IMF Regional Economic Outlook: Strong Recovery in the Caucasus and Central Asia to Continue in 2011 April 28, 2011 Strong post-crisis recovery in the Caucasus and Central Asia (CCA) region is expected to continue in 2011, although at a somewhat slower pace than in 2010, the International Monetary Fund (IMF) said in its Regional Economic Outlook for Caucasus and Central Asia released in Tbilisi today. According to the report, average growth across the region this year is expected to remain strong, at just below 6 percent, compared with 6½ percent last year. Growth will continue to be driven by positive external factors—high commodity prices, the pickup in Russia, and strong growth in China. The recovery was mainly driven by higher oil and gas exports—helped by favorable prices—and by public investment and fiscal support to sectors affected by the crisis. “To sustain the recovery, policymakers in the Caucasus and Central Asia will need to address rising inflation, respond to social pressures arising from high food prices without threatening fiscal stability, and restore the health of banking systems,” said Middle East and Central Asia Department Deputy Director David Owen. Looking ahead, a key issue for countries in the region will be to diversify their sources of growth beyond mining, oil, and gas. They can best do this by improving the business environment to increase the role of the private sector and by strengthening regional trade and investment links. Action on these fronts is critical for job creation and poverty reduction. Fiscal pressures are a concern Fiscal pressures are a growing concern in the CCA, the report notes. Governments in the region are finding it difficult to resist pressures to raise wages, pensions, and other social payments. In particular, to help limit the impact of higher food prices on the poor, governments are controlling price increases of staple goods, reducing taxes, and drawing on strategic food reserves. Such untargeted measures are not very cost effective, as they benefit both the rich and the poor, and involve high fiscal costs. But for many countries these have been unavoidable in the absence of adequate social safety nets. Over time, therefore, more effective, targeted safety nets should be developed to protect the poor. As this happens, administrative measures can be phased out, and global commodity prices rises can be allowed to pass through into retail prices. At the same time, pressures for general wage increases should be resisted, if possible, as these could risk entrenching inflation at a high level and threaten debt sustainability in the region’s oil and gas importing countries (Armenia, Georgia, the Kyrgyz Republic, and Tajikistan). Inflation is on the rise Headline inflation has sharply risen in the CCA, as in other parts of the world, according to the report. Consumer price inflation in the region reached 11 percent on average in February, up from about 6 percent a year ago. This can be explained mainly by the rising cost of food, which makes up more than 50 percent of consumption baskets in the region. Higher fuel prices are another driving force. With global food and fuel prices expected to rise by a further 15–18 percent in 2011, inflationary pressures are projected to continue, with headline inflation rising further in the months ahead. Experience suggests that higher food and fuel prices will eventually pass through into general price inflation, if governments and central banks do not respond. Central banks are already tightening monetary policy, and may need to do so more forcefully to contain inflation. And fiscal policy needs to remain prudent and support anti-inflationary efforts. Banks in the region have not yet fully recovered from the crisis Restoring banking system health remains a key priority for the region, the report says. In Armenia and Georgia, banks’ profitability is recovering, foreign funding and domestic credit have picked up, and nonperforming loans have declined. In other countries in the region, however, borrowers are struggling to pay back loans. In Kazakhstan, the Kyrgyz Republic, and Tajikistan, where the share of nonperforming loans remains particularly high, authorities will need to put in place comprehensive resolution strategies. Greater competition would also help develop stronger banking systems, most notably in Tajikistan, Turkmenistan, and Uzbekistan, where directed lending continues to crowd out development of credit to the private sector. Dollarization, which rose with the crisis, remains a risk, and supervisors need greater autonomy, independence, and legal protection to do their jobs properly. Risks ahead Risks to the outlook are mixed. Growth could be stronger if the upward movement in oil prices continues, with higher exports and investment. The region’s oil and gas importers would face a larger import bill, but would also benefit from higher remittances from Russia and greater foreign investment. Heightened inflation expectations, lingering financial sector problems, and a possible deterioration of the global economy could all potentially hurt the country’s growth prospects. The sociopolitical environment also poses risks because of high poverty levels and perceptions of low voice and accountability in some countries. Policy challenges Policymakers in the CCA face the tricky balance of trying to maintain macroeconomic stability while protecting the most vulnerable, the report says. This will involve addressing several pressing challenges: • the surge of inflation with risks of inflationary expectations becoming entrenched; • an upsurge of social pressures to increase fiscal spending, which may generate threats to macroeconomic stability; • the poor quality of bank portfolios, which restrains credit growth and effective intermediation. The report recommends that, over the long term, the region’s policymakers should seek to create jobs and reduce poverty by working toward: • developing adequate safety nets; • increasing the role of the private sector; • diversifying economies away from natural resources; • achieving greater regional synergies; and • improving the business environment through enhanced transparency, governance and institutional quality.

