Research Request #3 (Reg. Muhammed Yunus)

Banker to the Poor

• Publisher: PublicAffairs
• Pub. Date: October 2003
• ISBN-13: 9781586481988

Synopsis

The simple idea of micro-loans is revolutionizing developing economies. Instead of lending large sums of money to often corrupt bureaucracies, economist Muhammad Yunus founded Grameen Bank to offer tiny sums, as little as $5, to individual craftspeople, tenant farmers, and subsistence entrepreneurs so they could keep themselves afloat between buying and selling. That was in 1983. Sixteen years later, with $2.5 billion being dispersed annually to more than two million families in rural Bangladesh and repayment rates close to 100 percent, Yunus is being hailed as the father of a new economic model that is bringing people out of poverty. In Banker to the Poor, Yunus explains why his program works.

Creating a World Without Poverty

• Publisher: Perseus Publishing
• Pub. Date: December 31, 2007
• ISBN-13: 9781586484934
• Sales Rank: 108,360
• 256pp

Synopsis

The winner of the Nobel Peace Prize outlines his vision for a new business model that combines the power of free markets with the quest for a more humane world-and tells the inspiring stories of companies that are doing this work today.

In the last two decades, free markets have swept the globe, bringing with them enormous potential for positive change. But traditional capitalism cannot solve problems like inequality and poverty, because it is hampered by a narrow view of human nature in which people are one-dimensional beings concerned only with profit.

In fact, human beings have many other drives and passions, including the spiritual, the social, and the altruistic. Welcome to the world of social business, where the creative vision of the entrepreneur is applied to today's most serious problems: feeding the poor, housing the homeless, healing the sick, and protecting the planet.

Creating a World Without Poverty tells the stories of some of the earliest examples of social businesses, including Yunus's own Grameen Bank. It reveals the next phase in a hopeful economic and social revolution that is already under way-and in the worldwide effort to eliminate poverty by unleashing the productive energy of ever human being.

(http://www.bn.com)

Blogged Sept 25, 2007 Reported by CNN on Nov 26, 2007

First reported in this blog Sept 25, 2007
(http://asia.news.yahoo.com/070925/afp/070925094617asiapacificnews.html)

Souped up version reported by CNN

China's ambitious plans in space
updated 11:18 a.m. EST, Mon November 26, 2007

By John Vause
CNN

(CNN) -- When China's lunar orbiter blasted off last month, there was not a cheer or smile or a "whoo-haaa" to be had in mission control.

Taikonaut Fei Junlong exits the re-entry capsule of China's second manned spacecraft on October 17, 2005.

Perhaps because for the government scientists, it was just another small step in an ambitious space program which could ultimately see a Chinese space station orbiting the Earth, a Chinese moon colony and a joint China-Russia explorer on Mars.

If all goes well, and so far it has, the Chang'e 1 will spend the next year orbiting the moon, mapping the surface and looking for resources. Next, the Chinese hope to send an unmanned rover to the moon by 2012, with a robotic mission to bring back samples by 2017. Officials have recently backpedaled from goals of putting a taikonaut (the Chinese version of an astronaut or cosmonaut) on the moon by 2020, but analysts believe that is still a pressing ambition.

"If China can go to the moon, eventually with a manned program, it will represent the ultimate achievement for China in making itself essentially the second most important space power, accomplishing what even the Soviets had not," says Dean Cheng, a China military analyst for CNA, a private research corporation.

According to Cheng, the Chinese are now embarking on a systematic space program the world has not seen since the 1960's and for the first time since the collapse of the Soviet Union, the United States is facing real competition. That may explain why the head of NASA, Michael Griffin, recently warned that "China will be back on the moon before we are . . . I think when that happens Americans will not like it."

But there could be a lot more at stake than just lunar boasting rights. It's unlikely the Chinese will land at Tranquility Base and pull down the Stars and Stripes. But the goal could be mining resources. One powerful, potential fuel source is helium-3. Helium-3 originated from the sun and was deposited in the moon's soil by the solar wind. It is estimated there are up to two million tons on the moon, and virtually none on Earth.

"If we can ever get helium-3 and helium-3 to fuse together it is what we call nuclear power without nuclear waste -- there is no radioactivity associated with that reactor," says Professor Gerald Kulcinski, an expert in helium from the University of Wisconsin.

