Month: June 2017

Every 45 seconds or so, a neatly wrapped VanHeusen dress shirt destined for a J.C. Penney store in the United States drops off a new production line at a factory north of Vietnam’s capital.

Next door, rice paddies the size of 40 football fields have been filled for the $320 million textile mill which Hong Kong based TAL Group plans to build so it won’t need to import cloth for the shirts.

As elsewhere in Vietnam, there has been no sign of an impact on investment plans since U.S. President Donald Trump abandoned the proposed Trans Pacific Partnership (TPP) trade deal which had been expected to benefit Vietnam more than any country.

In fact, foreign direct investment rose 6 percent year-on-year to $6.15 billion in the first five months of 2017.

Cheap labor is an obvious lure for foreign investors. TAL’s chief executive, Roger Lee, said Vietnam also scores highly on middle management, work ethic and government policy.

Though the removal of U.S. import tariffs under a TPP pact would have been a bonus, Lee said he had no second thoughts about investment plans after Trump pulled out of the deal soon after taking office.

“Vietnam is a very compelling proposition,” said Lee.

The wage for garment workers is $250 a month in Vietnam, compared to $700 in China, where TAL recently shut a factory for cost reasons.

The removal of tariffs of up to about 30 percent would have made clothing firms particular beneficiaries of the TPP deal, which had been forecast to add 28 percent to Vietnam’s exports and 11 percent to its gross domestic product over a decade.

Other clothing firms were also not discouraged by the scrapping of the deal. Lawsgroup’s chief executive, Bosco Law, told Reuters it was now seeking to expand from its three factories with 10,000 workers.

Vietnam’s trade surplus over the United States – the sixth biggest last year – has come under scrutiny as a result of Trump’s “America First” policy to bring manufacturing jobs back to America. But it hasn’t discouraged investment.

“We have started working for a couple of American manufacturing companies that contacted us after the TPP’s demise and that are willing to relocate part of their operations from China,” said Oscar Mussons, Senior Associate at Dezan Shira and Associates professional services firm.

Cheaper than China

Vietnam has been a big winner as Chinese manufacturing costs have risen and China itself is now one of the three biggest investors in Vietnam.

The TPP deal would have further improved access to U.S. and other markets for manufacturers based there, but also bound Vietnam to reforms meaning everything from opening up food import markets to strengthening labour rights.

Investment and Planning Minister Nguyen Chi Dung told Reuters that Vietnam planned to go ahead with its commitments under TPP anyway – both to strengthen the economy and because of other trade deals, such as one with the European Union. The 11 remaining TPP members are also still trying to keep it alive.

Dung said Vietnam had a target of $10 billion a year in foreign direct investment over the next five years — compared to nearly $16 billion in 2016 alone — as it sought a change in the type of investment it wants to draw.

“Before we focused on quantity, now we switch to quality,” Dung said. “Higher technology, higher added value, less use of energy, less use of raw materials, less cheap labor.”

That is where Vietnam has a greater challenge. It lags competitors for top skills. The proportion of secondary school leavers going on to further studies is a third higher in China and over three times higher in South Korea.

“Vietnam is still a very attractive country, but companies might not invest as much as expected because they find the employees lack the skills for that added value,” Mussons said. “Companies have been too focused on reducing costs and not enough on training.”
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Military conflicts and growing threats around the world continue to underpin demand for weapons, but industry and government leaders from the United States, Europe, Russia and the Middle East say they don’t see a huge near-term spike in arms orders.

Executives report being busier than ever at this year’s Paris Airshow, the oldest and biggest aerospace expo in the world, which featured aerial acrobatics by Lockheed Martin Corp.’s F-35 fighter jet.

But they caution that foreign arms sales take years to complete, and NATO governments must get through lengthy budget and bureaucratic processes before they can raise military spending to meet a NATO target for members to spend 2 percent of gross domestic product (GDP) on defense.

No big spurt seen

“We’re seeing some growth, but I like to be pragmatic. I’m not seeing a big tick up in defense spending across the board,” Leanne Caret, who heads Boeing’s defense business, told Reuters in an interview. Her division generates about 40 percent of its revenues overseas, a big change from just several years ago.

