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World Insights: Europe fears losing economic competitiveness as manufacturers lured to U.S. in energy crisis

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As the European Union (EU) countries are struggling to find a solution to its energy crisis, the United States has become a hot destination for the relocation of their industries, and emerges as the biggest winner.

BRUSSELS, Oct. 27 (Xinhua) — Europe is beset by a severe energy crisis. Household energy bills are through the roof. Inflation remains stubbornly high, and the cost of living is soaring. Angry people took to the streets. Worse still, cold weather is on the way and a tough winter is ahead.

The list of problems goes on, yet the real risk the continent faces, experts believe, is loss of competitive edge due to rising energy costs, as manufacturers are shifting their production to the United States where energy is cheaper and incentives were unveiled.

As the European Union (EU) countries are struggling to find a solution to its energy crisis, the United States has become a hot destination for the relocation of their industries, and emerges as the biggest winner.

SOARING ENERGY PRICES

The European countries have been suffering under painfully high energy prices as a consequence of the Russia-Ukraine conflict, as well as the COVID-19 pandemic and the spillover of the United States’ aggressive interest rate hikes.

Europe’s energy supply from Russia has been seriously reduced as the Ukraine crisis continues. Last year, up to 40 percent of the natural gas used in the EU to heat homes and power businesses came from Russia. Today, this figure has fallen to around 9 percent.

With access to Russian gas becoming increasingly difficult, European countries had to switch to much expensive American liquefied natural gas (LNG). The quantity of LNG purchased by Europe from the United States has exceeded piped gas from Russia for the first time in June, according to the International Energy Agency (IEA), which means the United States is replacing Russia to possibly become Europe’s largest energy supplier.

However, the United States sells its LNG to Europe at “four times” the price at which it sells to American suppliers, said French Economy and Finance Minister Bruno Le Maire, who feared that the United States could benefit from the situation to the detriment of European interests.

“We are going to say with great friendship towards our American friends, our Norwegian friends, that ‘you are great, you provide us with gas.’ But there is one thing that can’t work for a very long time, that is we can’t pay for gas that is four times more expensive,” French President Emmanuel Macron expressed his dissatisfaction recently.

“We can see that the United States is the biggest beneficiary of this energy crisis. Huge profits flow into the pockets of U.S. natural gas suppliers,” Cui Hongjian, director of the department for European studies at the China Institute of International Studies, told Xinhua in a recent interview.

With the Ukraine crisis, the United States has succeeded in making Europe not only more dependent on it for security, but also for energy in the future, he added.

RISING PRODUCTION COSTS

Energy has been regarded as the bedrock of sound economic development. Though accounting for a small fraction of GDP for most developed countries, the energy sector has an out-sized impact on inflation and input costs for all sectors due to its ubiquity in consumption.

Europe’s energy costs approximately 2 percent of GDP in normal times, but it has soared to an estimated 12 percent on the back of surging prices, a recent article of Foreign Policy said, adding that high costs of this magnitude mean that many industries across Europe are scaling back operations or shutting down completely.

The analysis has been echoed by industry observers, who said that soaring energy prices in Europe are forcing a large number of European energy-intensive plants to curtail or even terminate production, which is a sign of expanding deindustrialization in Europe. If the trend continues, the industrial structure of Europe may be eroded for good, they warned.

As an instance of the toll Europe has taken for high energy prices, the Dutch aluminium maker Aldel has announced that it is halting the production of primary aluminium because electricity prices are too high.

Yara, one of the world’s leading crop nutrition companies, has shut down its fertilizer plant in Sluiskil of the Netherlands.

Nicolas de Warren, the president of Uniden, the Federation of energy-intensive industries in France, has said that the industries have reached a limit as the sector’s competitiveness is overshadowed by price spikes of energy.

Some industries may survive the energy crunch in Europe by importing elementary products from the United States at lower costs. However, the metal, chemical, glass, ceramic and paper industries in Europe will be eroded, de Warren warned.

According to Eurometaux, the European non-ferrous metals association, the power crisis has knocked 50 percent of the EU’s aluminium and zinc capacity offline, and the impact also includes significant curtailments in silicon and ferroalloys production, as well as on copper and nickel sectors.

BIG WINNER

While European manufacturers are shrinking production, with some even struggling for survival due to the high energy costs, things are quite different on the other side of the Atlantic.

German media reports showed that German flag carrier Lufthansa, multinational conglomerate corporation Siemens, supermarket brand Aldi and health care company Fresenius, four out of the more than 60 German companies in Oklahoma, have jointly added 300 million U.S. dollars of investment in the U.S. state.

