CASA-1000 project: Pakistan, Central Asia to discuss power price

Even in conservative prospect there will be sufficient volume of energy and water resources in Tajikistan to maintain the required electricity generation needed for CASA-1000. PHOTO: FILE

ISLAMABAD: 

At a time when the government is struggling to find a way to press on with the gas pipeline project with Iran, which risks US sanctions, Washington is pressing Islamabad to strike a power import deal with the Central Asian states in upcoming talks in the US.

The four countries, which are part of the Central Asia South Asia (CASA) 1000 power supply programme, have already signed an inter-governmental council resolution that defines project structure and key commercial principles, signalling their commitment to developing the project this year.

According to officials, a Pakistani legal team has already reached Washington whereas a working group will leave today (Wednesday) to hold talks over power price with other stakeholders for transmission of 1,300 megawatts of surplus electricity from Tajikistan and Kyrgyzstan through war-torn Afghanistan. Of the total quantity, Kabul will consume 300MW.

US authorities believe that the Iran-Pakistan (IP) gas pipeline is not a viable project, which is in an advanced phase, and describe the TAPI gas pipeline and CASA-1000 power supply projects as ideal. In both these projects, the pipeline and power lines will pass through Afghanistan, which has seen decades of instability.

Experts are of the view that power and gas import from the Central Asian states appears to be a dream as it will be very difficult to ensure the security of infrastructure for the Afghan government. They point out that after the withdrawal of Nato forces by the end of this year, the security situation may worsen there.

Financing and cost

According to government officials, the World Bank and the Islamic Development Bank (IDB) have agreed to provide $1 billion in financing for the power import project and the remaining funding needs will be met by participating countries.

Representatives of the World Bank and IDB will also participate in the US talks to discuss the modalities of financing.

In the final feasibility study of the CASA-1000 conducted in February 2011, the surplus capacity of Tajikistan and Kyrgyzstan for electricity export was reassessed. About 3,700 gigawatt-hours (GWh) are expected to flow by 2016.

However, the catch is that under the “No generation expansion scenario”, power export will decrease every year in the wake of a rise in demand in Tajikistan and Kyrgyzstan. Moreover, the energy will not flow throughout the year and will be available from April to September only.

According to a study, the cost of power transmission is estimated at 3.37 cents per unit, which will go up to 7.26 cents by 2030. The levelised cost – the price at which electricity must be generated from a specific source to break even over the lifetime of the project – will be 5.38 cents per unit for 15 years and 4.94 cents for 30 years.

Projected sale price of Tajikistan is 1.5 cents per unit and of Kyrgyzstan is 2.5 cents per unit.

During the upcoming meeting, legal consultants will also discuss important project agreements including the master agreement, power purchase agreements and coordination agreement. Other preparatory activities pertaining to financing, selecting a developer and operator, finalising environmental and social assessment and a benefit-sharing plan for communities living around the corridor of the transmission line will also be taken up.

Feasibility

According to Tajikistan embassy in Pakistan, Tajikistan after being disconnected from Central Asia’s energy grid has no other option but to sell surplus electricity in the summer to South Asian countries.

It will also help build close economic relations with Kyrgyzstan, Afghanistan and Pakistan. “It will help Afghanistan demonstrate its viability as a transit country linking the two regions,” the embassy said.

It said Canadian company SNC Lavalin, which has conducted the feasibility study, justified the viability of CASA-1000 based on the current and projected volume of spill water of hydropower plants in Tajikistan in the May-September period.

According to calculations, even in conservative prospect without taking into account the growth of energy generation until 2035, there will be sufficient volume of energy and water resources to maintain the required electricity generation needed for CASA-1000.

“According to information from our Afghan colleagues, the possibility of construction of the second line over Salang Pass has been endorsed by Fitchner (engineering) company,” it said.

Jaguar Land Rover profits continue to boom

Demand was strongest for the Jaguar XJ (pictured), XF and Range Rover models. Photograph: Simon Stuart-Miller

Profits have continued to boom at the resurgent Jaguar Land Rover, with the British car manufacturer reporting third quarter profits of £842m – more than double the same period in 2012.

Revenues from the premium and luxury brands leapt to £5.3bn in its quarterly results, with sales up 27% year on year in the last three months of 2013.

Jaguar Land Rover sold 112,172 vehicles in the quarter, with particularly strong demand for its Jaguar XJ and XF and Range Rover models, the company said. Combined sales from its brands reached 425,006 vehicles in 2013, a record for the firm.

The British subsidiary's performance has been helping to keep its owners, India's Tata Motors, in overall profit, as it faces declining consumer confidence in its own domestic markets. Tata bought Jaguar and Land Rover from Ford in 2008 and has steadily increased production since, with around 25,000 staff employed at its plants in the West Midlands and on Merseyside.