Boeing officials expect steady gains in weapons sales, but warn against expectations for any kind of “gold rush” despite U.S. President Donald Trump’s pledge to boost military spending, saying there may be more of a shift in what platforms and weapons programs are in demand.

Recent increases in tensions between Russia and the United States have raised concerns about another arms race, but top officials in both countries agree that there will not be a mad rush to bulk up on weapons.

Moscow’s top arms trade official, Dmitry Shugaev, told reporters at the show that Russian weapon makers remained competitive despite Western sanctions, but the cyclical nature of the business and budget constraints are dampening prospects for a big surge in global arms sales.

He also expressed skepticism that NATO members would rapidly increase their military budgets, despite pledging to move toward the 2 percent goal.

Trump position

Trump’s public declarations that NATO members are not pulling their weight may have had some impact. Lockheed Martin’s Aeronautics business leader, Orlando Carvalho, said national security budgets and military systems’ demand outside the United States are beginning to increase, “especially with the focus that the president has put on NATO.”

In 2016, total world military expenditure rose 0.4 percent to $1.69 trillion, according the Stockholm International Peace Research Institute (SIPRI).

The European Union’s economic and financial affairs commissioner, Pierre Moscovici, also cited that risk, warning that European countries needed to match political pledges to boost military spending with actual resource commitments.

“There is now a window of opportunity for investing more in European defense … but as with all windows, a window closes if you don’t go through it,” he said.

Gradual increases in Europe

Germany and other European countries are boosting military spending, concerned about terrorism and Russia’s increasingly assertive military stance after its annexation of Crimea and its support for separatists in eastern Ukraine, but the increases are likely to be more gradual than dramatic.

In the missile defense arena, Western concerns about rapid advances in technology by North Korea, China and Iran, as well as Russia’s increased military activities, are driving orders for a range of defensive systems, according to U.S. and European executives.

“The threat is absolutely increasing and it’s increasing rapidly,” said Tim Cahill, vice president of air and missile defense systems at Lockheed. “In every region around the world, the level of interest in integrated air and missile defense has been going up in the last few months.”

Wes Kremer, president of Raytheon’s Integrated Defense Systems, said he was meeting with officials from countries that had not shown any interest in missile defense systems just four or five years ago.

“Back then, they didn’t see a ballistic missile threat, or they didn’t see Russia as a threat, but now that has changed,” he said.
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Webster Allen Two Hawk Jr. had not had a drink in six weeks – one of the conditions for getting a bed at the Rapid City, South Dakota rescue mission. But the 55-year-old Sicangu Lakota artist had received some bad news that cold day in March: All of his artwork had been stolen.

In his distress, Two Hawk got drunk with friends in a downtown park. When he returned to the mission to sleep, he was turned away.

“So, my brother sat down by some of those big electrical boxes near Memorial Park, probably to get a break from the wind,” said Castle LaCroix Kelly. “And that’s where they found him the next morning. Frozen to death in the snow,” she said.

South Dakota is home to nine federally recognized tribes, and its reservations are among the poorest in the country. Tribal members flock to Rapid City in search of jobs, but often end up on the streets.

The Black Hills Regional Homeless Coalition makes annual counts of Rapid City’s homeless population to gauge funding needs. This year, it counted more than 240, most of them Native American. But the numbers likely are much higher.

“We are unable to count those who are in jail, detox, living in hotels, doubled up, or ‘couch surfing.’ All of those situations are still situations of homelessness, and those individuals are living in situations that are far from appropriate, safe or ‘housed,’” said Anna Quinn, executive director of the HOPE Center, a faith-based group serving Rapid City’s homeless.

Mean streets

Shane Boudreaux, Sigangu Lakota, has been homeless several times, and knows firsthand how rough the streets can be.

In 2002, the National Coalition of the Homeless rated Rapid City the third most dangerous U.S. city for the homeless—especially Native Americans. Cut off from family and culture, they are vulnerable to alcohol, drugs and violence. Sometimes they are harassed by the locals. And sometimes their lives are cut short.

