporations after collecting US$2.4 billion from 30 companies involved in price fixing automotive parts.

Toyo Tire  Rubber girlsWith fines totalling US$1.86 billion in the 12 months to last September, the DoJ's largest haul was US$425 million from the Japanese Bridgestone Corporation – the fourth highest fine in the department's history.

The four other top positions were also occupied by Japanese companies with Hitachi Automotive Systems in second place with a US$195 million penalty, followed by a US$190 million payment from Mitsubishi Electric, US$120 million from Toyo Tire & Rubber and US$103.2 million from JTEKT Corp.

The DoJ also jailed 21 people with average sentences of 26 months in connection with the cartel scheme.

"The size of these penalties is an unfortunate reminder of the powerful temptation to cheat the American consumer and profit from collusion," commented assistant attorney general Bill Baer. "We remain committed to ensuring that corporations and individuals who collude face serious consequences for their crimes."

The latest to plead guilty is Sanden, an automotive parts manufacturer based in Gunma, Japan. The company has agreed to add to the DoJ tally by paying US$3.2 million for its role in conspiring to eliminate competition in the purchase of compressors used in air conditioning systems by Nissan for vehicles made in the U.S.

The DoJ said Sanden held meetings with other conspirators to fix price quotations to Nissan between August 2008 and April 2009.

LONDON/WASHINGTON, DC/SHANGHAI: A report by the McKinsey Global Institute (MGI) says global debt has risen US$57 trillion since 2007 to stand at US$199 trillion – or 286 percent of global GDP.

By mid-2014, developing economies accounted for 47 percent of all global debt growth as governments increased their borrowings by US$6 trillion. However with the exception of China, Malaysia and Thailand, the level averages 121 percent of GDP, compared with 280 percent for advanced economies.

MGI says "it is clear that deleveraging is rare and that solutions are in short supply. Given the scale of debt in the most highly indebted countries, the current solutions for sparking growth or cutting fiscal deficits alone will not be sufficient. New approaches are needed to start deleveraging and to manage and monitor debt."

World debtSince 2007, China's total debt has risen from US$7.4 trillion to US$28.2 trillion by the second quarter of 2014, or from 158 percent of GDP to 282 percent. China's overall debt ratio is now higher in proportion to GDP than that of the U.S., Germany or Canada.

MGI notes China will equal Spain's current level of debt - 400 percent of GDP - by 2018 if it continues at the current rate due the concentration of debt in real estate, the rapid growth and complexity of shadow banking, and the off-balance sheet borrowing by local governments.

The company estimates that nearly half Chinese household, corporation or government debt is directly or indirectly related to real estate - collectively worth as much as US$9 trillion.

Loans by "shadow banking" entities now total US$6.5 trillion and account for 30 percent of China's outstanding debt (excluding the financial sector) and half of new lending. Most of the loans are property-related and are often marketed by banks - creating a false impression they are guaranteed - to wealthy investors promising high returns. MGI warns that the level of risk of China's shadow banking sector "could soon be tested by the slowdown in the property sector".

The report says a third area of concern is the growing off-balance sheet debt issued by Chinese local governments to finance airports, bridges, subways, industrial parks, social housing and other projects. Since 2009, lending to local governments has reached US$2.9 trillion.

MGI concludes saying: "The growing debt of the global economy is an unwelcome development seven years after the financial crisis began. While significant deleveraging may prove elusive for many countries, effectively managing the growth of debt - and reducing it where necessary - is an imperative."

PARIS: The International Transport Forum (ITF) at the OECD says freight will replace passenger traffic as the main source of C02 transport emissions as volumes are forecast to expand between 230 percent and 420 percent by 2050.

As a result, related C02 emissions will grow between 140 percent and 350 percent depending on how much freight switches from road to rail in the same period.

OECD freight growthThe ITF report says airfreight volumes (measured in freight tonne-kilometres) will grow the fastest at 482 percent from a base of 191 billion FTKs in 2010 to 1.1 trillion FTKs by 2050. Corresponding C02 emissions will rise the most at 411 percent from 150 million tonnes to 767 million tonnes per annum in the same period.

"The foreseeable increase in global freight represents an unprecedented challenge for the world's transport systems," said ITF secretary-general José Viegas. "A quadrupling of freight emissions can seriously undermine climate change mitigation," he added.