Chinese buyers continue to push strong global sales figures at JLR, with Brazil, India and the US the other major markets.

Jaguar Land Rover's chief executive officer, Ralf Speth, said: "Our financial performance for this and the preceding quarters is a testament to the quality of Jaguar Land Rover's award winning product offerings which continue to meet the exacting standards demanded by our customers around the world.

Abbott’s promise of ‘better jobs’ is cold comfort for retrenched car workers

The Australian flag flies at Toyota’s Altona plant in Melbourne. The company has announced it will be leaving the country. Photograph: Paul Crock/AFP

So we’ve lost the car industry, and with it at least 40,000 jobs. Fear not, says Tony Abbott, there’ll be “better jobs” down the road.

But since his new “line in the sand” against industry handouts is a contributing factor to this fundamental economic transformation – a decisive factor, according to former Labor minister Kim Carr – and given that losing the entire car industry is a pretty big deal, we have heard surprisingly little about where these new jobs might be, or how the government will encourage them along, or how it will help the workers whose lives are crushed in the meantime.

The Coalition’s manufacturing policy was a sparse thing, offering a “manufacturing transition grants program” of $50m over the next four years, a gradual increase in money for export market development grants and some general rhetoric about how the Coalition was “committed to a strong manufacturing-based sector”.

It deliberately avoided the crucial point – whether there would be subsidies for the car industry after 2015. That was pretty important, since the then industry spokesman, Ian Macfarlane, had already correctly predicted the car industry would ‘'collapse entirely’' without them.

“If you look across the world almost every government supports its car industry … it’s decision time in Australia and there’s no middle ground. You either support the companies into manufacturing a new model here or you cut them loose and let them go,’' he said in 2012.

When Holden announced last year it was indeed going in 2017, the Abbott government announced a review of the South Australian and Victorian economies and $60m in federal help, but it seemed to have been done in a rush and the government was unclear about what it would cover.

Abbott said it would be used for “promoting the industries of the future, it may be feasibility studies, it may be investment in research and development ... it may over time involve significant new infrastructure spending”. But he said it would almost never be available for grants to businesses, which were on the wrong side of the new line in the sand.

Yet a press release announcing the fund said it would provide “grants to existing and new businesses that establish or expand manufacturing operations in South Australia or Victoria” and “support for existing component manufacturers in Victoria and South Australia to adjust their business output or business model to non-automotive and overseas customers, or who commence or expand export activity”.

By the time the minister called for submissions, this direct reference to grants was gone and he has since then been hard at work figuring out exactly what the fund would do.

When Toyota announced its departure on Monday, Macfarlane said the fund could be expanded. Abbott points out the carmakers aren’t closing for several years, so he has time.

But what could a government averse to “corporate welfare” actually do? It hasn’t said. But here are some of the ideas it has been receiving. The bad news for a government preparing an austerity budget is that most of them cost a lot of money.

• Not proceed with the former Labor government’s plan to deny big companies (with revenue over $20bn) access to the research and development tax breaks. Reversing the measure would also reverse budget savings worth more than $1bn over the next four years (Ai group).

• Introduce new research and development incentives. Also expensive. (Victorian government).

• Spend more money on reskilling the sacked workers and on training in general (South Australia wants $37m from the commonwealth for reskilling, Ai group says the vocation education and training budget should be increased by 3% over time).

• Spend more on the automotive diversification program, which helps car component makers change their businesses to supply other industries (although this sounds awfully like the kind of direct grant the government has ruled out). South Australia wants $26m for this.

• Commonwealth defence spending – for which Victoria and South Australia are competing. The Victorian government is pushing bids by its state’s companies for $27bn worth of defence contracts, including patrol boats and new combat vehicles.

* Commonwealth spending on roads – both states are discussing specific projects – but not public transport, which the Abbott government insists is the responsibility of the states.

• Reverse some of the $400m in cuts to the former Labor government’s clean technology program, which was funded from the carbon tax but which had already promised money to more than 600 manufacturers to retool and revamp their operations – often resulting in modernisation as well as reducing emissions. The $25m promised to SPC Ardmona by the former government came from this program. About 100 other manufacturing companies will also now miss out on grants they had been promised but for which they had not signed contracts by the time of the election. Labor says the government would improve the prospects of manufacturing and reduce emissions if it funded most of these through its Direct Action climate change fund

OECD admits overstating growth forecasts amid eurozone crisis and global crash

A demonstrator clashes with riot police during a strike in Athens, Greece, 2012. The OECD said a failure to predict the path and the impact of the eurozone crisis, and a failure to understand the banking crisis and how interdependent the global financial system had become, were to blame for forecasting errors. Photograph: Aris Messinis/AFP/Getty Images

A failure to spot the severity of the eurozone crisis and the impact of the meltdown of the global banking system led to consistent forecasting errors in recent years, the Organisation for Economic Co-operation and Development admitted on Tuesday.