Selected Economic Indicators in Caucasus and Central Asia (CCA)     Average           Proj.   2000–05 2006 2007 2008 2009 2010 2011   Real GDP Growth 9.4 13.6 12.3 6.8 3.7 6.6 5.7   (Annual change; percent)               Armenia 11.2 13.2 13.7 6.9 -14.2 2.6 4.6 Azerbaijan 11.3 34.5 25.0 10.8 9.3 5.0 2.8 Georgia 6.5 9.4 12.3 2.4 -3.8 6.4 5.5 Kazakhstan 10.3 10.7 8.9 3.2 1.2 7.0 5.9 Kyrgyz Republic 4.1 3.1 8.5 7.6 2.9 -1.4 5.0 Tajikistan 9.2 7.0 7.8 7.9 3.9 6.5 5.8 Turkmenistan 16.6 11.0 11.1 14.7 6.1 9.2 9.0 Uzbekistan 5.1 7.5 9.5 9.0 8.1 8.5 7.0   General Government Fiscal Balance 0.6 4.2 3.1 6.2 0.9 3.4 4.5   (Percent of GDP)               Armenia1 -2.6 -2.0 -2.3 -1.8 -7.8 -4.9 -3.9 Azerbaijan1 0.2 -0.2 2.6 20.8 6.8 13.9 16.9 Georgia -1.1 -3.0 -4.7 -6.3 -9.2 -6.6 -4.0 Kazakhstan 2.4 7.2 4.7 1.1 -1.4 1.3 1.8 Kyrgyz Republic -5.6 -2.1 -0.3 0.0 -3.6 -6.5 -8.9 Tajikistan -3.0 1.7 -5.5 -5.1 -5.2 -3.0 -5.4 Turkmenistan2 1.0 5.3 3.9 10.0 7.8 2.1 1.0 Uzbekistan -0.6 5.2 5.3 10.7 3.1 4.6 7.0   Current Account Balance -1.6 3.2 1.6 8.9 0.4 5.7 8.6   (Percent of GDP)               Armenia -6.4 -1.8 -6.4 -11.8 -16.0 -13.7 -12.4 Azerbaijan -12.2 17.6 27.3 35.5 23.6 27.7 28.4 Georgia -8.0 -15.1 -19.7 -22.6 -11.2 -9.8 -13.0 Kazakhstan -1.4 -2.5 -8.1 4.6 -3.7 2.5 5.8 Kyrgyz Republic -0.1 -3.1 -0.2 -8.1 2.0 -7.4 -8.7 Tajikistan -2.8 -2.8 -8.6 -7.6 -5.9 2.2 -4.1 Turkmenistan 4.1 15.7 15.5 16.5 -16.1 -11.4 -4.7 Uzbekistan 3.8 9.1 7.3 8.7 2.2 6.7 10.0                 Sources: National authorities; and IMF staff estimates and projections.         1Central government.               2State government.