The key though, says Kulcinski, will be developing a fusion reactor, which he says could be done within 15 to 20 years, in tandem with a program to establish a permanent human presence on the moon. Just four tons of helium-3 would be enough to supply all the power needs for the United States for a year, two shuttle payloads according to Kulcinski.

Analysts believe the lure of such potent resources is one of the reasons behind China's exploration of space. State media reported last month details of a new rocket with enough thrust to put a space station into orbit. When it's developed, the Long March 5 will have almost three times the power of existing rockets.

China has long wanted to be part of the international space station, but has always been denied, partly it's believed because of U.S. concerns. But that may not be a problem for the Chinese if they can send their own space station into orbit, reportedly by 2020. But again the Chinese are sending mixed messages, saying no firm date has been decided. More immediately, there are plans a for televised space walk by three taikonauts next year, according to the Shanghai Daily.

At a recent news conference Pei Zhaoyu from China's space administration repeated at least three times that "China has always adhered to the principle of peaceful use of outer space." But he made no mention of China's satellite killer missile which was tested earlier this year, destroying an aging Chinese weather satellite in low Earth orbit.

That and the fact that China's space administration is controlled by the military has many in Washington worried about where the Chinese are heading. Technologically, the Chinese are still behind the United States, but analysts warn that might not be the case for much longer. "The Chinese have the advantage of a centralized decision-making authority where they can say we will do that and we will apply those funds," says Cheng, while pointing out that NASA is at the mercy of Congress, politics and a new president in 2009 who may have new goals and ambitions.

China has always insisted that it's not in a space race with any country, especially the United States -- but it is on a slow, relentless march to the moon, and beyond.

Now thats a leader (Australian PM Mr.Rudd)

(Authors comment - You will never see this in US Media)

Kevin Rudd orders MPs to school

John Ferguson and Gerard McManus

November 27, 2007 12:00am

KEVIN Rudd's MPs have been ordered back to school to learn about classroom problems and tell the nation of plans for his so-called education revolution.

Mr Rudd has written to his MPs, ordering them to visit one public and one private school in their electorates before caucus meets for the first time this week.

Seven seats remain in doubt, but at least 83 MHRs, plus senators, are expected to attend Thursday's caucus.

And the Prime Minister-elect has told the nation's most senior public servant to pave the way for his $1 billion plan to provide computers for all students in years 9 to 12.

Mr Rudd was expected to arrive in Canberra as early as today to begin work on his new Government.

And he has warned high-profile new MPs they may have to wait their turn for a place on the front bench.

Mr Rudd said new MPs would benefit from some parliamentary experience, a possible hint that former union heavyweights Bill Shorten and Greg Combet might have to cool their ambitions for a while.

As the Liberal and National parties descended into chaos, former Howard government staffers were shredding documents and cleaning out offices to make way for the new Labor administration.

Outgoing treasurer Peter Costello made a lightning visit to Canberra yesterday to clear out his office.

(http://www.news.com.au An article from Herald Sun)

Australian election results as reported by BBC and FOX News

PM Howard concedes Australia poll

"The plans we put forward for the future are detailed if you look at what we've advanced in terms of education, hospitals and climate change and water as well as our proposals on industrial relations" Mr Rudd Prime Minster Elect

(http://www.news.com.au)

Mr Rudd praised Mr Howard's dignity in defeat Rudd victory speech Australian Prime Minister John Howard has admitted defeat in the country's general election, and looks set to lose his parliamentary seat.

Mr Howard said he had telephoned Labor leader Kevin Rudd "to congratulate him on an emphatic victory".

Mr Rudd said the country had "looked to the future" and he pledged to be a prime minister "for all Australians". With 70% of votes counted, Labor were on course to win the 76 seats needed to form a government. More than 20 constituencies from a total of 150 are still to produce a result, but Labor already has 72 seats compared with 48 for Mr Howard's Liberal-National coalition.

Rare fate
Amid cheers from Liberal Party faithful, Mr Howard said it had been a privilege to have served as prime minister since 1996.

AUSTRALIAN ELECTION
More than 13.5m of Australia's roughly 21m people are registered to vote Electors will choose candidates for all 150 seats in the lower House of Representatives and 40 of the 76 seats in the upper house, the Senate PM John Howard has led the conservative Liberal-National party coalition to four election wins since 1996 and is seeking a final term.