The Paris-based organisation said it repeatedly overestimated growth prospects for countries around the world between 2007 and 2012. TheOECD revised down forecasts at the onset of the financial crisis, but by an insufficient degree, it said.

"Forecasts were revised down consistently and very rapidly when the financial crisis erupted, but growth out-turns nonetheless still proved substantially weaker than had been projected," it said in a paper exploring its forecasting record in recent years.

The biggest forecasting errors were made when looking at the prospects for the next year, rather than the current year.

The OECD said a failure to predict the path and the impact of the eurozone crisis, and a failure to understand the banking crisis and how interdependent the global financial system had become, were to blame for the errors.

"Challenges were compounded by the unusually high speed and depth of cross-country interconnections between real and financial developments, the increased variability of economic growth compared with the pre-crisis period, the lack of timely data on many important financial factors, and the limited understanding of macro-financial linkages," it said.

The OECD said a failure to understand the impact of austerity policies in various countries did not appear to be a major driver of forecasting inaccuracies. It said the OECD became better at factoring in the impact of austerity amid little space for further monetary loosening as the crisis continued.

Overall, "fiscal consolidation is not significantly negatively related to the forecast errors".

Changes that have since been introduced to address some of the issues include a closer monitoring of short-term developments, for example by taking more notice of early signals from surveys and other anecdotal evidence.

Work has also begun on improving economic models to better reflect the impact of banking sector behaviour.

"The macroeconomic models available at the time of the crisis typically ignored the banking system and failed to allow for the possibility that bank capital shortages and credit rationing might impact on macroeconomic developments," it said.

Bank of England launches inquiry into forex manipulation claims

Andrew Bailey told the Treasury select committee: “The governors of the Bank have taken the claims about the meeting with the Bank’s officials extremely seriously since we first heard about these allegations. Just so you know, we first heard about them in October. Photograph: Yui Mok/PA

The Bank of England has launched an internal inquiry into allegations that its officials endorsed sharing of information between traders in the foreign exchange market, the central bank's deputy governor told MPs.

The inquiry will examine claims that at a meeting between Bank officials and senior currency traders last April the officials said it was permissible for traders in different banks to share information about clients' positions ahead of the setting of a benchmark rate in the foreign exchange market.

Andrew Bailey told the Treasury select committee: "The governors of the Bank have taken the claims about the meeting with the Bank's officials extremely seriously since we first heard about these allegations. Just so you know, we first heard about them in October.

"The governors immediately initiated a full review into it led by the Bank of England's legal counsel but also supported by external legal counsel and also in close collaboration with the FCA [financial conduct authority]."

Bailey, who is in charge of supervising financial firms, said the Bank had found no evidence that officials had endorsed sharing of information but added: "We do not regard that review as over."

Bloomberg News reported last week that a senior currency trader had informed the financial conduct authority that Bank staff at the April meeting had condoned information sharing. Alleged collusion in setting benchmark rates in the foreign exchange market is at the centre of allegations of market manipulation that could be as big as the Libor scandal.

Bailey said the Bank's inquiry had not yet seen the anonymous trader's notes from the meeting.

Bailey agreed with committee member Pat McFadden that if true the allegations would be "extremely damaging" to the Bank's reputation.

"I agree with you on that. That is why we have set up this investigation and this process," Bailey said. "The governors take the whole question of the reputation and integrity of the central bank extremely seriously. It's the most important thing we have."

The benchmark in question is used to price a wide variety of financial products and is the subject of regulators' attention amid allegations that traders at rival banks were sharing information about their orders from clients to manipulate the price.

A record of the April meeting released by the Bank showed it was chaired by Martin Mallett, its chief currency dealer, and included an entry entitled "extra item". The record says: "Processes around fixes. There was a brief discussion on extra levels of compliance that many bank trading desks were subject to when managing client risks around the main set-piece benchmark fixings."

Martin Wheatley, chief executive of the FCA, which is in charge of stamping out market abuse, told MPs last week that the allegations were "every bit as bad" as those surrounding Libor. Banks have been fined billions of pounds over the Libor scandal.

The meeting was between senior traders at investment banks and a subcommittee of the Bank's foreign exchange standing committee. Bloomberg was told that during a 15-minute conversation about currency benchmarks traders said they used chat rooms to match buyers and sellers ahead of the one-minute period when rates were fixed to avoid trading at a volatile time.

The officials are alleged to have said the practice might benefit markets because it made them more stable.