DMS COALTRAM TAKES THE MARKET BY STORM AS ENSHAM TAKES THREE

Mining services group Diversified Mining Services (DMS) continues to score success with its locally-manufactured Atlas Copco Coaltram utility vehicles with Ensham Resources recently purchasing three new Coaltram CT10 vehicles for their underground operations in Emerald.

Since launching to the market early last year DMS has now sold more than 30 vehicles and has indicative orders for a further 25 more over the next few months.

DMS Underground Coaltram General Manager Craig Anderson said the vehicles were quickly becoming the underground diesel vehicle of choice for the Australian mining industry.

“After a long research and development phase we couldn’t be happier with the response and the demand from the industry,” he said. “Sales to date have exceeded our expectations and we are now ramping up production to ensure we can meet the demand.”

Other customers choosing Coaltrams over other machinery include Centennial Coal, Donaldson Coal, BHP Illawarra, BMA Queensland, Mastermyne, WDS Contractors, NRE Gujarat, Xstrata QLD, Xstrata NSW, UGM Contractors and most recently Ensham Resources.  The Coaltrams are produced in Beresfield near Newcastle by DMS.

Ensham Resources Principal Engineer Mining Graham Morris said the company selected the Coaltram CT10 because with its greater lift height, good visibility and engine emission controls it was best suited technically to the operating conditions expected in its new bord and pillar operation.

“We look forward to them coming into operation in the near future,” he said.

Mr Anderson said the high level of demand for the vehicles had justified the company’s decision to invest in a long-term research and development phase.

“The Atlas Copco Coaltrams are Australian vehicles for Australian conditions and the industry is quickly realising the competitive advantage they provide in delivering long term cost savings, as well as productivity and efficiency gains,” he said.

“The Queensland and New South Wales coal industries have really embraced these vehicles and the more we put into the market the more demand we are receiving. We are well advanced with our plan to double our production capacity over the next 18 months to satisfy customer demand.”

Mr Anderson said other articulated LHD vehicles used in Australian underground coal mines have had minimal changes or improvements in the past 10-15 years.

“With a Tier 3 electronically controlled engine and the onboard MONEx management system the Coaltram offers significant advantages for future vehicle tracking and uploading of operational critical data to be integrated automatically into the existing mine site management systems,” he said.

DMS, an unlisted public company, was formed in May 2009 with the merger of five well respected and successful mining services businesses. The merged businesses were Anderson Group of Companies (the Coaltram vehicle designers), Ausgroup Industries, Ausscaffold, East Coast Engineering, AllSteel Fabrications and MachineTek Engineering. In December 2010 DMS further acquired Induspray Australia and Valley Scaffold in the Hunter Valley.

PSA INTERNATIONAL VOTED ‘BEST GLOBAL CONTAINER TERMINAL OPERATING COMPANY’ FOR THE 6TH TIME

PSA SINGAPORE TERMINALS IS ‘BEST CONTAINER TERMINAL – ASIA’ FOR THE 22ND TIME

PSA International won the „Best Global Container Terminal Operating Company’ award for the sixth time, while PSA Singapore Terminals was voted „Best Container Terminal – Asia (over 4 million TEUs per year)’ for the 22nd time at the 25th Asian Freight & Supply Chain Awards (AFSCA) ceremony in Singapore this evening.
On winning these awards, Mr Eddie Teh, Group CEO, PSA International, said, “On behalf of the management, staff and unions of PSA Group worldwide, PSA is honoured to receive these prestigious awards from the maritime industry. We wish to thank all our customers and business partners for their continuing support and vote of confidence, and look forward to providing them with our best service.”
AFSCA is an annual event organised by leading shipper and supply chain newspaper Cargonews Asia. More than 13,000 readers of Cargonews Asia were polled to select best-in-class companies in 40 industry-specific categories. Award winners are regarded as industry benchmarks of excellence in their respective areas.
Background

About PSA International

PSA International is one of the leading global port groups. With its flagship operations in PSA Singapore Terminals and PSA Antwerp, PSA participates in 28 port projects in 16 countries across Asia, Europe and the Americas. Employing the finest talents in the industry, PSA delivers reliable and best-in-class service to its customers and develops win-win relationships with its partners. As the port operator of choice in the world's gateway hubs, PSA is “The World's Port of Call”. In 2010, PSA handled 65.1 million TEUs of containers worldwide, of which 27.7 million TEUs were handled at PSA Singapore Terminal.