Kevin Rudd is taking the centre-left Labor Party to the polls for the first time as leader Election issues are the economy, environment and war in Iraq.

"We've bequeathed to [Mr Rudd] a nation that is stronger and prouder and more prosperous than it was 11 and a half years ago," he said. Mr Howard, who had been bidding for a fifth term in office, conceded the national election and accepted it was "very likely" he would also be defeated in his Bennelong constituency.

If unseated, the 68-year-old would be only the second prime minister in Australia's history to suffer such a fate.

Voters in Bennelong had elected Mr Howard in 13 consecutive elections over 33 years. But with more than 50% of the votes counted in the constituency, figures from the electoral commission suggested he had lost the seat to Maxine McKew, a former TV journalist.

An exit poll conducted by Sky News and Channel 7 suggested a similar result.

Anti-government backlash Labor leader Mr Rudd, a 50-year-old former diplomat, had led in opinion polls throughout the election campaign. In his victory speech, he thanked Mr Howard for his "dignity" in defeat and for his "extensive contribution to public service".

He promised to "forge a new consensus" by ending the "old battles of the past" between business and unions, and between economic growth and environmental concerns.

HAVE YOUR SAY After too many years I can finally hold my head up and be proud to call myself Australian again Anne, Brisbane

During the campaign, Labor sought to capitalise on the Howard administration's refusal to sign the Kyoto protocol on climate change. Mr Howard campaigned on his record of sound economic management. The BBC's Nick Bryant, in Sydney, said Labor had swept back into power by harnessing an anti-government backlash.

Mr Howard had found himself on the wrong side of public opinion on the Kyoto protocol and the war in Iraq, our correspondent said. Many people also seemed to be simply tired of Mr Howard after 11 years of his rule. Participating in elections is compulsory under Australian law and more than 13.5 million people were expected to vote.

Story from BBC NEWS:http://news.bbc.co.uk/go/pr/fr//2/hi/asiapacific/7109692.stmPublished:

2007/11/24 13:13:16 GMT

We Report. You Decide. Updated 11/24 10:43 PM ET

WORLD HEADLINES

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Bush Ally Howard Set to Lose Australian Elections

Australian Opposition Party Claims Election Victory Over Top Bush Ally John Howard
Saturday, November 24, 2007

SYDNEY, Australia — Labor Party leader Kevin Rudd swept to power in Australian elections Saturday, ending an 11-year conservative era and promising major changes to policies on global warming and the Iraq war.

"Today Australia has looked to the future," Rudd, a Chinese-speaking former diplomat, said in a nationally televised victory speech, to wild cheers from hundreds of supporters. "Today the Australian people have decided that we as a nation will move forward ... to embrace the future, together to write a new page in our nation's history," he said.

The win brought a humiliating end to the career of outgoing Prime Minister John Howard of the Liberal Party, Australia's second-longest serving leader who, as little as a year ago, had appeared almost unassailable.

Howard faced further potential embarrassment. The voting results in his own district were on a knife edge, and he was in real danger of becoming only the second sitting prime minister in 106 years of federal government to lose his seat in Parliament.

Howard said he was likely to lose it, and took full blame for the drubbing handed to his center-right coalition. "I accept full responsibility for the Liberal Party campaign, and I therefore accept full responsibility for the coalition's defeat in this election campaign," Howard said in his concession speech in Sydney.

Official figures from the Australian Electoral Commission showed Labor far in front after more than 70 percent of the ballots had been counted — with 53 percent of the vote compared to 46.7 percent for Howard's coalition. Using those figures, an Australian Broadcasting Corp. analysis showed that Labor would get at least 81 places in the 150-seat lower house of Parliament — a clear majority.

The change in government also marks a generational shift for Australia.

Rudd, 50, had urged voters to support him because he said Howard was out of touch with modern Australia and ill-equipped to deal with new-age issues such as climate change.

Howard campaigned on his economic management, arguing that his government was mostly responsible for 17 years of unbroken growth, fueled by China's and India's hunger for Australian coal and other minerals, and that Rudd could not be trusted to maintain prosperous times.

A new government is unlikely to mean a large-scale change in Australia's foreign relations, including with the United States — it's most important security partner — or with Asia, which is increasingly important for the economy.

