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SATURDAY, FEBRUARY 25, 2012
TOKYO: A Tokyo Stock Exchange employee works
at the computer terminal yesterday. Asian stocks
markets mostly posted tentative gains yesterday
following a mixed bag of US and European economic
reports and as oil prices rose to a new ninemonth
high. —AP
Poll tension puts
$2bn Malaysian
IPO in doubt
KUALA LUMPUR: Malaysia could delay a $2-billion listing of a
state-linked palm oil firm as farmers’ opposition to the deal risks
undermining the ruling coalition in fiercely contested national
polls expected this year. The listing of FELDA Global Ventures
(FGVH), originally set for mid-2012, aimed to give Malaysia’s
$27-billion palm oil sector much-needed financial firepower to
boost yields and expand when top producer Indonesia is gaining
market share.
But the initial public offering has triggered unexpectedly
strong resistance from some of the 113,000 farmers who
together own 60 percent of the land given to them by FGVH’s
parent, the Federal Land Development Authority (FELDA).
Although the listing would bring each family a one-time windfall,
opponents say it would deprive them of financial control of
an asset they have held for generations.
Pressing on with the IPO without addressing these concerns
would be risky for Prime Minister Najib Razak, who calls the
farmers his “safe deposit” in the fight to win elections that must
be called by April 2013, but are expected this year. Najib is
fighting to reverse a dismal election showing by his ruling coalition
in 2008, when the opposition made historic inroads in parliament.
“The prime minister is concerned about this. He wants
the listing to happen but he may take a step back to ensure the
settlers are satisfied,” said a senior government official with
direct knowledge of the listing plans.
“The process needs to take time. In the worst case scenario,
Najib will push the IPO after the elections,” said the official, who
declined to be identified. The farmers, or FELDA settlers, as they
are known, number about 1.6 million, including their extended
families. They form the bulk of the voters in 54 of Malaysia’s 222
parliamentary seats and are mostly ethnic Malay, the core support
base of the ruling Barisan Nasional coalition.
The opposition has backed the farmers over the deal as it
seeks to push its way into the traditional rural strongholds of
Najib’s United Malays National Organisation (UMNO). Najib’s
father, former prime minister Abdul Razak, started FELDA in the
1950s, handing out land to Malays to fight poverty. The farms
expanded to 880,000 hectares (or 2.2 million acres), making for
the world’s biggest plantation scheme, with FELDA owning
about 40 percent of the land bank.
The farmers and FELDA played a crucial role in making
Malaysia the world’s second-largest palm oil producer. “There is
now the potential for widespread dissatisfaction over the listing,
with the younger generation of settlers questioning the
economic benefits,” said Ibrahim Suffian, director of Merdeka
Centre, an independent polling group. “It is a generational
gap.”
Growing resistance
The listing plan envisages FVGH taking over the plantation
group’s commercial arm, Felda Holdings, which is 51-percent
owned by farmers through an investment cooperative (KPF).
On paper, it fits Malaysia’s plan to privatize state assets and
draw in investors seeking exposure to palm oil prices that have
risen six percent this month alone. —Reuters
business
Chinese investors tread
more carefully in Africa
China eyes more partnerships with foreign firms
BEIJING: China’s oil and commodities firms
are set to tread more carefully in Africa after
being stung by kidnappings, seizures of cargo
and, most recently, the expulsion of a
chief executive . But they won’t pull back. If
anything, China will broaden its exposure to
the region, home to some of the world’s
most resource-rich but unstable countries,
as it scours the globe for resources needed
by the factories and businesses of the
world’s fastest-growing economy. Any major
change is instead likely to be in tone rather
than intent, with Chinese investors expected
to take a less aggressive approach and to
increasingly partner with other foreign firms
in dangerous and unpredictable markets.
“When Chinese firms started in Africa, it
was more driven by the political motivations
of top executives of state energy giants,”
said a Beijing-based oil executive. “So the
investments were made in a rushed and
aggressive manner ... But (now) I think they
will be more cautious when it comes to due
diligence and investment decisions.” Recent
problems in Sudan have shown China the
risks of being a big and politicised investor in
a continent that accounted for 24 percent of
China’s crude oil imports last year.
Rebel forces operating in Sudan, near the
border with South Sudan, kidnapped 29
Chinese workers last month, apparently
using them as political pawns before releasing
them 10 days later. It was the fourth case
of abduction of Chinese in Sudan. Chinese
oil firms have also become tangled in an oil
row between Sudan and newly independent
South Sudan, leading to production shutdowns
and the expulsion this week from
South Sudan of the head of Chinese-
Malaysian oil consortium Petrodar, the main
oil firm operating in the new African nation.
As Chinese firms go overseas in pursuit of
profit and raw material, such problems have
multiplied. In the last year alone, China has
seen two dozen cement factory workers kidnapped
by Bedouin tribesmen in Egypt, and
a spate of strikes for better pay and conditions
at mining operations in Zambia and
Zimbabwe.
No option
Given that stepping back from Africa is
not an option, China must learn to better
navigate the region’s hazards, experts say.