Bamboo liberation day

 

Mendha Lekha wins right over bamboo, finally

 

Environment minister warns of legal action if officials refuse passes A large crowd gathered at Mendha Lekha village in Maharashtra's Gadchiroli district in the morning on April 27 to witness a historic event. The state forest department handed over a transit pass book to the village community leader Devaji Tofa, signifying the village gram sabha would henceforth exercise the power to issue transit passes for selling bamboo harvested from the nearby forests.

  The passes are needed to take the bamboo out of the village and sell it in the market, but the forest department had been refusing to issue these passes to the residents for the past one-and-a-half years.

Mendha Lekha was one of the two villages in the country to win community rights over their forests in December 2009 under the Forest Rights Act of 2006. The Act gives tribal and forest peoples the right  to gather and sell minor forest produce (MFP), including bamboo, in the market. The village residents have been fighting for control over bamboo since then.

  Over 3,000 people gathered to witness the handing over of the right to issue transit passes. Those present included Union minister of state for environment Jairam Ramesh, Maharashtra chief minister Prithviraj Chavan and state home minister R R Patil. 

  As soon as he received the passbook, Tofa issue two transit passes. Its recipients were area MLA Namdev Usendi and Sunita Narain of Delhi non-profit Centre for Science and Environment; they had purchased

bamboo poles from the village on February 15 when Mendha Lekha organised a symbolic bamboo sale to protest the forest department's intransigence. At that time, Usendi and Narain had applied for transit

passes so that they could take the bamboo back with them. Speaking on the occasion, Usendi demanded that people should be given the right to sell other MFPs like mahua and tendu leaves (used for rolling beedis)

in the open market.

  Tofa called for automatic recognition of right to MFP in all villages across India.   Political leaders gathered at Mendha Lekha were in a generous mood unlike the forest department officials who have been unwilling to let go of control over minor forest produces. Ramesh called for minimum support price for 12 MFPs, including bamboo, tendu leaves, mahua and sal seeds.

   Chief minister Chavan was not to be left behind. He called for transit passes for tendu leaves in addition to bamboo. The leaves are another major source of income for forest departments. Chavan said giving forest rights to people is the only way to save forests. Patil, too, called for community rights over tendu leaves as well, saying it would help to improve the lot of forest and tribal peoples. He remarked that people in Gadchiroli district comprise the poorest in the state though it has the highest forest cover in the state at 78

per cent.

  The forest department's refusal to issue transit passes for bamboo was criticised by one and all. Ramesh pulled up the state forest department and minister for their anti-people mindset. “If transit pass not given, legal action would be taken against officials,” he warned. He emphasises that the power to issue transit passes for

bamboo must be  retained by gram sabha.   Principal Chief Conservator of Forests, Maharashtra responded by saying bamboo will be included under Panchayat (Extension to Scheduled Areas ) Act (PESA).

  Usendi criticised forest department for not knowing the provisions of the Forest Rights Act when uneducated and poor people of Mendha Lekha know it. This made struggle for bamboo necessary, he said.

India Calls for A Robust Power Grid in SAARC Region

India has called for integrating the entire SAARC region by a robust Power Grid system to address power deficit in South Asian Countries. Speaking at the Round Table Conference on ““Promoting Investment Opportunity in Power Sector in South Asia: Leveraging Cross Border Power Trading”, Minister of State for Power, Shri K.C. Venugopal said here today that a SAARC power grid linking Bangladesh, India, Nepal, Pakistan and Sri Lanka has the estimated potential to install at least 1,00,000 MW in the region for common use among its member countries. He added that although India has reached a significant installed capacity of 1,72,000 MW, the shortages have been in the range of more than 8% in the energy and 10% during the peak hours. Its revised 11th Five Year Plan target of capacity addition is more than 60,000 MW, which is more than the total capacity added in the previous two Plans.