One of the biggest differences will probably be in Australia's approach to climate change. Rudd has nominated the issue as his top priority, and promised to immediately sign the Kyoto Protocol on greenhouse gas emissions. When he does, the United States will stand alone as the only industrialized country not to have signed the pact.

Rudd said he would withdraw Australia's 550 combat troops from Iraq, leaving twice that number in mostly security roles. Howard had said all the troops will stay as long as needed. At home, Rudd has pledged to govern as an "economic conservative," while pouring money into schools and universities. He will curtail sweeping industrial reforms laws that were perceived to hand bosses too much power, turning many working voters against Howard.

Labor has been out of power for more than a decade, and few in Rudd's team — including him — has any government experience at the federal level. His team includes a former rock star, one-time Midnight Oil singer Peter Garrett, and a number of former union officials.

But analysts say that Rudd's foreign policy credentials are impeccable, and that he has shown discipline and political skill since his election as Labor leader 11 months ago.

Rudd's election as Labor leader marked the start of Howard's decline in opinion polls, from which he never recovered. Howard's four straight election victories since 1996 made him one of Australia's most successful politicians. But his refusal to stand down before this election, even after being urged to do by some party colleagues, mean his legacy will be tarnished by the hubris of staying too long.

Mark Apthorpe, a 24-year-old information technology worker who lives in Howard's district of Bennelong, voted for Rudd even though he was happy with the way the economy was being managed.

Like many voters, he said it was time for a change.
"Johnnie's said a few things that he has gone back on," Apthorpe said of Howard. "He's been around a long time, and he'll be gone in 18 months anyway."

Howard earlier this year announced plans to retire within about two years if he won the election, sparking claims of arrogance.

Australians head to the polls

Fri Nov 23, 2007 5:05pm EST

By Michael Perry

SYDNEY (Reuters) - Australians began voting on Saturday in national elections to decide whether to end more than 11 years of conservative rule or give Prime Minister John Howard, who trails in opinion polls, a fifth term.

"Its in the hands of the people," Howard said as he took his morning walk from his Sydney Harbor-side residence.

Howard, 68, again warned voters that if they elected a Labor government it would threaten Australia's economic prosperity.

"The government to be chosen today will set the direction of the country for years into the future," Howard said on YouTube Web site, in a pitch to young voters he has struggled to woo.

"So if you think the country is heading in the right direction don't risk that right direction by changing the government," he said.

Howard, a staunch U.S. ally, has made a commitment to keep Australian troops in Iraq if re-elected. He has offered voters A$34 billion ($29 billion) in tax cuts, but few new policies.

In contrast, opposition Labor leader Kevin Rudd has pledged to withdraw combat troops from Iraq and sign the Kyoto Protocol on global warming, further isolating Washington on both. The Mandarin-speaking former diplomat would also be expected to forge closer ties with China and other Asian nations.

Rudd, 50, a Mandarin-speaking former diplomat, has promised generational change for Australians, an "education revolution" boosting IT skills in schools and reform of health and controversial labor laws championed by Howard. (Nov 22 Reuters)

An Australian commando died fighting the Taliban on Friday, the third soldier killed in recent months in Afghanistan.

Both Howard and Rudd want to keep troops in Afghanistan, but opinion polls show Australians opposed to operations in both Iraq and Afghanistan, and are losing faith in Howard's tough security stance, which has won him previous elections.

Howard has been written off by opinion polls throughout the six-week campaign, with some predicting a landslide win for Rudd, after only 11 months as party leader. But a Newspoll on Saturday had Labor only slightly in front.

Howard risks becoming the first prime minister to lose his own seat in an election for 78 years. Boundary changes have turned his blue-ribbon Sydney electorate, which he has held since entering parliament in 1974, into a marginal seat.

"LAZARUS"

Many voters of Asian origin see Howard as anti-immigration, due to his tough stance against boat people. An anti-Muslim leaflet distributed by his party in the closing days of the campaign may reinforce their belief.

Labor needs to win an extra 16 seats to take office and both Howard and Rudd say the election will be very close, possibly decided in a handful of marginal seats.

Howard once described himself as "Lazarus with a triple bypass" for his ability to be resurrected from political defeat. Even if he wins it will be his last hurrah, as he has promised to step down mid-term for his treasurer, Peter Costello.