The expansion of investment by the German auto industry in the United States is also in full swing. The largest German car maker Volkswagen laid the foundation for a new battery laboratory in the State of Tennessee in June, and it has committed 7.1 billion dollars in supplier partnerships in North America through 2027. In March, Mercedes-Benz opened a new battery assembly plant in Bibb County, Alabama. BMW has also announced a plan to increase its investment in Electric Vehicles in the State of South Carolina.

As the Russia-Ukraine conflict drives up Europe’s energy costs, a number of European manufacturers are being lured to the relative stability of the United States, a Wall Street Journal article recently reported. “A big winner is emerging from Europe’s energy crisis, and it’s the U.S. economy.”

Several factors contribute to economic relocation. On one hand, the relatively low energy prices in the United States translate into lower production costs for European manufacturers, which is leading them to move some of their production from Europe to the United States.

On the other, U.S. Congress passed a landmark 430-billion dollar climate, tax and healthcare bill named Inflation Reduction Act in August. According to the Act, most of the funds will be earmarked as subsidies for energy and climate programs, which fueled a green energy investment rush by European companies in the United States.

Washington’s incentives have upset the Europeans, who fear the Inflation Reduction Act could upend the “level playing field” on trade between the EU and the United States.

“We need to work on adequate European responses to this American Inflation Reduction Act, which might jeopardize the developing field between our two continents,” Le Maire said recently.

German Economy Minister Robert Habeck also noted that companies and firms are drawn away from Europe to the United States “because of the strong subsidies paid there.”

Europe has crippled its energy system, its energy markets, a mix of fuel types and sources, energy infrastructure, long-term contracts and geopolitical relationships needed to assure energy stability and security, said John Pang, a senior fellow at New York-based Bard College.

“In the short term, there will be shortages, supply uncertainty, financial turmoil and political upheaval. In the long term, Europe will complete its deindustrialization. More major companies will certainly move to the U.S.,” Pang said.

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Asia remains attractive destination for global investment

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BOAO, Hainan, March 27 (Xinhua) — Asia remains a dynamic and attractive destination for global investment, said attendees at a sideline forum of the Boao Forum for Asia (BFA), which convenes its 2024 annual conference in Boao, a resort town in southern China’s Hainan Province.

According to the forum’s Asian Economic Outlook and Integration Progress flagship report, Asian economies demonstrated strong resilience in investment activities in 2022. Foreign direct investment (FDI) flows into Asia-Pacific economies amounted to 809.4 billion U.S. dollars, growing by 6.76 percent over the previous year and accounting for 62 percent of international FDI inflows.

Asia has been a significant beneficiary of FDI, said Shamshad Akhtar, Federal Minister for Finance, Revenue and Economic Affairs of Pakistan, while noting the role of FDI in Asia’s development at the sub-forum with a theme of “Investing the Future of Asia.”

It is important to recognize that Asia, particularly emerging markets, is now on its own development momentum. Asia have become the world’s manufacturing and trade hub supported by foreign capital and investments, she noted.

In 2022, Asian economies attracted a total of 8.8 trillion U.S. dollars in portfolio investment, and China’s stock of portfolio investment surpassed 1 trillion U.S. dollars for the first time, said the report.

Speaking at the forum, Charles Dallara, a member of the Board of Directors of Partners Group, said foreign investments are supporting the global market developments and Asia is really a dynamic and attractive location for investments, especially FDI.

Among Asian economies, China is a very attractive destination for FDI, he said, adding that at the same time, a large amount of capital from China has flowed to other countries and many Chinese businesses and enterprises are investing in the United States, Europe, Japan and Southeast Asia.

Officials and experts also voiced opinions on how to boost investor confidence, improve the investment environment, and enhance investment destinations’ attractiveness in Asia.

Geopolitical influence, rule of law, market potential, industrial system, labor forces, market players, and policy support are factors that affect the inflow of FDI, said Xu Zhibin, deputy administrator of the State Administration of Foreign Exchange.

Governments also play an important role in attracting global capital, said Shimizu Tokiko, assistant governor of the Bank of Japan, adding that Asian countries have resilient economy and governments should have consistent policy arrangements and provide a clear map on its own development for investors.

According to the report, the Asian economy is expected to grow by around 4.5 percent in 2024, surpassing that of 2023, and continue to be the largest contributor to global economic growth.

With a founding purpose to promote economic integration in Asia, the mission of the BFA is to pool positive energy for the development of Asia and the world. The BFA annual conference 2024 runs from March 26 to 29.