“One of my friends died here just a few weeks ago,” said Boudreaux. “They found him floating in Rapid Creek. Police said he was riding his bike and must have hit a railing and fallen off the bridge into the water.”

Homeless women are particularly at risk, said one Lakota woman who asked not to be named.

“I’ve been raped. I’ve had things thrown at me. I’ve had my purse ripped off my shoulder. I’ve been left behind by my boyfriend after getting beaten. I’ve been called names.”

She said she doesn’t believe authorities take these crimes seriously, and said local police are harder on Native Americans than other groups.

A 2015 study on race disparities in Rapid City policing showed more Native Americans are arrested than other group in the city, and that police were more likely to use force against Native Americans than any other race.

Rapid City Police Chief Karl Jegeris admitted to age-old tensions between Native Americans and the city’s population, but denied that his officers are heavy-handed.

“I think that in comparison to other cities that I’ve been to, I would say we’re a much safer city for our homeless population. We have a specialized street crimes unit that patrols downtown and park areas. We get to know the homeless on a first name basis and get along very well with them generally,” he said. “But there are certainly exceptions.”

When Native American homeless are arrested, Jegeris said, it is usually for low-level crimes, such as drinking in public or disorderly conduct. But more serious conflicts sometimes arise.

“Due to historic and generational trauma issues, there is a lot of distrust in the Native American community, especially toward authority figures,” he said. “And unfortunately, law enforcement is the most visible sign of government authority. So, we run into conflict somewhat regularly when we are just trying to help ensure general safety for that person.”

Investing in tribes

Rapid City is looking to expand services and shelters for the homeless. But the National American Indian Housing Council (NAIHC) believes the fundamental problem is the shortage of suitable housing on reservations.

“It’s a lot harder to get capital investment in these communities,” said NAIHC executive director Tony Waters. “Building homes on reservations is more expensive because of the lack of infrastructure in these areas. So, the budget cuts we’ve seen proposed by the administration this year certainly would be bad news for Indian Country.”

The Department of Housing and Urban Development (HUD) provides tribes with $650 million in housing grants, under obligation by historic treaties. President Donald Trump has proposed cutting that amount by $50 million, which Waters said would devastate communities already living in poverty.

Back in Rapid City, Anna Quinn worries about the fate of programs like the HOPE Center.

“Any reduction in budget would also be detrimental to those who are working so hard to help the homeless get out of their situations,” she said.
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Global liquor behemoth Diageo said Wednesday it will pay up to $1 billion to buy a tequila brand co-founded by movie star George Clooney.

Clooney founded the Casamigos brand four years ago with partners Rande Gerber and Mike Meldma.

Diageo said it will pay $700 million for Casamigos at first, and then pay another $300 million over 10 years if the brand reaches certain performance milestones.

London-based Diageo’s other brands include Johnnie Walker, Guinness and Captain Morgan.

Clooney and Gerber, an entrepreneur who is married to model Cindy Crawford, have appeared in ads for the brand. Diageo says the founders will continue to promote Casamigos and have a say in its future.

The deal is expected to close in the second half of this year.

 
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Although Afghan businesses have long wanted to exploit the potential of India’s huge market, trade between the two countries has been hampered due to their tense relations with Pakistan.

But a plane loaded in Kabul with 60 tons of medicinal plants landed in New Delhi this week, raising hopes of giving a major boost to commerce between landlocked Afghanistan and India.

The flight flagged off the establishment of a new air cargo corridor between the two countries. Along with another, more long-term initiative to develop the Iranian port of Chabahar, India hopes to ease access to conflict-ridden Afghanistan and eventually to Central Asian countries.

Pakistan is a barrier

Pakistan allows Afghanistan to send a limited amount of perishable goods over its territory to India, through which the shortest and most cost effective land routes lie. However, India is not allowed to send any imports through Pakistani territory.