Rudd, 50, is offering voters a generational change, saying Howard is too old and tired to lead Australia.

"I offer Australia new leadership for the future, a positive plan for the future because Mr Howard's government's best days now lay behind it," Rudd said on Friday. "Mr Howard has gone stale in his government's approach to the future."

Howard has attacked Rudd's lack of experience, insisting that a Labor government dominated by former trade unionists would wreck an economy which has recorded 17 years of growth and record unemployment.

He says that under his tenure, dominated by security and the economy, Australia has become more secure and stable.

Since the September 11, 2001 attacks in the United States, Australia has been on medium security alert. Australia's military in 2006 was at its highest operational level since the Vietnam War, with troops in Iraq and Afghanistan and elsewhere.

(Editing by Andrew Roche)

(http://www.reuters.com)

Not reported by US Media (Reg. British government loses data in mail on 25 million citizens)

British government loses data in mail on 25 million citizens

Mark Rice-Oxley
Christian Science Monitor
Nov. 22, 2007 12:00 AM

LONDON - British trust in the way government stores and secures vital personal information was sorely tested Wednesday after it emerged that sensitive data on about 25 million Britons (almost half the population) was lost in the mail in an unprecedented security blunder.

...

Reported by AP (source for FOX News)
Disks With Data on 25M Britons Missing

Tuesday, November 20, 2007

By DAVID STRINGER, Associated Press Writer

...

The disks contained details on 7.25 million families in Britain claiming child benefit _ a tax-free monthly payment available to everyone with children. (No details)

The following was reported by BBC, on its web site ...

CHILD BENEFIT

Available to the parents, normally mother, of every child in UK under 16

Older children in full-time education still eligible

Taken up by almost 100%

It amounts to £18.10 a week for a first-born child

For subsequent children - it amounts to £12.10 a week

(http://news.bbc.co.uk)

Currency blocs fall into place Asian policies suggest regional union

By Andrew Wood in Hong Kong

Published: November 22 2007 03:05 Last updated: November 22 2007 03:05

Asian central banks appear to be adopting similar monetary policies in a way that suggests they could be preparing for an eventual currency union for the region, according to Deutsche Bank.

Twelve Asia-Pacific currencies – including the yen, the Korean won, the Indian rupee and the Australian dollar – have increasingly traded as a bloc since 2005, the bank’s research has found.
There is an increase in the correlation between the value of Asian currencies as central banks try to keep their export-led economies competitive internationally and also reduce foreign exchange volatility within the region.

This trend is a result of the wider use of trade-weighted currency baskets in India, China, Singapore and Malaysia, the bank says, adding that the patterns show similarities to movements in some European Union currencies in the years before the euro was created in 1999.

“Asia is beginning to look a lot like Europe in the 1980s and the start of the 1990s,” said Martin Hohensee, Asian head of fixed income and credit research, who led the analysis.

“Policymakers and politicians are talking seriously about the possibility of Asian currency union, even if there isn’t a single currency,” he told the Financial Times in an interview.

Asia has a thickening network of free-trade agreements, creating conditions similar to Europe’s single market that paved the way for the euro. “Intraregional trade within Asia accounts for a similar share of total trade as was the case in Europe in 1992,” he said. The Asian Development bank has outlined plans for a possible Asian Currency Unit, similar to the European Currency Unit that preceded the euro.

But Mr Hohensee said that, unlike in Europe, there is much less political will for integration. Nevertheless, this week leaders of the 10 members of the Association of South-east Asian Nations agreed to remove trade barriers by 2015 to create a European Union-style economic community.

“What seems to be happening in Asia is an economic process that might become a political one,” Mr Hohensee said.

He did not think Asian central banks were deliberately colluding in setting monetary policy, but that informal co-operation would grow naturally. “I think every time central banks get together and talk they realise that volatility is in no one’s interest,” he said.

Deutsche Bank says the trend offers investors the chance to use similar strategies to those popular in the run-up to the euro, by betting that interest rates for high-yielding currencies will converge to the regional average. “This informal kind of monetary union by stealth is throwing up good investment opportunities,” Mr Hohensee said.

The bank is launching two Asian Convergence indices to track the trend. One is based on the nine non-Japanese regional currencies most likely to take part in any Asian currency union, and another broader index which includes the yen and the Australian dollar, as both countries are likely to be affected by any Asian regional currency policy.