Shri Venugopal said that although the issue of cross border trading is a complex one involving market, technology, finance and most importantly geo-political issues, there has been some success as well. One of the good examples of cross border power trading is between Bhutan and India and also to certain extent between Nepal and India. Bhutan is supplying almost 1200 – 1400 MW to the Indian grid and the arrangement between the two countries has been working to the satisfaction of both sides. The Minister added that the success of power trading between Bhutan and India has encouraged the two countries to take up more hydro projects through cooperative ventures and many Indian public sector companies are engaged in collaboration to add 10,000 MW capacity in Bhutan by the year 2020.

Expressing satisfaction on increasing private investment in power generation, Shri Venugoapal said that out of more than 58,000 MW power projects under construction, private developers are supporting about 32,339 MW. Thus Indian power sector is showing good example of Public-Private Partnership to enhance generation capacity and overall electricity availability in the country.

The one day conference was attended by the delegates from India, Bangladesh, Bhutan, Nepal and Sri Lanka and deliberated on current level of energy trades particularly electricity between India and neighbouring countries.

UTI Dividend Yield Fund combines equity exposure with relative downside protection

UTI Dividend Yield Fund, the Rs 2,998-crore diversified equity fund investing in high-dividend-yielding stocks, is designed for those investors looking to increase their equity allocation with relative downside protection.

An analysis of the UTI Dividend Yield Fund’s performance over two distinct time zones – the Bull period during January-December 2007 and the Bear period during January-December 2008 – reveals an interesting trend. During the Bull period, returns calculated based on the Fund’s NAV show one-year returns at 70.56% vis-à-vis 59.74% by the benchmark BSE-100 index. But that’s only half of the story. The real revelation comes when returns during the Bear period are analysed. During this period, the Fund shows a negative return of 44.44% against 55.28% by the BSE-100.

The UTI Dividend Yield Fund has outperformed its benchmark BSE-100 index consistently over the years. Returns calculated based on the Fund’s NAV show one-year returns at 39.60% vis-à-vis 27.68% of the BSE index, while corresponding three-year and five-year returns are at 12.54% (0.79% for the BSE-100 index) and 25.40% (20.65% for BSE-100), respectively.

The Fund’s investment manager Swati Kulkarni portfolio management strategy works on primarily four principles: Diversification across sectors and market capitalization, Bottom-up approach, Focus on the stock’s fundamentals, and Growth at reasonable pace. Towards this, her team tends to select high-dividend-yielding stocks which usually have a strong cash generation track-record. Some of these trends tend to indicate undervaluation of a stock. Her philosophy is to capture potential capital appreciation in reviving markets, while limiting the downside in falling markets.

Importantly, UTI Dividend Yield Fund offers investors the twin benefits of capital appreciation and dividend yield. As illustrated earlier, the Fund is well-known for its consistent performance across market cycles and has a good dividend track record; it has declared 14 dividends since inception.

The UTI Dividend Yield Fund is popular among equity investors, who look for investing in portfolio of large and medium sized companies having strong cash flow and sustainable payouts.

The top five stocks in the Fund’s portfolio in terms of percentage of assets invested are Infosys Technologies (7.16%), ICICI Bank (4.99%), Tata Consultancy Services (4.54%), ITC (4.02%) and NTPC (3.95%).

In terms of sectoral allocations, 19% of investments are in energy stocks & financial services stocks each which include NTPC, GAIL, Petronet ICICI Bank, HDFC, SBI, and Bank of Baroda. 12% of investments are in IT sector, one of the most-favourable sectors. Among other sectors, a sizeable 8% of Fund’s portfolio is in cement & consumer goods each. 