Indian Prime Minister Narendra Modi and Afghan President Ashraf Ghani decided to establish the air corridor last September after Pakistan rejected fresh calls by the Afghan leader to allow his country to engage in direct trade with India over its territory.

Although India is the second largest destination for exports from Afghanistan, this lack of easy access has been a dampener.

Air corridor trade

In New Delhi, officials hope the new corridor will boost annual trade between the two countries from $700 million to $1 billion in three years and give a lift to exports of Afghanistan’s agricultural and carpet industries.

A second flight is scheduled to land in New Delhi next week, bringing 40 tons of dried fruit from Kandahar.

At a ceremony marking the inaugural flight in Kabul on Monday, Afghan President Ashraf Ghani said he wants to make Afghanistan an exporter country.

“As long as we are not an exporter country, then poverty and instability will not be eliminated,” he said.

Indian foreign ministry officials say the connectivity will allow Afghan businessmen to leverage India’s economic growth and trade networks for its benefit and give farmers quick access to sell perishable products.

Does the air corridor trade have a viable future?

A prominent trader in New Delhi, Shyam Sunder Bansal, said he stopped trading with Afghan businesses several years ago due to the challenges such as transit routes, banking and currency facilities.

India is hoping to eventually extend air cargo flights to other cities. 

But Bansal is skeptical whether it will be commercially viable to sustain imports via air. “They cannot continue it forever because that will be unconventional, uneconomical,” he said.

However, a South Asia expert with the Indian Institute of Defense Studies and Analyses in New Delhi, Sukh Deo Muni, said since the distance involved is not too long, the air freight corridor could be viable.

He said New Delhi is committed to the project as it will open up access for India to not just Afghanistan but also Central Asian markets. According to Muni, “broader significance is to give two messages. We are committed to Afghanistan and we want to tell Pakistan, you cannot obstruct our access to Afghanistan and Central Asia. This is the long term view.”

Afghanistan mainly sends fresh and dried fruits, vegetables and oilseeds to India. It also takes a host of products from India — a flight from New Delhi has carried pharmaceuticals, water purifiers and medical equipment to Kabul as part of the initiative.

Indian foreign ministry spokesperson Gopal Baglay said the frequency of the air service would depend on demand. “It is, at the end of the day, a commercial venture which is supported very heavily, very strongly and very purposefully by both the governments.”

Land corridor through Iran

India has also initiated another key project to develop the Iranian port of Chabahar and open a direct transport corridor to Central Asia and Afghanistan bypassing Pakistan. This would also give Kabul an alternate route to the Indian Ocean, which currently uses the Pakistani port of Karachi for sea trade.

There was optimism last year that the project would take off, but it is barely making headway amid fresh worries that the U.S. administration under President Donald Trump may reimpose sanctions on Iran. 
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Travis Kalanick, the combative and troubled CEO of ride-hailing giant Uber, resigned Tuesday under pressure from investors.

The company’s board confirmed the move early Tuesday, saying in a statement that Kalanick is taking time to heal from the death of his mother in a boating accident -while giving the company room to fully embrace this new chapter in Uber’s history.” He will remain on the Uber Technologies Inc. board.

In a statement, Kalanick said his resignation would help Uber go back to building -rather than be distracted with another fight.”

The resignation came after a series of costly missteps by Kalanick and the fast-growing company that he helped found eight years ago. Uber on Monday embarked on a 180-day program to change its image by allowing riders to give drivers tips through the Uber app, something the company had resisted under Kalanick.

The San Francisco-based company is trying to reverse damage done to its reputation by revelations of sexual harassment in its offices, allegations of trade secrets theft and an investigation into efforts to mislead government regulators.

Uber’s board said in a statement that Kalanick had -always put Uber first.”

While building the world’s biggest ride-hailing service, Uber developed a reputation for ruthless tactics that have occasionally outraged government regulators, drivers, riders and its employees.

The company’s hard-charging style has led to legal trouble. The U.S. Justice Department is investigating Uber’s past usage of phony software designed to thwart regulators.

Uber also is fighting allegations that it relies on a key piece of technology stolen from Google spin-off Waymo to build self-driving cars.
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