Patterns begin to emerge

The chart shows the correlation between individual Asian currencies against the dollar and a basket of those currencies from 2000.

Of the 10 currencies measured by Deutsche Bank, eight have shown increased correlations since 2005 than the previous five years. Five have shown correlations of greater than 90 per cent since 2005: the Chinese renminbi, the Malaysian ringgit, the Philippine peso, the Singapore dollar (which has jumped from 10 per cent since 2005) and the Thai baht. The yen and the Taiwan dollar’s correlation to other currencies have turned negative since 2005, however.

Copyright The Financial Times Limited 2007

(http://ft.com)

Why Wal-Mart Set Up Shop in Italy

By JESSE DRUCKER , Wall Street Journal
November 14th, 2007 Page C1

More than 4,500 miles separate a small Wal-Mart Stores Inc. office in Florence, Italy, from the company's dozens of Illinois retail outlets. But thanks to a convoluted tax arrangement, court records show, Wal-Mart's Italian operation has helped the giant retailer cut its state tax bill in Illinois by millions of dollars a year.

Wal-Mart set its affairs so that its Italian outpost is the only operating unit of a real-estate subsidiary that controls billions of dollars of the retailer's property in Illinois and other states. Because technically its only employees are based in Italy, the real-estate unit claims its operations are foreign, exempt from Illinois corporate income taxes.

Earlier this year, the Illinois Department of Revenue objected to the Italian tax maneuver, demanding $26.4 million in back taxes, interest and penalties. Wal-Mart paid the amount in dispute and then sued the state for a refund, according to a complaint filed in May in Illinois Circuit Court in Springfield, Ill.

A Wal-Mart spokesman declined to comment beyond a prepared statement: "We have a disagreement with the state of Illinois over our tax liability last year, and we've asked a judge to resolve that for us." He declined to explain why Italy was chosen as the home of this particular foreign operation or whether Wal-Mart has other such arrangements.

The dispute with Wal-Mart is part of a wider effort by some states to crack down on what they believe is abusive use of so-called 80/20 companies. These companies are domestic subsidiaries that conduct at least 80% of their business overseas.

States typically don't tax income from outside the U.S., and many companies have used 80/20 subsidiaries to legitimately shield foreign operations from state taxation.

But authorities in several states have challenged a number of companies over the 80/20 units, claiming the structure was improperly used to shift income away from the purview of state taxing authorities.

The misuse of 80/20 companies is "shocking to the conscience," said Brian Hamer, director of the Illinois Department of Revenue. "These kinds of manipulations clearly were never contemplated by the state legislatures," added Mr. Hamer, who wouldn't comment on any single company or legal case. "It ought to have been clear to businesses that this was highly questionable conduct."

Illinois tax authorities are in a dispute with Mc Donald?'s Corp. over nearly $11 million stemming from its use of an 80/20 subsidiary. Details are sketchy, but Mc Donald?'s, based in Oak Brook, Ill., says in court papers that a Delaware financing unit that owns restaurants in St. Thomas, Virgin Islands, conducts 80% or more of its business activity outside the U.S., exempting its operations from being included in Illinois tax calculations.

Minnesota, BNSF Wrangle

Meanwhile, Minnesota tax authorities are taking issue with interest payments made by Burlington Northern Santa Fe Corp. to a pair of Delaware subsidiaries doing business in Canada. The railway company deducted the interest associated with the payments but didn't pay taxes on most of the income received by the subsidiaries. The state's revenue department says in an audit report that this was "done purely for tax avoidance purposes." The Fort Worth, Texas, company paid a disputed $4 million in back taxes and interest and sued the state in May for a refund.

A McDonald's spokeswoman said: "We believe the results of our business have been properly reported to the state of Illinois." A Burlington Northern spokesman declined to comment.
At the prodding of the Illinois revenue department, that state's legislature in 2004 passed a law essentially shutting down the abusive use of 80/20 units. The Minnesota state legislature enacted one change in 2005 and has considered several other bills since then to shut down alleged abuse of the structure.

States Crack Down

Wal-Mart's Italian tax-planning maneuver is the latest disclosure of a strategy by the firm to cut state taxes. A page-one article in The Wall Street Journal in February focused on how the Bentonville, Ark., retailer cut taxes in some states by paying rent to a real-estate investment trust it owned, even though the money never left the firm.