According to UTI Mutual Fund’s own analysis, a lump sum investment of Rs 1 lakh made at the time of the Fund’s launch in May 2005 would have translated to a whopping amount of Rs 3,28,600 today. A similar investment in the BSE-100 stocks would have netted a tad lower amount of Rs 3,01,777.

Little wonder that the UTI Dividend Yield Fund was among the only two mutual fund schemes out of total 66 schemes that won the CNBC TV18-Crisil Mutual Fund of the Year award in the Equity Diversified Funds category. The Fund has been rated 5 star by Value Research & Morning Star and has also won the Best Large Cap fund award by Morningstar.

Silver Soars Above all Commodities

Take a look at the accompanying chart. It’s a snapshot of how four sectors – stocks, silver, gold, and copper - have fared since the market’s high in 2008. The three commodities stand out with an average gain of over 50%. The stock index (used the S&P 500, but could just as easily have used another benchmark) hasn’t gained at all. While stocks swung wildly, depending on a myriad of different factors – product-line positioning, debt structures, diverse regulatory requirements, etc. – commodities chugged on, reliably responding to the inherent needs of the marketplace.

And among commodities, there is no question of who the star was. It was silver. Indeed silver has more than doubled from its 2008 multi-year high. The rise in most commodities can be traced to the demand for them among the industries of the developing world – particularly China and India. And among those industries, silver is virtually irreplaceable. Silver is the best thermal conductor and the best electrical conductor, making it a favorite for electrical junctions. When polished, it is also one of the most reflective substances we have – making it a prime component in optics. It is a catalyst for a several fundamental reactions in industrial chemistry, including the manufacture of ethylene glycol, a vital precursor to polyester. Silver is also prevalent in automobiles, and it is used in some of the industry’s key safety applications. By virtue of its exceptional conductivity, silver is also critical to many energy efficiencies in alternative energy and other sectors. Finally, and most significantly, it is a key component in two widely separated power applications – solar panels, and pressurized-water nuclear reactors (where its ability to absorb free neutrons is crucial for control rods).

In the wake of the turmoil in the Middle East and Japan it is easy to see why demand for silver – as linked as it is to power generation and energy conservation applications - would increase. But there is something else. Silver is also a monetary metal. Indeed silver’s history as coinage is even longer than gold’s. 

For more than a century, gold has been favored by institutions as a monetary metal – probably because it is much easier to store large amounts of money in gold, which is more valuable per ounce than silver, and because gold is even less susceptible than silver to tarnish and oxidation. Still, if you look at the amounts of silver available compared to amount of gold the ratio of gold to silver does not make sense. Above ground there is roughly five times more silver than gold, and below ground (according to US Government statistics) the ratio is about 10:1. So valued in terms of their relative scarcity, a silver:gold ratio of roughly 10:1 makes sense; but the current ratio of 36:1 doesn’t. The public appears to have caught on to this fact, though. Individual demand for silver coins has been soaring – which is one reason for the strong performance of the metal.

Add up all these silver factors – its industrial value, its underpricing relative to gold scarcity, and its appeal as a proxy precious metal investment for gold – and the dynamics are in place for the continuation of an explosive bull market in silver. Industrial users could even end up competing with individuals seeking protection against currency inflation. The situation could become a “virtuous circle” for pricing, one in which demand from one sector reinforces demand from the other.

The trend for gold and silver should continue higher, as dollar weakness and continued geopolitical uncertainty will support the precious metals. Gold’s next target will be $2000 an ounce which could come as early as this year and market watchers see little standing in its way. Silver could target $50 an ounce, but given the velocity of the rise, it might be due for a small correction. 

I don’t know what that “danger price” would be – my guess is well into triple digits($ terms). For now my advice is to accumulate any precious metal ,whether silver or gold.

-Umesh Shanmugam(Purely my view)