China’s state-owned energy and mineral
Fitch downgrades
3 Australian banks
SYDNEY: Fitch yesterday downgraded the prized credit ratings
of three of Australia’s big four banks, citing higher funding
costs. It downgraded by one notch Commonwealth Bank,
Westpac Banking Corp., and National Australia Bank Ltd. to AA
minus from AA. Australia and New Zealand Banking Group,
which already had a AA minus rating, remained unchanged.
It follows Standard & Poor’s downgrading of the credit ratings
of all four banks from AA to AA minus in December as
part of changes to the way it assesses risk. “In Fitch’s view,
wholesale funding, particularly when sourced cross borders,
has become more vulnerable to swings of confidence,” it said
in a statement explaining its move.
“Despite some improvement since 2008, all four banks
retain a reliance on wholesale funding, particularly from offshore
markets.” Despite the downgrade, the four major
Australian banks remain among the strongest for Fitch
globally. —AFP
firms have usually tried to remain above the
fray, saying disputes with workers or ethnic
groups are the local government’s responsibility,
but experts say they should work on
their public relations savvy.
“They become associated too closely
with the government and don’t make
enough effort to tell the local people and
the NGOs at home or from abroad that they
are doing a good job,” said Zha Daojiong, a
professor at Peking University who studies
China’s energy deals abroad. At the very
least, China will certainly strive to improve
the security of its projects in Africa, said
Michael Arruda, a specialist in energy deals
and partner with legal firm Jones Day in
Beijing.
“China isn’t going to change its strategy
when it comes to Africa. They are going to
go where the oil is. You can’t say you’d like
to go to nice places like California because
that’s not where the super-sized resources
are. In contrast, the resource potential of
Africa remains enormous.” “But I think they
are going to be more cautious about the
safety of their operations on the ground
there.”
While Sudan may provide far less oil to
China than Iran or Saudi Arabia, it ranks as
Chinese oil company CNPC’s most valuable
overseas investment. In building investment
ties, China sometimes trades off long political
ties to many of the regimes in charge.
And it also has a lot of human capital invested
in Africa and elsewhere around the world,
with more than 800,000 citizens employed
abroad.Jobs for hundreds of thousands of
Chinese at these overseas locations also
relieves pressure on the teeming domestic
job market, said Zha of Peking University.
“China is in a vulnerable position. It is different
from the United States or Britain or other
countries primarily because of the employment
of its own nationals,” he said.
China’s focus on Africa and some other
emerging markets also reflects its struggle to
make inroads in other, more established
regions, and not just because of political
opposition. “(That) is one of the explanations
and it remains true, but I don’t think it is the
only explanation,” said Zha. “Oil and other
energy investment is a competitive market
and Chinese companies in comparison with
their peers-not only in Europe and America
but closer to home in Japan and South
Korea-are not as competitive in terms of
quality and efficiency, the quality of equipment,
post-project services. “In more stable
places, the demand for quality ... is higher
and it is an issue whether Chinese companies
are capable of winning contracts in
those countries.”
Political blowback
China describes its investments in Africa
as “normal commercial practice”, but many
of its state-owned firms have won contracts
on the back of a high-profile campaign by
Beijing to expand its political, diplomatic and
economic presence on the continent. They
have thus been exposed to political blowback.
The China Non-Ferrous Metals Mining
Corporation (CNMC) has had more problems
than most, and became the much-maligned
face of Chinese investment during a bitter
election campaign last year in Zambia,
where it owns several lucrative copper
deposits.
Many of the troubles facing Petrodar-a
consortium of Chinese state firms Sinopec
and CNPC along with Malaysia’s Petronasare
derived from China’s support for
Khartoum during decades of civil war
between the Muslim north and mainly
Christian South that killed two million people.
One way Chinese firms can lower their
profile in Africa is by joining consortia led by
foreign firms.
On Tuesday, state oil firm CNOOC
teamed up with France’s Total to sign a $2.9
billion deal to join British firm Tullow to
develop an oil field in Uganda. Metals conglomerate
Chinalco has also sought to cut its
exposure by teaming up with Anglo-
Australian miner Rio Tinto to develop the
huge, politically troublesome Simandou iron
ore project in Guinea. “You are seeing them
taking stakes in consortia instead of looking
for 100 percent control over an asset,” said
Arruda.
“As time goes on, they are more confident
in taking positions that are smaller,
and they are doing so not just to get access
to reserves but also to knowledge and
expertise.” The trend is likely to continue,
said Zha, the Peking University professor. “It
will help internationalise our operations and
increase the number of stakeholders when
it comes to such issues as political risk,” he
said. —Reuters
AIA’s new business
grows 40 percent
HONG KONG: Asian insurance giant AIA said yesterday its new
business grew 40 percent year-on-year, a better-than-expected
result thanks to strong growth in Singapore, Malaysia and
China. The firm, which is one-third owned by the troubled
American International Group (AIG), said the value of its new
business rose to US$932 million in the 12 months to November
30, up from $667 million a year earlier. The result beat an average
forecast of $870.5 million in new business by eight analysts
polled by Dow Jones Newswires.
Value of new business is a common growth measure used in
the insurance industry, which takes into account the present
value of expected future profits arising from new policies sold
during the year. “We have continued to deliver strong growth
in our key performance measures,” AIA group chief executive
Mark Tucker said in a statement. “These results demonstrate
that the momentum in value creation which we generated in
2010 has been sustained throughout 2011.” —AFP