That REIT strategy has been challenged by tax authorities in several sates; some have enacted laws to close the REIT structure since the Journal article.

However, the REIT tax structure saved money only in some states -- those that tax income solely from operations within their borders. This taxation system, known as "separate reporting," can make it simpler for companies to shift income out of state to tax-friendly jurisdictions such as Delaware or Nevada.

But "combined reporting" states such as Illinois are much tougher. They add together all profits of a company's domestic operations, regardless of what state they are in, and then allocate a portion of those profits to their state.

Theoretically, combined reporting makes it harder for companies to shift income to more advantageous locales.

Because Illinois rules apply only to domestic profits -- not world-wide income -- companies can get around the rules by figuring out ways to effectively shift income overseas.

Wal-Mart's 80/20 structure worked like this: The company first transferred its Illinois stores to its in-house REI Ts?, paid rent to the REI Ts? and then deducted those payments from its taxes. The REI Ts?, in turn, paid that money to their 99% owner, a Wal-Mart unit based in Delaware.

Ordinarily, Illinois's combined-reporting rules wouldn't permit a company to cut its taxes by shifting income to a Delaware unit. But in late 2001, Wal-Mart formed a Delaware subsidiary called WMGS Services LLC, records show. WMGS, with offices in Florence, was a wholly owned subsidiary of Wal-Mart Property Co., which also was 99% owner of Wal-Mart's main REIT.

In its filing, Wal-Mart contends that Property Co.'s ownership of the Italian unit converted Property Co. into an 80/20 company. In other words, at least 80% of its employees and its property were overseas, exempting its income from taxes.

Though Property Co. is the 99% owner of the REIT -- which owns dozens of stores in Illinois -- Wal-Mart says Property Co. owns no real estate itself. And although Wal-Mart has more than 48,000 employees in Illinois, the firm contends Property Co. has no employees in the state, either.

The only employees of Property Co. were in Italy, the company says. Property Co. was set up to own the majority of the shares of Wal-Mart's main REIT and has no employees anywhere, Wal-Mart has said in court records elsewhere. (In its court filing in Illinois, Wal-Mart says that WMGS's employees and property were in Turin, Italy; an official with the company in Florence and a Wal-Mart spokesman in the U.S. say the company doesn't have an office in Turin.)

WMGS employs 22 people at its office in central Florence, according to a company official who answered the door there on a recent weekday morning. The office is responsible for procuring merchandise from around Europe, he said. Wal-Mart has no stores in Italy.

Gulf states’ dollar peg comes under threat

By Peter Garnham

Published: November 15 2007 23:14 | Last updated: November 15 2007 23:14

Speculation heightened on Thursday that Gulf Arab states were preparing to ditch their currencies’ pegs against the dollar as the United Arab Emirates expressed concerns over the policy for the second time this week.

Sultan Nasser al-Suwaidi, governor of the UAE central bank, said on Tuesday that the dollar’s slide had pushed the country to a “crossroads” over the UAE dirham’s peg.

On Thursday, Mr al-Suwaidi followed up those comments, saying there were strong social and economic pressures to drop the dollar peg, suggesting the UAE could move to track a basket of currencies instead, which would predominantly, but not entirely, consist of dollars.

The statement sent the dirham, which has been fixed at Dh3.6725 against the dollar since 1997, sharply higher in the forward currency market, with one-year forward rates predicting a 2.7 per cent appreciation in the currency.

Kuwait switched from a dollar peg to a currency basket in May, but other members of the Gulf Co-operation Council – Saudi Arabia, the UAE, Oman, Bahrain and Qatar – have held steadfastly to their dollar pegs, in spite of the US currency slumping to record lows.

The UAE said it would only drop its dollar peg in concert with other GCC members. Saudi Arabia, the GCC’s most influential member, has so far showed strong determination to fight speculation that it would revalue the Saudi riyal, intervening aggressively last week in the forward foreign exchange market to defend the riyal’s peg.

However, analysts say the UAE’s comments could undermine the credibility of any verbal or market intervention from Saudi Arabia.

The problem for the Gulf states is that, as the Federal Reserve cuts US interest rates, a weakening dollar adds to inflationary pressures in the region.