Viegas says governments and operators could avoid such a nightmare scenario by improving capacity management as many freight facilities are underutilized; investing in missing links – alternative and multi-modal connections increase efficiency; adapting infrastructure to accommodate more and bigger vessels, including port hinterland connections; and improving load factors while reducing idle times across supply chains.

The ITF expects the North Pacific to grow 100 percent faster than the North Atlantic and surpass it as the world's busiest freight lane. At the same time freight volumes on the Indian Ocean are expected to quadruple by 2050.

Intra-African and intra-Asian freight volumes will grow 715 percent and 403 percent respectively based largely on road transport. The OECD notes that with the share of global domestic transport accounting for 10 percent of trade-related international freight but 30 percent of C02 emissions, countries could do a lot more to reduce this percentage as domestic transport is shaped by national policies and less by international agreements.

The ITF, an intergovernmental organization with 54 member countries, acts as a strategic think tank for advising government ministries on multimodal transport policy.

LONDON: A report from the UK Parliament's House of Commons Committee of Public Accounts says corporate advice from PricewaterhouseCoopers (PwC) based on diverting profits to the Grand Duchy of Luxembourg, is characteristic of a mass-marketed tax avoidance scheme.

According to the International Consortium of Investigative Journalists (ICIJ), PwC helped multinational companies obtain at least 548 tax rulings in Luxembourg from 2002 to 2010. In files released in December last year the ICIJ showed that Hutchison Whampoa, whose subsidiary Hutchison Port Holdings is a global port operator, was one of them.

kevin-nicholson-pwcHouse of Commons committee chair Labour Party MP Margaret Hodge commented: "We consider the evidence that PwC provided to us in January 2013 was misleading, in particular its assertions that 'we are not in the business of selling schemes' and 'we do not mass-market tax products, we do not produce tax products, we do not promote tax products.'"

Based on evidence from Kevin Nicholson (right), head of Tax, PricewaterhouseCoopers LLP, and Fearghas Carruthers, head of Tax, Shire Pharmaceuticals, the latest report says the pharmaceutical company has enabled interest payments on intra-company loans to reduce significantly its overall tax liabilities: While Shire has external borrowings of around £800 million, it makes interest payments on intra-company loans worth $10 billion to a company it has established in the Grand Duchy.

The committee says the net effect is to shift profits from countries with higher tax rates to Luxembourg where Shire employs just two people out of a global total of 5,600. Noting that Shire paid tax of only 0.0156 percent on its profits in Luxembourg, the report says neither PwC nor Shire could demonstrate that the company's presence in the country was designed to do anything other than avoid tax.

"We believe that PricewaterhouseCoopers's activities represent nothing short of the promotion of tax avoidance on an industrial scale," said Hodge, who added: "The fact that PwC's promotion of these schemes is permitted by its own code of conduct is clear evidence that government needs to take a more active role in regulating the tax industry, as it evidently cannot be trusted to regulate itself."

hutchison-tax-ruling.pdf

ATHENS: The new Greek government of prime minister Alexis Tsipras has announced a moratorium on the sale of a 67 percent stake in the port of Piraeus to China.

COSCO PiraeusIn November last year the Piraeus Port Authority and Piraeus Container Terminal, part of COSCO, signed a €230 million deal to increase the port's annual container capacity to 6.2 million TEUs from the current 3.7 million.

The leftist Syriza party, prior to winning the general election on January 25th, said it would halt the privatization of state assets stipulated by the IMF and European Commission as a condition of Greece receiving a €240 billion economic bailout in 2010.

Newly-appointed minister for Shipping and the Aegean Thodoris Dritsas told Reuters this week that "the Cosco deal will be reviewed to the benefit of the Greek people".

Other assets slated for sale by the former conservative government and now on hold include Greek Railways and the state-run power company PPC. In addition the 40-year lease of 14 regional Greek airports to Fraport and a 99-year lease of the former Athens airport Hellenikon to a Greek-Chinese-Abu Dhabi consortium could also be subject to review.

Prior to the election, other proposed sales included stakes in the Greek postal service and Athens airport. The latter reported a 20 percent increase in passenger traffic and a 3.3 percent rise in cargo during 2014.

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