Source(s): Xinhua

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Global business leaders: China will continue to be a key contributor to global economic growth

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Global business leaders praised China’s decision to pursue high-quality development and expressed confidence in China’s economic potential, saying China will continue to be a key contributor to global economic growth.

They made the remarks at the China Development Forum 2024 in Beijing on Sunday, during which international scholars, entrepreneurs, government officials and representatives from international organizations discussed key issues concerning the development of China and the world.

In her speech, International Monetary Fund Managing Director Kristalina Georgieva said that China is transforming its economy from high rates to high quality of growth and that high-quality development ultimately depends on reforms.

She projects over 3 percent growth for 2024 and the following year for the global economy and urged deep structural reforms for all countries to enhance the conditions for entrepreneurship, innovation and economic performance as the world is facing low productivity, high debt levels and geopolitical tensions.

The IMF head called for China to implement “a comprehensive package of pro-market reforms,” saying China could grow considerably faster with reforms starting with sound macroeconomic fundamentals, and the additional growth would add $3.5 trillion to the Chinese economy.

World Bank President Ajay Banga also mentioned the global challenges, saying they intensified global inequality. He noted that developing countries faced an “unimaginable” gap with 1.1 billion young people expected to enter the workforce in the next decade while the expected jobs being created would only be 325 million. However, he also cautioned that it’s just a prediction, not an actual destiny, adding that China’s “remarkable journey” in the past five decades was a testament to what is possible.

Like Georgieva, Banga also emphasized the importance of reforms. He said that since China’s reform and opening up in 1978, it has lifted 770 million rural residents out of poverty, and due to reform, China fundamentally changed its development trajectory, with more than 8 million jobs created every year for over three decades, sharply reducing global poverty from 44 percent to 9 percent. Once a major World Bank borrower, China is now one of the bank’s biggest donors, Banga added.

The IMF head presented opportunities to boost productivity and improve living standards citing digital and green transformations. She acknowledged China’s leading position in artificial intelligence, saying China’s well-developed digital infrastructure provides a head start.

In terms of advancing the green economy, she described China as a global leader in deploying renewable energy with enormous potential, adding that China was making rapid progress in green mobility.

She also highlighted China’s contributions to assist the IMF in providing affordable long-term financing to low-income countries and states undertaking reforms to reduce risks to prospective balance of payments stability, including those related to climate change and pandemic preparedness, and capacity-development initiatives.

“China’s remarkable development success has delivered tremendous benefits to hundreds of millions of people,” she said and expressed her confidence that China and the world can tackle the current challenges and create a more prosperous future for all through cooperation.

Apple’s Tim Cook also attended Sunday’s forum. The CEO of the U.S.’ largest smartphone empire was in Shanghai to open a new Apple store this week, and he met with China’s Commerce Minister Wang Wentao on Friday.

“I think China is really opening up, and I’m so happy to be here,” Cook told a reporter from CGTN at the forum on Sunday.

He also told the China Media Group that Apple would keep increasing its investment in research and development in China, adding that Apple’s flagship mixed-reality headset, the Vision Pro, would hit shelves in China by the end of this year.

Source(s): CGTN

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BOC announces sale of Drift Thelu Veliga

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Bank of Ceylon (BOC) has announced the sale of leasehold rights of Drift Thelu Veliga Retreat.

According to the bank, the Civil Court has extended BOC the right and permission to sell the Head Lease rights of the property, as per the court’s case number 2096-CVC-2023 on March 14th, 2024.

The resort is owned by Theluveliga Retreat Private Limited, a private limited liability company, which has been mortgaged as a security at the bank to recover the dues of the Term Loan Facility obtained by Castaway Maldives Private Limited.

The bank earlier on March 21st announced that the Head Lease rights of the 5-star property is South Ari Atoll is now available for interested buyers.

BOC further added that the current Headlease period expires on April 2064, which can be extended by the successful bidder for another 49 years according to the Maldives Tourism Act.

According to the bank, the bid reserve price is fixed at MVR 21.14 million.

Interested bidders are invited to submit their proposals to acquire the leasehold rights of the property by furnishing a non-refundable deposit of USD 2,000 to obtain the tender applications and documents from BOC.

To participate in the bid, bidders are required to deposit USD 25,000 at the time of bid application submission. BOC demands the money be deposited by cash, transfer, or DD.

The bank further said that in the event of more than one successful bidder with the same prices, BOC will request the bidders for spot bids which is subjected to a minimum increment of USD 50,000.

The final hour for bid application submission to acquire the leasehold rights is 14:00hrs on April 23rd, 2024.

The 30-villa holiday retreat debuted in October 2015.

Source(s): sun.mv

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