Gerard Lyons, head of global research at Standard Chartered, says problems develop when there is a disconnect between the policies needed in one region and those needed elsewhere. This is something the UK found to its cost when it was tied to the Deutsche mark in Europe’s exchange rate mechanism in the early nineties – something which eventually forced the UK out of the ERM.

“A similar episode, albeit different in scale, is now being seen in the Gulf,” says Dr Lyons. “While the US is cutting interest rates in response to a slowing economy, the Gulf needs a tighter monetary policy to curb inflation.”

Hedge funds could benefit from any appreciation in Gulf currencies as, according to dealers in London, they started building up bets on a revaluation by the Gulf states as soon as the problems in the US mortgage market became evident in July.

However, Hans Redeker of BNP Paribas, says the prospect of an appreciation in GCC currencies is no longer just a trade for expert hedge funds. “This has become a widespread trade that family offices, private banks and most proprietary desks have on,” he says.

Russell Jones of RBC Capital says it is in the interest of the region’s rulers to act to quell inflation. Rising inflation could prompt civil unrest from the region’s predominantly young population, he says. “The longer they delay abandoning their pegs, the more painful it will be.”

However, there is a wider context to the debate, given the strains being felt in Europe from the strong euro and a widespread feeling that some Asian currencies, including China’s renminbi, need to strengthen further.

Mervyn King, governor of the Bank of England, said this week that countries, such as China, that link their currencies to the dollar were causing increasing tensions and the matter needed to be addressed at this weekend’s G20 meeting of finance ministers and central banks in Cape Town.

When asked about GCC currency pegs, Mr King said he was concerned that states such as Saudi Arabia and the UAE might de-peg their currencies, indicating that he would prefer Asian currency appreciation to an early de-pegging from the GCC.

Mr Redeker says: “Western central banks fear that a GCC de-peg will increase commercial and financial demand for floating non-dollar currencies, such as the euro and sterling, which in current market conditions would send them sharply higher.”

Copyright The Financial Times Limited 2007

(http://ft.com)

Caterpillar warns of US recession

By Bernard Simon in Toronto

Published: October 19 2007 20:54 | Last updated: October 19 2007 20:54

Caterpillar, the US-based maker of construction equipment and heavy-duty engines, issued a bleak prognosis for the US economy on Friday, saying that it was “near to, or even in, recession”.

The warning, which included a downward revision of 2007 earnings estimates and a sober outlook for the US market in 2008, helped propel a widespread slide on Wall Street on Friday. Caterpillar shares were 6 per cent lower at $73.03 by late afternoon.

The sectors in which Caterpillar operates – trucking and construction – are widely seen as barometers of US economic health.

While Caterpillar’s net third-quarter profit climbed to a record $927m, or $1.40 a share, the improvement was entirely due to a strong performance in other parts of the world. Earnings in the third quarter of 2006 were $769m, or $1.14 a share. Revenues climbed almost 9 per cent to $11.4bn.

“We continue to see remarkable growth outside of the United States with particular strength in key industries like mining, oil and gas, electric power and marine engines,” said Jim Owens, chief executive.

But North American revenues fell by 11 per cent in the third quarter to $5bn, due to construction industry weakness, as well as a steep fall in sales of heavy trucks, many of which are fitted with Caterpillar engines.

Mr Owens said that the Federal Reserve would need to make further cuts in interest rates “to move economic growth back to nearer the economy's potential”.

Caterpillar’s estimated 2007 earnings are now in a range of $5.20-$5.60 per share, down from $5.30-$5.80. Earnings are expected to rise by 5-15 per cent next year to a fifth consecutive record. The 2007 sales projection is unchanged at about $44bn, up 6 per cent from last year, with a 5-10 per cent increase expected in 2008.

Caterpillar expects machinery and engine sales in its home market to decline by 12 per cent this year, offset by growth of 25 per cent abroad.

North America’s share of total sales is set to drop from almost 50 per cent in 2006 to 40 per cent this year.

Overall North American heavy-truck sales have tumbled 30-45 per cent each month since March, compared with a year earlier, due to the faltering economy and heavy orders in previous years in advance of tighter emission controls.

Standard & Poor’s said in a report this month that the weakening economy, especially housing and construction, “add to our concern that a rebound [in truck orders] will not begin in earnest until 2008 and perhaps the latter half of the year”.

Copyright The Financial Times Limited 2007

(http://ft.com)