Number of new homes set to increase but 'will still not be enough'

New houses under construction. Savills forecasts private developers will provide the bulk of properties, building 91,000 homes this year. Photograph: Matt Cardy/Getty Images

The number of new homes will fall well short of the estimated 240,000 needed every year to meet demand, according to forecasts from estate agency Savills.

The number of new homes built every year in England is set to increase by 55% over the next five years as the economy improves and housingmarket activity spreads beyond London, the agency says, with the number forecast to increase to 167,000 a year by 2018, up from the 108,000 completed last year.

However, it says even these figures are a "best-case scenario" based on "robust assumptions" of 8% annual growth in private sector building, a rate only seen for periods of the 1980s and 1990s.

Private developers will provide the bulk of the properties, with Savills forecasting they could build 91,000 homes this year, rising to 123,000 in 2018. The numbers of homes created by housing associations and local authorities are predicted to grow to 34,000 and 10,000 respectively. In 2013, councils built only 1,360 homes – although even that was an increase from a low point of just 60 in 2000.

Private developers have been buoyed by the first stage of the government's Help to Buy scheme, which offers buyers a 20% interest-free loan to enable them to purchase a new-build property with just a 5% deposit. The scheme was launched in April last year and,

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in its first nine months, almost 13,000 homebuyers used it. The government has also made moves to make it easier for councils to build, including the relaxation of rules on borrowing.

Susan Emmett, Savills residential research director, said: "We have made some robust assumptions about increase in output from both the private and public sector. It is worrying that even a best-case scenario is still not good enough to meet our housing need."

Even at the top end of Savills' forecast, private sector construction would be below the 203,320 homes delivered by developers in 1968 when building peaked; it would also be below the 154,210 new homes created in 2007 before the housing market ground to a halt.

China and Taiwan agree to establish representative offices in historic talks

Wang Yu-chi, head of Taiwan's mainland affairs council, left, shakes hands with China's vice-foreign minister Zhang Zhijun in Nanjing. Photograph: Alexander Yuan/AP

China and Taiwan, at odds for more than six decades, have agreed at historic talks to set up representative offices as early as possible, though sensitive political issues such as a formal peace treaty were not on the table.

The talks on Tuesday between Taiwan's mainland affairs minister, Wang Yu-chi, and China's vice-foreign minister, Zhang Zhijun – who heads the Taiwan Affairs Office - were the first since the 1949 creation of the People's Republic of China.

They mark a big step toward expanding dialogue across the Taiwan strait beyond economic and trade issues.

China's ruling Communist party considers Taiwan a renegade province and has never ruled out the use of force to bring the island under its wing after taking control of the mainland at the end of the civil war. But economic ties have grown considerably in recent years.

Taiwan's Wang described his meeting with Zhang, in the eastern Chinese city of Nanjing, as "an unimaginable occasion in earlier years", China's official Xinhua news agency reported.

"Being able to sit down and talk is a really valuable opportunity, considering that the two sides were once almost at war," Wang said.

Zhang told Wang both sides should have "a little more imagination" regarding relations.

"We meet under great attention and expectations, and bear great responsibilities," Zhang said.

Xinhua later reported that the two sides had agreed to set up representative offices "as early as possible" for the two semi-official organisations, which deal with ties between the two.

Taiwan and China also agreed to deepen economic ties and "appropriately deal with" issues on medical care for students in either place.

In October, China's president, Xi Jinping, said a political solution to the standoff between the mainland and the island could not be postponed forever. But Taiwan's President Ma Ying-jeou later said he saw no urgency to hold political talks and he wanted to focus on trade.

Zhang signalled that China would never stand for Taiwan formally declaring independence – considered a red line for Beijing, which Taipei must never cross. "The political basis for peaceful development of cross-Strait relations is to oppose Taiwan's independence," he said.

Ties between China and Taiwan hit a new low during the 2000-08 presidency of Chen Shui-bian, who infuriated Beijing by being a vocal advocate of the island's formal independence. China sees Taiwan as simply a wayward province with no right to statehood.

Nanjing, where the meeting was taking place, is of historic and emotional significance for both sides, especially for Taiwan's ruling Nationalist party, which once governed the whole of China.

It was China's capital during the Nationalists' rule, until they fled to Taiwan in 1949 after losing the civil war with the communists.

The city is also the burial place of Sun Yat-Sen, the founder of modern China, who is revered by both mainland China and many in Taiwan.

Since taking office in 2008, Taiwan's Ma has signed a series of landmark trade and economic agreements with Beijing, cementing China's position as Taiwan's largest trading partner. But booming trade has not brought progress on political reconciliation or reduced military readiness on both sides. Many in democratic Taiwan fear autocratic China's designs for their free-wheeling island.

Despite the close economic ties, US-armed and backed Taiwan remains a potential flashpoint and its recovery is a priority for China's Communist party, which is investing billions to modernise its military.